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In the natural-gas producing field 4 groups, 3 of which are also in the electric field, already control over 50 percent of the production. Of those, three companies are also big in the electric field, namely, Cities Service, Columbia, and Electric Bond & Share, and the fourth company, which is not in electricity, is Standard Oil of New Jersey. You know where it stands.

In the gas pipe-line situation it is about the same or a little larger percentage, by the same groups. You will see this in part 68, exhibit 6068, left with you.

Now, I leave with you as a thing to determine, whether there has already arisen a situation in the natural-gas and natural-gas pipe line, which is the transportation end of it, industries that show a need and a demand for Federal action.

Already we have the situation as to natural gas where Midwestern big cities are up on their ears and have formed an association, and have asked to appear before the House committee, and presumably will ask for the privilege of appearing before you to lay before you their trouble in getting natural gas when it is going to waste, and when the pipe lines are only running 10 to 12 percent full. The big industrial city of Detroit has not yet an adequate supply of natural gas, and they want it. So do other cities. These are the instances of starvation in the midst of plenty, as to this commodity, that I mentioned earlier.

I think with this I should close, and I thank you for your patience. If I have been of any assistance, I am glad, and I am at your service, as are the Commission and all of our people at the Federal Trade Commission.

The CHAIRMAN. The committee will now adjourn to meet again tomorrow morning at 10 o'clock.

Mr. Corcoran will make an analysis of the bill. Following that analysis there will be one or two other Government men who will testify with reference to certain phases of the bill.

(Thereupon, at 12:55 p. m., Wednesday, April 17, 1935, the committee adjourned to meet at 10 o'clock the following morning.)

PUBLIC UTILITY HOLDING COMPANY ACT OF 1935

THURSDAY, APRIL 18, 1935

UNITED STATES SENATE,
COMMITTEE ON INTERSTATE COMMERCE,

Washington, D.C. The committee met, pursuant to adjournment on yesterday, at 10 a. m., in room 412, Senate Office Building, Senator Burton K. Wheeler presiding.

Present: Senators Wheeler (chairman), Donahey, Bone, Minton, Truman, Moore, Hastings, White, and Shipstead.

The CHAIRMAN. The committee will please come to order. You may proceed, Mr. Corcoran.

STATEMENT OF THOMAS G. CORCORAN, COUNSEL, RECONSTRUC

TION FINANCE CORPORATION, WASHINGTON, D. C.

Mr. CORCORAN. Mr. Chairman and gentlemen of the committee, my name is Thomas G. Corcoran. I am counsel of the Reconstruction, Finance Corporation.

Mr. Chairman, you have asked me, as I understand it, to describe in general terms the effect of title I of the bill, S. 1725, this morning.

This bill was drawn in two parts. Title I relating to holding companies, was drawn at the instance of the National Power Policy Committee. In testifying before you this morning I understand the request came because I cooperated in the drafting of the bill.

Title II of the bill, relating to the control of wholesale rates and certain other matters in connection with interstate transmission of electricity by operating companies was, I understand, drawn at the Federal Power Commission, and Mr. DeVane, of counsel for that Commission, will testify this afternoon about the general application: of that title of the bill.

As I have said, title I of the bill, which relates to holding companies, was drawn by the National Power Policy Committee. Dr. Splawn, at present an Interstate Commerce Commissioner, who testified before you on

Tuesday, and who was as you know once a utility commissioner in Texas, spent approximately 3 years for the Interstate and Foreign Commerce Committee of the House of Representatives investigating this holding company situation. Colonel

Chantland, who testified before you yesterday, is counsel for the Federal Trade Commission, which spent approximately 7 years investigating the ramifications of the public-utility industry, which really means the holding company situation. The Federal Power Commission has made several studies on its own initiative concerning the relationship of the holding-company problem to the public-utility problem generally.

Last fall the President appointed a committee, an interdepartmental committee, composed of those persons in each department of the Government concerned with the power problem who knew the most about the problem, to consider what should be done in the way of definite recommendations to Congress on the holding company problem as a result of all these investigations.

I think there has been laid before each member of the committee a copy of the report of that interdepartmental committee. It is attached to the message of the President of the United States, a message which the President sent to Congress on this bill in the form of a transmittal of the report of that committee.

