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about half of the gas that is supplied in the State of Ohio, and there would not have been any one community which would have had enough money to make the fight; they would not likely have had enough money, on account of lack of funds or lack of amount of rates involved to make the fight. Therefore I think it is important today that if we are going to regulate fairly and adequately, that the State commission in all intrastate matters and the Federal Government in all interstate matters be authorized to carry on in the public interest the investigations required in solving the problems which are faced. If these communities are members of the United States population and the United States population is appropriately represented, the Federal Government ought to be in position to carry on the fight for them in making investigations on sufficient scale to solve the problem. In the absence of such investigations, burdened with the authority of meeting the local problem, under the law which is not complete, without the ability to meet the problem, it is important that some commission have authority to assist the local commission. And I cannot give a more important illustration than that referred to of the city of Cleveland and the communities along the pipe line served by the gas company. These local communities could not have possibly carried on a fight involving the amount resulting from the increased rates paid to a company operating in West Virginia.
In our case, for example, the local commission in this case would be without authority to secure data from the company operating in West Virginia in its effort to regulate the rates of the East Ohio Gas Co., but would be assisted by the Federal Government making an investigation outside the State.
The CHAIRMAN. Mr. Burton, to what extent is gas consumed in a city like Cleveland ? How large is the consumption of gas in Cleveland ?
Mr. BURTON. How much gas does it consume ?
Mr. BURTON. I am advised about six to eight million dollars annually.
The CHAIRMAN. About $6,000,000 to $8,000,000?
The CHAIRMAN. And how much of that is transported from outside the State ?
Mr. BURTON. It is about 50 percent, I think-no, about 70 percent which Cleveland consumes comes from out the State and 30 percent from the Ohio field.
The CHAIRMAN. That is all you want here; you want to complete the power to regulate the excess from without the State, that being a factor involved in the regulation of rates?
Mr. BURTON. That is true.
The CHAIRMAN. Your own State commission's authority is insufficient to cover the field except by having Federal regulation to complete that authority!
Mr. BURTON. Exactly.
you are and in what capacity you appear!
Mr. BURTON. My name is Harold Burton, mayor, city of Cleveland, formerly director of law at the College of Oberlin, formerly from the community of Oberlin in Ohio.
The CHAIRMAN. Any further questions?
Mr. CROSSER. I was going to ask, Mr. Mayor, even granting that the city of Cleveland had plenty of funds to make the fight, there is no possible certainty, is there, about what would be the result under the present circumstances. Under the present arrangeinent, there is no certainty about the results which might be procured for the citizens of Cleveland even though you had funds with which to make a fight.
Mr. BURTON. You are asking for my opinion of the utility commission ?
Mr. CROSSER. No; my question is with reference to the Federal Government intervening. You would not be sure of getting fair rates under the present set-up even though you had the money with which to make a fight?
Mr. BURTON. I would not want to go that far. If the utility commission, say, in Ohio had a half million dollars to spend, I believe we could get fair results. It would depend upon the Utility Commission of Ohio and depend upon its success in going into West Virginia and getting authority to make the investigation, because it has no such authority now.
Mr. CROSSER. That is what I am getting at.
Mr. WADSWORTH. West side Ohio gets some gas from the Panhandle field, does it not; that is, the western side of your State?
Mr. BURTON. I understand from Mr. Reed there has been none from the Panhandle Gas Co. We have none in the East Ohio Gas Co., but when you get close on to the line of Illinois, I could not be sure of that. Th: CHAIRMAN. Thank you,
Mr. Mayor. M. BURTON. Thank you.
The CHAIRMAN. Those who have testified today will have the privilege of revising their remarks; if they will apply to the clerk of the committee they can obtain that opportunity.
Mr. Daily, how much time will you require? We have about 10 minutes left.
STATEMENT OF FRANCIS L. DAILY, REPRESENTING CHICAGO
DISTRICT PIPELINE CO., CHICAGO, ILL.
