PAGENO="0001" PAGENO="0002" COMMITTEE ON INTEI~SPATE AND ~0BEIGN COMME~O~ JOHN BELL WILLIAMS, Mississippi KENNWE'H A. ROBERTS, Alabama HARLEY 0. STAGGERS, West Virginia WALTER ROGERS, Texas SAMUEL N. FRIEDEL, Maryland TORBERT ~L MACDONALD, Massachusetts G13~ORGE M, RHODES, Feursylvania. JOBLN ~1AR1~~A~, Oklahonia LEO W. O'BRIEN, New York JOHN E. Moss, California JOHN D. DINGELL, Michigau PAUL G. ROGERS, Florida ROBERT W. HEMPHILL, South Carolina DAN ROSTENKOWSKI, IllinOis JAMES C. HEALEY, New York HORACE R. KORNEGAY, North Carolina W. It. HULL, Ja., Ml~souri GILLIS W. LONG, Louisiana LIONEL VAN DEERLIN, california JQIIN B. BENNETT, Michi~ar~ ~ILLL+~M L. SPRINGER, fl~o1s PAUL F. SCHENCK, Ohio J. ARTHUR YOUW~RR, California M~IATON ~. GIJRNN, New Jersey SAMUEL L. DEVIN1E, Ohio ANCHER NELSEN, Minues~ta ~AS'rXN~lS KW~Tfl, 1~assachUsetts WILLARD S. CtJItTIN, Penn~y~ta~a ABNER W. ~IBAL, Conneet~cut GLENN CUNNINGHAM, N~a.ska JAMES T~ BROYHtLL, North Carolin~ DONALD 0. BROTZMAN, Colorado ~oaaa W. Panar r~1uss M. Mawosa, Jr. UI3COMMITTEE ON INVESTIGATIONS OREN HARRIS, Arkansas, Chairmen JOHN B. BENNETT, Mi&bigan WILLIAM L. SPRINGER, Illinois J. ARTHUR YOUNGER, California DONALD 0. BROTZMAN, Colorado owzs, Ja., Chief Counsel r BISASLEY, Chief Clerk OREN HARRIS, Axkannas, Chairman W. E. WrLr~L&MsoN, Clerk KENNETH J. PAIETEa, Assistant Clerk Prof essional ,S~taff PAGENO="0003" PAGENO="0004" PAGENO="0005" PAGENO="0006" ADMINISTRATIVE PROCESS mittee. ~ e same reqt~est was mad Commission in the last Congress ~ chairmanship of hr. Swidler, the present chairman. But the committee and the Congress did not feel and have not felt th~ wide latitude they have requested to be ir ~ ~ with the intention of the Congress when these agencies be in I with the spirit of ~~ntorun PAGENO="0007" AI~MINISTRATIVE PROCESS 3 course of this committee's work at this time Judge Prett~yman will ultimately come before the committee for the full development of that story in order that the committee may have the benefit of his experi- ence and their recommendation in arriving at its judgment as to what to recommend. I make this statement for the record at this time to give a brief background of the interest of the committee in carrying out its dtities and responsibilities. Today the committee has been called together for the purpose of surveying the objective of improved procedure of the regulatory agen- cies, and how we may arrive at the best solution in carrying out our job and giving help to those who are responsible for such a tremendous task. As. I have explained, we have been working on this problem for the last 7 or 8 years. Recently my attention was called to a statement that was carried in the press on Saturday, January 26. Tn view of the tact that it referred to a particular problem which has concerned this committee, I made some inquiries about the problem. I learned, as the article had indicated, that a letter had been written to the Presi- dent of the United States under date of January ~3, 1962, by Corn- missioner flloward Morgan of the Federal Power Commission. Now, as chairman of the committee-and I think that I express the feeling of the committee,-it isn't our duty or responsibility to become involved with any differences of opinion on any particular decision or judgments made by the Commission. We maint~tin it is the duty of all Commissioners to do their job and make their own ~dêcisions based on the facts and information in any particular case. If it is a part of the majority decision, or if it is a unanimous decision, or if it is a dissent on a particular issue, it is the duty o~ each Com- missioner to assume his own responsibility. And so this committee is not concerned, then, with any differences of opinion that might exist within the Commission itself, or any personalities that might be in- volved. We are concerned with the administration of the laws and whether or not these ~Commission~ are carrying out the law a~ writte1~ ~and intended by the Congress and the legislative record, we think, should be considered. In view of the fact that the letter had to do with the general prob- lem of the regulatory agencies of the Government after obtainrng a copy of the letter and reading it, I felt that this committee Ethould have the benefit of the experience of Commissioner Morgan, as we intend to have other Commissioners not only of the Federal Power Commission but of the other agencies of the Government, particularly the chairman, to report the progress they have made in carrying out their responsibilities oftl ~ceanlth r ivir, iL~. the record. PAGENO="0008" 4 ADMINISTRATIVE PROCESS (The letter referred to follows :) ~ . FJtDE1~AL P~WER Coi~nnssToN, OFFICE OF CoMMIssIoNE~. Wc~skin~gton, Ja~iutary 23, 1963 The PRESIDENT, The White Hoase, Waskiiagton, D.C.. DEAR MR. PRESIDENT: It is with considerable regret that I now convey to you my firm decision Rot to accept a further appointment to this Commission after expiration of my present term of office on June 22, 1963. I respectfully request that a nomination to replace me be made in time to permit confirmation by the Senate prior to that date. There are a number of reasons for my decision but I am sure I should be con- sidered less than gracious if 1 were to list them all. Besides, several of themare clearly visible to those who have read the dissenting opinions which I have beeti obliged to write during my service here. I should, however, like to make a gen- eral comment concerning the regulatory agencies which may be of some small h'elp to you, to my successors, and to the public interest. My study and work in the regulatory field cover a period of 25 years, and the strongest convictions pro- duced by that experience are those I am setting forth in this letter. Standing as it does midway between the extremes of unbridled monopoly and undiluted State ownership, public utility regulation has been perhaps as noble, hopeful, and challenging a concept as any in our democratic framework of gov- ernment. The passage of law establishing this concept required all the coura~ self-sacrifice and tenacity of men like George Norris, Hiram Johnson, Giffoi~d Pinchot and many. many more of the same caliber. Ordinary men could not possibly have secured the enactment of those laws against the almost overwhelm- ing forces opposed to them. Ordinary men cannot administer those laws today in thq face of pressures generated by huge industries and focused with great skill on and against the sensitive areas of government. Ordinary men yield too quickly to the `present-day urge toward conformity, timidity, and personal security. tinder our laws the great natural monopolies which form our utility industries are granted almost priceless protections and privileges. The industries and individual companies are keenly alert to their rights, as they should be, and properly insist before the commissions, the courts and the Congress, upon prompt and full enjoyment of those rights. But those unusual rights-rights not enjoyed by unregulated industry-are accompanied by unusual obligations and responsibilities. Or are supposed to be. There is the rub. If our regulatory laws are not administered by men of the same character, courage, and outlook as the meti who enacted the laws, we will surely finc~ the regulated industries and companies successful in post- poning, or evading entirely, the responsibilities which are supposed to accompany their rights. When this happens, utility regulation ceases to be or never becomes a protection to the consuming public. Instead it can easily become a fraud upon the public and a protective shield behind which monopoly may operate to the public detriment. The big problem in the regulatory field is not ex parte communications, influence peddling, and corruption as that word is commonly understood, though where these problems exist they can be serious. In my experience as a reg~I- latory official I have been approached only once with a veiled intimation that money or stock waS available in return for a favorable decision, and that was at the State level, not here in Washington. But abandonment of the public interest can be caused by many things, of which timidity and a desire for personal security are the most insidious, the least detectable and, once established in a regulatory agency, t.he hardest to eradicate. This Conunission, for example, must make hundreds and even thousands of decisions each year, a goo(l many of which involve literally scores and hundred of millions of dollars iii a single case. Without the neede(l sense of p~thlic responsibility, a Commissioner can find it very easy to consider whether his vote might arouse an industry campaign against his reconfirmnatiomi by the Senate, and even easier to comivimice himself that no such thought ever crossed his niind. And if he can fool himself, whom can he not fool? The big problem is to find men of ability, character, courage, and broad vision who have the same viewpoint as the authors of the legislation they will be called on to administer ; men who would feel a.t ease while working with a Pinchot or PAGENO="0009" PAGENO="0010" 6 FEDJiRAL Powisn COMMISSI0I reasons for asking not to be re Fof your information and t~t of your subcommittee I am enclosing 10 copies of the letter Which I wrote President Kennedy. The general comments in this letter as I pointed out therein represent a point of view cone~rn1ng the major and crucial area of difficulty in all regulatory agencies which I have been develop- ing with increasing conviction for a number of years. I sincerely believe that When commissions are staffed by men of genuinely outstanding stattire and caliber, men such as those mentione~l in the letter, the less important admini- strative and procedural problems of the agencies tend to be minimized, while the more important problems are more quickly recognized and dealt with This is not to say that the numerous studies of such pro'bl~ms are unnecessary or that they are not helpful but that a main avenue of attack on those problems is the recruitment and selection of outstanding personnel at the Commissioner level. My comments were not directed specifically toward this or any other single agency. Your letter of invitation suggests that you wish my views primarily on matters of preceàure and I shall be glad to discuss such matters with the subcommittee within my competence to do so It should be pointed out however that I am not a specialist in administrative and procedural matters nor have I attempted to become one. My Work, both at the State commission level and on this Com- mission, has of necessity beOti directed toward the substantive aspects of case decisions and broad regulatory policy. I shall however be glad to discuss any matters von desire in the hope that such a discussion may provide some small and continuing benefit in the regulatory field, to which I have devoted a number of years of study and work. I accept your invitation and look forward to a useful discussion with your subcommittee. Sincerely, HOWARD MORGAN, Conimissioner. The CHAIRMAN. Mr. Morgan, with this background, I think you should have an opportunity at this time to make whatever statement you would care to make. STATEM1~NT O~' EON. EOWARD MORGAN, MEMBER, F~1YERAL POWLR COMMISSiON Mr. MORGAN. I am here in answer to your invitation which was issued after my letter to the President was written declining further appointment to the Federal Power Commission. I wish to emphasize again, as I did in my letter to the President, that the ideas in the letter were general in nature and general in plication. They have been made by many others before me. Dean Landis is a noteworthy example. And I think every regulatory com- mittee of the House and Senate which has studied regulatory agencies has emphasized very heavily the necessity for excellent quality in the appointments to the Commissionur level. President Kennedy him- PAGENO="0011" i~DMINISThATIVE P~ti~YCESS 7 self in his message to the Congress on regulatory agencies on April 1~, 1961, under the heading "The Caliber of Appointed P~rsonilel" ~iid this: No amount of reorganization or new procedures can be effectiye Without or a substitute for high-quality personnel In c~harge of these agencies. No other single step can accOmplish as much. The thought I had in writing the letter is that so many studies concentrate on administrative and procedural matters that it seemed important to me, and has for many years, to emphasize and reem- phasize the very point that President Kennedy himself made in his report to Congress. I would like to include in the record as well as my letter to the President a letter which I wrote to my old friend Congress~toman Green, of Oregon, in December of 1960, at the time when the first inquiry came to me concerning my willingness or interest iii serving on any regulatory agency in Washington. I believe you will see that the same comments in a different form are contained in this letter, and show that my interest in this matter has not changed over a long period of time. If it please the subcommittee, I would like to offer this letter for inclusion in the record. The CHAIRMAN. It will be received. (The document referred to follows:) Tim BLACK/BtTTR RANCh, Sist era,, Oreg,, December16, 160. Hon. Enivu GREEN, Member of Congress, House Office Building, WasMngton, ThU. Dz~n Mns. Gnnnw; This is in answer to your request for background material relevant to my posible appointment to the Interstate Commerce Commission or other regulatory agency and is an expansion of the material furnished your stafl by telephone yesterday. Also enclosed are references, where appropriate covering each period and type of experience. First, however~ let me reemphasize one point which I made yesterday. Over the past several years, when asked by you and Senator Morse, Senator Neuberger, and others to consider such an appointment, I have consistently refu~ed. As a young man in the t~bvernment service, I had the great privilege of working under the direction of the late 3~oseph 13. Eastman, Chairman of the Interstate Coin- merce Commission~ and oPe of the finest public servants ever to be employed b~ our Government. This was a wonderful eitperienee but It's impossible for Inc to forget the heartbreaking frustrations and overwork which confronted th4~, great man as he tried to produce order, pu~ompt action, and vigorous protection for the public against the steady opposition of a majority of Commissioners who were usually moribund and sometimes worse. I am certain that this long, lonely struggle contributed to his untimely death during the war; a war which bad already prevented President Roosevelt from acting upon the reorganization plans Mr. Eastman had prepared for him. When Mr. Roosevelt himself died before the end of the war and Mr. East- man's proposals and the need f~r reform were forgotten, I promised myself that I would never return to Washington in connection with a regulatory agency except in a policymaking position and then only if assured that the President who had appointed me was determined to follow through with a thorough house cleaning and the appointmemit. at his ea\rliest opportunity, of a clear working majority of Commissioners dedicated to honest, vigorous regulation In the public interest. The events of the past few weeks, including Senator Kemiedy's appointment of Dean Landis to advise him, have given me the first hope since Mr. Eastman's death that these conditions may soon prevail. If this is the case, then you may suubmit my name to the President-elect and his advisers, for in these circum- stances I should be honored and delighted to serve, if nominated and confirmed. If these conditions are not to prevail, however, my previous attitude will remain unchanged for as you know, I do not need a job; I have a good life and it would be pointless to exchange it for the anxieties and frustrations &idured PAGENO="0012" 8 ADM~NISThAT the contents misquoted. Two principal questions seem to I' press stories. One was: Was I referring to my co] gues on the Fed- eral Power Commis~ion in any derogatory way? answer is "No," and the letter itself makes that plain. I want to make it even plainer now. My colleagues are able, honest, conscientious me~n, and further, they are men whose company I enjoy, and for whom I have formed a genuine personal fondness. And this includes all of them. I cannot and will not make derogatory comments about them. And I am very sorry that my letter to the President has been misinterpreted by those who have soughtto make a sensational thing out of it. .J have differed with my colleagues on policy matters, sometimes quite strongly. But that is what a commission is for. It would not be a proper commission if it did not have the interplay of opinions, in- cluding those that are strongly held. But on a personal basis, my asso- ciation with my colleagues has been pleasant, friendly, even, and ami~ cable, and I have no reason to believe that it will do other than con- t~nue on that basis. Another question has arisen as a result of press stories: and that is: Was I riderring to myself when I described the qualities that an ideal commissioner should have? The answer to this is also "No," as was made plain in the letter, and I would like to make that plainer now. I mentioned four men who served on the Interstate Commerce Com- mission a number of years ago who exemplified my idea of outstand- ing commissioners to serve as a model for all regulatory agencies. They were the great Joseph Eastman, Clyde Aitcheson, Walter Splawn, and Charles Mahaffie. I knew three of those men personally, and I knew them all by reputation. I worked for one of them for a brief period. Now, gentlemen, if I had twice the brains I have and five times the knowledge, and were about two-thirds of my present age, and were appointed to a regulatory commission, I think that after serving 20 years there might be a chance. that. I could possibly belong in. the corn- party of those men. But under no other circumstances. So I was not referring to myself. . . . PAGENO="0013" PAGENO="0014" 10 ADMINISTRATIVE PROCESS The CHAIRMAN'. I am not myself interested in any of the personal matters, but I am interested in the broad problem here of helping to bring about improved regulation. Mr. MORGAN. I understand, sir. The CHAIRMAN. You are a young man. Mr. MORGAN. I thank you for the kind words, sir. I am not sure you are accurate. The CHAIRMAN. You can understand my statement when you i lize my age at this stage in comparison to yours. But you have I 2~5 years of experience in this field of regulation, you sat? Mr. MORGAN. Let me add that that is not continuous experience, The experience covers a span of 25 years, but it is not continuous this field. The CHAIuMAN. But you have had long experience~ Mr. MORGAN. Yes, sir. The CHAIRMAN. Now, am I to understand that you have decided that there is not enough imaginatioi~ in dealing with the problems of regulatory agencies, even though you have convictions, that you have become discouraged and perhaps disgusted and given up hope that you can accomplish what in your mind you feel would be best in carrying out the laws, and just decided you would get out; is that a fair statement or not ~ Mr. MORGAN. Well, I wouldx~'t put it quite that way. But there is a question, and there has been increasingly a' question in the minds of students of regulatory affairs over the past few years, as to whether utilities can actually be regulated in the manner envisaged by the authors of the legislation under which they are supposed to be regulated. And this in part is what I was talking about in my letter to the President. We live in an age which enables enormous pressures to be generated, and as I said, focused with great skill on the agencies of Government that `are supposed to control certain sectors of industry~ Now, I am sure I don't have to tell the members of the subcom- mittee~who have dealt with regulatory matters for many years that the regulated sector of industry is very different from the unregit- lated. As I said in my letter, it has enormous privileges which be- come rights when they are granted by law as they are. And those industries are very quick, as they should be, to take advantage, full advantage `and prompt advantage, of all the rights that they have. They are not so quick to accept the responsibilities that go