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which he had dictated after having read the testimony in a suit being tried in Delaware, wherein he pointed out that certain gentlemen had organized for the purpose of bringing natural gas from West Virginia into Detroit.
I know in 1925 the big companies were telling us that they could not get natural gas, and at that time I did a lot of work along with others endeavoring to get natural gas for the city of Detroit, and other cities were equally interested in bringing natural gas to their cities.
Now then, of course, the question that my friend over here asked might very well apply to the city of Grand Rapids, where he says they are getting along very well, but we do not have a sufficient supply of natural gas, and that is true of a great number of the other cities in Michigan. As far as I am concerned the State utility regulatory bodies have been complete failures. The only way in which the cities and the consuming public in this country are going to secure any remedy is through some integrated relation with the United States.
Mr. Chairman, back here with me, with this same protest, voicing the same protest, is the mayor of Cleveland; my Detroit colleague, Councilman Eugene Van Antwerp, the mayor and officials of the city of Portsmouth, Ohio, which cities have very different situations, where the one is paying a very high price, and is located right at the supply, and the other is paying a reasonable price and is located some distance away.
As I say, these cities were organized, and afterward were invited to join with that great organization, the mayors' conference, and at these two organizations I was requested to read a paper, and following which, last year, a committee, by resolution of that group, was appointed by that group, the conference, for the purpose of further study and presenting to you suggestions for the legislation which you have before you today.
I might say to you so far as the Crosser bill is concerned, of course, the cities feel that under the former legislation the Federal Power Commission by its decisions and by its work has done a great job in making an investigation of the natural-gas industry in this country. We do not care which of these bills is passed, just so long as you give us a bill that will regulate this industry.
I marvel when I stop to think what this great industry has been doing in this country, where, as the Secretary of the Interior pointed out, there is enough gas wasted every day in the United States that if used would produce more power than Muscle Shoals can produce in a single day, but as long as that has been left and will be left in the hands of monopoly it will destroy the reserve, this greatest of our reserves, the natural-gas resources in this country.
For instance, in Kansas City they are paying 40 cents at the gate, yet it is situated right on top of the gas supply, practically, while in Detroit, Mich., 1,200 miles away from the supply the rate is 3312 cents, and the cost of transporting that gas through the pipe lines is some 30 cents. And, in Cleveland, Ohio, they are paying a lower rate and the mayor has asked for a reduction of the gate rate of 381,2 cents. While at Portsmouth, Ohio, located just a few miles from the West Virginia field where they get the gas, they are paying
There is no way in which the consuming public, the producers of gas, and the investors, if you please, will be protected except by the passage of some legislation such as that proposed in this bili. And, Mr. Chairman, we are offering several amendments to some sections of the bill which we believe will take care of the situation.
I have the same feeling, if you will permit me to say so, about this bill that I had about previous legislation, recommended by the President and passed by Congress, the holding-company bill, and in my humble judgment, after 25 years' experience in municipal and State government work, I believe that this bill, so far as its provisions are concerned, is just as important and will mean just as much to the investor and the public.
In connection with the questions asked by Congressman Mapes on the same subject, the answer to that would seem to be that if there is no supply and no reserve in the State that question would not arise.
Thank you very much.
Mr. CARVER. Mr. Chairman, my name is Robert D. Carver, of Kansas City, Mo. I happen to be a director of the Gas Service Co., and I would like to have a moment to answer the statement of Mr. Smith,
The CHAIRMAN. You will have an opportunity later.
Mr. CARVER. Because it is misleading, and I would like to answer it.
The CHAIRMAN. We cannot give you time just now, but later on you will be given ample opportunity.
Mr. CARVER. Very well.
The CHAIRMAN. We will now hear from Mr. Harold Burton, of Cleveland.
STATEMENT OF HAROLD BURTON, MAYOR, CLEVELAND, OHIO
Mr. BURTON. Mr. Chairman and members of the committee, I would like to present this matter simply in the light in which I have seen the development of this legislation through the experience of the city of Cleveland with natural-gas lines and through the experience of other smaller communities in Ohio in which I have been connected with the gas controversies.
