This is the holding-company title. The purpose of that amendment is to eliminate operating utilities from the holding-company part of the act. When we come to title II, we shall recognize the propriety of congressional legislation affecting electric utilities. This is merely a separation of the drastic regulations which Congress sought to impose upon the interstate holding company from the utility which may be a subsidiary of a holding company.

The next paragraph is paragraph (f), and reads as follows (reading):

(f) Nothing contained in this title shall be deemed in any way to affect or to minimize the regulation and control over public-utility companies by the respective State commission; and whenever, by the laws of any State, the State commission is given control over the issuance of securities by, or other transactions of, public-utility companies, the jurisdiction of such State commission shall be exclusive as to any matters over which it has jurisdiction.

The CHAIRMAN. Then you would exempt them from the Securities Commission?

Mr. BENTON. No. We never have asked to have them exempted from the Securities Commission so far as the sale of their securities is concerned. We did not appear on the securities bill at all. We considered that that was entirely proper legislation. This has to do with the issuance of securities. That had to do with the sale of securities to the public.

The CHAIRMAN. But if you are going to have control over these companies at all, you have to have control over them in just the same way as the Interstate Commerce Commission has control over the railroads. The reason the railroads have got into trouble is because of the fact that the railroads have not been subject to that regulation. The Interstate Commerce Commission has not had supervision, and has not exercised supervision, over the issuance of securities. You know perfectly well that while it may be said that the issuance of securities has nothing to do with rates, as a matter of fact it does have a bearing upon rates.

Mr. BENTON. I think it is important, and that is why the regulation has ordinarily been placed with the regulatory commission in the State. You are faced with this situation. There cannot possibly be two regulations of the issuance of securities. There is only one issue of securities. Congress recognized that when it took control of railroad securities. It made it exclusive. I apprehend that Congress would not provide for a double running of the gauntlet, so to speak, by utilities-by requiring them to get authority from the State and from the Federal Commission, and also to meet requirements of the Securities Commission.

The CHAIRMAN. I certainly think that the Federal Commission should have the say as to whether they are going to issue securities or not. Not only is the State interested in that, but the general public is interested in the sale of these securities.

Senator COUZENS. Not only that, but the situation is not comparable with that of the railroads. We have only one railroad agency, You have 48 State agencies. You can hardly leave the issuance of securities to 48 State decisions.

Mr. BENTON. As to the railroads

Senator COUZENS. In the case of the railroads there is only one agency that has anything to do with the issuance of securities, and that is the Interstate Commerce Commission. You could hardly let 48 State commissions authorize the issuance of securities to be old nationally without some Federal supervision, could you?

Mr. BENTON. You will do that inevitably, because whatever of these companies are not operating interstate will necessarily be left subject to state regulation. You can, I have no doubt, take exclusive control of the regulation of the securities of the interstate companies, but the question which I have

The CHAIRMAN. With reference to the States, I do not think there is any question about it. The securities, when issued, are sold all over the country. The sale of them is not confined to the particular State.

Mr. BENTON. That is entirely true, and it was for that reason that we never have interposed any objection or question with respect to the entire propriety of the Federal Government granting to the Securities and Exchange Commission power to regulate that phase of it. That is done under the act now. This is a question as to the issuance of the securities. Under the laws of the several States these securities are now regulated. There are some States where there is no such regulation. In such States, of course, this act would apply, because this proposed paragraph which I have read merely saves the right of the local commission to regulate where it has been granted the power to do so by the State.

Paragraph (g) reads (reading]:

No provision of this title shall apply to a public utility company, the major part of the business of which is not subject to the jurisdiction of the Commission, solely by reason of the fact that such public-utility company controls another public-utility company operating in another State, the major part of the output of which, measured in volume, is transmitted to said controlling public utility, and is used by it for sale to consumers in intrastate commerce or in local distribution.

The CHAIRMAN. What has that reference to?

Mr. BENTON. Tbat refers to a situation such as I spoke of in Illinois.

The CHAIRMAN. Has that reference to securities?