along with those advantages. The CHAIRMAN. Are you talking about the industries ~ Mr. MORGAN. Yes, sir. And the pioneer legislators who enacted the laws ~xpected the regulatory agencies to be firm, and it is necessary for them to be so, and to be prompt to seeing to it that the other side of this compact' between the regulated utilities and the public is carried out. If the agencies are not firm, if they are not prompt, if they don't move on th~ir own initiative to investigate and to hand down orders, the natural expectation is, gentlemen, that the executives of those in- dustries, competing with each other for the top jobs and for the favor of stockholders, will be forced by the very pressures of cor- PAGENO="0015" ~OVersy, Si) PAGENO="0016" 12 of Idaho Power if and when a cci surplus power to Utah Power &] Co., went into contract went into effect while this present Commission wa~ sitting, in 1961. It is another one of the sales of surplus power at dump rates. I pointed out that this Commission has an obligation to do that ~r Commission said should and would be done when d~irnaging action it is i img mo facts to find out whether a certain action should be~taken. You will find wheil you read this order that it is a simple boilerplate order, a standard finance issuance order, accompanied by a seven-page raising e problems of public po4icy and the protection of e. Ar B is not one word of resFonse from my colleagues, ion is not wiliinfr ,ju fit to run. That, of course, leads me to the second broad general qu your explanation, in the dissetit in this particular case, of what caused ~i to arrive at your decision. PAGENO="0017" PAGENO="0018" 14 ADMINISThATIVE The CHAIRMAN. Well, did you mean the s to the other agencies of the Government, since you did latory agencies as such? ~r. MORGAN. To th~ extent that any agency has a lower level of lied personnel at the top positions than is possible, my statement that is simply an exercise in logic. I think U~. it is an strable fact. Mr. BENNETT. Mr. Chairman, would you yield bei~ point? The CHAIRMAN. Yes, Mr. Bennett. Mr. BENNETT. Mr. Morgan, in respect to your state~ past year and a half you have felt - fellow Commissioners had tendencies personal security, what did you have in Mr. MORGAN. Well, let me make a g you- Mr. BENNE~r. I would like you to be ~ ecause that seems to me to be a serious charge a, ,~.. ~ iissioners, whether they be on your Commission or some other Commission. And I would like to know what you had in mind specifically. I am sure you have got something in mind. Mr. MORGAN. I don't want to be specific as to the case involved. But let me say this, that when in open Commission meetings-and I don't mean it is open to the public, but with the full Commission present and the staff department heads, the lawyers, the secretary, the executive director-the statement is made that we mustn't investigate the situa- tion because it would disturb industry, and perhaps- Mr. BENNETT. The statement made by whom? Mr. MORGAN. By a Commissioner, and sometimes by the staff-and that statement is accepted arid acted on, in the absence of any other reason for such an action, or usually inaction, then I would say this is an example of what I was talking about. Mr. BENNETT. What would the statement be about? Specifically what was he talking about that the rest of the Commission accepted? The case I have just discussed, Idaho Power Co., is a Lch that statement was made, and formed the basis for the `s refusal to investigate. And there have been others. o Power & Light-Pacific Gas & Electric intertie proposed i, which involved a financial issue of the Pacifk Power & i -, was another situation in which the failure or refusal to in- ye e the matter to see whether it was consistent with the public interest was explained not in the Commission's order, but in- Mr. BENNETT. I am not talking about the public interest now, I am talking about this chai~ge that you made, the tendency of ordinary people-and you have narrowed that down to some of your colleagues PAGENO="0019" PAGENO="0020" 16 ADMINISTRATIVE PROCESS nd we are to Mr. MORGAN. What is not being done? The CHAIRMAN. Men of real stature and ability being appoil these Commissions. Mr. MORGAN. If you will read Dean Landis' report where he deals with this subject, he describes the decline of Commission personnel beginning about the time of World War II in far more specific detail than I have in my letter to the President. If you would like, I will be happy to read some of this into the record. The CHAIRMAN. I think that is already in our records, Commissioner Morgan. And I might also say that Dean Landis is not down here any more; his time was short for one reason or another. I admire "ye long had great admiration for him; he is a man ~h was a temporary job. him and from Mr. Moss. The CHAIRMAN. Mr. Moss. Mr. Moss. Mr. Morgan, while we are at this point, I have read your dissents, and let me say that I find i~n them a sense of great vigor, clai~ity and logic. There may be instances in reading them where I ~"~" not always agreed, nevertheless the fact that you have stated tnd witho ny equi n your view s is, I think, much to your PAGENO="0021" PAGENO="0022" 18 ADMINISTEATIVE PEOCESS and Oxbow projects, instead of the regular straight-line method pre- scribed by the FPC's uniform system of accounts 9 Mr. MORGAN. Yes, sir. Mr. Moss. And in the failure of the Commission, at least in their opinion, to take cognizance of any of these factors, you found that there was timidity, a reluctance to move into perhaps a i~ew area approval of requests for finances, of expansion by company 9. Mr. MORGAN. It seems so to me. And my impression was stroi~ reinforced by the conversations within the' Commission while case was before us. / Mr. Moss. Now, I would say that before the California case in which you also dissented-I was under the impression that the Commission did look to the uses of the proposed findings. Mr. MORGAN. The law requires us to. Mr. Moss. And I felt- I had every conviction that this was being done. So to that extent, at least to me, I could, I guess, by a very broad application of the term "fraud," say that that type of regulation at that pornt was not the type of regulation which I anticipated was provided for in the procedures of the Commission and contemplated in the law itself. Mr. MORGAN. I put it as strongly as I could in my dissent. And I wrote two of them in that case. We did not do-not only did we not do wh~t the cons~imers normally expected us to do-we did not do what the law requires us to do. Mr. Moss. That is all I have. The CiIAIRMAN. I want to continue until we get through with the letter. I think it should be analyzed before we continue further. I don't think anyone could have any disagreement with what Mr. Moss has just said with reference to the responsibility of a ~ommis- sioner in going into any particular problem and arriving at a de- cision in his own mind from the facts and information he has. But the hnplications with reference to the character and ability of other Commissioners, not only in your own Commission, but in other regulatory agencies, are what I think we should be interested in in this committee. I might say, Commissioner, I have been very strong over the years for men of ability, background, and experience in these various regula- tory agencies. An4 I have a letter on file from the President of the United States to that effect. And I have a letter on file from the former President, Mr. Eisenhower, to that effect. In my letters to them, I urged consideration of men of ability, and when they had performed their duties, that reappointment be con- sidered. I feel that this is a policy that should be followed by the chief Executive. But the real question here is that in your statement of t for your not wanting reappomtment, you make reference to the tory agencies in general, and you characterize them as mai ordinary men, and you make reference to courage and outlooks ~ if not proper, and so forth, brings on the type of fraud that Mr. Moss referred to, and that seems to me to be a real problem here today. Ani I wanted to know for the committee just what you meant by this characterization. I have a feeling that there has been a gradual PAGENO="0023" PAGENO="0024" Mr BENNETT Mi ~ , ~L W'n ing with you a few minutes ago. I tions of Mr. Moss. I have often heard you say improved. The deterioration V u just said a few ] PAGENO="0025" PAGENO="0026" 22 ADMINISTRATIVE PROCESS What was the case? What were you trying to do, tell him what we ought to do with the Federal Power Commission in the future, or were you giving him an abstract lecture? Mr. MORGAN. 1 was doing exactly what the letter says I was doing. I was reemphasizing once more, as many other people have done, the importance of the caliber of personnel at the top level in regulatory agencies. Mr BENNETT You say in the letter, ordinary men cannot admin ister these laws. Now, would you describe your fellow Commis~rnn- ers as ordinary men? Mr. MORGAN. I would rather not describe them at all, sir. Mr. BENNETT. I think, Mr. Chairman, we are entitled to this infor- mation. This man has made some serious charges here against other members of the Commission. Now, maybe the charges are true, I don't know. But I think it is our job to find out, and I think this witness is evasive about it. I don't think he is frank with us. And I don't think he is being honest with us in his statement. You have used some language in here, and you are smart enough to tell us what you meant by it. And I am going to ask you again: What did you mean, that the other Commissioners, your fellow Com- missioners, are ordinary men in the sense that you used, it in the last sentence on page 1 in your letter? Mr. MORGAN. I am sorry, but my responsibilities require me to dif- fer on occasion with my colleagi4es, and, when I do, to set forth my teasons for differing with them, and I have done thi~. But my re- sponsibilities do not require me to pass judgment on them as indi- viduals, as persons. I described my relations with them at the outset of my testimony. And what I said was true. Mr. BENNETT. I heard what you said at the outset of your testimony, and I have already read what you said in your letter. And I am hav- ing a hard time reconciling the two. Mr. MORGAN. Have you read the part of my letter which says it does not intend to depict or describe anyone including myself or my col- leagues? Mr. BENNETT. Yes. Mr. MORGAN. That means what it says, too, sir. Mr. BENNETT. What category do you put yourself in as a Com- missioner? Are you an ordinary man, as a Commissioner? Mr. MORGAN. I am afraid that I am. Mr. BENNETT. Is that the reason you are quitting, so the President can put an extroardinary man in your place? Mr. MORGAN. It is one. And I hope he does. Mr. BENNETT. Do you think there are any better men in the Com- mission than you as far as the protection of the public interest is concerned? Mr. MORGAN. That is a. diffiêult question to answer. Mr. BENNETT. Would you give it a try? Mr. MORGAN. I would rather not try to rate the members of the Commission with respect to each other, including myself, sir Mr BENNETT You want to leave with us the impression, then, that a matter of fact you are not offering any criticism of your col leagues or their decisions, and that you are perfectly satisfied with the PAGENO="0027" ADN~STRATIV~ PROCESS 23 caliber of protection that they are giving the public on the Com- mission? Mr. MORGAN. Will you repeat that again, sir? Mr. BENNETT, Will you read it to hiw, Mr. Reporter? (The record was read by the reporter, as requested.) Mr. MORGAN. I have not commented, and I will not comment on the caliber of my colleagues, becau~e to do so would be to make a personal reflection or estimate of them which would be e~itirely impiroper. I have commented at length in my dissenting and concurring opinions as to their actions and as to the policies that they have adopted or have failed to adopt, and those statements remain on the public record where anyone may consult the~n. But I have not made personal judg- ments or comments, and I see no reason to do so now. Mr. BENNETT. You just want to make this as a high-level discussion to give the committee the same kind of gobbledygook that you gave the President in your letter of January 28, is that about the size of it? Mr. MORGAN. I think I am being as clear as I can be on what I can properly say with respect to my colleagues, and what I can say only with great impropriety. I have commented on policies, on principles, on actions, and on inactions. I can do that, but I thiiak it would be the grossest impropriety for me to comment on them as individuals and with your indulgence, I will not. Mr. BENNETT. I am not through, Mr. Chairman, but I understand you want to adjourn. The CHAIRMAN. Since you have discussed, as an example of what you have in mind, the Idaho case, I think in order for the record to be complete it should be included in the record. (The document referred to follows:) UNITET) STATES OF A~ERIOA FEDERAL POWER Before Coiiiini~sioners: O'Connor, .Jr., - Idaho Power Compaiiy Oanr.n ArrnoRlzucc, THE IssUANcE o: (Issued Deeeiuber 10, 1 PAGENO="0028" 24 ADMINISTRATI~JE PROCESS approximately ~~~ssory amount of $3O,L~,O00, all as described above, will be in e~. securities within the purview of Section 204 of the Act. (3) The proposed issuance of Promissory Notes in the aggregate principal amount of $30,000,000, all as described above, will be in excess of 5 percent of the ~ar value of the other securities of Applicant, and therefore, will not be exempt by virtue of Section 204(e) from the requirements of Section 204(a) of the Act. (4) Applicant is not organized and operating in a State, under the laws of which the security issue here involved is regulated by a State commission within the meaning of Section 204(f) of the Act; and the proposed issuance Is, there- fore, not exempt by virtue of that Section from the requirements of Section 204 of the Act. ~ proposed issuance of Promissory Notes will be exempt from the corn- idding requirements of Section 34.la of the Commission's Regulations Fedeial Power Act by reason of paragraph 34 la (a) (2) thereof PAGENO="0029" PAGENO="0030" 26 ADMINISTRATIVE PROCESS rais~. stances, to construct t implementation of hidE endent proc lug t~ Its furtbe~ Howev resj~or~'~ for construction It appears that the Idaho Power Compeny is already faced with ~ problem of surplus capacity; and that this situation is likely to continue for' some time in the future. J~'Orther, It iih~ been variously estiinate~d that Idaho Power will not need the additional 27~,OOO ltw to be provided by Little Hells Canyon dam until sometime between 19E~6' and 1975,1 and none 4~ these estimates' has taken into consideration the problems Idaho Power may face in attempting to dispose of additional eai~aeity at compensatory rates if low-cost Bonneville power becomes available in southern Idaho. In the present circumstances there is some degree Of doubt concerning the economic wisdom of building all three of those projects, as was the case in 1958 when our predecessors chose to grant a license for all of these separate under- takings to a company that then had an installed capacity of 375,375 kw, ratbei~ than recommend the construction of a single large unit by the Federal Gove~n- ment. The extent to which these prOjects were undertaken as the result of a clash betweOn Ideologies rather than as the result of prudent business judgment remains undetermined. In any event, the result o~ premature yet legally necessary construction (i.e., for license retention pnrpose~) has been to force Idaho i~ower to dispose of it's surplus' production by means of practices Which may `be operating to the detri- ment of its consumers ~nd possibly Of its stockholders. Consequently, I am most reluctant to enlarge and aggravate what al'read~r appears to be a problem seri- ously affecting the public interest by approving the issu~tnc~ of securities to finance what, in the light of availtible evidence, may prove to be additional pm- mature or unneeded construction There already exists a need to settle the question Whether the cost `of Idalko Power's present excess capacity should iomitlnue to be borne by its customers, or wl~ether that cost should be borne by its stockholders until inclusion of all gen- erating capacity in Idaho Power s rate base is economically jnshfied Failing this, however, I feel that as a minimum we should determine whether the financ- ing costs of the additional issue here proposed should properly be charged to Idaho Power's customers orto, its stockholders. The available evidence referred to includes but is not limited to tb~following: (a) Idaho Power has contracts, with Pacific Power and Light, Washington Water Power, and. Utah Power and Light for large blocks of firm power from Idaho Power's new Brownlee and Oxbow dams on the Snake. Idaho Power's contract rates to those companies for that power are: PacifIc, 4.75 mills; Wash- ingtori Water Power, 4.75 mills; and Utah Power,2 4.60 mills. Idaho Power's. Idaho rower Itself testified miner In the Hells Canyoiu ~pany's three-dam plan "cx- PAGENO="0031" £DMINISTRATIVE PROCESS 27 systemwide costs are reliably estimated to be in the neighborhood of 6.5 mills. During 1961, the company's sales to those three utilities accounted for more than 2G% of its total capacity output.~ (b) Ii~i 1956 Idaho Power filed rate schedules (PPO No. 24) with this Con~mls~ sion providing for the sale of firtu power to the Utah Power & Light (3otmpany at rates of 7.5 and 8 mIlls. They are still in effect. In 1958 Idaho Power filed another rate schedule (FPO No. 26) calling for the sale of additional flr~ power to the same customer, at the same delivery points, and under the same conditjous, at a rate of 4.6 mills-effective ~poa the com~p1etioi~ of Edaho'8 Oa'bow project in the latter part of 1961. This anomaly did not escape the prior members of this C~mm1ssion. ~VIze7 directed the secretary to write a letter to the company on June 4, 1958, question- Ing "the propriety of having rates In the above-designated rate schedule which are different from those contained in your Rate Schedule FPC No. 24, since both agreements provide for essentially the same class of service to the same pur- chaser at the same delivery points. "In connection therewith," that letter con- eluded; "the rates and charges conl~ained in your Rate Schedules FPC Nos. 24 and 26 and your company's cost to serve the purchaser may be subject to further scrutiny at the time service is initiated thereunder." Service thereunder has since been initiated; yet the propriety of the ~Lual rate filings remains unscrutinied. (c) Inasmuch as certain of Idaho Power's other wholesale customers are pay- ing rates considerably in excess of systemwide average costs, it further appears that the foregoing practices may constitut~ an illegally preferential and discrimi- natory situation. Moreover, Idaho Power presently is seeking a 13.6% rate increase from its Intrastate retail customers in Idaho. This Is developed in full In the Brief of the General Services Administration on behalf of the United States Atomic Energy Commission, dated July 2, 1962, in Case No. U-1006-42 before the Idaho PUC. The question that shoi~d be deternlined by this Commis- sion (or by a joint inquiry with the Idaho Commission~ is t Power may be requiring Its ci cona - Exhibit U of company's application in this matter, filed October 10, 1962, states that "Applicant has no known contingent liabilities except 1te~ns erich as damage suits or claims (covered by excess coverage insurance after primary the Portland Oregon PAGENO="0032" 28 ADMINISTRATIVE PROCESS postponed-it is clear that a~ is insured against liability in this matter; a of its possible liability will alter the costs financial burden that company here asks us I i of the Project i ~. 