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AMENDMENTS TO H. R. 4008 REQUESTED BY THE NATIONAL ASSOCIATION

RAILROAD AND UTILITIES COMMISSIONERS

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Amend section 1 (b) to read as follows:

"Sec. 1. (b) The provisions of this Act shall apply to the transportation of natural gas in interstate commerce, to the sale of such natural gas at wholesale for resale [to the public], and to natural gas companies engaged in such transportation or sale, but shall not apply to the local distribution of natural gas or to the facilities used for such distribution or to the production or gathering of natural gas: Provided, That nothing in this Act shall be construed to authorize the Commission to fix the rates or charges to the public for the sale of natural gas distributed locally or for the sale of natural gas for industrial use only."

AMENDMENT NO. 2

Amend section 2 (5) to read as follows:

“(5) Natural-gas company' means a person engaged in the transportation of natural gas in interstate commerce, or the sale of such gas at wholesale for resale [to the public] whether or not such gas is mixed with artificial gas”.

AMENDMENT NO 3

Further amend section 2 by adding thereto the following:

(9) Natural gas' shall be construed to mean either natural gas unmixed, or any mixture of natural gas and artificial gas."

AMENDMENT NO. 4

Further amend said bill by inserting after section 16 a new section as follows, renumbering sections 18 to 23 as 19 to 24.

"SEC. [209] 17 (a) The Commission may refer any matter arising in the administration of this [Part] Act to a board to be composed of a member or members, as determined by the Commission, from the State or each of the States affected or to be affected by such matter. Any such board shall be vested with the same power and be subject to the same duties and liabilities as in the case of a member of the Commission when designated by the Commission to hold any hearings. The action of such board shall have such force and effect and its proceedings shall be conducted in such manner as the Commission shall by regulations prescribe. The board shall be appointed by the Commission from persons nominated by the State commission of each State affected, or by the Governor of such State if there is no State commission. Each State affected shall be entitled to the same number of representatives on the board unless the nominating power of such State waives such right. The Commission shall have discretion to reject the nominee from any State, but shall thereupon invite a new nomination from that State. The members of a board shall receive such allowances for expenses as the Commission shall provide. The Commission may, when in its discretion sufficient reason exists therefor, revoke any reference to such a board.

“(b) The Commission may confer with any State commission regarding the relationship between rate structures, costs, accounts, charges, practices, classifications, and regulations of public utilities subject to the jurisdiction of such State commission and of the Commission; and the Commission is authorized, under such rules and regulations as it shall prescribe, to hold joint hearings with any State commission in connection with any matter with respect to which the Commission is authorized to act. The Commission is authorized in the administration of this Act to avail itself of such cooperation, services, records, and facilities as may be afforded by any State commission.

"(c) The Commission shall make available to the several State commissions such information and reports as may be of assistance in State regulation of public utilities. Whenever the Commission can do so without prejudice to the efficient and proper conduct of its affairs, it may upon request from a State make available to such State as witnesses any of its trained rate, valuation, or other experts, subject to such reimbursement to the Commission by such State of the compensation and traveling expenses of such witnesses as the Commis

sion shall require. All sums collected hereunder shall be credited to the appropriation from which the amounts were expended in carrying out the provisions of this subsection."

NOTE.—In amendments nos. 1, 2, and 3 language which is additional to that now in H. R. 4008 is italicized. Language now in the bill which would be struck out by the amendments is shown by enclosing in black brackets. Amendment no. 4 is a new section not now in H. R. 4008. It is section 209 of the Federal Power Act, without change, except as to words struck out which are shown by enclosing in black brackets, and words added which are italicized.

Mr. BULWINKLE. Have you got extra copies of those with you?

Mr. BENTON. I have some. I do not have enough for every member of the committee. I have two copies. Perhaps they may be passed around.

Mr. Chairman, I would like also to present for the record, if I may, a resolution which was adopted by the National Association of Railroad and Utilities Commissioners at its forty-seventh annual convention, setting forth that it favors legislation of this character. It was prepared and reported by the executive committee of the association which is made up of approximately 25 of the commissioners from the different States who have been longest in service.

