Sidebilder
PDF
ePub

under the provisions of the act the right of eminent domain, whenever he "can not acquire by contract or pledges an unimproved dam site or the right to use or damage the lands or property of others necessary to the construction, maintenance, or operation" of his project. If the Commission finds that the interests of interstate or foreign commerce are not affected, the act grants authority to proceed in compliance with State law, and the declarant is freed from any subsequent liability to the United States under any existing or future acts of Congress regardless of conditions that may thereafter arise.

While the Commission might, in the absence of a declaration of intention, express opinions regarding its jurisdiction with respect to any stream, such opinions would not have legal force. It is only when a declaration is filed and a decision rendered in the manner prescribed in the act that the finding of the Commission becomes conclusive and binding both upon the declarant and upon the United States. For this reason the Commission acts only in specific cases as presented to it in the manner provided by its rules and regulations. In rendering its decisions the Commission does not act on purely technical grounds or endeavor to extend its jurisdiction beyond the point where in its judgment some substantial interest of interstate or foreign commerce now exists or is likely to exist in the future. The Federal Water Power Act did not propose to bring any new streams within the authority of the Federal Government. It proposed rather to provide a method whereby the status of doubtful streams could be determined, and to set forth in definite form the conditions under which rights upon such streams could be acquired.

9. THE RELATION OF FEDERAL TO STATE AUTHORITY IN THE ADMINISTRATION OF THE FEDERAL WATER POWER ACT.

The Federal Water Power Act sets forth the functions and duties of the Federal Power Commission as the executive agency of the National Government in the administration of those water powers which are under the jurisdiction of the United States. It also sets forth certain requirements of State law that must be fulfilled by applicants for licenses from the Commission. In certain respects, as in its authority to dispose of public lands for power purposes and to determine the character of structures which may be erected for such purposes in a navigable stream, the powers of the Commission are exclusive. In other respects the powers of the Commission are concurrent with or supplementary to similar powers possessed by the States. Under these circumstances it is manifest that success in the administration of the Federal Water Power Act will depend in considerable degree upon the manner in which the State and Federal jurisdictions, particularly where both apply, are harmonized.

Under the provisions of the act the Commission has certain strictly administrative duties, such as receiving and advertising applications, holding hearings thereon, issuing permits and licenses, conducting investigations, collecting annual charges, and assessing benefits from headwater improvements. It has also certain functions and duties which are more or less regulatory or supervisory in their nature. These relate to approval of maps and plans and design of project works; to construction, maintenance, and operation, and to retirement and replacement of project works and property; to the creation and maintenance of depreciation and amortization reserves; to the expropriation of excessive profits; to valuations of property; to the submission of reports by licensees; to accounting practices; and to the regulation of rates, service, and securities. With respect to all these, except the last two named, the requirements of the act are mandatory on all licensees. The requirements with respect to the approval of the project works, to their construction, maintenance, operation, and retirement and to the creation of necessary reserves are also made express conditions of any licenses issued. The ultimate responsibility for the enforcement of these requirements rests upon the Commission, and the act makes provision for such enforcement and for penalties for lack of compliance.

In the preparation of regulations and procedure for the administration of the act it has been the intention to limit Federal supervision and control to those matters for which the Commission must itself assume responsibility under the provisions of the act; and within this limit to leave, in general, initial responsibility to the States in those matters where the States also have jurisdiction under their own statutes, reserving to the Commission the right to take initial action in any matters not covered by State statutes, and also reserving the right to add to State requirements if such requirements do not substantially meet those imposed by the Federal statute.

In carrying out those provisions of the act which require applicants for license to present satisfactory evidence of compliance with State law with respect to the appropriation and use of water, to the right to do business within the State, and to engage in the generation, transmission, and distribution of power, the Commission notifies all interested State agencies, as well as neighboring muncipalities, of all applications filed; publishes in a local newspaper for a period of eight consecutive weeks notice of each application received; and on its own initiative checks all applications for compliance with the preliminary requirements of State law.

The act provides that licenses shall be issued only on the condition "that the project adopted, including the maps, plans, and specifications, shall be such as in the judgment of the Commission will be best. adapted to a comprehensive scheme of improvement and utilization

for the purposes of navigation, of water-power development, and of other beneficial public uses; and if necessary in order to secure such scheme the Comission shall have authority to require the modification of any project and of the plans and specifications of the project works before approval." It also provides that licensees "shall maintain the project works in a condition of repair adequate for the purposes of navigation and for the efficient operation of the works in the development and transmission of power" and "shall make all necessary renewals and replacements.'

[ocr errors]

While many States through their laws regulating public utilities have provided means for requiring adequate maintenance and replacement of public utility properties, few appear to have taken any effective measures toward requiring the full economic development of the resources of their streams or toward passing upon the adequacy of the plans proposed for such purposes. The responsibility for assuring reasonable compliance with this requirement of the act will, therefore, for the present at least, rest largely with the Commission. To what extent it will also be necessary for the Commission to assume responsibility over adequate maintenance and replacement of project works only the future can determine. It is hoped, however, that State agencies will take such action that the Commission may be wholly relieved of responsibility in this respect. There is more involved in the question of maintenance and replacement than mere continuity of service or ability to supply power demands. The United States either on its own behalf or on behalf of the States and municipalities has the option of acquiring the properties of any licensee at the end of the license period for a price represented by the unamortized cost of the properties. It has, therefore, a special interest in their design and construction and in the manner in which they are maintained. It has also a general interest in the full utilization of the national power resources. Both interests require it to reserve the authority to enforce where necessary these provisions of the act.