1971. s as o~ 1~he date HOWARD ~ The CHA~IRMAN. We will have to suspend these hearings. There are other-there are questions by other members of the committee, so I am going to ask you to come back tomorrow afternoon at 2 o'clock. The committee has an executive session that it must go into now for another purpose. (Whereupon, at 11 :50 a.m., the subcommittee went into executive session.) PAGENO="0033" PAGENO="0034" 30 ADMINISTRATIVE PROCESS tions Seetion of the Motor Transport Division, and co~ until I went into the Navy. Mr. BENNmVr. Did you work in Mr. Eastman's office? Mar. MORGAN. No, I did not, Mr. BENNETT. Did you know 1\2tr. Eastman personally? Mr. MORGAN. Yes, sir. Mr. BENNETT. Did you ever have any task- Mr. MORGAN. I did not know him well, and I did not know him very long. Mr. BENNETT. You were only with ODT for 5 months? Mr. MORGAN. I have forgotten the exact period but that sounds ap- proximately right. Mr BENNETT From April 1 to September22, 1942 ~ Mr. MORGAN. Ithink that is- / Mr. BENNETT. Is that right? Mr. MORGAN. It sounds very close, and I see no reason to differ. `Mr. BE~ETT. Were you a~igned to any tasks by Mr. Eastman? Mr. MORGAN. No; I think it was at his direction that I was assigned to Mr. R~iy Atherton, whose mission at the time was to open branch offices in, I think 52 cities in the United States. And I worked, there until thatorganization job was finished. Mr. BENNErE How often did you see Mr. Eastman during the ~ months, 4 or 5 months you were there? Mr. MORGAN. Very seldom. Mr BENNETT Did you see him at all ~ Mr MORGAN I believe-well, of course Mr. BENNETT. Did you have any &mferences with him about your work? Mr. MORGAN. No, I ctui't say that I did. Mr. BENNETT. Did he know you were there, working there? Mr. MORGAN. Pardon? Mr. BENNETT. Did he know you were working for OPT? Mr. MORGAN. Yes,. Mr. BENNETT. Who hired you? Mr. MORGAN. This, I don't remember. Mr. BENNETT. It wasn't Mr. Eastman? Mr. MORGAN. Do you mean who was the hiring o~filcial? Mr. BENNETT. Yes. Mr. MORGAN. It- Mr. BZNNETT. Didn't somebody give you a job? Did you interview Mr. Ea~tman or cli4 he interview you prior t& your working there? Mr. MORGAN. I thinb there was some correspondence between us before I came east. / Mr. BENNETt. What exactly did you do? I do&t mean to make it a long story. I am not goir~g to prolong this, but what did you do during that 4- iuonth period? Mr. MORGAN. I don't recall how long I was assigned to Mr. Ather-~ ton. / When that organization was l~4rly complete I was transferred to~ another ~ection under the dIrectioit of Mr. Ed Buhner. Mr. BENNETT. What doing? PAGENO="0035" * - the Senat its accurate ~N-ETT (rea -am as g1v~ PAGENO="0036" 32 ADMINISTRATIVE Well, I don't know, that it was any great a ~r. BENNETT. You had? Where did you get that? Mr. MORGAN. Well, I worked my way through college in heavy construction, in the Pacific Northwest; at Bonneville Dam, on high- way construction jobs and other things. I had spent about 4 years out of college working- Mr. BENNETT. In the sale- Mr. MORGAN. No; in construction work. Mr. BENNETT. You were an operator of equipment? Mr. MORGAN. That is right. Mr BENNETT Had you had any experience in the sal t in the Navy? ~. Never, and I had very little after I came you worked at it from 1946 t. I think you are awa~e of the real money was made by those who could `afford to buy surplus equipment by the acre, which I could not do. Mr. BENNETT. Well, the only reason I am asking you this is be- cause you went to great lengths in your letter to talk about personal S on commissions, and I am just wondering whether ~-~d in the Navy with the heavy equip- ~out might say, as a after a telephone report desci ~a matter of days for a modest profit. And that is what I was doing. PAGENO="0037" PAGENO="0038" 34 ~ And I haven't been able to find out which is the case yet. Mr. MORGAN. Well, in 2 years in that one-man job in Oregon, and 2 more years, almost 2 years here, I have learned to appreciate, even more than I did as a student, the necessity of having men of strength and character and creativeness and imagination and courage in these jobs. And I wanted to pass that on to the President again before I left, That is why I did it. Now, you said yesterday- Mr. BENNETT. Why did you give the letter to the press then? Mr. MORGAi~.. I did that because about a day or so-perhaps 2 days after the letter went to the White House Mr. Pearson published a ver- sion of the letter in his column. He had not seen the letter and none of the Senators, with whom I had discussed the fact that I was going to write the letter, had seen it either. But on the basis of conversations in the Senate Mr. Pearson pub- lished a version of the letter which was not entirely accurate. It was not seriously inaccurate, but it did contain statements which 1were not in the letter, and I--- Mr. BENNm. What difference did that make? What difference did it make what Pearson said? The President bad the letter. He knew what you said. What were you trying to prove, that Pearson was wrong, by releas- ing this to the press? Mr. MO~GAN. Mr. Pearson's column is published all over the United States- Mr. BENNETT. I mean, if you were trying to prove that, I would say that y~u are trying to do a ~ob that people are engaged in every day in the year without apparentlytoo much success. r just can't se~ why you gave this letter to the press, Mr. Morgan, unless it was for the purpose of embarrassing the President. Mr. MoRa~N. No, it was not for that purpose. Mr. BENNETT. By indicating to the public that he was not appoint- ink the right kind of people th public office. Mr. MORGAN. It was not for that purpos~. It was for the purpose of clarifying the matter Mr BENNETT It was for the purpose of straightening out Drew Pearson `~ Mr. MORGAN. It was for the purpose of clarifying the question as to the contents of the letter Mr B~NNE'rT Did you get a reply to this letter ~ Mr. MORGAN. I got anacknowiedgment. Mr BENN1~TT Did you get a reply ~ Mr MORGAN I wouldn't call it a "reply" Mr BENNETT Well, I am not surprised Why did you send this letter to the President 6 months before your te~n expired ~ Did you believe it would take him 6 months to find an extraordihary character like yourself to go on the Commission? Mr. MORGAN. I have not, and I do not, characterize myself as extraor- dinary hut it took him 6 months to get me in office. PAGENO="0039" ADMINISTRATIVE PROCESS Mr. BENNETT. Well, he did have a problem, and I, in some respects, sympathize ivith the problem that he had in getting you confirmed, but he stuck with it and got you confirmed. But I still can't see-p-why you felt it necessary to give him 6 months' notice that you were going to leave him. Mr. MORGAN. I have just given you the answer, sir. Mr. BENNETT. Did you think he was going to appoint somebody else who would be as hard to get ~~onflrmed as yourself? Mr. MORGAN. I have no way of telling but that is the reason why T did what I did; to give him time, incluciing such delays as I encoun- tered, to have a replacement by the time my term ex~pires. That is the reason and that is the o~ily reason. Mr. BENNEPr. Well, you knew, when you wrote this letter, that you were going to create friction among your fellow Commissioners. You knew, when you sent this gobbledegook up to the President it was going to create a lot of furor as far as this Commission is con- cerned and yet, as badly as you apparently feel about your job aicLd as badly as you feel about the shortcomings of your other Commissioners, you still want to stick around with them for 6 months after it has ap~ parently become intolerable to you, from the tone of your letter to the President? Mr. MORGAN. I don't concur in any of your statements, Mr. Een~ nett. My differences with my colleagues are on the basis c~ ~ - we are all men with enough self-discipline to asso' conduct our business smoothly regardless of those i Mr. BENNErr. But would you call your letter a ii Mr. MORGAN. A mythical letter? Mr. BENNETT. Yes. Mr. MORGAN. No, sir, I would not. Mr. BENNETT. You weren't t"1 tall 1 r 35 rnd you haven~t had an~ it is just alot of p'atitudes here. PAGENO="0040" ~AN, Mr. Mr. Morg and do so ~ ~ncere affec lthelett objective r ~` of the 1 with which very few men could dfsagree. I think it is time to look at the letter and not a lot of extraneous matters which are not embodied in the letter. I r~ lit through with great care a number of times. - ~ not 6 months but 5 months' notice that you do not nent. I think that is very considerate. man reaches the conclusion t ~ ient that he should, in fairness, mi have reasons. Some of those reasons to the distinguished gentlewoman from ui prior you permitted your name to be submitted i appoinment, where you spelled out the type of job you would like to have the opportunity of doing if you were going to serve. I. know it is no great secret to those who were acquainted with your work, that you were imposing certain standards as objectives to be sought as a member of this Commission. Is that correct? Mr. MORGAN. Yes, sir. And I think you will find, if you refer to the letter I wrote to Mrs. Green after I had served as Commissioner in Oregon and before I took this appointment, I felt the same way on this subject then as I do now. Mr. Moss. I am not an expert on regulation. I have never sat on a regulatory body. I have served on this com- mittee for 6 years and I have served on the old Oversight Committee, and the Administrative Agencies' Subcommittee, and this subcom- mittee. The jurisdiction of all three is virtually the same. I have very clear convictions as to the character of regulations we have had. In some instances I have been very critical not only of the caliber of the personnel in some of the Commissions but in the almost inbuilt certainty that there is going to be far too much delay and pro- crastination in handling these very significant issues which come before it, whether it is the Federal Power Commission or Federal Trade Commission or Federal Communications Commission, and in all of them we have too much delay, too much indecision. 36 ADMINISTRATIVE PROCESS PAGENO="0041" PAGENO="0042" 3~ ADMINISTRAPJV~ PEOCESS And I think that is an excellent statement and I think it would take a considerable stretch of the imagination to characterize that as "gobbledygook" or "hot air." It is good, s~und doctrine. And cer~ thinly the men you cite arc men who have made a re~putation which requires no defense from me or you or anyone else. Ihey have been away from us long enough to have history do a pretty good )ob Of evaluating their contribution~ and they were most significant. Certainly, we give rights to utilities, privileges which carry with them responsibilities, and I think the great majority of them live upto those responsibilities but there are some who don't always do so, and sometimes a little prodding is necessary, isn't it? Mr. MORGAN. Well, I think the points I made in that letter can stand to be reemphasized. They have~ been said many times and they will be again. Mr. Bennett said yesterday that he has a 7-year-old granddaughter who understands these things. I had a great-grandfather who spent a great deal of his time, at- tempting to teach the Indians Latin and Greek in the Or~gon terri- tory, and I le~rned from him that it pays to x~epeat simple, obvious, true things over and over lest they be lost sight of. That is all I wa~ atteuipting todo in the letter. Mr. Moss. If it didn't pay to repeat them few of our churches would find a need to meet each and every Sunday, ~as they have been doing for 1,963 years. Now, I think that another truth comes out here, and I think it is oiie~ as we have studied the problems of regulating, that could well be reflected. I have not bad the time to research it but it could well be reflected in some of the reports of this committee. You can't solve all of these problems of the regt~latory commissions by passing new laws or undertaking a new reorganization. Thei~e are intangibles he~re that don't lend themselves to legislative correction. And. I think it is well sinumarized in this statement, and is one that all of us should consider moi~e because there is a great tendency that whenever an ill appea~s, to seek a legislative correction, but the type of man: is most important- Mr. MORGAN. I believe so very firmly. Mr. Moss~ Now-'- Mr. MORGAN. I believe yesterday I read Mr. Ke~rnedy's statement on this very point. No one could have been more explic~it than he in hisstatement. Mr. Moss. Now, the letter, I thini~, in my opinion, and there are those who will disagree, but in my opinion it is excellent and stands on its own feet if it is read objectively. The Chairman, in outlining the purposes of the hearing yesterday, stated that we were to pursue a study of how to improve the pr~ce- dures of the Commission. That being the principal objective, I would like to know if you have some proposals *hich you feel would be beneficial to this com- mittee as it discharges its obligations to the Congress and to the public. Mr. MORGAN. I wonder if I could answer your question, Mr. Moss, by reading some notes which I drafted since the meeting yesterday, setting forth the answer to a question which I haven't been asked yet, which is: Whyl am leaving the ~ommis,sion? PAGENO="0043" ADMI~STRArX~IVE PROC~S~ Mr. Moss. W~fl, I wouldb~ interested in a fuller statenient on that, if you~- Mr. MORGAN. And also including som~ suggestions as t~ possible avenues of correction~ for these ailments and imperfections which are the reasons fo~r my leaving. Would that satisfy you, sir? Mr. Moss. I would like very much to hear it. Mr. MORGAN. One, the Commission does not have the freedom and independence which it needs in order to carry out the powers dele- gated to it by the Congress. The Co~nmission is not independent externally and it does not have freedom and independence interna'ly. The reasons can plainly be seen through an analysis of Reorganization Plan No. 9, under the act of 1950. The President has the power to designate the Chairman and, pre- sumably, ~ie also has the power to withdraw that designation. The Chairman, under the plan, has almost complete administrative con1~rol over the staff, including personnel authority with respect to hiring and termination, promotions, pay increases, and assignments of duties. This committee and the Congress should understand that more than administrative control is transferred to the Chairman under that plan, because these powers are translatable into control over policies so far a~ the staff is concerned Policies not f Chairman staff members i d careers the Chairman's A standing criticis I sione are c~ptives 0 owin I price of nat..~. PAGENO="0044" - I refer you to my concurring statement and my dissent in ADMINISTRATIVE PROCESS. 40 bersome, raises countless legal problems, involves certain rencroachments on producer and consumer alike, is illegal in my ~ ~in its effects upon both the producer and the consumer interests and, ~n my opinion, is neither a fair~ nor an effective, way to control pro- 1 r prices. has done I a grow economic ~ffectual, and that iL~ price of gas toL' petitive forces in the marketplace than pricing regulation. I believe we should wor~ ducers, and concentrate our stead for t we p ystem ~ and c `,in `an effort to clear up its backlog of work the Commission has resorted, on an enormous `scale, t~. settlement of pipeline rate cases instead of full litigation and proper adjudicai4On of those cases. Partly, this is because we are short of staff and a large reason we are short of staff is the tremendous manpower we are devoting under the present method, to the control of gas prices at the producer level. These settlements in my opinion, are a very expensive device, from the consumer's point of view, for the clearance of the Commission's back~iog. I will cite as an example the Tennessee Gas Transmission Rate case, -- "~led a f"7 weeks ago and in the decision of which I did `ncreases subject to andgott - of `1 ~ ~ 6 million less than the staff recommended, an~d I did not participate in the decision of the case because of that tremendous gap. PAGENO="0045" PAGENO="0046" 42 ADMINISTRATIVE PROCESS Five, the same must be said of the problem of tax consolidations, but I shall not elaborate on this point because it involves cases now pending for decision, other than to say here again we should have acted years ago. Six, the unprecedented action of t.he Commission in setting up, with my reluctant concurrence, tecimical. advisory committees representing the electric and natural gas industries, has raised the gravest questions regardmg improper influence by industry directly upon the Commis- sion and its staff. These committees have some value, and I emphasize that they do have some value. But I am not persuaded that the value is sufficient, to offset the dangers to the Commission's integrity. If these advisory committees are not abolished, each of them should be broadened to include inoie consumer and outside independent inter- ests, such as labor, the universities, genuinely independent Commis- sion staff members; and should contain representatives of all other in- dustries serving as energy sources. Their meetings should be open to the press and the public, even though this may require such committees to meet in a public audi- torium. Seven, the Commission's regulation prohibiting ex parte com- municatiouis with Commissioners and other employees involved at the decisionniaking level, concerning cases in litigation before us, should be broadened to prohibit improper communications with those members of the staff who are charged with Iarticipation in such cases in behalf of the public interest. If such staff presentations :aI.e altered or weakened as the result of industry pressure, the public's side of the case obviously will be poorly presented, and this will have an inescapable impact on the quality of the decision which finally emerges from the record thus made. Such a prohibition, in my opinion, would add to the independence of the staff, and perhaps this would obviate the creation of a needed public defender panel within the staff for presentation of the public's case, as has often been recommended. Eight, the Federal Power Commission is charged with the. respon- sibility of close liaison with other governmental agencies, but the liai- son is not close enough or coope.ratlve enough to enable the Commis- sion to adjudge properly the impact of its actions on the programs set up by the Congress to be. administered by those other agencies. Further, the liaisons presently existing are tinged and colored by jurisdictional rivalry and squabbling of the most pettifogging nature, with t.he result that the attempts at coordination contain within them the seeds of interagency discord. In my opinion, this is one of the gravest failures of all of the re.guuia- tory agencies, as many reports have pointed out, and steps should be taken by the Congress to deal with the problem of interagency policy formulation. Niuie, the Federal Power Commission and, in my opinion, all other regulatory agencies need more insulation not only from the blandish- ments and enticements of the industries they regulate, such as cx parte communications, offers of future jobs, and so on, but also more in- sulation from uncertainties with respect to reappointment, reconfirma- tion, and the like. PAGENO="0047" ADMINISTRATIVE PUOC~S~ I concur with the many st~g~estions which have been made with ~regard to increased compensatior~, drastically increased retirement benefits and longer tenure of office. I would suggest that 10 years is an appropriateterm. The absence of such protection and insulation is presently an im- pediment, in my opinion, to the independence of these agencies whhth the Congress contemplated when it delegated its responsibilities to them. Ten, each Commissioner needs a larger personal staff of specialists, or assistants, to assist hith in analyzing the huge volume of cases which flow through his office each week. No Commissioner, working with a single assistant and hampered to some extent by the fact that the staff may not always be free and wi~l- ing to advance its own independent judgment and assistance, can hope to deal accurately and fairly with a weekly load of son~e 65 to 90 cases brought before the Commission in a single weekly working meet- ing lasting approximately 6 to 8 hours. Eleven, one of the most important achievements of the present Com- mission is the establishment of an Office of Economics within the staff. This was accomplished only last year and is a sad commentary on the administrative standards existing in the agency from its incep- tion until that time. When one considers that this agency regulates the largest industry in the United States, in terms of investment: the ` - try, and the fifth or sixth 1 est; t - muchfor~1 ~ ~ ~ning w~ ne are th~ sacrifices and ~ on my family, and to leave the Commission. And I have attempted, on very short notice, to offer some suggestions concerning mostof them. Mr. BENNETT. Will you yield for one question? Mr. Moss. Yes, but I want to thank you for t' I am not going to try to commi rather extensive, and I would have. I will be very happy to yield. 