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entering at Baton Rouge and connecting there with a nonaffiliated pipe line that extends on to New Orleans.
Also a company called the New York State Natural Gas Co., that produces gas in the northern part of Pennsylvania and transmits it by pipe line into New York State, selling it wholesale to the Syracuse Lighting Co. and to some other distributing companies that serve consumers in Ithaca, Portland, and Geneva, and other communities in that area.
I merely wish to suggest certain amendments that have been, some of them, suggested to me by other people in the natural-gas business. None of them change the purpose or underlying theory of this law. They clarify and in some respects change some provisions that we think should be changed. I have had them typed, and will pass them around to you, and I will refer to them in the order that they are on the paper.
(The proposed amendments above referred to are as follows:)
Page 2, line 13: Change period to comma and add “or for resale for industrial use only."
Page 4, line 24: Change period to semicolon and add "provided that in making its rates or charges consideration may be given to the quantity taken, the time when used, the purpose for which used, and other relevant factors."
Page 7, line 19: The word “Restoration" should be “Transportation.'
Page 8, line 7: Add "Such order shall not be made until after a finding of the fair value of the property of the natural gas company used or useful in rendering the service covered by the schedule under consideration."
Page 10, line 3: Change period to semicolon and add : "Provided, however, That facilities may be abandoned without obtaining such permission, approval, or finding, if service is not thereby impaired or if substitute facilities will be installed.”
Page 13, line 24: Insert after the word “property” a comma and the words “subject only to State jurisdiction,”.
Page 26, line 8: Substitute for lines 8, 9, and 10 the following: “The filing of an application for rehearing under subsection (a) of this section shall operate as a stay of the Commission's order pending action of the Commission on such application.”
Page 28, line 12: Strike out the words "rule, regulation, restriction, condition, or”.
The first one is on page 2, line 13. I have suggested that there be added these words: "Or for resale for industrial use only".
And the purpose of those words, the addition of those words, is simply this: The bill as drawn applies to the sale of natural gas for resale and then contains a provision that excludes the fixing of rates for the sale of natural gas for industrial use only.
Gas sold for industrial use is sold in two ways: First, by the pipe line itself direct to the industrial customer without the intervention of a distributing company, and, secondly, the gas is sold by the distributing company, which gas is purchased by the distributing company from the pipe line company.
That gas is sold under a separate agreement or a separate rate schedule than applies to the gas that is sold for general use and therefore is a separate transaction.
There is a question in the minds of some of the people in the industry as to whether or not the language as it is now in lines 12 and 13 applies only to the sale of gas that is made by the pipe line directly to the industry and does not include in the exclusions the gas that the pipe line sells to a distributing company for resale for industrial purposes, and the purpose of the addition of these words is to make clear that all gas that ultimately goes to industrial customers, purchased under the separate rate or a separate contract, for that purpose is not within the provisions of his legislation.
Mr. MARTIN. Is there a considerable volume of that character of resale?
Mr. DOUGHERTY. Oh, yes, sir; most of it, Mr. Martin, that is sold is sold in that way. For instance, the Colorado Interstate Gas Co. sells direct to the Colorado Fuel & Iron Co. Of course, that is a tremendously large consumer. But, in Denver, all of the industries are sold gas by the local company, the gas being purchased from the pipe-line company. The same is true of Colorado Springs.
Most of the pipe-line companies do sell gas, as I have indicated, although some of them sell to a number of industrial consumers direct.
The second change I have suggested is on page 4, in line 24, the addition of some words which some of the people in the industry think are proper; that is, to change the period to a semicolon and add:
Provided, That in making its rates or charges consideration may be given to the quantity taken, the time when used, the purpose for which used, and other relevant factors.
