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this pipe-line company coming into Detroit, if in the future it cannot meet the price that can be given by another company, that company can in Detroit be compelled to withdraw from the service, and it accepted those restrictions.
We have also a provision that Michigan gas can come into Detroit. It is not a contract, but it is a statement on record before the corporation counsel of Detroit by the Detroit City Gas Co., and if they accept those restrictions in order to get the market, why we do not need to lean the other way and say, "Why, you have gotten in there once, and you are in there for the next hundred years."
Mr. COLE. Is there anything now which prohibits the city of Detroit, if it wants to, installing a municipal gas plant and using Michigan gas?
Mr. SCHEER. Not at all, except a constitutional limitation which provides that 60 percent of the taxpayers must favor the idea.
Mr. COLE. Would there be any prohibition against that if this bill passes?
Mr. SCHEER. No, sir; but it certainly does interfere with our ability to make our own deals with respect to bringing in gas at lower prices. It is a case of ourselves being close at hand, close to the situation, and knowing what we wanted, and knowing what we wanted and basing our views on our past experience and taking that as against an assumption that something is needed to be done which we do not feel needs to be done.
Mr. MAPES. Mr. Chairman-
Mr. SCHEER. I would say that at our first meeting the cities that were represented at our first meeting, so-called charter members, if you want it to mean that way, were St. Paul, Minn., which includes Minneapolis, and Wisconsin, Illinois, Missouri, Kentucky, Indiana, West Virginia, Ohio, and Michigan.
Now, then, there were only about 20 cities, but they were the larger cities.
Mr. MAPES. Were they unanimous in their support of the recommendations which you are making?
Mr. SCHEER. Well, I should say, gentlemen, and I can call upon one of the men in this audience to support that, if they were confronted with the necessity of taking this bill with 7 (c), and not taking any bill at all, they would say, “Don't give us the legislation. We will come back at another time.”
Mr. MAPES. That was the unanimous opinion?
Mr. SCHEER. That is my belief; and if you want to ask Mr. Dickey, who comes from Portsmouth and is particularly concerned as to 7 (c), who came to us before we had ever seen “How did that get into the bill ?” I would like to have you ask him that question. He is a municipal official. I am not.
Mr. MAPES. For my own information, is Detroit getting any Michigan natural gas?
Mr. SCHEER. No. They made the gas company there agree to take in Michigan gas, if Michigan gas can be brought down on a competitive basis. Again, we are not subsidizing local industry, but we are certainly going to protect it.
and said, Mr. PETTENGILL. Would section 7 (c) interfere with Michigan supplying Detroit, if you wanted to use Michigan gas?
Mr. SCHEER. If it were not for the fact that the Michigan fields are up where they are. If they were down where they straddled the Michigan-Ohio line, it would interfere with such a competition from our own people.
Mr. MARTIN. Mr. Chairman, may I ask a question?
Mr. Martin. You idea of 7 (c) is that it freezes a situation in which an existing facility has a complete monopoly; it freezes that situation?
Mr. SCHEER. Yes. When I say that I say the facility. I mean the pipe line. I do not mean the whole utility.
Mr. MARTIN. Certainly. I am referring to the pipe-line company.
Mr. SCHEER. Yes. I think it takes away the liberty which we have got now and just gives us more than we want. It is like
Mr. MARTIN. And, if you are dissatisfied with conditions which develop which might be rectified by competition if it was permitted, it would be necessary for you to come to the Commission for relief!
Mr. SCHEER. I did not quite get that point. Mr. MARTIN. Uuder this section 7 (c), if you were dissatisfied with conditions growing out of this monopoly, although it only affected the local situation you would have to come for relief to the Commission and thresh out the issues and get a settlement here, whereas competition if permitted might settle it.
Mr. SCHEER. That is right. Competition might effectively settle those questions. It has in the past.
Mr. PETTENGILL. There is further regulation by State authority, by regulating the distributing company, which I suppose in most States does have a certificate of some sort. Is that a sufficient control against other companies coming in to take that particular market and starting competition?