43 PAGENO="0048" 44 ADMINISTRATIVE PTh wri~ting this pee~~ type Instead of t4ing him honestly and straight:~ ity, as you just have here, the reasons why you wanted to quit and then go ahead and quit, you wrote that. Thank you. Mr ~ I have no questions at this point, Mr. Chairman. ~ringe~ Mr. SPRIN*R. L~ come fo the 1 You have ~nentioned in paragraph 2, page 1, President: Besides, sev~ra1 of them are clearly visible to those who have read the dissent- ing opinions which I have been obliged to write during my service here. w. Yes, sir. 1 ~ five opinions which were ren- ~~.inotsu three occasions-I t out looking' at them-on two or thrc. joined with Commissioner Ross, or he has j ~ senting and concurring separate statements. On all the rest of them I think I dissented alope PAGENO="0049" PAGENO="0050" 46 ADMINISTRATIVE PROCESS Mr. MORGAN. But the fact- Mr. SPRINGER (continuing). You believe in this instance that every~ body was out of step but you? Mr. MORGAN. Well now, Mr. Springer, these Commissions were not ereated for the purpose of achieving unanimity. We have an obligation, as independent Commissioners, to reach our own conclusions and argue the very strongly when we feel very strongly about them. Mr. SPRINGER. All right, but you were particularly unhappy that they didn't agree with you? Mr. MORGAN. I think anyone would prefer to have almost anyone else agree with him on any subject. Mr. SPRfl~GER. Mr. Morgan, in this letter, I have tried to analyze it as best I could, there have been a number, I believe, three alleged derelictions of duty as best I can make it out. If there are others you will advise m~? Mr. MORGAN. Well, I am not sure that I will go along with your word "alleged" because, as I made very plain in the letter on two occasions, the remarks were general and' I made it specifically plain that they were not designed to describe my colleagues and myself. Mr. SPRINGER. Let me ask you this: Do you believe that that was the impression which was created by the average reader in the 22d Congressional District of Illinois? Mr. MORGAN. Sir, I don't know any average newspaper readers in that district, and I haven't seen the press reports there. Mr. SPRINGER. Do you believe that your statement created the im- pression that you a~e leading this committee to believe, in the con- gressional district iti which you live in the State of Oregon? Mr. MOnGAN. I haven't seen tiny clippings from that district either but I will say, and I `said so promptly at the time when I released this letter to the public to try to clear up the misapprehensions con- cerning it which came from Mr. Pearson's column-I said that it had been extensively misquoted. I don't want to criticize the press any more than I want to criticize my colleagues, but they like to stretch things a little bit and make them a little more snappy and exciting than they naturally are. And this happened to my letter and for that I have already apologized. Mr. SPRINGER. If you, Mr. Morgan, had been reading in your con- gressional district in Oregon, and a newspaper came out that a Com- missioner of the Federal Power Commission in Washington had alleged that the Commission was not protecting the public interest, what would you have believed? Mr. MORGAN. Mr. Springer, I am not responsible for what the newspapers say concerning a letter when they put words into it which are not there. Those words are not in that letter, but I did testify yesterday that in certain cases I felt that the public had received less protection than it should. , I said so in my dissenting opinions, but I did not say so in this letter. Mr. `SPRINGER. You used the words-anyone who reads this, what- ever you say, can come to no other impression when you use words PAGENO="0051" ai~d sen 1a~es such as these "conformity," "timidity," "pers~aal security." "Without the needed sense of public responsibility a Commission~r can find it very ea~y to consider ~whether his vote might arouse an industry campaign against his confirmation in the Senate." Can anyone who rends this letter not conclude that that Is what you had in your mind abcut the people who sit on this Commission? Mr. MORGAN. Well, I have tried to make it as plain as I can t~ht~t my differences with my colleagues have been on policy considex~athns and that has been made very plain and explicit by me. But I cannot take responsibility for what people read into t~à letter. My reasons for leaving are discussed only in the first half o~ the second paragraph of the letter. Mr. SPRTNGI3iR. We are trying to get this thing straightened ont. Whether the President is going to do it or not I do not know. When I first read it-that was the impression created in my mind. That you were making allegation against members of your own commission and generally against commissioners who were deciding cases and writing opinions here in Washington in the public interest. I want to come first to the Federal Power Commission. P0 you find tha~t any of the persons who were on the other side of those cases in t~hose dessenting opinions of yours have been guilty of any ~ relectioi of duty? . ~ ~amjust - is no need for me to g part anyt~~ymi decisions as a re )ornted to the Mr. ~ ~. I do not know ti certainly couldn't put my finger c inc to look intoi where I and prc PAGENO="0052" 48 ADMINISTRATIVE PROCESS Mr. SPRINGER. Would you say, ~r. Morgan, t~iat any of these men have been guilty of writing opinions which contain platitudes instead of public protection, puff-jobs and image-building instead of prin- ciple, wull chart juggling and streamlining instead of hard work? These are your words, Mr. Morgan, not mine. Mr. MORGAN. When you read those words, coupled with my state- ment that they were not intended to describe my colleagues and my- self, why do you relate them to my colleagues? Mr. SPRINGER. The whole tenor of your statement, the whole tenor of your letter-you are saying to the President that that is what is going on down in the Commission. Mr. MORGAN. No; I did not say that, Mr. Springer. Mr. SPRINGER. If anyone reads this letter he is bound to come to the conclusion-I don't care if it is Jack Kennedy-come to the conclusion that that is what is going on in his shop, and he had better get some better people down there. Mr. MORGAN. I do not accept that. Mr. SPRINGER. Let me ask you this. Would you say that these men down at the Commission other than yourself who have been rendering those decisions "have yielded to extraordinary pressures" of business? Mr. MORGAN. There are all kinds bf extraordinary pressures, Mr. Springer. Mr. SPRINGER. I will rephrase the question. Would you say that any of these men who have been serving on the Federal Power Com- mission, the people who have been rendering decisions down there, have yielded to extraordinary pressures? Mr. MORGAN. I would like to discuss with you one of these dissents I have here. Mr. SPRINGER. First of all, would you answer the question yes or A ~1 T think legally, as in a court of law, you can then explain ~area1l1~ ;titution and keep it from collapsing, keep it front faL. / "~ just as great as any other kind of pressure. believe that in these particular cases-and there have been several hem-violence has been done to legal rights of citizens of the +b~ rommission unwisely and mistakenly yielded to ~n the status quo, -~ork- a PAGENO="0053" PAGENO="0054" AD~INISTEATIVE PROCJ~SS Mr. SPRINGER. These jobs take extraordinary skill and ability, isn't that correct? Mr. MORGAN. Mr. Springer, th~se job's ~will absorb every iota of cx- pertise, brains, education, experisiice, and character that a man has ~ I don't care who he is, these )obs will drain hun of everything he has It is impossible in my opinion to exaggerate the need, for outstanding' men in these jobs. Mr. SPRINGER. And this is the reason that you are leaving the. Com-~ mission, isn't it? Mr. MORGAN. I was asked that question yesterday, and I think tbe~. question ended this way: "Are you leaving for this reason, so that the President can appoint an extraordinary man in your place?" And I said, "It is one of the reasons,, and I hope he does." Mr SPRINGER Would you consider yourself above the average of those serving on the various regulatory agencies in Washington of whomyou have knowledge? Mr. MORGAN. I know very few of theul, and I would not presume to rate them against each other or myself any more than I ~`ould my own colleagues. Mr SPRINGER Do you consider that you are a man of ability, char.~ acter, courage, and broad vision,, Mr. Morgan, again using your own word~s~ and that you have the same viewpoint as the authors of the legislation that you have been called on to administer ~ `Mr. MORGAN. Mr. Springur, these words also were accompanied by the statement that they were not meant to describe my colleagues or'- myself. Mr SPRINGER Mr Morgan, let me put you in the President's posi- tion for lust a moment with a hypothetical question, because I think it is important. Mr. MORGAN. I would much rather that you did not, Mr. `SPRINGER. Are you a lawyer, Mr. Morgan? Mr. MORGAN. No; I am not. Mr. SPRINGER. If you were the President making appointments to the Federal Power Commission,, would you take into consideration a man's past reputation `for truthfulness and veracity tq be an inflortant factor in his appointment? Mr. MORGAN. Yes; of course I would. Mr. SPRINGER. Mr. Morgan, if you were the President and were to make an appointment to the Federal Power CommIssion, would you have confidence in the prospective appointee if' you knew that he had concealed upon his personnel forms past Government employment information which would have made a difference to you in making' the appointment? Mr. MORGAN. This certainly would be a matter I would want to' investigate, of course. Mr. SPRINGER. Would it make any difference to you. as the appointer' of a, Commissioner to the Fe~Ierai Power Commission if that appli- cant had sworn falsely our six or seven occasions with reference to mat- ters cont~tined in the personnel form in violation o'f the law'? Mr. MORGAN. Mr. Springer, all this was gone into at the time of my Senate confirmation. Mr~ SPRINGER. I am just asking for an answer, is all. PAGENO="0055" At~MINISTRATIVE PR0C1~SS Mr. Chairman, I am not seeking in devious ways to lead the witness into any trap at all; I am just seeking answers, to find out what his background is. Mr. MORGAN. I will answer you. Mr. SPRINGER. Would you repeat the question, Mr. Reporter? (Question read.) Mr. MORGAN. I ~vant to explain something to you, Mr.~ Springer,. that is important at this point. Mr. SPRINGER. Will you first answer the ~juestion, and then you may explain your answer. Mr. MORGAN. Would you read the question again, please? Mr. SPRINGER. Would you read it to him again, Mr. Reporter? (Question reread.) Mr. MORGAN. Yes~ it would. But it would also make-I would1 really want to know whether he had or not. Mr. SPRINGER. Now, in view of the President's message ko the Con- gress on integrity in the Federal service, do you believe that the' President would have appointed a man to the Power CGmmission who concealed on several occasions vital information and swore falsely as to the conteut of his personnel form? Mr. MORGAN. ~[e very likely would not have, if that were the case. Mr. SPRINGER. Mr. Morgan, did you know that in 1961 there wer& exactly 53 cases of false statements on form 57's that were referred to the Department of Justice for action? Mr. MORGAN. No, sir, J ~ `~ not 1- that. - ~:, were you ever arrested? And I would like to answer PRINGER. Mr. MQRGAN. please. Mr. SPRINGER. You have answered my question. I F for any explanation. I just asked you a yes or no. I 1T~ ~~ted tc S 51 thE you - r the arres ~ you were arrested. JOItGAN. I waS. PAGENO="0056" and they you were IORGAN. I RINGER. PAGENO="0057" PAGENO="0058" ~54 ADMtNISTEATIVE ?ROCESS Thirdly, that men serving on the Commission have be~ome neurotic fi'om worry after having cast a vote in the public interest. Failure of any member of the Federal Power Commission to act in the public interest for any of th~se reasons would make him guilty ~of violation of his oath of office and would be grounds for rethoval. The witness has been asked in detail to point to any decision handed down by this Commission or any commission which was made by any ~commission or commissioner as a result of the above-named deficiencies in the name of the Commission. The witness has failed to point out any single instance in which there has been any proof whatever of the ~dereliction of duty by any Commissioner or Commissioners as a result of a desire toward conformity, being timid, or fo~r p~rsonal security reasons, or for fear that his votes will arouse a leampaign against him for reconfirmation in ~he Senate. Mr. Chairman, if this witness had taken his charges to the tLS. District Attorney, and had gone before a grand jury and sought an indictment a~d had that returned and then brought action before a ~court of criminal jurisdiction, the judge would have been forc~d as a matter çf law to dismiss it before it ever arrived in the hands of a grand jury. The judge himself would have directed a verdict against this witness. If this witness could have brought an action in civil law for damages resulting in an action against any commission or commissioners and cOuld have made his case ont in a court of civil 1aw,~the judge would have been forced as a matter of law to direct a verdict against this witness. And, Mr. Chairman, may I say that in civil courts to make out a case to go to a jury only a scintilla of evidence is necessary. Mr. Chairman, if this `witness were to take a case to a court of equity, the fairest court in Anglo-Saxon law, this witness could not `have made out a case. In equity there is a rule of law that the corn- p~Eainant must come in court with clean hands. Does this witness come with clean hands and with a reputation of truthfuJness~ The records of the hearings on Howard Morgan for appointment to the Federal Power Commission contain findings that ~ie was ar- `rested on September 10, 1937, on an assault charge, found guilty and fined $25 plus costs. He was arrested on Febraary 7, 1937, in Portland, Oreg., for questioning. Mr~ Chairman, the circumstances of these arrests are not at issue here. What cannot be explained by this witness, and what cannot be justified by a person holding such a high office, is the subsequent con- ~cealment of tb~ose arrests in direct violation of the law. On six ~overnment employment applications in the years 1942 to 1.~52, Howard Morgan answered no to each question relating to these `arrests. On another notarized affidavit he avowed that the statement on one of `the other applications was correct. Mr. Chairman, I quote from page ii of the committee report to the US. Senate on Mr. Morgan's hearing for confirmation: Not only did Mr. Morgan fall to answer each question truthfully, but his ~admissions before the committee make it clear that be deliberately concealed "his arrests. In doing so, he violated the law. PAGENO="0059" ~WI~TB~Tfl~E ~EOCE~S Form 57 contains iu~i express warning on its face against all state- ir~ents. The form specifically refers to the appropriation divisions law ~which reads as follows: Whoever within the jurisdiction of any de~arttnent or agency of the nnited States shall knowingly and willfully falsify, conceal or cover up by any tricks or schemes or device a material fact, or make any false or fictitious statements ~or representations, or use any false document knowing the same to coiitain ~any false, fictitious or fraudulent statements or entries, shalt be fined not more than $10,000, or imprisoned for not longer than 5 years. I want to make it clear to this committee that this statute is ap- plicable even though the charges which resulted in one arrest were dismissed, and the statute applicable even though the arrest may he irrelevant to the applicant's fitness for a Government position. This statute is fre4uently invoked. The records of the Civil Service Com- mission show that in the year 1961, 58 cases of false statements on forms 57 were referred to the Department of Justice for action. The Civil Service Commission, in addition to the criminal penalty, is empowered to invoke a~dministratve penalties for false statements on employment applications. These do include removal from his position and barring him from Federal employment for a period from 1 t~ 3 years. It is interesting to know that Mr. Morgan's concealment did not end' in 1952, the date of his last form. And I quote from the Senate report again: Mr. Morgan did not tell the White his concealment on form 57 untIl after ~ be interes~ krio House, ~s n natur'il, PAGENO="0060" ADMINISTEAT7E PEO4~SS Again this stal ~rges the dereliction of ~ missioners and the President of the I pointments, but upon this committee for not~taking some This is the reason that we have met yesterday and today to find out ~what the evidence was that this man has of dereliction or failure of duty by commissioners or commissions subject to the legislative juris- diction of this committee. And thus far he has not brought fprward any. Thank you very, much. Mr. Moss. Mr. Chairman- The CHAIRMAN. I think after a st ought to have an opportunity to r - Mr. MORGAN. I am a little d~ ments have been made and y were based were not described. The two incidents that Mr. Springer is talking about were, one, an investigatory arrest, of exactly the kind you have read about here in Washington which has caused so much controversy and criticism, be- cause I had in my possession a tire given to me by my employer which turned out to be stolen. He came into possession of it through legiti- mate channels, just as I did. And when those facts were ascertained, the whole thing was dropped. No charges were ever even brought against me. And later the entire matter was expunged from the rec- ords by the chief of police of the city, on his own motion, in order to clear the record. And thereafter I thought as a matter of right and law that I had the right not to report that matter, it having been expunged. I was told after the Senate hearings, in which I did not make that * statement, that I should have made it, and I make it here. Whether I had a legal right not to report it I don't know. But I thought I did and many attorneys have so advised me. The other arrest-they both happened when I was perhaps 20, or 21, I believe-the other arrest was for taking a truckdriver off my em- ~iave cheerfully ~unched him in the other eye,~too, so that'we could spend the whole day discussing it. I do not admit to culpability iii ith& matter. I never have and I don't now. I will let my statement stand,. there, sir. PAGENO="0061" PAGENO="0062" 58 1 At~MINISPRATIVE PROCES~ Of cqur~e, that carries with it improved procedures and recdm- inendat~ons which we are seeking from any and all people to reach these objectives. We are not a court, and we do not want any indica- tion in the reàord that we are. We are not prosecutors, we are merely a factflnding body trying to carry out our own responsibilities. Mr. SrEING]u~. Mr. Chairman, I cannot let those statements of yours stand alone, for the simple reason that my whole questioning of this witness in the latter half of/my questioning was to determine whether or not this was a witness capable of being believed. And I was bring- ing up past relevancy only with reference to this man's past record for truthfulness and veracity, and I have as much right to do tl~is as anybody does with any witness coming before this committee. And I have not tried to exceed the rules of this committee or any court in which I might be called as a member of the body. The CnAIRMAN. I don't think the gentleman had any intention t~ go beyond any authority, but he was getting pretty close to it. Mr. SPRINGER. Mr. Chairman~ I resent that statement. I never at any time came close to impinging on the rules of this `committee or the rules of any court in which I practice in this