On page 12, at the end of the report, you will find the names of those who were the members of that interdepartmental committee. There is Mr. Ickes, the Secretary of the Interior; Mr. McNinch, the Chairman of the Federal Power Commission; Mr. Mead of the Reelamation Bureau; Mr. Norcross of the Forest Service; Mr. Morris L. Cooke, who has for many years been a consulting engineer in the electrical field; Mr. Healy, formerly a member of the Federal Trade Commission, who initiated and conducted most of the investigations about which Colonel Chantland testified before you yesterday, and who is now a member of the Securities and Exchange Commission; Mr. Lilienthal, to whom has been peculiarly committed the power problems of the Tennessee Valley Authority; and Mr. Markham, Chief of Army Engineers.

A good many members of that committee, as you will see, are members who have served in more than one administration, and the committee as a whole can in no way be described as a radical or a Bolshevik committee.

The CHAIRMAN. That is supposed to fall to the lot of Senators and not members of the Cabinet or their assistants !

Mr. CORCORAN. My mistake.
The CHAIRMAN. You may proceed.

Mr. Cohen was chosen as general counsel of that committee. I was asked to cooperate with Mr. Cohen in the drafting of the bill.

This bill was drafted and then submitted to the National Power Policy Committee. It was in process of drafting nearly 5 months. It has been probably prayed over as much as any bill that has been brought up to Congress in a long time.

The CHAIRMAN. Do they pray over them down there!
Mr. CORCORAN. Well, you might say so in this case.

Senator WHITE. They may pray over them down there, but we have to do more than pray over them up here.

Mr. CORCORAN. After the bill had been worked out in a form satisfactory to the National Power Policy Committee, as you may probably know, there were two conferences with members of other organizations in the Government, and with leaders in the Senate and the House; and then after that the bill was sent over to the Attorney General of the United States, or to a committee headed by the Attorney General of the United States, to make sure that there was no question of its unconstitutionality and to make sure that the bill as drafted carried out what was conceived to be the President's policy.

The CHAIRMAN. I take it, Mr. Corcoran, after they get the approval of the Attorney General there could be no question about it.

Mr. CORCORAN. After all that checking and cross-checking, the bill was introduced in both the Senate and the House in substantially identical form.

There has been placed before each member of the committee an analysis, section by section, of this bill, S. 1725. That is, I mean of title I of the bill. As I have said, Mr. De Vane will testify this afternoon and will provide you with an analysis of title II of the bill.

This analysis of title I of the bill was originally prepared for the House Committee on Interstate and Foreign Commerce before their hearings started, and before the hearings started before this committee.

There is a difference between the House and the Senate in the numbering of sections of the bill by reason of the fact that in the House committee the short title was switched to the end of title I instead of at the beginning, so that each section in the Senate bill has a number that is one higher than the corresponding section in the House bill. This analysis has been worked out carefully, section by section, with the policy of each section carefully outlined under the section head.

When the National Power Policy Committee went into this holding-company situation it started with the fundamental underlying operating industry, which as Commissioner Splawn testified before you on Tuesday, is fundamentally a local industry.

It is a legal monopoly, relieved from the check of competition by reason of special grant of the local government. A tremendous amount of the confidence which the public has in public-utility securities is based upon the supposition that local regulation, justified by the fact of that monopoly, protects the industry so that it will be a stable industry, with stable earnings, and stable management.

From the scientific point of view, as Commissioner Splawn pointed out to you on Tuesday, there is no reason why the operating industry should be organized on anything more than a local scale. As he testified, at the present time the feasible limit of transmission of power over a high line is about 300 miles, and there have been, recently, improvements in Diesel generating equipment that make it very doubtful whether it is economical or is going to be economical in the future, to use a high line even for such distances.

The CHAIRMAN. I had understood that there had been recently perfected an invention, or that there were patents for equipment which will make it possible to carry the power farther than that economically. Is there anything to that?

Mr. CORCORAN. Well, I am not an engineer, but —
The CHAIRMAN (interposing). I understand.

Mr. CORCORAN. And I suppose engineers will testify before you; but I understand there are possibilities that through the use of direct current you can transmit for distances possibly longer than that, I mean distances greater than 300 miles. On the other hand, there is cutting in on that the possibilities of a remarkable development of the Diesel engine, which, particularly in rural communities, or in communities where the load is not too high, may replace the high line altogether.

I know something about that because I have worked on the problem of rural electrification and the problem of supply to isolated areas.

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