Mr. SCHEER. Yes. That is only one of the many checks we have got on a situation of that kind. That is just one of many of them. I did not enumerate them. I did not think it was necessary.
Mr. HALLECK. Mr. Chairman-
Mr. HALLECK. Are there now cities in this country which would like the service of natural gas that do not now have it?
Mr. SCHEER. Yes; I would say there are a great number. employed by a group of Michigan cities which tax themselves onehalf a cent per meter per month for a period of 6 months to pay my expenses. That is what they think of the necessity for natural gas.
Mr. HALLECK. Now, do you not think that capital might be more interested in extending a line, possibly an independent line, to some of those areas to serve some of those cities, if they believed and knew that not only would they get a fair rate, but their entrance into that market would not be usurped or destroyed by some large company coming in and putting them out of business?
Mr. SCHEER. Your question answers itself. The fact that a few companies without that protection, practically monopolize the entire industry, is obvious.
Mr. HALLECK. Of course, the history of the natural-gas industry is that it has been operated as a purely private business insofar as interstate activities are concerned.
Now, we are seeking in this bill to subject them to governmental control and regulation. Of course, I was a little interested in your statement that you would rather not have any bill than to have this one with section 7 (c), because the benefits that are otherwise provided in the bill will accrue and if it should be discovered that section 7 (c) was operating to the detriment of the consumers, or the cities interested, it could easily be taken out of the law. Mr. SCHEER. Mr. Halleck, you have got that and then you have
The Commission has the right to keep them from selling gas too low, at too low a price, too. They have got that check, and we certainly do not need that on these enterprises. You have got that check and regulation over the rates. The people usually do not think that, in contemplating rates, that they might be too low; but you certainly have that power there. It is just and reasonable. You have got the check there and we have such checks locally to take care of that situation, and if experience shows that you need that additional protection for the great monopolies, why, maybe we can come in next year and say, “Let us get in”, but please let us keep something that we have gotten during the last 2 years, as a result of a great deal of work.
Mr. COLE. Mr. Chairman-
Mr. COLE. May I ask another question? As a member of the subcommittee that considered the gas bill during the last session, in recommending the bill, section 7 (c) as found in this bill was not included. I have not heard anyone in the testimony so far state the reason for its being in the bill now.
Mr. PETTENGILL. Who is the "daddy" of section 7 (c)?
Mr. COLE. It was not in the bill that our subcommittee wrote last year.
Mr. SCHEER. As a matter of fact, no reasons have been advanced for it. I tried to make some plausible reasons, and answered them, and maybe you were not here, Mr. Cole, but I did bring that out earlier in the session.
The CHAIRMAN. I will assume responsibility for authorship of section 7 (c).
Mr. SCHEER. We want to say, Mr. Chairman, that we know that you were motivated by the very finest consideration for our needs, because you championed this measure in the past, and we have been content not to come up here before, because we have got other problems; because we felt that your bill would be a help. We introduced H. R. 8711, because it more definitely sets forth our views. We would prefer to have this bill, because you have gone so far into the provisions of section 7 (c). It is not in this bill.
Mr. HALLECK. Mr. Chairman.
Mr. HALLECK. There is certainly ample authority in other utility measures to justify the inclusion of this section in this bill, if this is such an industry, or a similar industry.
Mr. SCHEER. Well, the practice has not proven that point, and I do not think you can prove it by application to other industries.
Mr. HALLECK. Practice so far has proven that competition has failed to bring down rates.
Mr. SCHEER. That is not true. Competition has brought down the rates. Until we brought in an independent pipe-line company to Detroit the best price for gas, which the local gas company was trying to make, and the best price that we could get until this pipe line was brought in, as was testified to before the common council of the city of Detroit, the best potential price they could get was 45 cents à thousand cubic feet. We cut that down 3312 percent, by contracting with this company.
Mr. HALLECK. Of course, you are referring to one specific instance, and I am referring generally to the situation as it has prevailed over the country. In other words, if competition in the industry had kept the rates down, or brought them down, to where they should have been, there would not be any use in passing this bili, would there? Competition has not done that.
