The CHAIRMAN. But they cannot prevent the utility from paying the excessive contract price. Was not that so held in the cases which you cited?

Mr. MOORE. It all depends on the state of the law in the particular State.

The CHAIRMAN. Exactly; but that is the gap.

Mr. MOORE. No. If you will just allow me a moment, suppose there is no State law that regulates these intercompany transactions or affiliate contracts. Under the doctrine of Smith v. Illinois Bell Telephone Co. and the Western Distributing Co. case, where there is no State law that regulates those transactions, then the Commission, in the absence of a statute, can inquire into those matters and consider what is a reasonable charge to be made. There are about 12 States that have a statute, and, of course, they can all have them if they want to. Suppose they pass a statute that provides that such & contract shall not be made unless the Commission first approves it. Then it cannot be made without an approval first.

The CHAIRMAN. Exactly. But your State is then bordering on interstate commerce, is it not?

Mr. Moore. No. If the State passes a statute such as 12 of them have done, that says that such a contract between affiliated interests cannot be entered into without first filing that contract and getting it approved, that is a perfectly valid requirement. As I said, 12 States have such a statute, and all of them can have it.

The CHAIRMAN. Even though they can, I am not at all sure that you are correct in your statement that it would be effective. But the fact that only 12 of them have such a statute creates a gap. Under the Interstate Commerce Commission law the Supreme Court has held that where the State has not taken jurisdiction, and has not attempted to correct some of the evils, of course, the Federal Government steps in and does it.

Mr. MOORE. It all depends on what is the objective. If the objective is to take all possible jurisdiction that the Federal Government can exercise, of course you can go a long way. If the objective is to leave the State regulatory bodies and their jurisdiction free to function to their maximum extent, then there is a very small gap.

The CHAIRMAN. But you know and I know that in many of these States-practically all the States—they do not function at the present time to the fullest extent that they can operate, and they do not do it to a large extent because of the fact that the power interests have had sufficient influence upon their State legislatures to prevent them from getting the necessary appropriation to make the law effective.

Mr. MOORE. Of course, Senator, that

The CHAIRMAN. I think there is something to be said with reference to the common-carrier provision. I think there is something to be said as to why it might be well to eliminate that. There might be objections, but I do think that the Federal Commission ought to have the power to make regulations.

Mr. MOORE. We have no objection to giving the Federal Power Commission, or such other body as it is thought proper, power to regulate that wholesale contract.

Senator Bone. Even though your companies did what you suggest, and took this power from these new pools of power that are being created, such as down in your country, in order to avoid what you think might be the harsher thing, transporting it to some possible market, you would still take it at a rate which would be around a dump-power rate, would you not?

Mr. MOORE. Of course, the seller of the power in that situation is almost able to dictate his terms.

Senator BONE. The seller or the buyer?

Mr. MOORE. The seller, because he will come right in and compete if you do not take it.

Senator Bone. What has been the experience in that respect?

Mr. MOORE. Mr. Wilkie is going to testify before you gentlemen, and he has had very intimate experience with that.

Senator BONE. I will pass it, then.
Mr. MOORE. His company is right in that hotbed.
Senator BONE. Go ahead.

Mr. Moore. I just wanted to point out, Senator Wheeler, that on page 360 of the transcript, in Mr. DeVane's testimony, there is an interesting comment in connection with the question you asked yesterday afternoon. I have the transcript before me. I do not know whether you have or not. I made the remark that Mr. DeVane had said and I think truly said that the rate section of title II, that is, the wholesale rate section, was not nearly as important as the other provisions. Let me read you exactly what he said, on page 360.

. [Reading:]

Now, it is important at this point probably to make this distinction: That insofar as rates are concerned, that is all the bill does.

That is, to fix wholesale rates. (Continuing reading:) The main features of the bill are the other provisions, that have nothing to do with rates.

Then he went on to explain what they were. That is very significant language, and he was exactly right in what he said, because he then proceeded to point out this next section, which undertakes to give the Federal Power Commission, on page 106, power to set up these regional districts in such way as it sees fit. That is the remaking of the utility map that has been talked about quite a bit.

