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Mr. DEVANE. Now, the industry will no doubt attempt to minimize the importance of this interstate transmission by a break-down of the 17.8 percent between affiliated companies in holding-company groups and between companies that are not affiliated. The industry claims that only about 1 percent of this power is exchanged between companies that are not affiliated.

Data which have been assembled by the national power survey show that not 1 but somewhere between 3 and 4 percent of the total energy which moves in interstate commerce is between companies that are not in the same holding-company group. To approach the matter from this viewpoint, however, is entirely misleading. The table which I have just submitted for the record shows the percentage of import and export into or out of each State.

I should like to call your attention to a few figures: For example, in New Hampshire there are exports of 61.1 percent of the electric energy generated. Vermont exports 70.8 percent of its energy; Massachusetts imports 32.2

percent; Rhode Island imports 48 percent and exports 37.1 percent; Pennsylvania imports 33.8 percent; Delaware imports 103 percent; Maryland imports 96.3 percent and exports 97.7 percent; the District of Columbia imports 33.6 percent; West Virginia imports 32.8 percent and exports 57.8 percent; Indiana exports 43.2 percent; Missouri imports 44.8 percent; Virginia imports 64.3 percent and exports 74.5 percent; North Carolina exports 30.2 percent; Kentucky imports 57.9 percent; Tennessee imports 67.7 percent and exports 58.3 percent; Mississippi imports 88.8 percent; Alabama exports 38.9 percent; and Georgia imports 30.9 percent.

And I could go on with this list, but you will find that there is a very large percentage of importations and exportations of electrical energy across State lines in many of the States of the Union.

It has also been developed through the power survey that there are 97,000 miles of transmission lines in the United States of between 22,000 and 60,000 volts and 63,000 miles of lines of 60,000 volts and over. These high-voltage transmission lines are used chiefly to tie up different operating properties in the same holding-company groups. They are constructed and operated in the interest of the particular company, and, with probably one or two exceptions, are not used for the purpose of providing electrical energy in any given area in the public interest.

In the national power survey interim report, following page 6, will be found a map showing the transmission lines of 60,000 volts and over.

Senator WHITE. Where will I find that map!

Mr. DEVANE. It follows page 6 of that pamphlet entitled “Federal Power Commission, National Power Survey, Interim Report, Power Series No. 1."

Next I should like to direct your attention to the size of the industry and the annual toll collected from the people of the United States for the service rendered. The amount of capital invested in plants devoted to the production of electrical energy as claimed by the industry is, in round figures, $12,900,000,000.

Senator HASTINGS. You say the map shows the transmission lines of 60,000 volts or over?

Mr. DEVANE. Yes. That is only transmission lines of 60,000 volts or more. But we are in process of preparing a map that will show all transmission lines in interstate commerce. I could not have that ready to show you today. It is quite a job.

The CHAIRMAN. You may proceed.

Mr. DEVANE. The gross revenue from plants devoted to the production of electrical energy is $1,966,000,000, of which $1,834,000,000 represent revenue received from

sale of energy Senator COUZENS. How do you discriminate as between commercial and industrial plants? What is your line of demarcation?

Mr. DEVANE. Whether or not it is used for commercial purposes, like in stores; or whether or not it is used for power.

The CHAIRMAN. Senator Barkley, this is Mr. DeVane of the Federal Power Commission.

Senator BARKLEY. How do you do, Mr. De Vane.
Mr. DEVANE. Good morning, Senator Barkley.
The CHAIRMAN. You may proceed.

Mr. DEVANE. The recent rate survey of the Commission shows that there are 16,265,802 urban and 4,255,068 rural domestic users of energy. Rural as used in this sense conforms to the census classification, and includes villages of 2,500 population and less. There are 3,734,293 commercial and 600,826 industrial and other users, making a total of 24,855,989 users of electrical energy. The domestic users pay $675,000,000 annually for their service. The commercial users pay $510,000,000, and the industrial users pay $649,000,000, making up the total of $1,834,000,000.

There are 12,216,150 rural homes in the United States including towns of less than 2,500 population, and of these homes 3,511,114 use electric energy. There are 6,288,000 farms, of which only 743,954 use electric energy, or about 1 farm out of every 9.

Now, the large investment of consumers of electric energy in equipment is too frequently overlooked. In that connection, I should like to quote a paragraph from a speech of the Honorable Frank R. McNinch, Chairman of the Federal Power Commission, delivered December 10, 1934, as follows:

There is another and larger class of investors the value of whose investment is dependent upon the policies and practices of the power industry. I refer to the consumers who, according to an editorial in Electrical West, October 1934, have a greater investment in equipment to utilize electricity than the utilities have in equipment to furnish the current. It is stated that the utilities had on December 31, 1933, an investment of $12,900,000,000, while the consumers had an investment of $13,200,000,000 in utilization equipment, one-half of which was in household appliances. Every dollar of this consumer investment represents actual money paid for equipment. No such assumption may be safely made at to the claimed investment of the utility companies, as we do not know what' part represents money and how much represents water,

Dr. David Friday confirmed this estimate of consumers' investment in his recent testimony before the House Interstate and Foreign Commerce Committee.

