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that, the east Ohio people have a promotional or have a rate, a low bracket, to industrial consumers who use a large quantity of gas in any individual day, of 381/2 cents, gas which they claim they pay their sister company at the Ohio River 381/2 cents for and transport it to the city of Cleveland.
We realize, of course, that is an industrial rate. We favor promotional rates. And we realize that industrial rate prices to industries should be lower than the domestic consumers, but that can only be arrived at in a certain technical manner, and we think if this bill passes that the Federal Power Commission is sufficiently familiar with the engineering problem involved so that they will set up just what is a just and reasonable rate below that of the domestic consumer in a franchise. In other words, the price of gas is predicated to some extent upon a load factor. In other words, Detroit has a contract to purchase from the panhandle gas and the price that they pay of 3312 cents is based on a load factor of 70 percent; 70 percent, and they arrive at the load factor, for the benefit of some of you gentlemen that may not follow me, they arrive at the load factor in this sort of a fashion: Take the heaviest day of consumption of the year, and set that figure aside. Then they take the total consumption for the other 364 days and divide it by 365, and the relationship of that figure to the heaviest peak day is the load factor, and 70 percent of the load factor is highly desirable. So that the price Detroit has obligated themselves to pay is based and predicated upon the 70-percent load factor.
Now, that means that gas is fed into that line at the intake and compressed all along the line—you have to compress it, and keep 30 percent of that line flowing and yet there is no revenue from it; but you have to keep it there because they are liable to have a cold day and pull that 100 percent out, and probably 340 days in the year they will not pull much out over the 70 percent, so that the 30 percent of that line is rolling all of the time and has no value on the value of production at the intake and can be sold at a much less figure.
While I am not so familiar with the Detroit contract, I think that after they reach a certain point, beyond their load factor of 70 percent, that that gas drops from 331/2 cents to less than 20 cents. And, of course, that gas can be sold to industries and it is off peak gas and has to be sold at the time when you are not really having the cold weather.
Now, there was a question asked yesterday that I would like to answer in my own way. One of you gentlemen asked the question yesterday as to whether we could be assured under the present set-up of a fair and reasonable rate in the city of Cleveland under the present circumstances and the answer to that is emphatically no, because even if we had plenty of money—which we have not got-to make investigations and parleys, and even if the Commission were favorable, still the Hope people could say in the final analysis they would not sell any gas to the East Ohio Gas Co. and the East Ohio Gas Co. would not have any gas to bring into the city of Cleveland.
So we are absolutely helpless in the matter so far as being positively assured of a just and reasonable rate.
We hope that you gentlemen will seriously consider the amendments that were offered here by Mr. Scheer, the secretary of our alliance.
We feel that section 7 (c) is going to work a hardship on a number of cities.
Let me just say to you, to illustrate just how that is going to affect the city of Cleveland, we are involved now in a rate fight. We can buy gas from the Panhandle people in Texas if we want to make a contract and assure them we are going to use so much gas. They would be satisfied to be assured of the same amount of gas that we are now purchasing, but it would take us a year to get that gas, and in order for us to get that gas we would have to have a distributing plant. In order for us to have a distributing plant we would have to have the money, and in order for us to get the money we would have to issue general obligation bonds, which we do not have authority to issue because we have exceeded our limitation. We would have to get enabling legislation from the State of Ohio. That would take a long time for us to do that through the legislature.
But there is one other manner in which it might be accomplished: We can raise that money through mortgage bonds; and some of us in Cleveland have been shopping around to see just how and where we can raise the amount of money necessary to purchase that plant in the event we cannot work out a fair and equitable arrangement with the East Ohio Gas Co.
Now, then, if section 7 (c) were to be in this bill, we would not know whether we could get a contract for gas. I am quite sure we could sign that contract for a new supply of gas from Texas within a week; but if they had to come to Washington and set up and obtain a certificate of necessity and convenience, it is going to take 6 months or a year, because the Power Commission will be in no position to know whether they should issue a certificate of necessity and convenience until they inquire to find out the reasonableness of the rates, and they are going to have to make that examination and make it after this bill passes. Suppose someone comes down here to Washington next week and asks the experts of the Federal Power Commission if they can furnish gas to the city of Cleveland? Why, the Power Commission is going to be 6 months or a year before they will be able to determine it-the reasonableness of the rates that are going to be set in the city of Cleveland; so obviously I think that sort of a request would be denied at the present time.