I wanted you to notice particularly on the top of page 107, in that connection, that it is not based on voluntary action. The word "voluntary” is used, but it is not altogether voluntary.

The CHAIRMAN. What page are you reading from?

Mr. Moore. I am on page 106, the bottom of page 106 and the top of page 107.

The CHAIRMAN (reading):

Such control shall be designed to secure an abundant supply of electricity with the greatest possible economy and in the interest of the national defense and the proper utilization and conservation of natural resources.

Mr. MOORE (continuing reading): Such control, except in time of war or other emergency declared to exist by proclamation of the President, shall, as far as practicable, be by voluntary coordination under the supervision and direction of the Commission of the privately and publicly owned electric facilities in and between the several districts so established.

It may be that I do not read it correctly, but as I read that English, so far as practicable they want to get voluntary cooperation, but there is the power given to compel the establishment of these

regional districts, and, of course, the theory of that fits into this integrated theory in title I.

The CHAIRMAN. Do you not think that should be done?
Mr. MOORE. I think that is a very bad section.

The CHAIRMAN. I would like to have you tell me why you think it is a bad section. You say it is a bad section, but why do you say that?

Mr. Moore. I feel that this entire theory of putting in the hands of two commissions the power to just reshuffle the utility map of the United States will result in great dislocations that are bound to have very far-reaching effects, Senator.

The CHAIRMAN. You mean in the event you take out of the provision the common-carrier provision?

Mr. MOORE. Even if you took it out, even if you took out the common-carrier provision.

The CHAIRMAN. What would be the effect of it?

Mr. Moore. The effect of this is going to be that between the Federal Power Commission and the Securities and Exchange Commission, they are simply going to lay off on the map certain districts which will be recognized as these separate districts, regardless of what may be the views of managements about it, and regardless of the security situation that is outstanding.

Senator MINTON. Will not that bring us back to the proposition again? They might disagree about it, but they could not set up an unreasonable, arbitrary designation.

Mr. MOORE. I hope that is right, Senator.
Senator MINTON. As a lawyer, do you not think that is right?

Mr. MOORE. I would fight for that proposition as best I could, but I would be very much worried about it.

Senator MINTON. You believe in it?

Mr. MOORE. I would fight the best I could for it, but I would be very worried about it, in view of these waivers that are prescribed in this agreement that is provided for under title I.

Senator MINTON. I think that would be a clear constitutional right. Mr. MOORE. I hope you are right.

May I pass on hurriedly here, because I realize that my time is practically up. I shall be through in just a few moments if you will bear with me.

This next provision is a very plausible one, but it has a great deal of trouble in it. That is the provision that authorizes the Commission to practically be the dictator as to what extensions or enlargements may be made, and what abandonments may be made. Let me illustrate just how that will work.

The CHAIRMAN. I think that was covered by Judge MacLane rather effectively-I mean with reference to requiring them to go to the Commission in the event that they wanted to have an abandonment of a local power line in some State.

Mr. Moore. Here is what may happen in a perfectly natural way. Here is a company that wants to put in a new unit in its power plant, The Commission, because of some reason of policy it has in mind about regional districts and one thing and another, has the absolute power here to say, "You cannot do that.” Or suppose a companyI will not pursue that any further. Your see the point.


Senator Bone. I think there is something in your argument there about proper utilization and conservation, because that might tie up developments of one kind and another.

Mr. MOORE. Very much, Senator.

You will notice on page 109 that there is here, again, a complete system of regulation of securities set up. By the time we finish getting ail the approvals of securities under title I and title II and, under State laws

The CHAIRMAN. I think I will have to recess at this time.

Mr. MOORE. I will be through in 5 or 10 minutes, if you will indulge me.

I would like very much to finish before lunch. On page 109 is set up the standard by which the Federal Power Commission passes on securities. It might very well happen that one of these companies, as I read this law, would have to get from four to six approvals on a security issue. Suppose you have a State where they have a “blue-sky” regulation, and also a Štate commission for the approval of securities, and the company is in two of those States. You would have to get four approvals there. You would then have to get the approval of the Federal Power Commission and the Securities and Exchange Commission, as I read this clause.