land, And I want to~ make sure that there is no misunderstanding in this record of `my statement on that. The CHAIRMAN. That is perfectly all right. The Chair has the~ duty of protecting any witness that comes before it. Mr. Moss. I think the gentleman's statement details some 9 days of hearings-and I think the gentleman will concede it was prepared in advance of this afternoon's hearings-and reflects a judgment based on 1 hour and 45 minutes of hearings yesterday. The gentleman contends that charges have been made. I am not an attorn~y. But the gentleman knows that the statement in this letter would not be accepted as charges by any court. The statement is a statement'of personal conviction, and that every man is entitled to have. And it at no point goes beyond a summary of personal conviction. It expresses opinions, it advises as to an ideal type of person, but at no point does it tie into personalities. And it takes the greatest of distortion to make from it the type of document which brought forth the statement, which was prepared in advance of the afternoon session, and at best could be based on 1 hour and 45 minutes of hearings yesterday-I think it raises gravely in i~ny mind, sir, the question of the objectivity which brought it forth. `The CHAIRMAN. I hope we can get back to the objective of this hearing. Mr. Youngèr~ Mr. YOtNOER. Mr. Chairman, I would like to know whether you are going to proceed in turns of questioning in the committee. I hate been waiting for all this time, `and you have gone to Mr. Moss twice now out of turn. The CHAIRMAN. Mr. Moss just asked permission to make a state- ment. I hope we can get back to wh~teve~ questions there are. Mr. Hull?, Mr. Hui.r4. Iha~e no qtrestions. The CHAIRMAN. Mr. Younger? Mr. YoimoEu. Thank you, Mr. Chairman. PAGENO="0063" PAGENO="0064" 60 ADMINISTRATIVE PROCESS Mr. YOUNGER. yesterday as to w f the Commission ai Idaho Power Co. examination? Mr. MORGAN. L is rather lengthy, sir. Do you want it all re- peated? PAGENO="0065" PAGENO="0066" PAGENO="0067" PAGENO="0068" 64 ADMINISTRATIVE PROCESS this public power yardstick has been more effective in reducing ~ and controlling rate levels than has regulation. If you look at a map of the United States, take a blank map and draw in effective rate levels for, say, 500 kilowatt-hours a month in each State, you will find wide discrepancies all over the United States. This is not caused by regulation, but it is primarily caused, in my opinion, by the presence or absence, nearby and on an available basis, ~Qf low-cost public power. In the areas where you don't have it, the rates are uniformly very high. In the areas where you do have it and among private' power conipames immediately adjacent to public power areas, those coin- panies have found ways `to get their rates down. It is a stimulus to ;them, it ~s a challenge, a. goal, and they respond to it. Now, there are places which, in my opinion, have' more public power than is justified; more than they need. The State of Washington, of its total electric capacity in the hands of public agencies~ for ex- ample, has about 62 percent. The State of Oregon right next doer has about 15 percent, which is below the national average. I think they could stand a little more. New England has virtually none, and has the highest electric rates in the country. I feel tl~at public power is in danger, with the new technology com- ing in, of fading out of the picture. And I would not like to see that at all. I think it needs to grow and expand at a fairly rapid rate, or it will fade out of the picture. Our power system nationally will double in the next 10 years. If public power were to remain stagnant, it would be cut in that 10 years from 20 to 10 percent. The next 10 years our total system will dOuble a -i. and that means the public power, in 20 yet~rs, if it remained 5 ~ ~rcent of the total system, and it would 1 ~k to c 1 rates. ouk~ like to got another piece of a Do you believe that the publicly owned t awing from the Qov~rnment should pay the same or equal rate of interest on its money that the taxpayer is called upon to pay on the bonds of the Government ~ * Mr. MORGAN. Well, I must say I have mixed feelings about that. I don't seem to have a strong opinion one way or the other. And I don't believe I have really heard both sides of the argument. I know there is a fierce argument, but I don't believe I have heard it alJ. Mr. YOUNGER. In regard to the qualifications which you set up- ~uid yçn have also mentioned a number of commissioners who un- doubtelly are your ideals-I would like t~ ask if any of them left the Commission because they could not~apcomplish all the things that they thought they ought to accomplish, or did they stay and fight? Mr. MORGAN. ~X think all those men stayed until death or retirement. Mr. YouNe~n. -&nd by staying they j~ôbably accom~plished some- thing? . PAGENO="0069" PAGENO="0070" ity only over i only over wholesale rates in interstate cor~~ described by Mr. Moss yesterday were in fact happening there- is possible-namely, that losses incurred in the interstate wholesale contract sales were being made up by the customers, the retail custom- f Idaho, under intrastate rates, then you have a problem of dis- A B only way, in my judgment, to reach such a * ~ 1~'t~ 1 Power ~1s- PAGENO="0071" PAGENO="0072" ADMINTSTEATIVE FR~OCi~SS ~r. ~nO~z1%1~AN. Why dç~n't you answer my questidn now, yes or no, ~id e~1~in yottr answer ~ Yoti are certainly entitled to do that. Mr. Mo~GAN. `l'o tell you th~ truth, this ease ha~ always puzzled ~ine. I don't really know why the Omr~missi~ did what it did in that ease. And ~ince I don'~t know why, it would probably be best for me not to pass juU~ment oti it. But it .i~ a str~nge thing when a mystery of that kind is left in a case to which `there is a strong and vigorous dissent. Mr. BROTZMAN. it aM sure you iwealize that that is not even close to a response to the question I asked you. I would ask that the reporter read back the specific question I asked the Coiumissioner, and then if you would, please, answer that yes or no, and then go ahead and explain your answer? Mr. MOROAN. I will b~ glad to. I think I answered your question Mr. $1~b~TZMAN. I did not hear you, `if you did. All right, Mr, Reporter. (Question read.) Mr. MORGAN. I think the answer to that has to be "No." If I thought I were in possession of any facts to prove or show otherwise, I might answer otherwise. But I don't feel I am. It is a puzzling oase, it eiways has puzzled me. Mr. BROTZMAN. I will ask you to read your testimony tonight on pages 26 and 27. You will find, if you read all the questions and answers, that you cited that de~islou as an exampleof those particular words. Now, let us press on to another point. Mr. MORGAN, Just a moment, please. Yes, I thin1~ you could read that into what I said. [Ar. You think it i ute plain? Yes. ~ -~ ~ of the full argument, that is, at the ~ lr ~ would --V nøt hear the c I later, yesterday, to refresh your mem- been largely halted. PAGENO="0073" PAGENO="0074" The CHAIRMAN Mr presentation here and tried to analyze answers to questions, your position `in these matters. I i that I find it a little bit difficult to 1?ollow your reasoning. i ~ J men- tioned being puzzled by the case involving the Idaho Power Co. I about your position and the reasons for what has PAGENO="0075" PAGENO="0076" MOEW that it mg, say, eeo~ Power (J~rnimission f to permeate the stafl. The CHAIRMAN. Well, have you seen any indication that that has been done ? Mr. MOIthAN. If you want me to identify a concrete example, I can- not do that. The CHAIRMAN. That is a great diffiewity. These techniques you heed, Mr. Morgan, are to me most puz~iing. You raise up strawmen here and knock them down. I don't know whether you realize it or not, but in my judgment this kind of charge is rather serious. Mr. MORGAN. I have not made a charge about this matter. I sug- gested to you reasons-.--- The CHAIRMAN. Maybe you term it something else. You make statements, I will put it to you. Mr. MORGAN (continuing). Reasons why this committee and the Congress should give some attention to the administrative arrange- ments w~hicli now exist, The CHAIRMAN. We have certainly been trying to do that for the last 6 years. Mr. MORGAN. I am not saying that it is out of control, or that im- proper things are happening now. But it is an arrangement whereby an undue degree of influence for political purposes can be brought to bear on the Commission. The CHAIR1~IAN. You have served in the Commission, you have served down there a year and a half now right in the middle of this, and you have made these statements today. And I don't know-I think I am a reasonable individual, but I gather from this~o~1t of your experience with the work of the Federal Power Commission, that there has been some influence from the White y you know ~f none. ~nt. What else could we hterpret f been c ed. I is not administrative arrangement and te~ide ~ The CHAIRMAN. Well, of course that is the reason I say ~ s~nmg is a little bit puzzling t~ me. As you have stated in your letter, the Congress makes the law Mr. MORGAN. I understand that. The CHAIRMAN. Now, don't you take into consideration the policies as ~et out by the Congress when these laws are enacted? Mr. MO$AN. That is exactly what I do. The CHAIRMAN. I would think that from the indication here. The impression I get when you disagree in your dissent~-which is right, PAGENO="0077" PAGENO="0078" PAGENO="0079" PAGENO="0080" k76 ~ i~itoã~s E~rjdently ~ P~a ~pi~ked up the story from somebody iu the gro~i~thØ ot~ mor&, and 1*inted it about 2 d~ys after I niai~ed the l~tter.~ ~And~ bëoau~e t-h~ ~ersiou in the column was somewhat in~cn- rate. I thought I had better release the letter. I w~s of cnurse~ enlled ~by the~pr~ss about it, and I did release it, giving it to all the pi~'ess ~t the saipe time. The C~AIE1~LAN. Was that before it got to the White House? Mr. `~o~qAN. No, sir. The Pearson article was published either 1 day or 2 days after thp letter got to the White H'ouse, according to my re~oIIe~tion. And I released it to the press about 2 days after that. TI~ C~EtAIRMAN. Well, as has been indicated by others here, I want to commend yoi~ f~r your laudable suggestions regarding having men of ability, ~tre~gt~h, and character. That is nothing new around here ~s to the pi~incipie. But being a Commissioner, in the position that ~iou hold now, the implications and the tone of The letter have far- ~`eaching efi~ect. You ~eem to be most unhappy with the majority Commission's decisions in ~everal cases, from your letter and your explanation yesterday. You said titat some of the reasons for your decision not to seek reappointment weçe inporporated in your dissents. sow, in view of all th~t, you decided the best thing f~ you to ~o was to quit and get out of it~ And then the technique of letting that ~ail get out in the press-and I know how difficult it is around here, because I have some of that. problem myself-but it does raise serious questions as to this method of trying to bring about a different type of cnmmission. 1 am glail to hear you say that you did not have that in mind at all. 1 am also glad to hear that you did not have in mind any of the Commissioners, and you can~ut refer to any existing Commissioner~ accordi rig to your statements, and that is the t~iiing that puzzles me about the whole thing. Ou behalf of the committee I want to thank you for your appear- seem t ~sit ion, r you ~ been in rers for several .,, and I on certain other matters for 1, we are mature men, we are not lacking in self-dis- my part, I find my colleagaes~ on a personal basis to ~ about, with all estion as to how months of your JIIS tO - accom yen thought to that iii view of your attitude and feeling ~e thing of not waiting i.mtil June Mr. MORGAN. No; I haven't given any thought to that. The C1I~~1.It~LtN. Maybe they can put somebody else in th~re. PAGENO="0081" PAGENO="0082" PAGENO="0083" PAGENO="0084" 80 ADMINISTRATIVE PROCESS Therefore, it will be unnecessary for me to comment on th~t I information, because you already know what has been said, ~ I do ttot delude myself at alL I know there have been discussions about these problems between you and Mr. Morgan for some time, and particularly with reference to the contents of his dissenting opin- ions. I realize that even one, much lass six, I believe he referred to, is a rather difficult and technical and somewhat lengthy matter and I believe you should be permitted to handle it in your own way. I believe you have a statement you~wish to make fii~st. TESTIMONY OP HON~ ~OSEP1~ C. SWIDLER, CHAIRMAN, FEDERAL POWEB COMMISSION Mr. SwIPLnE, Mr.. Chairman, Mr. Brotzman, I have a prepared statement, but I shall not read it. It is availabl~. The CHAIRMAN. Do you wish your statement to be included in the~ record? Mr. SWIDLER. I should like to have it included~ in the record; yes,. sir. The CHAIRMAN. I observe that you have a number of exhibits along with it. Do you wish those to be included, with it~ too? Mr. SWIDLER. Yes, sir. I should like to have the entire statement made a matter of the record, if you please. The CHAIRMAN. It is your desire, then, to, in your own words, explain the statement that summarizes the problem before the com- mittee and the information therein? Mr. Swintnn. Yes. I should like to begin, if I may, Mr. Chairman, by telling some~. thing about the work of~ the FOder~l Power Commission in the last. 18 months or so that I have been Chairman. The CHAIRMAN. Well, permit the Chair to say that your stat~ment,., then, will be included in the record in~aecordance with your desires,. and `you may proceecL Mr. SWIDLER. Thank you, Mr. Chairman. (The complete prepared statement of Hon. Joseph C. Swidler, with attachments, is as follows:) SPATuMENT OF Jo~upu C. Swrnum, CJIAIRMAN, FJmEn~L Powna CoMMaSs~oN' I am glad to have this opportunity to appear before this committee to answer your questions ami to~ tell you of some of the aetivlti~s of the Federal Power Commission in the past 18 months. during., which the. present~members of the 1~omrnission~ have assumed office. The. House Conunittee on Interstate and i Commerce has great familiarity with the FPC's problems and operations,.. as its ie~ islative history and future legislative neei~k. I feel privileged a accounting of the present i's `~ts..l~' ~din;~ ~n. in I re of itt Commission without question represents the out Government of t1a&b~eeJ~dowu `oft t~eadmiuist~atl~e~ process,", and the I In a message' to Congress in April 1961 singled out the Cop~m:' backlog of pipeline rate eases pending which totaled over ~ ~_~i in rate - suspensions. PAGENO="0085" A~MiN~V~ ;~*~S 8I~ I b~bev~ it1ia~t we tha~e ~gene fair ~to~aM ~ o~ir i~ou~e ~ o~d~ awt ~w carrying ~i~t our ~ee5ponsib11it~es n~ a ~wanner tbat t~o~s ~edit to the ad miniotrative ptocess. During the past ~~ear and ~ h~if we have led n~w po~licles where needed, reorganIzed our staff, strea~iined our prooedures~ a~çl supplied new staff ieade4r~hFp. Our maim, emphasis has heen on pretecti~ the ptthiie interest -and on moving cases along taward conclusion just as e.vpeditiotsiy -as possible. Our efforts to cut recitape and instill a greater sense of urgency in our w~wk haye achieved major successes. The Conmi~sinn in the past 18 nioraths has disposed of the greatest portion of the b II n~flaLlar backlog of ua~ura1 gn~ pipe- line rate cases we inherited and ordered refunds of over $&b~) -million to eon~ sumers throughout the country. In addition, the Commission ordered the pipe- llxies to reduce their existing rates~yover $65 million a year. We have also made progres~ in reducing our backlog of applications for -natural gas pipeline eertlllcates which are required before construction of new projects ca-n begin. The Corn-mission In the last 8 months of 1M2 issued certifi- cates for over $230 million of pipeline construction~ as compared with apprcxi- mately $71 million in the comparable period In itMil. We are taking action to further accelerate the pace of our pipeline certificate work because we know the - Importance to the Nation's economy of prompt approval of pipeline projects which are in the public interest. I am attaching to this ~tatement a copy of the Commission's latest quarterly re- pert which summarizes our success in reducing our backlogs in all categories ~of our natural gas work during the past year. So far as rates of natural gas producers are concerned, the upward spiral haa been stopped and natural gas prices at the well have been stable In the past 18 months, for the -first time in the history of the Commission. Many people have ~claimed that producer regu1at~on is impossible, but the present Oommisslon has been pushing forward with what we are confident will prove to be -a workable solution to the problem. We are implementing the area rate approach to fix just and reasonable rate~ for Interstate sales of gas by producers in all of the Na- tion's gas-producing areas. The Commission has established guidelines which limit the evidence in pro- ducer certificate cases and will enable the Com~nisslon to hold the line on the price for new gas and at the same time disjose of certificate applications expeditiously. The Commission's settlement program has -helped us reduce backlog in this intetun period ~ ids ~ S -- re( - L PAGENO="0086" ADMTNTSTRATIVE PROCESS.: resen advisory comm~ tees. - private, cooperative, ~ power systems committees under r~ J leadership to take advantage of the opportuniL,~. modern-day technology, by joint plans for the use of large generating unite tied together with high voltage transmission lines. The survey is not intended as a basis for dictating to the various companiea in the industry what kind of generating units t should buy, what systems ~nd operat'~ ~ ~1~"~'e they s ~ow they should ~ purpose is t~ economy. e have also made progress in an area where we can for the U.S. Treasury. We have developed a simplified formula for money owned the Federal Government from downstream hydroelectric that benefit from upstream Federal developments. In this fiscal year, we are PAGENO="0087" of each of the Commission ins i~sued in contested proceedings since the present members of the Corn- rsion assumed office which is attached as appendix B to this statement. The opinions themselves are, of course, available at the Commission's offices. Even those who were most critical a year ago now recognize that the Commis- sion is making solid headway on the mountain of work before it. Dean Landis commented, publicly in February of 1962 that the attitude of the new Commission "is one of a readiness to meet these challenges and the intention to apply a Her- culean effort in doing so." He added that the Commission's ~ * * record in the past 3 months of bringing about the refunding of some $35 million o~ excess charges, is significant." Since Dean Landis' talk last February, we have ordered additional refunds of some $325 million, bringing the total refunds in the past 18 months in pipeline rate cases to over $350 million. This is one measure- one among many, and not the most important-of the returns in public benefits from the recent activities of the Federal Power Commission. The Commission was gratified to note in the final report of the Administrative Conference of the United States of December 15, 1962, that although the FPO was studied intensively, the Conference made no recommendations for improve- ments in our procedures. In fact, many of the general Improvements suggested by the Committee on Rulemaking were patterned after procedural reforms whic1~ the FPC has put into effect in the past 18 months. The final report of the com- mittees' study of the conduct of rate proceedings in the FPC has not been con- cluded but the preliminary draft which I am quoting with the reporter's per- mission stated that: "The present organization and procedures are well adapted to the functions being performed. While further changes of a modest nature may be desirable, the path of procedural innovation has been explored with great ingenuity and thoroughness * * ~" (p. 64). The report "also emphasized the need to attract more capable personnel, a problem that is common to most Government agencies and one to which the Commission has devoted a great deal o attention i~ - TbeCommir~sionis to PAGENO="0088" ADMINgSTRM?IV]~ PR~CiF~S "~liatever