Mr. SCHEER. Competition has not done that because of the political power of the industry, their control of the industry, and their ability to gradually squeeze out competition and there has not been sufficient protection to give competition a chance to reduce the rates.
Mr. HALLECK. I can well understand how that would be true.
The CHAIRMAN. I think anyone looking over the history of regulation in recent years could not help but reach the conclusion that the decided weight of opinion is, for modern regulation, in favor of a certificate of convenience and necessity. The only justification for regulating these utilities is that they do have what is in effect, a monopoly. In the absence of that monopoly it might be better to have no regulation so we could depend upon competition taking care of the needs of the consumer.
Now, you come here and you say we want regulation. We want a commission to depend upon, to give us reasonable rates, to fix maximum and minimum rates, but we are not satisfied with that. We want to play with loaded dice. We want regulatory control of the utility, but unrestrained competition for the consumers. If we can get an advantage through the lack of regulatory control over new competition coming into the field, we want that advantage.
We must eventually reach a conclusion one way or another, whether we trust the Commission. If we can trust the Commission, with the important duty of fixing our rates, why can we not trust them with the question of two lines or one? Is it necessary to add the power of unrestrained competition in order to give us just rates when that is the object of setting up a commission?.
Mr. SCHEER. Mr. Chairman, I would answer this way: Let the Congress, or let the committee, first prove there is unrestrained competition today. It just does not exist. For example, today we have got competition in Detroit. Furthermore, this certainly applies to a company that seeks to compete. It does not place every company under the requirement of getting a certificate.
The CHAIRMAN. How many big cities do you suppose would want to be furnished by two sources of supply?
Mr. SCHEER. How many?
Mr. SCHEER. May I ask Mr. Reed to answer that question? He speaks for Cleveland. He represents 40 Ohio cities, and I would like to have him have a chance to express his views. He has been in this for some years.
The CHAIRMAN. How many local cities would deliberately choose two electric companies or two water companies?
Mr. SCHEER. Well, when the one company is not satisfactory, they choose to build a plant of their own. We cannot build a pipe line of our own, but we can ask for competition there so that we can choose between it.
You cannot look over the industry and say that there has been destructive competitive competition. You cannot show the need for this,
The CHAIRMAN. The question is whether you are going to have one or two. The power is given to the Commission to decide, under the circumstances, whether it will permit another company to go in there and compete or take over a certain territory instead of the old company.
Mr. SCHEER. Yes; and that
The CHAIRMAN. And the Commission must make that decision from the standpoint of public convenience and necessity.
If such competition is in their judgment justified, there is nothing in this bill which would preclude the communities from having it. If you want to enter into some competition that is unwarranted, then this bill would stand in the way of it, because we assume that the Commission would not give that anthority.
If you have legitimate regulation, in the end your community will get better and cheaper rates than it will with too much competition.
The gas industry is in a separate position from other utilities. There is greater reason for this provision in the case of gas than electricity. Electricity is produced by permanently renewable sources of supply. Gas fields are limited, and it is only a matter of years when all are going to be exhausted. Communities are going to build up relying on gas and then have a hard time adjusting themselves to conditions to come. The investment of gas companies is more hazardous than that of other public utilities.
If there is any justification for a certificate of convenience and necessity, in my judgment, it is in the gas field.
Mr. SCHEER. Well, Mr. Chairman, our own answer is to point to the great growth of monopoly in the industry without requiring independent competition, independent action, or requiring them to get a certificate of convenience and necessity.
In our opinion, the only answer is that we have got a situation here in which our experience does not demonstrate that.
The CHAIRMAN. You have regulation established by law. The companies are regulated presumably in the interest of the public. That is what regulation is-monopoly controlled in the public interest.
Mr. SCHEER. Furthermore, regulation is devised to correct abuses, and there have been no abuses to correct in this instance; there have been no abuses.
The CHAIRMAN. Well, as long as the authorship-