The CHAIRMAN. Who is Dr. Friday?

Mr. DEVANE. Dr. Friday is an economist of rather wide reputation who appeared in behalf of the industry before the Committee on Interstate and Foreign Commerce of the House of Representatives when they were holding hearings on this subject.

Senator HASTINGS. Might I inquire as an illustration whether an electric refrigerator would be classed as a part of the electrical equipment of a household ?

Mr. DEVANE. Yes, sir. The CHAIRMAN. You may continue your statement. Mr. DEVANE. Dr. Friday said: To use this additional current, people had to purchase appliances costing at least $2,500,000,000, or an average of $500,000,000 a year during the 5-yeardepression period.

Now, I might say in that connection that I think that represents an investment that is larger than the entire industry made during that 5-year-depression period. Continuing the quotation:

I think it might be maintained that the users of electric energy in the United States, if you take industrial as well as commercial and domestic users, had as much money invested in appliances as electric companies have invested in generating, transmission, and distributing lines.

Now, Mr. Chairman, the time at my disposal here this morning would not permit of a section-by-section analysis of this bill. So, if it is permissible, I should like to discuss what I think are the chief features of the bill and have permission to incorporate, if I may, a memorandum that I have prepared which does explain each section of the bill.

The CHAIRMAN. At this point I will say, when we come to holding an executive session in reference to the bill, when we come to the point of meeting in executive session to take up the bill S. 1725, then We will take it up section by section, both as to the holding-company provision and as to this particular provision. At that time I intend to ask somebody representing the Federal Power Commission to come into the executive session, when we take it up paragraph by paragraph.

Senator BARKLEY. But, Mr. Chairman, it might be wise to have this statement made a part of the record. I think we should like to have it here.

The CHAIRMAN. Yes; the committee reporter will make that a part of the record.

Mr. DEVANE. I should like to have it go in your record, if I may have that permission.

The CHAIRMAN. That permission is given, and the committee reporter is directed to make it a part of the record at this point.

(The paper headed "Analysis of Wheeler Bill, S. 1725, pp. 104 to 140, Regulation of Interstate Commerce in Electric Energy is here made a part of the record, as follows:)

Title II (pp. 78 to 104) of S. 1725, introduced by Senator Wheeler, is entitled "Amendments to Federal Water Power Act." By these amendments the present act is divided into three titles. It is provided that the present Federal Water Power Act shall constitute title I of the amended Federal Power Act. The Wheeler bill does not contain all of the sections of the present act. It includes only those sections which it proposes to amend. None of these amendments to the present sections of the act are of major significance; they are made largely for the purpose of clarifying its effect in situations which have arisen in the course of its administration. A separate memorandum explaining these amendments is submitted herewith. The present analysis is devoted to the new titles which are added by the bill (pp. 104 to 140). Of these new provisions, title II (pp. 104 to 122) contains the substantive provisions for the regulation of interstate electric utilities, and title III (pp. 122 to 140) brings together the provisions applicable to both water-power licensees and interstate operating companies, including the general administrative and procedural sections.

The new title II of the act is designed to secure coordination on a regional scale of the Nation's power resources and to fill the gap in the present State

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regulation of electric utilities. It is conceived entirely as a supplement to, and not a substitute for, State regulation. Federal action is limited to those subjects that can effectively be handled only on a national scale; the coordination of existing interstate facilities and the development and interconnection of new facilities; control of security issues; accounting control which is essential to the compilation of a uniform body of information about the industry; and regulation of the rates of bulk sales of energy in interstate commerce-rates which the Supreme Court has held to be beyond the reach of the States. The important task of the regulation of consumers' rates is left entirely to the States. Every effort has been made to give the Federal Commission powers which will enable it to assist the States to make their regulation more effective.

Provision is made for the delegation of matters arising in the administration of the title to joint boards composed of representatives of the States affected.

An analysis of titles II and III by sections follows:

Section 201 (p. 104) defines the jurisdiction of the Commission over interstate utilities by stating the subject matter to which the title relates. It covers the transmission and sale of electric energy in interstate commerce, the production of energy for such transmission and sale, and all facilities in systems of power transmission situated in more than one State. Facilities for local distribution and for the production and transmission of energy solely for one's own use and not for resale are excluded.

The term “public utility” is used for convenience to define the operating companies that come under the provisions of the title. In subsequent provisions it is thus unnecessary to make constant reference to the limited jurisdiction of the Commission; use of the term “public utility” carries with it this essential limitation.

Section 202 (p. 105) imposes in general terms the duties of a public utility upon every operating company embraced within the jurisdiction defined in the preceding section. They are required to furnish, exchange, and transmit energy upon reasonable request, to maintain adequate service, and to charge reasonable and nondiscriminatory rates.

Section 203 empowers the Commission to divide the country into regional districts for the control of the production and transmission of electric energy. Except in times of war or other emergency, this control may be by voluntary coordination of power facilities under the supervision and direction of the Commission. But the Commission is empowered after notice and opportunity for hearing to direct public utilities to take all the steps necessary to secure such coordination.