(The resolution referred to is as follows:)

A RESOLUTION PREPARED AND REPORTED AT THE FORTY-SEVENTH ANNUAL CONVENTION

OF THE NATIONAL ASSOCIATION OF RAILROAD AND UTILITIES COMMISSIONERS BY THE EXECUTIVE COMMITTEE OF SAID ASSOCIATION, AND UNANIMOUSLY ADOPTED BY THE ASSOCIATION

Whereas the business of the transmission and sale of gas in interstate commerce at wholesale for resale, under decisions of the Supreme Court of the United States, is not subject to regulation by the States, and in the absence of Federal legislation providing therefor, is left wholly unregulated; and

Whereas jurisdiction to regulate such business should be vested in some tribunal, so that gas supplied to distributing companies in interstate commerce may be obtained at just and reasonable prices; therefore be it

Resolved, That this association favors the enactment by Congress of legislation vesting jurisdiction in some one of the existing Federal regulatory commissions to regulate the service of supplying gas, whether artificial or natural, produced in one State and sold at wholesale to a distributing company in another State, including rates applicable to such service; and

Resolved further, That Congress be asked to limit the jurisdiction granted strictly to gas transmitted and sold at wholesale for resale, and that such legislation be so drawn as in no way to limit or impair the power of the States to regulate intrastate and local service, and the rates applicable thereto; and

Resolved further, That the committee on legislation be directed to present this resolution to the chairman of the appropriate committees of the two Houses of Congress, and to support the passage of such legislation.

Let me say with respect to the amendments which I have presented, that they are four in number. Two of them are designed to make certain the fact that the terms of the bill will apply to mixed gas as well as to natural gas, unmixed.

Another is designed to make certain that the bill will apply to all intercompany sales of natural gas at wholesale, even though the sale be from one company to another company which will resell to another corporation before the gas is finally sold to the public.

The fourth amendment proposed is to incorporate into the bill the so-called cooperative provisions which are now contained in other Federal regulatory acts.

About that amendment, I may say that in 1920 in the Transportation Act, the Congress first incorporated cooperative provisions which have been very much used between the State commissions and the Interstate Commerce Commission.

Those provisions, somewhat extended, have been incorporated in the Communications Act, the Federal Power Act, and the Motor Carrier Act.

Amendment no. 4 proposes to incorporate in this bill the same language as is in section 209 of the Federal Power Act, with the addition of certain words which have been italicized. Those italicized words have been suggested for incorporation to give to the Federal Power Commission when it allows use of its experts by State commissions some latitude with respect to the matter of requiring the State commissions to pay for their salaries and expenses.

Under the Federal Power Act there has been some use of the cooperative provisions in investigations, where both the State commission and the Federal Commission were interested in the investigation. I know of one case of that character. In that case I understand the experts of the State who were used received commissions or authorizations from the Federal Commission.

I think in that case the State commission was able to pay for them entirely, and did so.

In some other case it might be that the State commission would not be able to pay experts. They might be engaged in work which was of importance to the Federal and the State commissions and the Federal Commission might think that not the whole salary of a Federal expert used but a part of the salary, or perhaps none of the salary, should be paid by the State.

Our thought is that some latitude can be allowed to the Federal Commission in using, in the public interest, the money which the Congress appropriates for the Federal Commission. It is money appropriated to be used to secure for the people of the United States efficient services at reasonable rates, and if it is used for that purpose it will be expended as Congress intended it to be expended; and no more can be expended than Congress has appropriated. I say that with respect to the words which I have italicized.

I made a rather full statement covering the law and the need for legislation of this character at the last session. I understand from what you have said, Mr. Chairman, that the record last year will be referred to. I think, unless there are questions, there is nothing more that I wish to present to the committee at this time.

Mr. MAPES. May I ask if the bill we are now considering, H. R. 4008, is identical with the bill which the subcommittee held hearings on in the last Congress, H. R. 11662?

The CHAIRMAN. Yes; it is the same bill with one substantial difference. The bill before is provides for a certificate of convenience and necessity, but otherwise the bill is almost exactly in the same language. That is the bill that the committee acted upon in the last Congress, and the committee also reported that bill to the House.

Mr. MAPES. In the last Congress?

The CHAIRMAN. Yes. It did not contain the provision which H. R. 4008 contains requiring competing lines to have a certificate of convenience and necessity.

Mr. MAPES. That section is new?
The CHAIRMAN. That is the only substantially new feature in 4008.
Thank you, Mr. Benton.

Mr. BENTON. Thank you.
The CHAIRMAN. We will hear Mr. Booth.

STATEMENT OF HARRY R. BOOTH, ACTING COUNSEL FOR THE

ILLINOIS COMMERCE COMMISSION, CHICAGO, ILL. Mr. Booth. My name is Harry R. Booth. I am acting counsel for the Illinois Commerce Commission.

I propose very briefly to discuss why the enactment of H. R. 4008 is necessary and vital for the protection of the rate payers in Illinois. I should also like to suggest two or three amendments to the bill and refer to one or two of the broader aspects of the bill under consideration.

Our support of Federal regulation of interstate natural-gas rates does not arise solely from the special problems which the commission has faced in the past 2 or 3 years on account of the transportation of natural gas from outside sources, but because we believe that the Federal Government should regulate those phases of the operations of the utilities which, due to constitutional limitations, are beyond the power of the States. Only then can effective and complete regulation of utilities in the public interest be assured.