Mr. Benton. No; this has reference to everytoing. In other words, we ask that a public utility located in Illinois, or in Maryland, finding it convenient to have its generating plant outside the State, and obliged to incorporate outside the State, but receiving all or practically all of the output of that generating property, shall not itself be made a rolding company and subjected to all the regulations which are imposed upon other holding companies. We do not seek, as I will tell you later, to withhold Federal regulation from the generating company which sends its power across the State line, but the owning company, which merely for purposes of convenience has located that generating plant outside the State, we ask to have not designated as a holding company.

The CHAIRMAN. If you did not have it, you could very easily break down your whole law by simply having them organize their aolding company outside tre State for the purpose of putting their generating plant there. I do not know any reason why the State commissions should object to it.

Mr. BENTON. That came up on the suggestion of Mr. Olson, that these Illinois companies do not do business outside the State. They have located their generating plant outside, but they do not want



to become holding companies, because they are not holding companies in any true sense of the word. For convenience of holding tbe title to that generating plant they have incorporated a company in Indiana. Having put their plant there, the output of that plant should be subject to the regulation of the Federal Government, because there is no other Government that can regulate it. We ask that it be regulated as to what it does

The CHAIRMAN. What is your fear with reference to it?
Mr. BENTON. I have not any fear

The CHAIRMAN. What provision of the bill are they objecting to that gives the Government jurisdiction over that particular plant? If it is an integrated holding company within the State of Illinois, in that particular division, or if it is incidental to it, then it would be exempt from the provisions of this bill. If it is not incidental to it, or if it is not an integrated district, then it should not be exempt from it.

Mr. BENTON. If it becomes a holding company, of course, it becomes obliged to subject itself for all time to come to all the regulations which you impose. It cannot make an extension. It cannot issue any securities. It cannot pay a dividend. It cannot do anything except by authority of the Federal Commission in Washington.

Senator COUZENS. Is there any difference, in your judgment, between an affiliate and a holding company?

Mr. BENTON. Not for the purposes of this bill. A holding company, of course, is a company that holds a certain number o. companies, all of which are affiliates of each other. They are not holding companies of each other.

Senator COUZENS. I can see quite a distinction between an ordinary affiliate and a holding company, such as is responsible for all of this trouble we have had. Is there not a distinction between a holding company, as we generally conceive it to be, and an affiliate which is organized for the purpose of creating one operating unit, such as across the line from Illinois, in Indiana, as you have mentioned?

Mr. BENTON. Of course there is a difference in the effect of them.

Senator COUZENS. If you wanted to cover any case like that, for the purpose of rounding out one operating unit, why could you not include a description of an affiliate that would accomplish that purpose? I do not see how you are going to get around that any other way. I do not construe an operating company that owns an affiliate to round out one operation, as a holding company, in the public mind.

Mr. BENTON. Of course, it is not what you are aiming at at all. That particular amendment is offered as one which we think will meet that kind of situation, which I do not believe will be open to the objection which the chairman suggested. If it is, it ought not to go in, but I am unable to see how it would break down the law. In some way we wish that situation to be met, because those companies, as Mr. Olson pointed out, are not doing business anywhere else except Illinois. They are Illinois companies, but just for purposes of convenience they have established their generating plant outside the State. Because they did they ought not to be subjected for all time to a kind of regulation which was never designed for them,

We have suggested an amendment to section 8 by the striking out of paragraph (b). That is the one which forbids any company to hold the securities or property of a company of another utility characterit forbids an electric company to hold a gas company, or a gas company to hold an electric utility.

Senator COUZENS. Do you think they ought to own them?

Mr. BENTON. I think that it often is in the public interest that they should, if your enterprises are not large. You have a single overhead for operating two kinds of services. It simply saves the public that much money. There is nothing inherently inimical to the public interest.

The CHAIRMAN. Except that you do not have any competition between them.

Senator COUżENS. That is what I was going to say. In other words, if the company found that it was more profitable to develop the electric light business, than the gas business they might block their gas business.

Mr. BENTON. They might.

Senator COUZENS. That is exactly what they do. I know of cases where they do it. Whether they own the company or not, they have working arrangements whereby they block the gas business in the interest of the electric business.