Mr. Daily, Mr. Chairman and members of the committee, my mame is Francis L. Daily. I am here representing the Chicago District Pipeline Co., of Chicago, Ill. My address is 122 South Michigan Avenue in that city. My purpose in appearing before this committee is to suggest one amendment to the ponding bill, of a very definite and limited character, which I will try to explain both as to its pui pose and to its effect.
The bill as I view it contains a hiatus, a gap, in the treatment that it gives in the natural-gas picture. It assumes that all companies are divided into two classes, interstate companies, which bring gas across State lines, and so forth, and distributing companies which buy gas from companies of that nature and sell it at retail locally, and that is generally true, but in at least one situation that I am
here representing, and possibly others, which I in no way represent, that is not true.
I am speaking of the Chicago situation. The natural gas which comes to Chicago, comes in from the Texas field through the line of the Natural Gas Pipeline Co., as has been explained, through several States, and gets into Illinois, finally to Joliet, which is not very far, I believe about 40 miles from Chicago, and into the distributing companies under contracts which have been referred to here. Now this company that I am appearing here for, the Chicago District Pipeline Co., takes its gas in through large transmission lines, just as large as the interstate lines and transports it an additional 40 miles to the Chicago city limits, and on the way it picks up other outlets through companies; it serves the section along the way. In fact, it sells gas to three local distributing companies at various points along those 40 miles. Its lines are entirely in the State of Illinois. This company, the Chicago District Pipeline Co., operates solely in the State of Illinois under authority of the Illinois Public Utility Commission, under a certificate of convenience and necessity from the Illinois Commission; and, its rates are on file with the Illinois Commission and its acts are supervised by that commission; in every respect it is an Illinois public-utility company. But because it does not have any pumps or facilities but takes its gas at Joliet, at the interstate pressure, and without additional pressure or additional treatment of the gas permits it to flow through the line, and sells it to a few places along the line, without doing anything to the gas, it is entirely conceivable—I hope that it is not true—but it is that it would be held to be an integrated line as a part of interstate commerce from Texas to the local distributing company, even though it has no connection with that commerce except the fact that it takes its gas out of the line that flows through chose States. In other words, it represents the situation in between what the bill is designed to cover and the local situation. The Ohio local commission, which was before you, has considered in its experience this as a local utility. There as in Illinois, it has a few small sales; it wholesales entirely, but that is a very small part of it, and so I do not think it should be considered under this bill in any way, as a practical proposition, but here, it buys its gas in Illinois and resells it in Illinois and is directly under the local regulations of the Illinois Commission, and is distinctly not national in character, and still because of the decisions of the courts defining interstate commerce, mostly in railroad cases, and even in some gas cases, as far as that goes, it is conceivable that under the language of this bill as it now stands—and for that reason we think it ought to be corrected—that the contention might be made that this Illinois line was engaged in interstate commerce, even though all of its business is done within the State, which would result in the transfer of that control from the local commission where it belongs to the Federal Power Commission. That is not desirable, and I assume it is not the desire of you gentlemen or the desire of Congress; I think that was put in through an oversight, and I am calling it to your attention; I think it is an oversight.
Certainly it is not the purpose of this bill that the local distribution of gas and the local transportation of gas and the local sale of gas shall be under Federal control. And just because there is no specific provision here which takes care of the in-between situation, where you have transportation of wholesale gas solely for local distribution, all of which occurs within the State, which gives rise to the situation causing me to be here today. This statement is limited to this one State, but there may be others; but I do not know of any other situation exactly comparable, but I think this will take care of the whole situation as it affects our case, and I want to make the following suggestion to the bill, if I may, Mr. Chairman. May I offer, with respect to the pending bill, an amendment to section 1 (b) the following amendment to be inserted as a proviso in the bill by adding after the word “gas”, in line 9 on page 2, the following language: or to the transportation and sale of natural gas wholly within a single State under authority granted by the State commission thereof or the facilities used for such purpose.