The enactment of a law conferring upon the Federal Power Commission authority to deal with interstate natural-gas companies and rates is now of the greatest importance to the consumers of the State of Illinois. Prior to the past few years the regulation of gas rates was essentially a local problem in our State. Gas distributed and consumed was produced within the State except for relatively insignificant quantities purchased from without the State. Today the situation has changed completely. Over 82 percent of the gas now used within the State of Illinois is brought into the State from the Oklahoma and Texas natural-gas fields.

The total gas sales in Illinois in 1934 were $51,329,000 and $54,236,000 in 1935. That is the total sales to ultimate consumers. Nearly $15,000,000 a year is now being paid annually to the Natural Gas Pipe Line Co. of America and the Panhandle Eastern Pipe Line Co., the two principal interstate natural gas utilities which sell gas to Illinois utilities.

I think it might be interesting for me to point out the fact that the interstate movement of natural gas increased in 1934 over 1933 about 19 percent and that the interstate movement of natural gas in the past 2 or 3 years has shown the same or larger increase.

There is a far greater consumption of natural gas in Chicago and in the past 2 or 3 years you have had the opening up of new markets like the Detroit market, thus increasing the movement of natural gas in interstate commerce.

It is my opinion that if Congress does not confer upon the Federal Power Commission the power promptly to control interstate natural gas wholesale rates, the people of Illinois may be compelled to pay, during the next 10 years, from 20 to 35 million dollars in excessive charges to the Natural Gas Pipe Line Co. of America. It is for this reason that prompt and vigorous action upon the part of Congress is necessary.

While I propose to limit my discussion primarily to the reasons why the enactment of H. R. 4008 is necessary and vital to protect the rate payers in Illinois, I should like to comment briefly, first upon some of the broader problems, and then discuss certain amendments which I believe should be incorporated in the bill.

First, it is of interest to note that in 1934 25 States each used a billion cubic feet or more of natural gas for domestic consumption alone. Ten of these used more than 10 billion cubic feet each. The States using the largest amounts of natural gas are Ohio, California, Pennsylvania, Texas, Oklahoma, West Virginia, Illinois, Kansas, New York, and Missouri. In 1935 the total sales of natural gas were 1,068,691,000,000 cubic feet. Less than one-third of the total amount sold, or 306,000,000,000 cubic feet was used for domestic purposes, producing a revenue of $210,842,000, while the total sales produced a revenue of only $358,067,000.

In 1934 the interstate movement of natural gas increased 19.4 percent above 1933 and aggregated 414,183,000 cubic feet, which was equivalent to about 23 percent of the total production. I believe that the interstate movement of natural gas has since increased because of the greater uses of natural gas in large metropolitan areas like Chicago, and the opening up of new markets like Detroit in the past year.

May I now_call your attention to a statement in the Summary Report of the Federal Trade Commission to the Senate of the United States, pursuant to Senate Resolution No. 83, in connection with its investigation of holding and operating companies of electric and gas companies. A study by Wilbur M. Baugham of the legal division of the Federal Trade Commission, beginning at page 79 of that volume, entitled "State Regulation of Gas and Electric Utilities Delayed or Defeated by Plea of Interstate Commerce", indicates that from 1889 the efforts of State authorities to regulate natural-gas rates in the interest of the public have either been delayed or defeated as a result of the constitutional limitations upon the power of the States to regulate the interstate operations of these companies. It would seem that in view of the decisions of the United States Supreme Court declaring invalid the efforts of the State commissions to regulate interstate natural-gas rates, Federal action in this field should no longer be delayed. It can hardly be said that the principle enunciated in the Western Distributing Co. case, that it is proper to consider the profits of interstate supply companies which are under the same common control as local operating companies, is sufficient to afford adequate protection to the consuming public. Moreover, the application of this principle in the Illinois situation is being strenuously resisted by the Natural Gas Pipe Line Co. of America.

Natural gas is brought to the central and southern sections of the State by the Panhandle Eastern Pipeline Co., which sells the gas to the Panhandle Illinois Pipeline Co. The gas is then sold to several distributing companies. The Chicago area and the northern part of the State are served by the Natural Gas Investment-Texoma interstate group, controlled by the Cities Service, Standard Oil, Peoples Gas, and other interests. The gas is sold to the Chicago District Pipeline Co., an Illinois wholesale pipe-line company, which sells the gas to the three large gas distributing companies in the northern part of the State—the Peoples Gas Light & Coke Co., Public Service Co. of Northern Illinois, and Western United Gas & Electric Co.

The distribution of natural gas in the Chicago area began with the purchase in 1929 by Samuel Insull of a large block of gas acreage

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