the outcome of the umny ~programs being in gi~rated by the new, ~omm~ssIon, it's clear that WC will play niarger role i~ the fntnre df the ~lectric ittllity industry than it has previously for many years?' (Pp. 8,22.) The views of the in\~estor~owned sa~gment of the electric power industr~ with nespect~ to the activUies of the new Commission is typi~ed by the f~flowing ~tatement in this week's ~1ectrical World: "Ohajrman~oseph C. Swidler took the reins of the Federal Power Com~nissiou about 18 months ago and is striving to ~nsh the agency to greater e~fort~ and l~roa4er responsibility. Be has Initiated the National Power Survey, visited eleetrie utilIties and man~factu~rers, an4 has ufidefleken a wide-~~n~ing journey through the Soviet 1Jjiioii to study electrical power inatallations there. one to s~hy away ffom cO~1trov&r~y, be has * * * takefl ~ew England utilities to task for high rates; * * * and, generally promised more strIngent regulation. `~An insjgbt into this oflicial's thinking should enable the industry to chart Its best course. This insight is especially necessaty bOcanse he started with a TVA background but now shows strong signs of trying to Steer to the middle of 4;he road." (Issue of lfebrwlry 25, 1963, p. 7~.) The talk referred to in the Electrical World was one I made to the Electric Council of New ~ngiand on October 1~, 1962, in which I outlined certain actions ~Jdcb I tboug~ht the industry should take to reduce rates in that area. In re- sponse to that talk, the New England Electric Council pledged: ~ * that the New England utilities will use every effort to ackleve the goals outlined by Mr. ~wid1er and to cooperate with State and Fodetal regula- tory commissions to bring the most abun4ant supply of ejectrh~ity at the lowest ~ossible prices to all parts of the country including ~sTew I~lilgiand." The attitude of the gas industry toward the present Commission is typified by the following exceruts from Gas Magazine: ~`* * * they have a growing-faith In the present Federal Power Commission. They don~t agree with the fact of utility-type controls, but they seem to have ~n~xpected confidence in the New Frontier makeup of the Cnnnnission. This confidence In the Commission also is marked by a sense Of freedom from farorit- ism. Most explorers and producers had rather have an honest, if tough, Corn- mission than one which might favor one producer against another, even while siding with producers as a whole against the other segments of the industry and the consumer * * ~" [June 1962.1 * ,* * * * * "The Commission under Chairman Joselh Swidler `has not been lgmorthg the `consumer interest' approach to regulation since taking office. Late last year, it ordered a broad surrey of What happons to the refunds it orders, and Whether these refunds are being passed alone to consumers * i~ "The refund volume is one of the more dramatic re~u1ts of the Commission's present hard-line settlement procedure. Almost any `da~r, the Commission an- nonnees a settlement with refunds ranging from a few hundred thousand dol- ia~s to Se~eral million. The settlement procedure in rate eases has shoWh, per- Imps more clearly than anything else, the power the Comtoisslon now e~er- ~elses. Where the tendency of companies faCed with a rate light was previously to ba'tllle'It out to the f~i'l Comthlssion anti iatC~ to the ~ofl~t~ if they still Wereift satisfied, many now try to get the best they can In negotiations with the staff, ttnd then agree to thesettlemeat." {Pebruary 11!~63.J I think tant the record of the Oonanisslon In the past year and `a half presents ample proof that the Commission, as jireseñtly constituted, Is doing a creditable Job of carrying out the poliules of Congress in the eIe~trIe power and `natural v invite any questions which the member~s df the committee rna~ wish ~ss tO me. [Federal Power Commission release No. 12,497-G-6907] ~ Swinum RnrOirrs ~aodj~nss IN Ani~ N~rrniah Gas ~aGuLauox~ AxuAs I)Uame 1962 TAsumG!rO~ D~C., Pehruar~ 13, 198&~~-The Fede'i~al PoWer C~namisston cut Its rate eane beoldog by wail ocer half during 1~62, redtieiti~ the number nathaild from 1)6 to 41 and the annual dallar a~tw~nt of ~nraposed 1fl4 PAGENO="0089" creases from $388.2 millioi to about $151 million, Ohafrman Jo~eph C. Swidler reported today. The FF0 during 1962 also made snbgtantlal progress in its other three natural gas regulatory areas, Chairman SWidler said. He reported: A reduction of $16,098,417 in the backlog of proposed annual rate Increases by independent producers of i 1 gas; A decrease from [lion to $914 ii construction in A - J~2, plus interest. i~ e than two-thirds of the $151,009,400 in pipeline rate increases pending at year's end was involved in five caSes. Ohe of these IS before the Commission, two are awaiting initial decision by FPO examiners, and two are undergoing staff~ investigation. The annual dollar amount involved in propose4 rate Increases by independent natural gas producers droppe4 for both the ynar and for the last quarter of 1962.. The Commission bad on hand proposed increases totaling $167,525,597 at the- beginning of the year, and this was redticed to $158;159,192 by September 30, and to $151,427,180 at year's end. Jitowever, the number of cases on hand rose ap- proximately 5 percent from 2,756 at the bi~ginning of the year to 2,881 on Septem-- ber 30 and 2,905 on December 31. Chairman Swidler also reported an acrosS-the-boa~d reduction in the amount of proposed construction in pending pipeline certificate applications for both the quarter and the year. Pending applications, measured by the estiniat~d construction costs, were re- tiuced from $1.1 billion to about $914 million for the year; the miles Of pipeline in pending applications was reduced from 8,782 to 8,582; and measured by com-~ presser horsepower the reduction was from 772,783 to 612,960. The number of cases on hand, bowe~er, rose from 206 to 224 during the year. Corresponding reductions for the quarter were $1,036,2B0,9~T3 to $913,783,652 (construction cOsts): 9,414 and 8,582 (miles of pipe); and 767,942 to 612,960 (compressor horsepo*er). Hearings havh been completed on nearly half of the $913,783,652 backlog of proposed new construction on band December 31, and approximately $120 million was being held up awaiti~g further information or action by the applicants or the disposition of other capes. More than $351 million of the pending pipeline construction applications, or more than one-third, is proposed in the five largest cases. Four of these cations are through the bearing stage, and the fifth is ready I - Temporary authorization has been granted f ion of $ the ne~ PAGENO="0090" PAGENO="0091" 3ompany PAGENO="0092" Pending ~bart of quarter- Applications flied during quarter C~rtificgtes ~ssuect du~jng quarter - Qtherwise disposed of during quarter Pending end of quarter - 2, 557 402 1 80 65 2 3 2, 814 / Number of dockets 1 Quarter ending- Animal amount: Quartei~ ending- Decem- ber 1962 Septera- bar 1963 :Decem~ bar 1961 December 1962 September 1962 December 1961 Filings under suspension start of quarter Increases suspended during quarter Disposition of suspension proceed- ings during quarter Increases allowed after hearing and decision IncreaSes disallowed or with- drawn after bearing and deci- sion Increasts allowOd by settlement proceedings Increases disallowed or with- drawn by settlement proceed- ings Filings under suspensjoil end of quarter 2, 881 191 167 6 1 1 2 12,905 2, 902 96 117 117 2, 881 2, 563 203 10 10 2, 756 $158, 159, 192 3, 682, 301 10, 414, 313 85,465 f 5, 502, 432 4, 826, 416 ~151, 427, 180 $164, 870, 541 5, 115, 468 11, 826, 817 3, 181, 997 8, 644, 82d 158, 159, 192 $165, 787,033 2, 406, 941 668, 377 491, 654 176, 723 167, 525, 597 1 A docket may include 1 or more filings. 2 Includes 901 dockets in area rate proceedings now in progress. 3 Increase during quarter. 4 during quarter. NO'rE.-A s~bstantia1 portion of the suspended independent producer rate filings are held pcn4ing determination of the proper area price in a formal proceeding. The Commission is currently devoting the e~arts of a considerable portion of its stall, In expediting 2 area hearings~ docket No. AR 61-1 and AR 61-2 and significant decrease in number of suspensions on hand is not anticipated pending conclusion of such bearing. APruNmx 13 FPC opinions issued since June 28, 1961 GUy of C'oltoss, c'alif. v. ~. California Edison Ge. E-6u31 (by Kuykendall, with Swidler and Morgani. Asserts jurisdiction over power sales by Sootharsi California Edison to Colton for resale; rate increases approved by California PUC held invalid. St. Lawrence Gas Go., G-i?500, et at. (by Morgan, e ith Kuykendall and Swidler) St. Lawrence authorlied to linilort gas from Canada; competing applica- tion by New York State Natural Gas Corp. denied. 88 ADMINISTRATI\~E PROCESS TABLE 111.-Independent prodigcer gas certificate filings and actions (service and al~assdonsne~4) Number thr December 1962 00 2, 557 1 None of these certificates was conditioned to require reductions in the initial sales price of the gas. 2 Temporary authorizations have been issued in 1,892 of these cases. Of the remaining 922 pending appli- cations, 300 involve service for which temporary authorization chnnot be issued. The remaIning 622 cases include those for which temporary authorizations have not been requested or which are new filings still being processed. 3 Increase during quarter. TABLE IV.-Independent produoer rate filings and actions Opinion No. 346 Date issued July 31, 1961 Aug. 8, 1~6l PAGENO="0093" rram8mi88ion Co., es principles to b PAGENO="0094" 1ff s designed to maintain co ..~ gas from another supplier at Hunt t.il Co., .. ~, .. .~i O'Connor and Woodward; Ross and Morgan c :). Dismisses producer rai~ increases which would have triggered higher rates in Mississippi and southern Louisiana. Ross and Morgan contend case should be remanded and rates allowed to become effective because FTC had not clearly defined standards at the time this case was hesrd. Portland General Electric Co., P-li233 (by Woodward with Swidler, Morgan, O'Connor, and Ross). Denies request to delete 2 navigation projects from license issued for already constructed Willamette River hydroelectric project (Oregon). Transcontinental Gas Pipe Line Corp., 0-10000 (by Morgan, with Swidler, O'Connor and Ross; Woodward dissenting). Denies iransco's proposal to absorb financial losses of distributor through special rate arrangement because it is patently discriminatory and not is~ the public interest. Texas Eastern Transmission Corp. et al., CP6O-1 1212, et al. (by Ross, with Swidler, Morgan, O'Connor, and Woodward). Approves $151.2 million pipeline construction by 6 companies. Black Hills Power & Light Co., E-7046 (by the Commission: Swidler and Ross; Morgan concurring; O'Connor and Woodward dissenting). Denies proposal to issue stock to executives and key employees under restricted stock option plan on grounds that there is no showing that th~ plan is compatible with the public interest. Morgan concuts but states that restricted stock options are unlawful. O'Connor and Woodward state plan meets statutos~y standards. Atlantic Seaboard Corp., 0-17774 (by Woodward, with Swidler, Morgan, O'Con- nor, and Ross). Grants permanent certificate to Atlantic segboard for its Tetra .4lta natu- ral gas storage project (West Virginia). Northern Natural Gas Co., CP6J-1 312 (by O'Connor, with Swidler, Morgan, Ross, and Woodward). Authorizes natural gas deliveries to a subsidiary of Northern at its Bush- ton, Kans., hydrocarbon extraction plant. Rate reduction ordered to com- pensate for loss in heating value of gas. Appalachian Power Co., E-6906 (by Morgan, with Swidler, O'Connor, Ross, and Woodward). Ordered company to follow prescribed FTC accounting methods on de- ferred taxes and to report to stockholders on the same basis. Slade, Inc., G-19986 (by O'Connor, with Swidler, Ross, and Woodward) Rules that reasonableness of 4 proposed gas producer rate increases cannot be determined on present record; cases to be decided in area rate proceedings. United Fuel Gas Co., CPSI-107 (by O'Connor, with Swidler, Morgan, Ross, and Woodward), Approves intercorporate transfer of ownership and operation of pipeline facilities by 3 subsidiaries of the Columbia Gas System. Texas Eagtern Transmission Corp., 0-12446 (by Swidler, with Morgan and Ross; O'Connor concurring; Woodward not participating). Bulk sale of Rayne Field (Louisiana) gas by producers to Texas Eastern held subject to FPC jurisdiction and not in public interest. Companies permitted to work out new arrangement. Southern Natural Gas Co., 0-20509, et al. (by Ross, with Swidler, Morgan, and O'Connor; concurring opinions by Ross, O'Connor, and Morgan; Woodward ~in part). `~s rides 1~v $3.6 million and orders $10 million in refunds; denies Ross, Morgan, and O'Connor ox- s for return on well-mouth properties, separate rate of return should be allowed 90 46~$ued ~inoe June 28, 1961- 368 329 370 371 Nov. 30, 1962 372 Dec. 3, 1962 Memo- randum opinion Dec. 11, 1962 373 Dec. 17,1962 Dec. 27,1962 374 375.. Dcc. 28, 1962 376 377 Do. 378 Dec. 31,1926 Ian. 379 3, 1963 Ian. 16,1963 Feb. 6,1963 Feb. 18,1963 PAGENO="0095" PAGENO="0096" S ~1(~ and CS ner. ~rs of the eoi. If von are e talking about. ~-~c probably we should have referred to this. Unless we have a ~ontro1 AJ~MINISTRATIVE ~OCESS Since that time, ~n additional $325 million hn~s been `added to that $35 milijon of refuia~s. To me it was very heartening, Mr. Chairman, when the report of the Admini~trat~ive Conference came out-and the Federal Power Commission was carefully surveyed in the cOurse o~f the work of the Conference--that not a sing~le recommendation for improvement was leveled at the Federal Power ~ommissiou. Instead, many of the gen- eral recommendations which were made to other agencies were based upon improvements which we had already, on our own initjative, in- corporated in the work of our agency. The interim report of the committee's study )of the conduct of rate procedures in the Federal Power Commission, from which Iquote with the permission of the reporter, had this to say: The present adniinistration and procedures are well adapted to the functions being performed. While further cbaii~es of a modest nature n~ia~ be denirable, the path of procedural inn~watioa has been expiøred with great ing~en~gty nn~I tbo~opgbntss. I Woul~d like now to refer to some of the highlights of this trans- formation of an agency almost dormant 2 years ago to one which is. I think, fully performing up to the expectations which anyone might reasonably have for improvement in the course of this limited period. The pipeline refunds now are in excess of a third of a billion dollars. This is money that is in the pockets of the American consumers. I am aware that yesterday, in the testimony, a comment was thrown out which wat intended to indicate that this was no achievement at all, that this was a setback. I shall discuss that matter in detail later in my statement. We have sta~bilized producer prices. On page 85 of our annual Ikeport, the committee will find a chart showing the course of natural prices in the field, and you will see that beginning in the middle 1 1 ~ off, and you c~n see th'it the melme was very ; say ti Lad r of nat ~y ar iat ~ PAGENO="0097" PAGENO="0098" ~94 Cents per Mcf 18 PAGENO="0099" PAGENO="0100" 96 interpretation, in my ~ the reason the letter has been given headlines. Now, I confess, I do not know how much of this is aimed at his colleagues. I do not think all of it, because some seem so inept that I cai~not believe that it was directed at his associates on the Commis- sion. Others follow the lines of his dissents arid clearly are aimed at us. But I cannot tell you any more than Mr. Morgan was willing to tell you where the one leaves off and the other begins. Mr. Morgan says: Ordinary men cannot administer regulatory laws today in the face of pressure generated by huge industries and focused with great skill on and against the sensitive areas of Government. Ordinary men yield too quickly to the present- day urge toward conformity, timidity, and personal security. Well, no one is going to quarrel with that as a generalization. I guess an extraordinary man is always better than an ordinary one, assuming that he is extraordinary in a socially desirable way, and as T ~I at a press conference, sure, it is better to have someone with -~ ~- ~ipid-that goeS without saying. Cour- a is: Have PAGENO="0101" PAGENO="0102" 98 A1~MINISTRATIVE PROCESS subject to a 10 percent of the industry. It was obviously not int~nded ~ uc~. gress, and the legislative history clearly shows it was not intended, ~s the vehicle for comprehensive regulation of transmission line con- struction or other construction programs. It was intended to insure the financial integrity of the cempanies and the soundness of security issues where the State commissions had not passed on them. In the Pacific Power c~ Light case, what came before us were two security issues, stock and bonds, ~or a wide range of corporate pur- poses, of which .a small part was to be devoted to the construction of a transmission line which was to operate at 230 hilovoits, but was to be so constructed that it could later be converted to 500 kilovolts. No question was raised that this line was fully justified as a 230- kilovolts line. The dissenting opinion accepts that fact. What Mr. Morgan challenged was the additional investment required to make it possible to convert that line to 500-kilovolts use. Now, mind you, we have no certificating jurisdk~tion. That company wou'd not be be- fore us if its securities were regulated by a State commission. It would not be there if they built that line with corporate funds or with the proceeds of a kind of security that did not require our approval. It was only before us for security approval. And it was Mr. Morgan's position that we should use the leverage of our position to prevent the company from installing that capacity for future conversion, although no one could say that looking to the futu~e, this was outside the bounds of a provident managerial decision. At any rate, the Commission took the point of view that we could not in conscience, considering the limited scope of our authority and the advice of our counsel, hold up that security issue, and I, for one, would not agree to the use of our leverage beyond our authority in order to intervene in a situation Congress had not given us authority to participate in. I may have been wrong. Mr. Morgan may have been right. With the passage of time, I became more convinced than ever that the majority w~s right. But what I say to you is, not by the wildest stretch of imagination can the position of the majority in that case be ~ised for purposes of attack and division and reflection upon the whole record of the Federal Power Commission. The other case is also a Pacific Northwest case, Idaho Power & Light Co., where Mr. Morgan thought we should use our security issue juris- diction to delve into rates under investigation by the State commis- sion, into th~ possibility that some power was being sold at too low a price-not too high, Mr. Chairman, too low; charges that the com- pany was not charging enongh depreciation~-not too much, Mr. Chairman, not enough; that it was adopting accounting practices which enabled it to keep ~ rates down. This was the discrimination we were to investigate. Well as I have made clear, Mr. Ch~tirman, our rate staff is new, it is just getting off the ground and we kave a large backlog. This PAGENO="0103" PAGENO="0104" Mr. ~ ~ unfair. I think this is the point that ~ i. the transcript if it were available in time- Still this Oommission has done little to improve it, despite the fact that a growing body of facts indicates that it has beett ineffectual atid that the price of gas today is more the result of competitive forces in the marketplace than the r - ilt of so~-called area pricing regulation. this Moss. I am PAGENO="0105" PAGENO="0106" 102 i~t statement. Mr. SWthL~R. That the Commission Initiate an inv~i1tory of sup~piies of the pipelh~e, as I understand the propo*L I have a copy Of the transcript by. my side. I will read that: I believe, too, that we should regulate strictjy the pipel~nes pur~1uts1ng pro- g~ms and equip the cömmiseion~ with an up-to-date i~wei~tory on all gas a~vai1able in the United States and use. competitivO foi~ce5 to the extent that we pose~bly can. That is an excellent suggestion, Mr. Chairman. Mr. Morgan well knows that months ago, the Commission directed at my suggestion, that the staff do just that, and it is now engaged in making such an inventory. Next, says Mr. Morgan, "We need a uniform system of accounts for such prothicers, a; long-postponsd responsibility, n~der which no steps whatsoever are being taken to discharge." There are t~o answers to this one, Mr. Chaii~ma~. I agree ~that it would be useful to have a unt~orm system of a~counts for gas pro~ ducers. But this committee well knows that we (are talking about a very complex and difficult problem. The gas producers are the en~ tire petroleum industry. They produce the gas ~nd the oil together~ and the question is how you make the allocations1 *ithin the industry, this complex petrochemical industry, how you s~void, in the process of establishing a system of accounts for the gØ~ end~ taking dottrol of the oil ends where we have no jurisdiction. The products come out of the same pipe. The second part is that this is not a~flcld in which we are idle. Our staff has instructions to try to develop such a system, first as applicable to the pipeline producers, to t~st it out without em- broiling the whole petroleum i~ndusfry in a half -~a;ked plt~n. We have developed, in connection with t~e ~lrea rate proceedings, a~ppendices which secure information from them on a more compre- hensive scale than ever before in history, and this may well prove, and I thin1~ will prove, to be of great help in moving us along toward the goal of a uniform system of accounts. But this is a difficult, important matter, and I am sure that thi~ committee is aware that this is not the work 0f a day and that you will not get such a system of ac4ount~ simply by saying we ought t~ have them The next point was the settlement program The CHAIRMAN The what ~ Mr SWIDLRR The settlement progi am~-the pipeline settlement pro- gram. I wpuld like to read what Mr. Morgart says on this one. This is beginning on page 75: These settlements in my opinion, are a ~ery exi4~nsive devtee from the con~- sumer's point of view, for the clearance of the Commissioners' backlog. I will cite as an example the Te~ivne88ee Natural G~z8 Pipeline Ii~ate case, which we settled a few weeks ago and in~ which I did no1~ participate iii the decision.. I will tel1~you why. There were approximately $320 million of rate h3creases subject to refund ln~ this case PAGENO="0107" PAGENO="0108" ADMINISTRATIVE ~~~ing the I interpolated rticipation L practice. Three, the early designation of a presiding examiner and conference procedures. 