I think if we divide the gas service into four groups we can see the problem that is presented by this bill. First of all, there are gas companies that distribute gas which they produce themselves, all of it, within the State. That is absolutely taken care of because in practically every State we have, including Ohio, regulation by the State commission.
Next you have the kind of case that was pointed out to you this morning where effort is made to solve it on a State-wide basis at this time, where some distributing company that does not have its own supply but derives its supply by contract from independent wholesale gas companies; the entire resale being within the State is at the mercy of the wholesale company, because so far as the State of Ohio is concerned by reason of the way the public-utilities law is written, it provides for regulation of rates of distributing companies, but leaves out of the jurisdiction of the utility commission the wholesale
A simple example will show the point that applies all the way through this field. In the village of Oberlin, where Oberlin college is located, they are supplied gas by a local distributing company which had a contract with an unrelated and unaffiliated wholesale company, which contract was for a period of 10 years and provided for an increase in the wholesale rates at the rate of 1 cent per year for each of those 10 years. And when anything was said by the local utility commission to the local company it simply said, “Why, you are fixing the rate, but we have to pay 1 cent more per year for each 10 years to the wholesaler and if we are forced to charge less, you will ruin us."
That was substantially the situation in all cases in the State of Ohio until within the past 2 years the State has amended the utility law and placed the wholesale companies under the jurisdiction of the utilities commission.
Now we come to the gas company that has a local distributing system and buys gas wholesale from the gas company that is outside the State. The city of Portsmouth, Ohio, as reported here today, is an outstanding example that buys gas in Ohio from the local distributing company, and the wholesale company is across the State line, and there is not any public utility in the State of Ohio that has jurisdiction over that wholesale company: They can fix the rate that will be charged locally; that is, in dealing with the distribution of gas to the local people in Portsmouth, Ohio, but they cannot examine into the records and into the books of the wholesale gas company to determine what would be a proper rate for the local distributing company, what it would have to pay for the gas it buys from the wholesale company.
The fourth kind of a case is the situation in the city of Cleveland. We are served by the Eastern Ohio Gas Co., which is a distributing company. It brings the gas from the Ohio River through Ohio and therefore does a wholesale service within the State, sells to a distributing company; it buys the gas at the Ohio River from the Hope Natural Gas Co., a completely affiliated company—both with the Standard of New Jersey--and pays a river rate there.
Now, we have been effective in that kind of a relationship where there is affiliation of the wholesale company with the local distributing company because of the partial control of the State commission, for the reason that in the fixing of rates the State commission is able to bring before it both companies and, say, for instance, that the retail company, the Eastern Ohio Gas Co., the one operating in the State, nays a certain price for wholesale gas, but it buys it from another affiliated company, and therefore there is control to that extent over the price it can charge because that is one of the expenses of the Eastern Co. Therefore, the State commission can require that that expense be fixed at a reasonable figure as one of the expenses of the local company, because it is within the control of the commission. Therefore, in that kind of a case partial control does exist by the State commission on the question of rates alone, but there is no jurisdiction in the Ohio commission to the matter of service performed by the Hope Natural Gas Co. Therefore, you have a sort of halfway control over the wholesale, in that we can insist in Ohio that the company makes the showing that the rates are very reasonable, but the Ohio commission cannot control the
operating company or fix a policy with reference to it in the State of West Virginia.
It is at that point that we want the Federal Government to use its jurisdiction over that interstate relationship between these affiliated concerns, the production of gas in West Virginia and the transportation into Ohio and distribution in Cleveland.