That is what this company which I represent is, and with that additional language it will make it very clear that the local operation is not under Federal control, as I do not think it was intended to be; but if that is not put in there a great deal more trouble will be consumed for the company and for the courts and the commissions in finding out whether or not it is or not than would be required in writing those few words in.
Mr. COLE. May I ask you a question?
Mr. COLE. Is your company now regulated by the local commission?
Mr. Daily. We are now regulated by the Illinois commission in every respect.
Mr. COLE. Does it determine the reasonableness of what you pay the Panhandle for gas?
Mr. DAILY. We do not buy Panhandle gas. We buy it from the Natural Gas Co. of America, but we sell
Mr. COLE (interposing). That is Panhandle gas.
Mr. DAILY. It comes from the Texas Panhandle, yes, I thought you meant the Panhandle Gas Co.
Mr. COLE. How does the Commission determine whether or not your contract with the other company calls for a fair price?
Mr. Daily. What has happened, as Mr. Booth told you, first, in the original contract filed in 1931 with the Commission, it was on the basis of operating costs for several months, and that was extended for 2 or 3 years, and on that point a new contract was made, or an amendment to the contract was made in 1935, which was filed with the Commission and the Illinois Commission' filed its consent to the contract at that time. And the schedule of rates is based on that contract. But in recent months, it has seen fit to reopen the case, and sent a communication to the company, but that is not on a question of controversy which we are discussing here; it is primarily with respect to the Interstate Pipeline Co., on the question which Mr. Booth described.
Mr. COLE. I did not hear you.
Mr. Daily. There is a controversy now on the Federal question, in which the Commission is attempting to go into the affairs of the Interstate Pipeline Co. on the points mentioned.
From our point of view, from the point of view of this local transportation company, we have submitted to the Commission our proposed contract, and I believe either a month or 2 months ago the Commission consented to the execution of that contract, and approved the schedule of rates based on that contract of December 1935, and since that time we have been and are now operating under that schedule and under that contract, but the Commission has recently reopened that proceeding to reexamine into the possible Federal questions which were described to you. That only affects the company in this way: That if the Commission should ultimately find, in reopening the question of this company's operation something different from the schedule based upon this contract, it would cause a controversy between the seller and the Illinois Commission. As the matter now stands we challenge the right of the Commission to ignore the operating expenses that we have incurred in the discretion of the company's management, especially because we have joined in a contract for the purchase of gas in Illinois and our position is the Commission has no power to set aside that contract.
Mr. COLE. Your company deals with towns along the line?
Mr. Daily. They are also controlled by the Illinois commissionthe local distributing companies.
Mr. COLE. And as I understand you, you are perfectly satisfied with the Federal legislative set-up, insofar as it deals with the interstate company with which you have a contract.
Mr. DAILY. I did not come down here to discuss the merits of the bill, as to whether it should pass. I am not here opposing the bill, if that is the question.
Mr. COLE. You are not opposed to it?
Mr. Daily. I am not here opposing the bill. I am just suggesting that if it should pass we desire that it should be amended; that it ought to be clarified on that one single point to make it clear where our company stands in the picture. I do not think it is clear now. Obviously we do not wish—and we do not think it was the thought or the intention that, such companies as this be under Federal control. Regardless of whether it might be so construed ultimately, we think that difficulty can be avoided and that the bill can be cleared up by taking a pencil for about 30 seconds and doing what I am here asking you to do. I do not think it was the intent that local operations such as this should be put under Federal control, but if the language as it now stands goes in, it might be contended—I would not want to say it would be—but it might be contended that such operations were subject to Federal control.
Mr. Mapes. As I understand your amendment, it only applies to the cases which are regulated locally?
Mr. Daily. By State commissions.
Mr. MAPES. And if a company did not come under the regulatory commission of the State, it would be outside of your amendment ?
Mr. Daily. Yes; my amendment would not apply.