1 interpolate, our regulations have been amended to provide for extensive use of pre'hearing conferences and for the early designation examiner. sent can be built depr~ the Commission we selected a case as a vehicle for doing ~, case. Hearings-oral argument, rather, was ordered in the Alabama- Tennessee case on this one issue. PAGENO="0109" ADMINISTEAPIVE PROCESS 105 A few weeks before the date scheduled for oral argument the Court of Appeals of the District of Columbia in the Pa~iha~d~ case handed down a decision saying that the Commission had no discretion with respect to the treatment of liberalized depreciation, In view of that cloud hanging over the proceedings, the argument was postponed. In the meantime, the* Conm'iission applied fo~ rehearing in the Panhandle case. Rehearing was granted before the court of appeals en banc. The matter was argued and is now before the full court fo,r decision. We await that decision. If we have discretion to re- view rulings on liberalized depreciation we shall do so. The hear- ings in Alabama~Tennessee have been suspended, they have not been called off. This is the full story, Mr. Chairman. The CnAIRMAN. Congress provided the depreciation in such cases, didn't it? Mr. SWIDLER. The question as to what Congress intended is ap~ parently one not free from doubt. And we have set this matter for hearing so that we can get oral argument on every phase of the lib- eralized depreciation question. The CHAIRMAN. Did not the court say that Congress has not pro- vided, that with respect to utilities, ratepayers are entitled to share in the temporary benefits resulting from the use of liberalized de- preciation in computing income taxes? Mr. SwIDLEE. I think there have been a good many court rulings, and they are not all consistent. We think that we have somç dis~ cretion as to the treatnient of liberalized depreciation. And if the court sustains us in that view, we will exercise that diseretion. The CHAIRMAN. Yesterday I asked Mr. Morgan about the most recent provision of the 1962 `i-percent investment credit. Mr. SWIDLER. That is involved in a rulemaking proceeding, Mr. Chairman. The CHAIRMAN. And therefore I would not ask you questions about it. But on the general broad policy, does not the Commission take into consideration the language that is in the legislation itself, together with the legislative history behind it? Mr. SWIDLER. Of course, Mr. Chairman. That is controlling. The trouble is, lawyers don't always agree what the words mean and what the legislative history points to. But if we can find any clear expres~ sion of congressional will we ~ollow it. The CHAIRMAN, I think that is commendable for all Commissions to do that. Some of these problems could be minimized. Mr. SWIDLER. Yes, sir. Mr. Morgan mentioned tax consolidation, but said that it was now pending for consideration. I don't know why it was brought up~ It is involved in a pending case. And we will decide it. Mr. Morgan critinized the technical advisory committees which he said were-I quote~-I think I am quoting, these are from my notes-~. "Set up with my reluctant concurrence." He says they should either be abolisijedor broadened. Well, let's take the advisory committees on the national power Survey first. We have an advisory committee on the gas side~ anc~ PAGENO="0110" 106 M~MINISTRATIVE PROCESS we have the advisory ~cOmmittees on the national j$wer survey. On the power side we have perhaps 150 people from all segments of the mdustry working too'ether for the first time, providing essential in- formation as to the prans of their companies, their load forecasts, their technological experiei~ce, their expertise in dealing with common prob- lems in generation and fuel handling, or in transrrdssion. And as I said, for the first time they are sitting around th4 same tables and working together. I think this is very good for the country, that there should be a foi~um where all of them look at their problems fronii a single national point of view, and that the right place for them to do it is in the ofllces of the Federal Power Commission. This, I think, is one of the most encouraging deve'opments in power system history. We have tried to balance these committees among the various seg- ments of the industry. I don't suppose in this, tiny more than in anything else that you do in a badly divided indi~stry, that we will ever win a 100-percent approval, but I think mo~t people think, we have done a fair. ~ly good and evenhanded job, and that we have com- petent advisers. But we have made clear that thes~ are advisory com- mittees, and that the power survey report will be the Commission's report and not an industry report, not a report by ~ny segment of the industry, Mr. Chairman. On the natural gas side, the Natural Gas Advi~ory Council meets infrequently. I think it has held a total of three tr four meetings so far. It was established in a way that we think s~feguarded the con- sumers interest. Representatives of the distribut~rs, consumers, and regulatory agencies are on it. It may be that ~hat representation ~ou1d be improved, ~nd Mr. Morgan knows that I have suggested some broadening of representation of consumer interests, and that it is still before the Commission for discussion. But I don't think it can serve its purpose as a way of finding out what the industry ~s thinking, as a medium for genuine communica- tiorL, if we invite all the groups that Mr Morgan says should be in ~ited, or as I beli~ve he put it, ~~ven if they have to meet in a conven- tion hall." That would be striking a public pose, ~t would not be working to- ward any genuine level of communication. The next point Mr. Morgan makes is that tihe regulation of cx parte communications should be broadened to include staff people who advise the Commission, and there should be a public defender within the staff. The Commission now has under c&nsideration a broadened ex parte rule. So far as the public defender concept is Soncérned, our whole stafl~ is a public defenddr staff. And I oppose~ the public defender principle, because the effect is to relieve the staff and the Commission of their responsibilities as public defenders. Mr. Morgan's eighth suggestion is that we do~i't have close enough liaison with other agencies. Our relationships, he says, are touched and tinged with jurisdictional rivalry and disc~rd. Of course, these other agencies-~-I presume he means departments-are headed by Cabinet officials. I PAGENO="0111" PAGENO="0112" isrecom Li final point is that the. Commission is our orders, that they should all be signed. I don't t that a ~ r of our orders will bear that out. I think that all of the opinions or virtually aB of the opinions are signed. There is a commissioner who takes responsibility for each of them and works with our opinion writ- ing staI~ to be sure that they meet the standards of the Commission and reflect the views of the Commission, Mr. Chairnian, I see that I have been sp~akin~ for quite a while, and I ~il1 now make myself available for any questions the committee may wish to ask. The CHAJRMAN. I see the time is now almost 12. 1 should think 1 ~ questions now would rUn us over the noon - + ~ "~r the noon hour AP] The CHAIRMAN. The committee'~ Mr. Swidler, you may resume. I b statement when we recessed at noon. TESTIMONT OP HON. JOSEPH C. SWIDLER, CHAIRMAN, PEDERAL POWER CO1VIMISSION-~Resuined PAGENO="0113" ADMINISTRATIVE PROCESS 109s Mr. Moss. And you have held appointive posts prior to becoming a member of the Federal Power Oommjssion Mr. SWIDLEE. Not Presidential appointments~ sir, this is my only Presidential appointment Mr. Moss. I said appointive. Mr. SWIDLEE. I have been an employee of various Government agen- cies for many years, sir. Mr. Moss. To your knowledge, is it unusual for a person holding an `appointthent, upon reaching a decision to retire or not to seek reap- pomtment, is it unusual for one to inform in advance and, in the course of the letter of information, express views as to the field in which they operate? Mr. SWIDLER. I do not recall any letters similar to this one, in my experience. Mr. Moss. That is not what I asked you, Mr. Swidler. I asked you if it was unusual, if a man retires to not seek reelection, perhaps as much as a year ahead, he informs his constituents~i~ it unusual for him to issue in connection with that statement of intent to retire a bit of advice to his constituents? Mr. SWIDLER. To the extent that I have never seen anything like this before, I would say-_. Mr. Moss. You have never seen anything like this? Mr. SWIDLEE. No, sir; I think it is very unusual. Mr. Moss. Well, I have seen letters informing people that they are not going to seek reappointment commenting upon personal views gleaned not only from the specific service but from allied interests. Do you think it is improper that a person do this? Mr. SWIDLER. Mr. Moss, I tried to make clear in my testimony that what I thought was improper about it was that the letter was not intended to be helpful, either to the agency or to the President, but was intended to imply.-__ Mr. Moss. How do yoti know what the intent was, sir? Mr. SWIDLEE. Because he states, sir, and this is the way everybody has interpreted it and I do not think it is susceptible of any other interpretation~ Mr. Moss. When you use the term "everybody," I want yqu spe- cifically to exclude me. So we must now concede that it does not apply to everybody. Mi~. SWIDLER. Everybody but you, sir. Mr. Moss. Well, I have talked with others who do not agree with that, so it must then broaden. It is not everybody but me; it is some other than you and perhaps others present here. I do not think you can even say you have reached the point where a consensus of interpretation of this letter is well developed. Or do you think you have? Mr. SWIDLER. Sir, I know the interpretation that has been given by it in the press, I know i~hat my family and my friends interpret the letter as saying, I know what my fellow Commissioners think. It seems to me that the reflections I see of the letter indicate that it was intended to emb~rrass and to imply that there were serious charges against his fellow Commissioners. Now, if members of this committee did not so consider it, I do not understand why you are having this hearing. PAGENO="0114" ilO ADMINISTRATIVE PROCESS Mr. Moss. I do not know what the members of th~ committee con~ sidered it to be. Mr SWIDLER Let me read to you the paragraph that I read befOre, Mr. Moss, and see- Mr. Moss. Oh, I know we shall-~--. / Mr. SWIDLER. See if you can find anything in this except- Mr. Moss. We shall go over it with care. Mr. SWIDLER (continuing). A signpost to everyone. Mr Moss Mr Chairman, I have become rather sensitrve over the years, 14 years in elective office, and I have learned how artful inter- pretations can be when you deal with parts out of contOxt. I am very conscious, when I write a letter, of the possible use out of context And when I write to some, I with great care review each sentence and weigh eaèh word because of the knowledge of the hazard facing any public figure who writes a letter. So I. don't like to just take out of context If we are going to discuss it, let us discuss it in its relationship of its parts one to the other. That is how I want mine to be evaluated. Mr. SWIDLER. Yes, sir. Mr. Moss. The first paragraph-do you take any umbrage to it? Mr. SWIDLER. No, sir, Mr. Moss. And the second. Mr. SWIDLER. Yes, sir; serious umbrage. Mr. Moss. All right. There are a number of reasons for my decision, but I am sure I should be considered less than gracious if I were to list them alL Mr. SWIDLER. Yes, sir. Mr. Moss. That is one you find repugnant? Mr. SWIDLER. Yes, sir, Mr. Moss. Why? Mr. SWIDLER. I am sorry? Mr. Moss. I say do you find that repugnant to yoi~? Mr. SwinLuR. Yes, sir; very. Mr. Moss. Why? Mr SWIDLER Because it implies to me, in a very left hande4 way, that his experiences were such that if he reveale~i them he would be ungracious, that his experieuces---- Mr. Moss. This was a case where he accepted ~ppointment-~- Mr. SwIDLER. Why would a nian s~y a st'range~ thing like that in a letter to the President, that he would be ungrac~ous-~-- Mr. Moss. Because he might have felt that in his coming here, the discommoding of his family was too great a sacrifice and it might be ungracious to mention that to the President, knowing he had accepted an appointment knowing full well there would be a disturbance. Mr. SWIDLER. He was staying out his term, sir. It would be not ungracious to leave after staying out his term. Mr. Moss. That is not what it says here, is it? Mr. SWIDLER. I am just saying what it meant ~o me~ and m~ant to a good many people. Mr Moss, I want to say, I am not trying to picl~ a fight here I view myself more fought against than fighting. If I~ had seen any honor- able way to avoid this confrontation, I would have done so, because PAGENO="0115" 2 PAGENO="0116" 112 the opinions,~MIr. Swidler, yours ~. ~. ~night ~ - of his convictions that I might or might not disagree wi ~. I v say there are some of your convictions too, that I might agree or might not agree with. But for vigor and clarity, I think his dissents are excellent. Mr. SWIDLER. If Mr. Morgan thought he could take the curse off this attack by some platitudes about the respect he has for his fellow Commissioners, he is wrong. This was intended ~s an attack, it was interpreted as an attack, and it was allowed to develop into a full congressional investigation as an attack. Mr. Moss. We are now talking about dissents. Do you want the statement you just made to apply to the dissents? Mr. SWIDLER. I think he was trying to get maximum publicity and mileage and create the most problems for his fellow Commissioners in those dissents; yes, sir. I don't disagree with the right of dissent. Mr. Moss. Let me say you people on the Commission gave him the out of a dissent that he ever got, and you gave it to Li 1 £ -~ Li 1 ~ That is where he ~e writte mmittee~ PAGENO="0117" PAGENO="0118" words, "In a Mr. Mr. he is a he ca: challeiiging ~, ~s, lie ca to cl\ear up when he goes back to Mr. Moss. I didn't get that. ~. repeat that? Mr. SWIDLEii. Yes. I say that if lie destroys on his ~ will leave us the rubble to clear up when he goes back to L this kind of challenge to good faith wliic~i is destructive. Mr. Moss. You think the Commission is such a w~k bod~ strong dissent will ~ it? Mr. SWIDLER. I think ~ structive and the capture o:f very harmful to the respec peopie should have and th~ in the work of the Federal I Mr. Moss. Do you have a mani Mi'. SWIDLER. No, sir; and I nOt get into t Moss. I just said this letter I could construe only a~ an attack. You brought up the dissents. Mr. SPRINGER. Mr. Moss, I could not hear. I wai~t to hear his last words. Mr. Swintm~. I said I did not bring up the dissebts; I had no in- tention of discussing them; I am re~dly not prepared to 4iscuss them.. They came iuto this conversation because Mr. Moss was challeng- ing wh was perfectly apparent, that the letter of resignation ~vas~ an at~" - . So you have then from the time of these dissents sound. )flS St] red? to that. I thhik it n~ust~be very ui~co~n- we to work on a commission where every.4 ~ and those who dissent mu~t tread with great `read and they which would y know ar corn ctions. ~IDLER. There is nothing that I enjoy more, Mr. Moss, than n of a point of law or a poiift of policy or a pQint v that when the challenge is to motive, y, this makes carrying forward a L. Now, Mr. Morgan and I- Lit any discussion of ~notive in a dissent ~$C 114 ADMINISTRATIVE PROCESS PAGENO="0119" PAGENO="0120" I did not understand as Mr. SWIDLF~R. No; if not i against / find too much to quarrel with here, and I think it is true that some~ times regulation can. be a cover for a failure of protection of the public interest when it is not effective. I think there are situations where the public thinks that their rights are being protected and they are not being protected. This is some- thing I have pointed out, too, Mr. Moss. Mr. Moss. Then you do not find that there is a~i untruth in this ~ Mr. Swmnui. No; I do not find there is an untruth in there; merely in its application to the Federal Power Commission4 Mr. ~ s. Do you think it is a v~did observation? WIDLER. I think it probably does apply to some agencies; yes, Th aragraph~ LEE b one is a long para ice as a regu :now about hi and even PAGENO="0121" PAGENO="0122" 118 ADMINISTRATIVE PROCESS hav~ iilblculed a new set of information system. Mr. Moss. Every agency in Washington has, haircn't t~ Mr. SWIDLER. I don't think so, beea~tse every once in a while ~hey ~come around to see ours. Mr. Moss. Every agency I go to for a briefing,1 I find they hai~e a ~set of wail charts. Mr. SwIDLi~. We didn't until recently. W~ g~it one to try to ~lnd ~out where we stand, to show the disposition oE various types of work .as compared with the targets and to show us where we ~re fa~lizig behind r-~1 what accounts for it. I not help fe~ling that that was a rather barbed remark. ~i. But his general advice-you would x~ot disagree with it, te doii rdwoi york and wor ~e two are quite cons be d rected toward control. Mr. Moss. I have seen agencies come in aric~ pu~ demonstration of their procedure, a~ud then one of theni in particular I investigated during the past 3 years, and I i~as shocked to find how inefficiently managed it was. But of `course, ~lf I had just taken the first presentation, which was a masterful job of wall chart juggling, I could have been misled. Mr. `SWIDLER. I agree with that, sic. One must go behind the charts. Mr. Moss. Still, as a general observation, do you think it is