It was on that point that Congressman Boren raised a question about section 5 (b) in the bill, and an illustration of that would be the complaint in the Cleveland case. And we have had our commission in Ohio investigating the Cleveland rates, getting all of the facts in Ohio, and then the question came up as to going into an examination of facts in West Virginia where they had no jurisdiction to secure them, and the Ohio Commission requested from the State of West Virginia that it compel the West Virginia Co. to submit to an investigation of questions bearing directly upon the validity of the wholesale rates and the rates of the affiliated company as determining the rates in Ohio of the local company. The request was granted, and under this consent arrangement worked out with the Eastern Ohio Gas Co. and the Hope Natural Gas Co., the State of Ohio, through the Ohio Commission, went into West Virginia, outside its own jurisdiction, by consent, and examined the books, by consent examined the property, and therefore was able to get the information before the Ohio Commission in fixing rates. But in previous years that consent had been refused. And Y think there should be inserted in section 5 (b), if that language is not broad enough, authority for the Federal Power Commission to make an examination of property which is without the jurisdiction of the State; that the State could call upon the Federal authority to make an examination in another State of a company's records, which company came into the State, where the property is outside of the State, I think it would be a proper application to the Federal authority to have it assist in the investigation of the interstate company as bearing upon the State case, securing data outside the State itself. Mr. BOREN. May I ask a question, Mr. Chairman? The CHAIRMAN. Yes, Mr. Boren.
Mr. BOREN. If this should apply only to instances which you suggest, I would find no fault against securing full information. But is it not your judgment that cooperation between the State commissions will make it possible to reach this whole situation designed to be covered in section 5 (b)?
Mr. BURTON. I do not think we could fairly place reliance on that. It would be difficult, in my opinion, if we were to rely upon that, where you are required to compel a company in one State to submit to examination of another State commission. Then there is another reason: Local communities are dealing with public utilities, like power and natural-gas companies, and in many of them only small amounts of oil and gas are taken in proportion to the size of the problem to be solved. In the case of Cleveland the fight was begun back in 1931 and was not concluded until 1934, covering a rate which would amount to $1,000,000 a year. Cleveland spent over a half million dollars in fighting the case. We were successful and had a $3,000,000 refund in rates, or a million dollar a year rate, just because Cleveland had enough money to fight that case. That would not have been possible in the small community, and there are a lot of communities all along the line of this company from the Ohio River up to Cleveland which takes about half of the gas that is supplied in the State of Ohio, and there would not have been any one community which would have had enough money to make the fight; they would not likely have had enough money, on account of lack of funds or lack of amount of rates involved to make the fight. Therefore I think it is important today that if we are going to regulate fairly and adequately, that the State commission in all intrastate matters and the Federal Government in all interstate matters be authorized to carry on in the public interest the investigations required in solving the problems which are faced. If these communities are members of the United States population and the United States population is appropriately represented, the Federal Government ought to be in position to carry on the fight for them in making investigations on sufficient scale to solve the problem. In the absence of such investigations, burdened with the authority of meeting the local problem, under the law which is not complete, without the ability to meet the problem, it is important that some commission have authority to assist the local commission. And I cannot give a more important illustration than that referred to of the city of Cleveland and the communities along the pipe line served by the gas company. These local communities could not have possibly carried on a fight involving the amount resulting from the increased rates paid to a company operating in West Virginia.
In our case, for example, the local commission in this case would be without authority to secure data from the company operating in West Virginia in its effort to regulate the rates of the East Ohio Gas Co., but would be assisted by the Federal Government making an investigation outside the State.
The CHAIRMAN. Mr. Burton, to what extent is gas consumed in a city like Cleveland? How large is the consumption of gas in Cleveland!
Mr. BURTON. How much gas does it consume !
Mr. BURTON. I am advised about six to eight million dollars annually.
The CHAIRMAN. About $6,000,000 to $8,000,000?
The CHAIRMAN. And how much of that is transported from outside the State?
Mr. BURTON. It is about 50 percent, I think-no, about 70 percent which Cleveland consumes comes from out the State and 30 percent from the Ohio field.
The CHAIRMAN. That is all you want here; you want to complete the power to regulate the excess from without the State, that being a factor involved in the regulation of rates?
Mr. BURTON. That is true.
The CHAIRMAN. Your own State commission's authority is insufficient to cover the field except by having Federal regulation to complete that authority?
Mr. BURTON. Exactly.
Mr. MAPES. Would you mind telling us for the record who you are and in what capacity you appear?
Mr. BURTON. My name is Harold Burton, mayor, city of Cleveland, formerly director of law at the College of Oberlin, formerly from the community of Oberlin in Ohio.