Senator MINTON. That would be only two more than you have already.

Mr. MOORE. Perhaps if we could live under the four, we could get along under that, and yet the gentlemen urge that the regulation cannot be assured.

The CHAIRMAN. Do you object to the provisions of title 2, giving the Federal Power Commission the power to investigate the cost of service as well as construction contracts between holding and operating companies?

Mr. MOORE. I think that power is a perfectly proper power to exercise if it is limited to these wholesale contracts, and if it is limited to the gap. I do not think there is any place for all that investigation insofar as other matters are concerned. I think it is a matter for the States to pass upon.

It is perfectly obvious from these remaining sections, from what Mr. DeVane said, that what the Federal Power Commission had in mind was not merely regulating these wholesale contracts. Why did he put up on the chart those rate curves about Portland, Oreg., Washington, D. C., and so forth? He was illustrating two companies on the one hand that had pursued what he thought was a wise policy in reducing rates and encouraging greater consumption. On the other hand, he took two companies that he thought had maintained high levels of local rates and had not promoted a great amount of increased consumption. Of course, those are matters which each management would have its own views about, but that is significant, gentlemen, because it shows that although this title II is drawn on the theory of not going into retail rates, the Federal Power Commission has that very much on its mind.

The CHAIRMAN. Yes; but under the bill it cannot do it.

Mr. MOORE. I am not so sure that it does not have a great effoct on it. Under the bill as drawn they completely regulate many matters that have a bearing on that matter. They regulate security issues. They regulate these management and service contracts.

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The CHAIRMAN. I thought security issues would not affect rates at all.

Mr. MOORE. It certainly may be urged that they do.

Senator BONE. That is very interesting. I wish you would expound the view of the power companies on that, because that has been discussed many times. I have been assured many times that the amount of securities outstanding had no relation whatever to rates. Is that true or untrue?

Mr. MOORE. Senator, I could talk to you for an hour on that, and I would rather not do it.

Senator Bone. I can understand that, but that is an argument made, and you are making another argument now.

Thé CHAIRMAN. This is the first time I have ever heard anybody representing the power companies even intimate that the securities that were issued had any bearing whatsoever upon rates.

Senator Bons. Why should you object to any “messing around” with your securities when they have no relation to rates?

Mr. Moore. We appreciate fully, I am sure, the views on both sides of that matter. What I am pointing out to you is that you are dealing with subjects here which get right back into the local situations.

Senator Bone. But that would not change the fundamental truth of this question one way or the other, as to whether securities affected rates or not. Rates are predicated on valuation, theoretically.

Mr. MOORE. Yes; on value.

Senator Bone. I will admit that that is pure theory, but theoretically they are based upon valuation.

Mr. MOORE. In my 5 minutes here, Senator, I cannot argue that out with you.

Senator BONE. So far as I am concerned you can have all the time you want.

The CHAIRMAN. Let me ask a question. Mr. Gadsden, have you some witnesses you would like to put on this afternoon?

Mr. GADSDEN. We have two witnesses. The CHAIRMAN. We will resume at 2:30 this afternoon, then, in the other room. I am compelled to leave at this time. Senator Minton will preside in my absence. .

Mr. MOORE. I simply want to make these two other comments, and then I am through.

In title III, on page 122, you have here completely set up a system of accounts and records governing the utilities broadly. It is not limited to these wholesale transactions at all. There is a regulation that governs the public utility as such, including the distribution. You will notice, in section 301, the fifteenth line, that this accounting that is prescribed here applies to distribution as well as to production and transmission.

Senator BONE. Would there by any objection to an accounting system or a classification of accounts that required a complete statement of facts?

Mr. MOORE. My whole point is that I think it should be limited to this gap that exists. It all depends on whether or no it is the congressional policy to go the limit.

. Senator BONE. These companies have monopolies and they are impressed with a public use and character. Why should they object?

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