Mr. BENTON. The judgment of our people was that the instances where there are these common holdings are very numerous, and that there is not anything in the nature of things so inimical to the public interest in such common holdings as to make it desirable to have a provision of law which outlaws them. You are setting up a commission here to regulate electric utilities. If it finds that this common holding is sufficiently opposed to the public interest so that there ought to be some limitation on it, we assume that it would so report to Congress, and secure legislation. But we have not any information which leads us to believe that this provision ought to be in the law, which would absolutely outlaw all common holdings. I might state that in the city of Keene the gas company was practically dead until the people who are running the electric company reached out and acquired it, and put in new gas manufacturing machinery, and gave a good gas service. I know that in that community they did a good service.

The CHAIRMAN. What is your next amendment?

Mr. BENTON. The next amendment is to section 9. It is obvious enought without reading it. That is the one which specifies the things which a company may invest in. It is merely à provision that nothing in this act shall authorize them to invest otherwise than they are permitted by the State law.

The next amendment is to section 15. It is unnecessary for me to read it. Section 15, on page 55, paragraph (e), on page 57, provides that

After the Commission having jurisdiction thereof has prescribed the form and manner of keeping accounts, no public utility shall keep any accounts other then those which are prescribed.

Many of these public utilities are State-operating utilities. Many of them are going to be utilities the major part of the business of which is State business. I am sure it would not be the intention of Congress to disable the States from getting information from its utilities which shall be alike for all the utilities.

The CHAIRMAN. This does not prevent them from doing that, as I read it. (Reading):

(e) After the commission having jurisdiction thereof has prescribed the form and manner of making and keeping accounts, cost, accounting procedures, correspondence, memoranda, papers, books, and other records to be kept by any company hereunder, it shall be unlawful for any such company to keep any accounts, cost-accounting procedures, correspondence, memoranda papers, books, or other records other than those prescribed or such as may be approved by the commission having jurisdiction thereof, or to keep its cccounts, cost-accounting procedures, correspondence, memoranda, papers, books, or other records in any manner other than that prescribed or approved by the commission having jurisdiction thereof.

That is simply for the purpose of having a unified accounting system all over the United States, and so that they will not be able to keep two sets of books, one for one purpose and another for another.

Mr. BENTON. I know the purpose of it, Senator, but if you stop with the language which is now in the bill, then if the State system of accounts varies at all from that which has been prescribed federally, the utility will point to that and say “We cannot keep your State accounts. The State commission, which has prescribed for the electric utilities in the State a uniform set of accounts, wants to get the accounts for all the utilities in the State alike. If those that happen to be subject to the Federal Commission are unable to keep the State accounts, the State will have some accounts kept in one way and some in another.

The CHAIRMAN. Do you think it is a good thing for the States to have some accounts kept in one way and some in another? Would it not be a good thing for the utilities generally to have a unified system of accounting for all the States? My attention has been called to the fact that on page 69 there is this language (reading):

In the case of the accounts of any company whose methods of accounting are prescribed under the provisions of any law of the United States or of any State, the rules and regulations of the Commission in respect of accounts shall not be inconsistent with the requirements imposed by such law or any rule or regulation thereunder; but this provision shall not prevent the Commission from imposing such additional requirements regarding reports or accounts as it may deem necessary or appropriate in the public interest or for the protection of investors or


Would not that cover it?

Mr. Benton. I have not before me what you just read. I invite your attention to the fact that we are not asking that any part of the authority which the bill as it stands would give be stricken out.

The CHAIRMAN. I understand that.

Mr. BENTON. We are merely asking that that shall not be taken to disable a State commission from requiring some additional information.

The CHAIRMAN. As a matter of fact, it seems to me it would be a good thing for the utilities and for everybody else if they had one system of accounting all over the United States. However, the bill

, on page 69, line 9, if you have read that, apparently takes care of it. Evidently your committee had not read it. Otherwise they would not have asked for this provision, because it says (reading]:

In the case of the accounts of any company whose methods of accounting are prescribed under the provisions of any law of the United States or of any State the rules and regulations of the Commission in respect of accounts shall not be inconsistent with the requirements imposed by such law or any rule or regulation thereunder; but this provision shall not prevent the Commission from imposing such additional requirements regarding reports or accounts as it may deem necessary or appropriate in the public interest or for the protection of investors or consumers.

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