In close association with the foregoing are the requirements of the act with respect to the creation and maintenance of depreciation reserves; and the same special interests of the United States place upon the Commission ultimate responsibility for determining the adequacy of such reserves. There is wide variation in the requirements of the several States in this respect, and there are considerable differences of opinion regarding the extent to which such reserves should be accumulated, the basis upon which they should be computed and the degree to which they should be made mandatory. It would appear, however, that the trend of opinion and of practice is toward requiring the creation of reserves which will fairly reflect, as nearly as it is practicable to estimate, the depreciation that has accrued on property remaining in service, or the loss in service

value or in the capacity for service, that has taken place in such property. This principle is being followed by a large number of the State commissions, by the Federal Trade Commission, the Bureau of Internal Revenue, the Federal Reserve Board, and the Interstate Commerce Commission.

The licensees of the Commission will be largely public utilities subject to rate regulation by their several States and subject to varying requirements with respect to accounting for depreciation reserves. In recognition of the variations which exist and of the regulation that must necessarily obtain between rate allowances and depreciation requirements, the regulations of the Commission provide that, where any licensee is a public-service corporation subject to the jurisdiction of a State commission, it may account for depreciation on project properties in the manner and to the extent required by the State commission, but that if such accounting for depreciation does not show that adequate reserves have been established and are being maintained on such property the licensee shall be subject to and shall comply with any reasonable order of the Commission in relation to accounting for depreciation and to the creation and maintenance of adequate reserves for such project property.

It is not required that amounts credited to depreciation reserve accounts shall be represented by actual cash set aside into a fund, thereby becoming idle capital, but the amounts so credited may be employed in extensions or betterments either of project property or of other property, or used for such other legitimate purposes as the licensee may choose. The licensee will, of course, be held liable for the amount carried in the depreciation account and will, if he uses it for purposes other than replacement, be required to supply funds from other sources when needed for purposes of replacements. If the properties are taken over at the end of the license period the credit balance in the reserve account, not cash in bank or elsewhere, will determine what deduction, if any, should be made from the original cost to determine the net investment; but deduction will be made only if and to the extent that the earnings of the licensee during the period of the license, will have, in addition to such deduction, produced a fair return upon the investment in the project. All credits to depreciation reserve accounts, and all losses in service value of property, including in the absence of negligence extraordinary losses as well, whether or not provided for currently, are permitted to be included in operating expenses as a charge against the earnings from operation.

The provisions with respect to depreciation are among the most important contained in the act and in the regulations of the Commission. They involve not only the integrity of properties in which

the United States has the interest of a potential ownership, and the capacities of such properties to render efficient service, but also, and more important, the financial stability of the undertakings of which they form a part. Far too many public utility enterprises have been in financial straits because of the failure to provide sufficient reserves for future replacements. This failure has sometimes been due to a policy on the part of the utility of maintaining dividend payments at the expense of adequate reserves, and sometime to a policy on the part of public regulating agencies of maintaining low rates at the expense of these same reserves. Both policies are shortsighted, both only too likely to result in financial distress and in inability to supply adequate service at reasonable cost.

Adequate depreciation should be taken up currently or periodically and charged against operating expenses; for structures and equipment, even though they do not disappear as visually and as rapidly as fuel and other materials currently consumed, are just as surely used up through the processes of physical deterioration and obsolescence. To fail to show all such losses in the current accounts is to make a misstatement of financial conditions, to show net revenues which do not properly exist. To substitute for current charges against operating expenses occasional charges against surplus, as is frequently done, is a dangerous as well as a questionable financial practice; for the time is almost sure to come when accumulated and unprovided-for replacements will seriously strain, if not permanently impair, the resources of the utility.

The act authorizes and empowers the Commission to prescribe rules and regulations for the establishment and maintenance by licensees of a system of accounts. While the provisions of the act in this respect are not mandatory, it can hardly be assumed that Congress granted such authority except in the expectation that it would be exercised. Furthermore, a uniform treatment of items of fixed capital and of earnings, particularly in their relation to the net investment, to the rate base, and to surplus earnings for purposes of amortization, is indispensable to a consistent administration of certain features of the act and to the uniform application of its provisions to all licensees.

In respect to accounting the Commission will deal with three classes of licensees-public utility corporations under State regulation, similar corporations not under regulation, and industrial corporations. The first class will be the most important, both in point of numbers and in point of horsepower developed.

As in the matter of depreciation, considerable variation exists between the requirements of the several States with respect to accounting for public utilities. If the Commission should, therefore, prescribe a system of its own and make such system mandatory upon

« ForrigeFortsett »