So we just have to disband any theory of municipal ownership, I would say, for the next year with section 7 (c) in the bill.
Mr. HALLECK. Mr. Chairman-
Mr. HALLECK. As I understand you, you say this would not assure you of a lower rate because ultimately the company would refuse to furnish you gas at all. Does this bill provide that they cannot terminate their service without permission from the Commission?
Mr. REED. That is right.
Mr. HALLECK. Well, then, of course, that contingency to which you refer could not happen if this bill were to become law.
Mr. REED. Well, they threatened to tear the lines up on us before, but the Ohio commission has protected us in that respect. The Ohio Supreme Court said that they could not rip the lines up.
Mr. CROSSER. If the people who supply the gas at the Ohio River should discontinue it, you could not do much? You could not do anything on the other side of the river?
Mr. REED. That is right.
Mr. MAPES. You say that 70 percent of the total amount of gas consumed in Cleveland comes from the West Virginia fields, from a Standard Oil controlled company, and 30 percent from the Ohio fields?
Mr. REED. Local fields. Mr. MAPES. Do you obtain the gas from a separate company in the Ohio fields
Mr. REED. Yes; from various companies. Some of that gas is purchased from individuals who have individual gas wells and farmers, independent producers, and quite a bit of it, probably 50 percent of that 30 percent, comes from wells owned by the East Ohio Gas Co.
Mr. MAPES. So that you are now furnishing gas to the consumers of the city of Cleveland from more than one company!
Mr. REED. No. We have just the East Ohio Gas Co., but they are furnishing us other companies' gas.
Mr. MAPES, The East Ohio Gas Co. is the Standard Oil Co.!
Mr. MAPES. And it buys gas from the West Virginia field and from the Ohio field both; is that the situation?
Mr. REED. That is right. It buys gas at the river.
Mr. MAPES. And you buy all of your gas from the East Ohio Gas Co.?
Mr. REED. That is right.
I want to thank you gentlemen for having an opportunity to appear here. If there are no other questions, that is all I have.
The CHAIRMAN. We thank you, Mr. Reed.
There was some desire on the part of the members not to have a session tomorrow because the House is not going to be in session and some members are going to be absent. There is an amendment coming up on an appropriation bill that probably a good many members of the committee will desire to vote on and desire to be on the floor when it is considered this afternoon. It is possible, however, that that amendment will be disposed of by 3 o'clock, so if agreeable to the committee, we might meet at 3 o'clock this afternoon instead of tomorrow.
Mr. COLE. Instead of tomorrow?. The CHAIRMAN. With the idea of not meeting tomorrow. Mr. MAPES. What witnesses will appear before the committee this afternoon?
The CHAIRMAN. Mr. Dickey, city solicitor of Portsmouth, Ohio; Mr. Robert D. Garver, to make a statement in answer to a former witness; Mr. Hunt, of Syracuse, N. Y.; and Mr. Maltbie, chairman of the Public Service Commission of the State of New York.
Then, there is a statement to be filed by Mr. Gandy, representing the National Coal Association.
Mr. HALLECK. Are those proponents or opponents ?
Mr. MAPES. I have no objection to meeting this afternoon but I imagine that it will be difficult to get a very large attendance of committee members.
The CHAIRMAN. I doubt whether we will get much of an attendance tomorrow.
Suppose, then, that we meet at 2 o'clock with the understanding that when the amendment comes up on the floor we will recess.
(Thereupon, at 12:05 p. m., the committee took a recess until 2 p. m. of the same day.)
THURSDAY, MARCH 25, 1937. The committee reconvened, pursuant to the taking of recess, at 2 p. m.
The CHAIRMAN. The committee will come to order, please. I believe the next witness is Mr. Dickey. About how long do you want to take, Mr. Dickey?
STATEMENT OF W. L. DICKEY, CITY ATTORNEY, PORTSMOUTH,
Mr. DICKEY. Mr. Chairman, I will try to be as brief as I can. The CHAIRMAN. First, give us your name for the record, and your official designation.
Mr. DICKEY. My name is W. L. Dickey. I am city attorney, Portsmouth, Ohio.