That is in respect to section 4 (b), which prohibits any undue preference or advantage and requires the maintenance of no unreasonable difference in rates and facilities. These words which I propose merely state some of the things that a company may take into consideration in fixing rates at different places, namely, the quantity and the time when used, which has a lot to do with the load factor on the line, the purpose for which used, and any other relevant factors that
be said that this is addition of words that are not absolutely necessary-and I rather agree with that—but it is felt it would be helpful, even though the Commission, under subsection (b) as it now reads, could take those things into consideration.
On page 7, the typographical error in line 19, the use of the word “restoration” has already been called to your attention.
I would like to suggest that instead of using the word “transmission” the word “transportation” be used, as it has already been used through the bill, and that is the terminology of the industry rather than transmission, which, I think, is used more in the electrical indus-. try than in the gas industry.
On page 8, line 7, we have suggested a sentence that probably does conflict with the idea of a temporary rate being put into effect before a complete finding on the value of the property of the company has been made.
(The amendment referred to is as follows:) Page 8, line 7, add:
Such order shall not be made until after a finding of the fair value of the property of the natural-gas company used or useful in rendering the service covered by the schedule under consideration.
Mr. DOUGHERTY. But without the temporary rate provision containing the saving clause that any deficiency shall be made up in the final rate, we felt it advisable and fair to the companies.
Mr. COLE. Mr. Chairman-
Mr. COLE. Would that requirement delay the establishment of the temporary rate very long?
Mr. DOUGHERTY. Yes; that would, Mr. Cole.
When we decided to suggest the language that we do suggest for page 8, there was no provision respecting temporary rates in the bill, and, as you know, railroad rates are fixed most of the time without any hearing on value, contrary to the practice that is followed in other types of public service.
And we were hopeful that that method of fixing rates by naming them and then later attempting to justify them would not be followed here, and so we have suggested that the rate which the commission may fix under the authority of section 5 (a) be not fixed until the finding of the fair value of the property has been bade.
Mr. COLE. Has the value of most of the properties, especially the fields -sources of supply—been determined by the State commissions? For instance, in the Panhandle field, has that been appraised by the Texas commission?
Mr. DOUGHERTY. I think not.
Mr. MARTIN. It seems to me that he discussed the fixing of temporary rates and the elements of cost that were taken into consideration in the first instance, and how it might be rectified later if it were unfair and carried into the permanent rates. Would "fair value" taken into consideration the elements that Mr. Maltbie said were excluded by the New York Commission in fixing the temporary rates?
Mr. DOUGHERTY. I think it would.
Mr. MARTIN. I think he said that he took into consideration only the original cost and depreciation.
Mr. DOUGHERTY. That is right.
Mr. MARTIN. And that there is a great deal more work involved to determine all of the elements which might be required in "fair value", so that there would be a considerable delay and make it much more burdensome in the fixing of temporary rates.
Mr. DOUGHERTY. Well, that is true, Mr. Martin. The provisions here in section 5 (a) do not relate to any power of fixing temporary rates, with a later obligation to correct the injustices that are done. but it has to do with a final rate that is fixed by the Commission and that is why we are suggesting this language, that such final rates shall not be fixed until after hearing has been had in which the fair value has been determined, so that a rate will not be fixed except after that investigation has been made.
I think this is perfectly consistent, if it is applied here to the final rate, even though you do decide to add another section having to do with the temporary rate.
The CHAIRMAN. If we adopt this amendment you suggest, what would be the status of the matter before the Commission in trying to fix the rate ?
Mr. DOUGHERTY. Mr. Lea, if you also add a provision giving the Commission authority to fix a temporary rate, then that temporary rate, presumably, would be fixed, but no final rate would be established by the Commission until after the hearing had been held and a finding made on the fair value, taking into consideration all of the things that the law of the land at that time requires to be considered.
The CHAIRMAN. In the absence of a provision authorizing a temporary rate we have a hiatus here?
Mr. DOUGHERTY. I would think so.
Provided, however, That facilities may be abandoned without obtaining such permission, approval, or finding, if service is not thereby impaired or if substitute facilities will be installed.