This section furnishes the basis on which integrated regional systems of power generation and transmission may be built. The Commission can compel connections to be made that will secure an adequate supply of electric energy in all sections of the country at the lowest possible cost. It may direct the source from which current in each interconnected system should be taken at any particular time.

It also affords a means of eliminating the evils that accompany rivalries and jealousies between systems in a field where competition has long been aban. doned as a method of control. Present companies would gain strength and stability through the increased use of their facilities and the elimination of wasteful duplication of plant and services.

Section 204 gives the Commission jurisdiction over the construction, extension, and abandonment of facilities and services. This is a necessary power to make effective the coordination of electric facilities in integrated systems. This section also requires Commission approval for the transmission of electric energy from the United States to a foreign country. The following two sections make effective the Commission's control (sec. 205) over the sale or encumbrance of facilities or the merger, consolidation, or acquisition of properties, and (sec. 206) over security issues of electric utilities subject to the Commission's jurisdiction.

Section 207 requires each public utility to file with the Commission schedules showing the rates, charges, and classifications which are subject to Commission regulation in force and effect, and no charge can be made except after 30 days' notice to the Commission and to the public. The Commission is given authority, either upon complaint or upon its own initiative without complaint, to suspend the effective date of the change in rates for a period not exceeding 5 months beyond the time when the change would otherwise go into effect, for the purpose of investigating the reasonableness of change. If the investigation cannot be completed within the 5-month period, the new rate may go into effect, but in case the change results in an increase in rates the Commission may require the utility to make refunds if the increase is not approved.

Section 208 authorizes the Commission, after hearing had upon its own motion or upon complaint, to fix and determine just and reasonable rates. This section also provides that the Commission may, and upon request of State commission, shall investigate and determine the cost of production and transmission of electric energy across State lines in cases where no wholesale rate is involved and the Commission is without authority to establish a rate governing the sale of such energy. The purpose of this provision is to aid the State commissions in determining just and reasonable rates for energy furnished by companies having properties in more than one State. The State commissions are often hampered in their rate proceedings by their inability to value property outside their States and the difficulty of making allocations of property, income, and operating expenses. Only a Federal agency can have jurisdiction broad enough to deal with the situation.

It cannot be too strongly emphasized that the rate-making power conferred upon the Commission by sections 207 and 208 is limited to the field in which the States have no constitutional authority. Under the provisions of this title, the power of the States to regulate retail disribution rates, even where the energy comes directly from another State, is expressly preserved; wholesale rates alone are made the subject of the Commission's jurisdiction. The ratemaking provisions in the present bill are designed merely to fill the gap in regulation which results from the inability of the States to fix wholesale rates.

Sections 209 and 210 authorize the Commission to require establishment and maintenance of safe, proper, and adequate equipment, appliances, facilities, and services and just and reasonable rules, regulations, standards, classifications, and practices.

Section 211 authorizes the Commission to ascertain the actual prudent cost of the property of every public utility under its jurisdiction and to require the utilities to file inventories of their property and its cost. It directs the Commission to keep itself informed of the cost of all additions and betterments to utility property. And it provides that in determining just and reasonable rates, the Commission shall fix rates which will allow a fair return upon the actual legitimate prudent cost of the property used and useful for the service in question. Rate regulation must eventually be based on prudent investment. Recent decisions of the Supreme Court and the respect which the Court has always paid to the constitutional interpretations of the coordinate branches of the Government afford grounds for hope that this highly desirable result will be accomplished if the Congress should now definitely adopt the prudent cost-rate base. This would present the case to the Court in a new light with a declaration of national policy that it has never had before.

The next two sections, 212 and 213, contain the usual utility law provisions, permitting complaints to the Commission and orders for reparation in cases where unreasonable or discriminatory rates have been charged.

Section 214 (a) provides that the Commission may refer any matter arising in the administration of this title to a board composed of persons nominated by the State commissions of the States affected. The board would act as an agent of the Commission and its decisions would have such force and effect as would be determined by the Commission's regulations. Each State affected would be entitled to the same number of representatives on the board and the Commission would have discretion to reject any nominee. This subsection is designed to permit decentralized administration, under the general supervision of the Commission, by individuals who are acquainted with the situation and the problem in the locality affected by the particular proceeding. It is substantially identical with a section included in the Communications Act.

Subsection (b) of section 214 authorizes the Commission to confer with any State commission regarding the relationship between the matters within the jurisdiction of the State and Federal commissions and to hold joint hearings with any State commission and to avail itself of such cooperation as may be afforded by a State commission. Subsection (c) authorizes the Commission to make available to the State commissions any information which may be of assistance to the States in their regulation of utilities and any of its experts who may be of value as witnesses in State proceedings.

Sections 215 and 216 govern service contracts with utilities and the acquisition of utility securities by holding companies. These subjects are fully covered by title I of the bill, and these sections can be eliminated.

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