The CHAIRMAN. Thank you.
Mr. DICKEY. I would like to give you a brief history of the Portsmouth situation down there, which I think is a condition or set-up which if this bill passes will be applicable to those conditions as they exist.
I will try to be very brief, Mr. Chairman. I am the director of law of the city of Portsmouth, and stating the case, the United Fuel Gas Co., which is a subsidiary of the Columbia Gas & Electric Co., delivers the gas wholesale to the gate of the city of Portsmouth; the Portsmouth Gas Co. is a subsidiary of one of the other companies, the Associated Gas & Electric Co., and distributes this gas to the burner tips in the city of Portsmouth.
In 1932 we passed a rate ordinance, fixing rates to the consumer, at 40 cents per thousand. That action was appealed by the United Fuel Gas Co. to the Utilities Commission of Ohio. We have been wrestling around with that case before the utilities commission since that time.
We did not have many grievances to find with the Portsmouth Gas Co. other than some attempts that they contained in their cost of production, or delivery, and they were eliminated. The next question, however, arose as to the matter of costs. We at that time did pass some legislation in Ohio putting the United Fuel Gas Co. under the jurisdiction of the Utilities Commission of Ohio. They were ordered to submit their records to show that the gate rate as well as the Ohio River rate was reasonable and just, and that they refused to do, appealing the matter to the United States district court, where we have had 2 years on the matter, and it is still pending in that court.
They were objecting to the jurisdiction of the Utilities Commission of Ohio, given to the commission through the legislation that we had passed.
Now, the United Fuel Gas Co. is charging at the gate, to the distributing company, 37 cents. In the Columbia gas controversy, or rate case was a case in which the Columbia Co. carried its fight to the Supreme Court of Ohio, and will probably end in the United States Supreme Court, where the company was charging all the way from 18 to 24 cents, using the Ohio River rate charge. Now, regardless of whether that is a reasonable charge, they are selling, as I stated before, gas to the Portsmouth Gas Co. at 37 cents. At New Boston, a city of approximately 8,000, lying immediately east of Portsmouth proper, and is surrounded on three sides by the city, and the streets only separate the two cities, and across the street, the United Fuel Gas Co. is distributing at the burner tips gas at 40 cents per thousand. They are further selling to the Ironton Distributing Co., 30 miles east of Portsmouth, and on the Ohio River, gas at 40 cents. And right across the river they are selling gas at about 29 cents. And, a little farther west the rate to the
Mr. MARTIN (interposing). How do they cross the river?
Mr. DICKEY. They cross the river between Huntington and Ironton at one place and then they cross it again
Mr. MARTIN. I mean how do they cross it?
Mr. DICKEY. By laying the line on the bottom of the river. Furthermore, the United Gas Fuel Co. is selling gas to the Wheeling Steel Corporation at Portsmouth at a rate less than 25 cents. I have not been able to verify that, but I have been told, informed by different sources that it is as low as 21 cents.
Those are some of the figures that I wished to give you gentlemen because in the passage of this bill, if this bill becomes effective, the application of this bill will apply specifically to our conditions there. This is probably one of the most outstanding cases in the country in which legislation of this kind will apply.
Mr. MARTIN. May I ask you a question?
Mr. MARTIN. Do you claim that these different ranges in rates, from 25 to 40 cents, are under practically the same conditions as to production, transportation, and distribution?
Mr. DICKEY. Yes; they all come from the same line and is gathered from the same territory.
Now, this gas distributed in Portsmouth is gathered in some lines in West Virginia, extending into Kentucky. They have in those localities an abundant supply of natural gas. It comes north into Ohio and some of it goes East. And furthermore, we have considerable distress gas in that territory. Now they talk about consumption; they talk about the production, or the available supply of gas not being sufficient. These pipe lines come over there and gather that gas up and transport it across the river into Ohio and other places and are so arranged that a great many people in West Virginia and Kentucky cannot get their gas into the pipe lines. As 'an illustration, they make a contract with an individual, or with some small company, to take so much of their gas as the market will require or the industry may demand into the pipe line. The pressure has to be maintained at the higher pressure for them to get in their gas. That is my explanation of distress gas in this locality.
Now, we have tried in every way that we can to reach an agreement with the United Fuel Gas Co. in order to get gas at a reason