Mr. DOUGHERTY. That deals with section 7 (b), which is the abandonment section and there is the thought in mind of some of the industry that 7 (b) now reads in such a way as to make it impossible to abandon a compressor station or to abandon a section of pipe and substitute for it another section of pipe without having to go to the commission,
The intent, we felt, was that the consent of the Commission on abandonment should be obtained only where some effect on service would result and the addition of this language : “Provided, however, That facilities may be abandoned without obtaining such permission, approval, or finding, if service is not thereby impaired or if substitute facilities will be installed”, gives the company the right to make temporary abandonments, change in equipment, substitution of pipe lines, and short distances and loops, without having to come to the Commission for those things. And, it seemed quite in line with the intent of the bill.
Mr. BOREN. You use the term “will be installed.” Does that not conflict with the provisional time limit and might that not affect the preceding clause
Mr. DOUGHERTY. Well, you could say promptly installed or installed at once.
Mr. BOREN. You would not object to substituting the word "are"?
Mr. DOUGHERTY. Well, sometimes it might be developed that you wanted to abandon your existing facilities before you brought others into effect; but I do not think there would be any great objection to that. I would say “no.”
Mr. BOREN. You would not object then to changing the phrase “will be installed” to “are installed” ?
Mr. DOUGHERTY. I think not.
Mr. BOREN. I raise that point, because I think it is possible that a provision as to the time element would nullify your first clause.
Mr. DOUGHERTY. There would be no objection to that, I think.
On page 13, line 24, we want to insert after the word "property” a comma and the words "subject only to State jurisdiction."
We deal there with the question of reserve powers to the State to fix rates of depreciation. A question of conflicting jurisdiction on the fixing of depreciation can be very serious to a natural-gas company. It might be that the Federal Commission would say to a company that it is engaged in transporting gas into a State and distributing it also and that “You must accrue on your transportation lines” say 4 percent on the value annually, “and must set that aside", that amount aside.
Now, a company may in a rate case, when it is pending before the State commission, be faced with an order of the State commission which says, “We will permit you to collect from the consumer an amount equivalent only to 2 percent of the value of that property annually” and thereby be faced with the right to include in the rate that we collect from the customer a lesser amount of depreciation charge than the Federal Commission is requiring us to set up on the books and to set aside.
So, in this, this is an attempt in this section to fully reserve to the powers of the State commission all of the authority and jurisdiction it does need with respect to depreciation.
We felt that the property, just as Mr. Maltbie has pointed outthat the property is the thing that either the Federal or the State jurisdiction attaches to, and in connection with that property his power of the State commission should be concerned with the property which is under its jurisdiction, and only under its jurisdiction, and then if other property is under the Federal jurisdiction that the rate of depreciation so fixed should apply for all purposes and be binding on all authorities.
We ought not to be in the position of being faced with different rates charged as a result of conflicting orders of the two commissions. We ought to be required to comply with one order and to have that apply for all purposes.
On page 26, line 8, you will find a sentence which has to do with the filing of applications for a hearing before the commission after it has made an order and after having provided in the preceding subdivision for filing of this application for rehearing.
Subsection (b) then provides that the filing of an application for a rehearing shall not, unless specifically ordered by the commission, operate as a stay of the commission's order.
Now, that results in this situation: The commission woud make an order either lowering the rate or fixing some duties of the company in some respect, and the company would feel it should not follow out that order' but desires to take it into court and so files an application for rehearing. Notwithstanding the fact that the company does intend to go to court on the matter, and this law as drawn would mean, require, that the company would immediately comply. After it got into court, it has the right, under this statute, to ask the court for an order suspending the commission's order, and so it might be that after having been required to comply with the new order you then would not have to comply with it until the court's decision had been finally rendered.
We think it is only fair that if a pipe-line company or naturalgas company does desire to test out in court review an order of the commission it should not be required to comply with that, since it has filed an application for a rehearing and is on the way to the courts; and when it gets into the court it is up to the court to deter