invalid? Mr. SwIDLER. If not directed at anybody h~ particular, no; I think that is all right. H~ says admittedly there is no ov~rsupp1~r- Mr [think you mu ~best people for the jobs, Mr. Moss. This does not deny that, does it? Mr. Swii~. OL Mr. Moss. Now, the next one: As `you well know, there has been a treat deal ~f stud~v of ~re ~Iately and with good reason. ;; I would. I this. You PAGENO="0123" PAGENO="0124" 1 of these recoffi- 120 ADMINISTRATIVE PROCESS )served be~ with V ome. and Mr. Moss. I Mr. SWIDLER. Yes, sir. Mr. Moss. They should not at any time be personal in the differ Mr. SwIDLER. Exactly; that is right. Mr. Moss. I believe that at least four of the members here today about 3 years ago joined in a report of this subcommittee which recom- mended that the Chairman not be designated by the President; am IL correct, Mr. Chairman? The CHAIRMAN. You are so far as I am concerned. Mr. Moss. Mr. Springer and Mr. Younger-I think we had looked at it. We were concerned over the preservation of the independence of ~ regulatory cm - Ions. aall 1 1 Mr. SwIDLER. `Ik~ Mr. Moss. It is a far more constructive contribution ~, you deal with the merit without involving in comment on the per- sonality differences or making evident personality differences between the proposer. ~ occurred on a number of instances. k a~ a serious nroposal, it omm Some of th~ ~ inter agree with. But I would like to have ~ which I regard as having value, but yours as well. Mr. SWIDLER. I shall review my testimony and supplement it if I failed to state my position adequately. PAGENO="0125" PAGENO="0126" 122 AD~INI~Th~U~ ~O~lJ~SSr Mr. SWIELRR. Not that I am aware of, sir, no, sir. Mr. SPRINGER. Have you had ~ chance to talk with the other ( missioners about this letter? Mr. Swmr~n. Informally, yes, sir. Mr. SPRINGER. Informally? Isn't the belief of those members, other than Mr. 1~[organ, that this~ was i~i the nature of an attack upon the Commission? Mr. SWIDLER. I hesitate to speak for the other Coi~'imissioners, sir. The CHAIRMAN. Will the gentleman yield? Mr. SPRINGER. Yes, sir. The CnAIRMAN. I am sorry to learn that the gentleman was ill this morning, but we got a report that lie could not b~ here, but I made the statement that other Commissioners who felt they might have been attacked would be gi~ven the opportunity, i~ they desired, to come before the committee. Mr. SrRINGER. Has there been any occasion in the Commission where you felt that any member of the Commission yie~d~d on his own con~ viction because of a desire to conform with the other members, because of timidity, or for any desire or from any desire for personal security? Mr. SWIDLER. No, sir. Mr. SPRINGER. Do you know of any Commissioner who has ever remlered a decision who modified his conviction i~n that decision be- cause he might arouse an industry campaign against his reconfirmation by the Senate? Mr. SWIDLER. No, sir; I do not. As applied to me, in particular, ~znd I do not want to get personal beyond what is appropriate here, I would think tlkat was particularly misdirected. As it happens, I was not a polit~ical appointee, my confirmation hearings reveal that I informed thy Senators that I had been offered this post, and they heard it frorti me~ They did not solicit the position on my behalf. The President offered it to me because he thought that I was the man he wanted, mistakenly or otherwise. I left a good law practice. I have worked for the Federai Gov~ ernment now for many years. At the end of this term, my Govern- ment will provide me with a generous pension, ai~td I have a law prac- tice to go back to. I do not need to stay in this position if I cannot make a contribution to it. Mr. SeRINGEE~ Mr. Chairman, do you know of any member of your Commission down there wh~ has become neurotic with worry after having cast a vote for the public interest? Mr. SwIDL~, We are all at our desks every ~Iay, sir. Mr~ SPRINGER. Would you answer that yes or no? Mr. SwmLEU. No, sir; I do not know anybody who is neurotic. Mr. SPRINGER. I just want this record to be clear, because Mr.. Chairman, these have been the nature of the attack, the very things you pointed out as an attack were the same things I pointed out aa an attack yesterday. Surely the news does interpret what a man pays in a letter as long and involved as this. I did not mean to cut you off. Did you have somethi~ig else?' PAGENO="0127" At~MINISTRATIVE P~1~ 123 Mr. SwIDLER. No; I would particularly like to say for the three colleagues who cannot speak for themselves that they seem to me to~ be very well balanced, with no neurotic tende~icies whatever t1~at I can discern. Mr. SPRINGER. Have you or any other Commissioners down there 1?een rendering any decisions where you have been getti1~g puff-jobs or image-building instead of protection, or streamlining and pall chart juggling instead of hard work? Mr. SWIDLER. No, sir. Mr. SPRINGER. Mr. C~irman, as I read through your statement very hurriedly this afternoon, it seems to me that you have pointed to one, two, three, four, five, six, seven, eight, nine places which I have marked, in which you have pointed out progress that you thought has been made in the Commission in the form of streamlining the agency and bringing it up to date. Mr. SWIDLER. Yes, sir. Mr. SPRINGER. You l~ave made this statement-~-I am not going to say it is all true, but at least you have tried to point out what innova- tio~ you made. If those are all true, I want to compliment you. Mr. SwIDLER~ I appreciate that, Mr. Springer. Mr. SPRINGER. I just hope-I had one Commissioner up here last year and he had a hard time because he had done something which was not particularly popular here on Capitol Hill. I think he waS right and I told him I thought he was right at the time. I just hope that you do not let you or any member of the Commission be upset because of the fact that you have had a disgruntled member of the Commission who is now leaving and has seen fit to make a statement impugning, a~ I get it, not just the Commission but the motives be- hind personal members of the Commission. Thank you, Mr. Chairman. The CHAIRMAN. Mr. Younger? Mr. YOUNGER. Thank you, Mr. Chairman. Mr. CHAIRMAN. Did Commissioner Morgan eo~sult you at all be- fore he wrote that letter to the President? Mr. SWIDLER. No, sir. Mr. YOUNGER. Did you know that he intended to h~ave? Mr. SWIDLER. I knew that he had political interests in Oregon and that he had long considered whether to go back to Oregon or stay on the Commission. ile. made a good many trips to Oregon early in his term ih an at~ tempt to decide whether to leave the Commission and campaign for the ~overnorship. And I knew this was something that Tie was turning over in his mind. But not beyond that, sir. Mr. YOUNGER. If I properly interpret the testimony yester~Lay anct your statements today, your Co~nmission meetings must hate been most entertailiiilg. Mr. Sw~pLER. No, sir; I thftik that Mr. Morgan was- Mr. YotNa~sn. I should think that either you or ~`ie would have known that something was going to happen sooner or later. PAGENO="0128" 124 ADMINISTRATIVE PROCESS Mr. SwIDLER. Mr. Younger, I think Mr. Morgan was quite right in saying that we had both attempted to suppress th~se problems so that we could work together. We are, after all, on th~ same Commission, we must meet and we must dispose of our cases and I think we have managed, everything considered, to do our jobs. Mr. YOUNGER. If I understood you correctly this morning, I would infer that Mr. Morgan wanted to use the authority of the Commission in a punitive way in connection with the approval of the finances. Mr. Swinn~it. Mr. Younger, I did not use the ~vord "punitive" and I am not sure that that would be accurate. But I think that the dis- sents reveal that he did want to use the jurisdiction over stock issues in order to develop many collateral lines of investigation and many other collateral problems. In connection with the Idaho Power Oom~pany security issue case, for example, that Was to be the instru- ment to go into the question of their progress on Hells Canyon, their retail power rates aS well as their `wholesale power rates, their depreci- ation policy, the fish problem on the Columbia River, and many other things. Now, this is a different approach from that of the rest of the Com- mission, which feels that it should make a calenlated decision on the best way to use our staff and not launch off into investigations merely because a company files a security issue application, and which feels that the use of security issue jurisdiction for leverage purposes is something that should not be extended unreasonably. Mr. YOUNGER. I know you used the word "leverage," but I had used the word "punitive," because I think usually When you want to use the leverage, and when you find a bureaucri~t that wants to use a leverage of that kind to accomplish some persoi~aI idea that he might have, it is done in a punitive way. He has that motive in the background. Mid that is one of the difficutties that we are having today with regulatory agencies when they use one right to try to get at something else which has been denied them. And I think that is one of the weaknesses. Mr. SWIDLER. I just want to make it clear that I do not say that this was punitive. I simply say that this was beyond the proper exercise of our powers, and not an effective use-an effective way to use available manpower. Mr. YOUNGER. Did you say at any time during the consideration of the Idaho case that you did not want to go~ into the investigation of the items Mr. Morgan had suggested becaus~ it would be damaging to the company and to the industry? Mr. SWIDLER. No, sir-no, sir. Mr. YOUNGER. Did you hear any member of the Commission make that remark in private when you were considering it? Mr. SWIDLER. No, sir. The only statement that I have made, and I think if any state- ments were made, they must be mine is that if we acted beyond our jurisdiction, we would forfeit the. respect of the industry ~upon which our own effectiveness depended. PAGENO="0129" ADMINISTRATIVE PROCESS 125 Mr. YOUNGER. This morning, you stated that every month you send a report to the President. Mr. SWIDLER. Yes, sir. Mr. YOUNGER. Do you send a report to this committee? Mr. SWIDLER. No, sir. Mr. YOUNGER. ~Do you send a report to the Senate Commerce Committee? Mr. SWIDLER. No, sir. Mr. YOUNGER. Do you consider that your Commission is an arm of the Congress? Mr. SWIDLER. Yes, sir. Mr. YOUNGER. Then why do you send a report to the President and not send one to the respective committees of the Congress which have legislative jurisdiction over you? Mr. SWIDLER. The President asked me to, sir. Mr. YOUNGER. Well, do you not think it would be rather incumbent upon you that if you furnished any information to the President, you might also furnish the same information to the bodies that have legislative jurisdiction over you, especially if you are an arm of the Congress? Mr. SWIDLER. I would assume, sir, that this agency had its own methods of keeping in touch with what we are doing, and, of course, through your staff, we have frequent inquiries. It would not occur to me simply to send you copies of other correspondence, but I would, of course, be delighted to fit into whatever system this committee establishes. If this committee would like reports, why, of course I would be glad to file them. I assume you would want to make this general and that all agencies would file such reports. But whether it is just the Federal Power Commission or all agencies, I will, of course, be de- lighted to make any reports that this committee wants. I should make clear that the President has not asked for exhaustive reports. These are very brief, and deliberately so, so that it hits just the high spots of accomplishments and problems. Mr YOUNGER I imagine one of the things which he is concerned with is the same problem that we are all concerned with, the prog- ress being made on the cases and the backlog-how it is being han- dled. It would seem to me that if you do get out a report of that kind, and file a report of that kind with the Executive, it also should be filed with this committee, for our information. Mr. SWIDLER. This report does not purport to be a systematic ac- counting as to the status of our backlogs in the various areas of our work, but only three or four items of outstanding importance which occurred during the month, either by way of achievement, by way of planning, or by way of prob'em or setback. Mr. YOUNGER. There is another problem that I would like to get your advice on. Most of these public utilities do. have power of eminent domain, do they not? Mr SWIDLER Yes, sir 99.948 O-63---9 PAGENO="0130" 126 ADMINISTRATIVE PROCESS Mr. YOUNGER. In other words, they can come in and condemn for a right-of-way across my land, and upon just compensation, they can secure through the courts that right-of-way? Mr. SWIDLER. Yes, sir. Mr. YOUNGER. And I have no right to dictate to them and tell them what they do with that right-of-way or how they handle the power or gas that they transfer over that right-of-way? Mr. SWIDLER. Yes, sir. Mr. YOUNGER. Do you think that same right ought to exist on public property? Mr. SWIDLER. The Commission is now attempting to formulate a position with respect to the proposed regulation of the Departments of the Interior and Agriculture, to which I am sure you refer- Mr. YOUNGER. That is right. Mr. SWIDLER (continuing). Which would condition the use of rights-of-way through the national parks and the national forest, national monuments, upon agreement to certain stipulations as to the right of the Federal Government to make use of the transmission lines which are constructed. I think we will have a position which we will express to the Interior Department. with respect to their proposed regulation. I do not know, Mr. Younger, speaking now personally- Mr. YOUNGER. I would not ask you to make a statement on it prior to your decision. Mr. SWIDLER. Very good. Mr. YOUNGER. But it is a problem with which we are going to be faced, especially out in the West, it seems to me, if any such policy on the part of the Government were confirmed, you might as well wipe out private power, and even Mr. Morgan, in his statement yesterday, does not want to completely eliminate private power. He wants to maintain the status of it as it is now, although I think he probably feels more kindly toward public power than he does toward private power. But certainly out West., where you can hardly move without getting a right-of-way over public lands, if the public lands are going to deny the utility the right of going into court or getting a right-of-way without again injecting certain rights that it has in getting stipulations, that, I think, seems to be going a little far. Mr. SWIDLER. Yes, sir. Mr. YOUNGER. That is all I have, Mr. Chairman. The CHAIRMAN. Mr. Rogers? Mr. ROGERS of Florida. Thank you, Mr. Chairman. Mr. Chairman, I was interested in going a. little bit into the charges Mr. Morgan made-at least I have assumed they were charges from his testimony-that the individual Commissioners were rather cap- tives, either of staff or of the Chairman working through the. staff. Perhaps you could enlighten us just a little bit on that. How many employees does the Commission have? Mr. SWIDLER. There are about 1,050 employees now, sir. PAGENO="0131" ADMINISTRATIVE PROCESS 127 Mr. RoGERs of Florida. How many are employed by the Chair- man? Mr. SWIDLER. Well. I think that- Mr. ROGERS of Florida. I realize you may not know the exact number. Mr. SWIDLER. Our personnel system is such that most of the em- ployees are hired by our personnel director and top staff personnel without most of the Commissioners knowing about it, or my know- ing2 either. There are a group of appointments at the higher levels which I must make personally and on which the approval of the other Commissioners are required. All appointments over grade 15 and all hearing examiners are appointed only with the approval of the whole Commission. Mr. ROGERS of Florida. So each Commissioner has a say-so in the employment of those people? Mr. SWIDLER. Yes, sir. I make the nominations. Ordinarily, on an important appointment, we arrange for a meeting so that all mem- bers of the Commission can meet the candidate and then vote on whether to approve his appointment. But the Chairman as the chief admini~trative officer has the responsibility for trying to find these people and bringing them to the attention of the other members of the Commission. Mr. ROGERS of Florida. Would you say it is done pretty much in consultation with the other members whom you interview together or- Mr. SWIDLER. I do the original screenin ` i some ol tions, I have literally interviewed twosc is a very time-consuming job. It is has been completed, normally, that I w tion of the other Commissioners. Mr. ROGERS of Florida. Now, in the r an employee, could any Commissioner i of you or to you that this particular en Mr. SWIDLER. Yes, sir; he could. Mr. ROGERS of Florida. Has this ever happened? Mr. SWIDLER. This has never happened. Mr. ROGERS of Florida. Have you, as Chairman, dismissed anyone since you have been in your position, that you recall offhand? I realize it might slip your mind. Mr. SWIDLER. Not in the sense of-a lot of these things are semi- negotiated. Mr. ROGERS of Florida. What I was trying to get at, for not carry- ing out your policy, have you fired anyone? Mr. SWIDLER. I think maybe some people have left sooner than they otherwise would. I have not been through a termination processing; no, sir. Mr. ROGERS of Florida. Was it because of your policy or the Com- mission's policy that you let him go? Mr. SWIDLER. It was after discussion with the Commission. PAGENO="0132" 128 ADMINISTRATIVE PROCESS Mr. ROGERS of Florida. So he was not dismissed necessarily, because he was not carrying out your individual views? Mr. SWIDLER. No, sir; that is right. Mr. ROGERS of Florida. Does each Commissioner have any say-So on the people that help him? Mr. SWIDLER. Each Commissioner has the exclusive appointive power for the people in his immediate office. Mr. ROGERS of Florida. You do not do that appointing? Mr. SWIDLER. No, sir. Mr. ROGERS of Florida. And how many would that include for each Commissioner? Mr. SWIDLER. I think it includes a legal assistant and two secretaries. Mr. ROGERS of Florida. For each Commissioner? Mr. SWIDLER. For each Commissioner; yes, sir. The CHAIRMAN. Will the gentleman yield at that point? Mr. ROGERS of Florida. Yes, sir. The CHAIRMAN. Is it not true that every member of the staff is available to every Commissioner when he calls upon him? Mr. SWIDLER. Yes, sir; that is true. Mr. ROGERS of Florida. I believe you made the. statement already that you have not had any influence at the Wh it.e i-louse? Mr. SWIDLER. Yes, sir. Mr. ROGERS of Florida. In your capacity as Chairman? Mr. SWIDLER. Yes, sir. Mr. ROGERS of Florida. I notice you did say earlier that if you needed help at the White House, you would call upon him. When would you feel it necessary to call upon the White House for help? What did you refer to there? Mr. SWIDLER. Wel], I have asked members of the staff at the White House to help me fi~id good people, and they are not easy to get. I must say that. a. talent hunt is a very difficult thing. Mr. ROGERS of Flor da. But. not. in decisions of cases? Mr. SWIDLER. No, sir; not ui decisions of cases. Mr. ROGERS of Florida. Mr. Chairman, I believe that is all I have, thank you. The ChAIRMAN. Mr. Brotzman, do you have any questions about any deserving people? Mr. BROTZMAN. To be on the record, I think there are a lot of dese.rving Republicans. This is on the record. Now, Mr. Swidler, turning your attention to the testimony about di ssent.s this morning, something came up about a dissent where you allegedly gave Mr. Morgan a lot of mileage, or something such as that. You gave him. an opportunity for a lot of mileage. Was this rela- tive to publishing of a dissent, or to what did that allude? You offered to answer the question. I think it was in response to some statement or question by my colleague from California. Mr. SWIDLER. I think Mr. Moss finally did ask the questions that. that related to. I think that is on the re.cord now. Mr. BROTZMAN. Let's go into it a little further, because I do not understand it. Did this allude to some dissent that you did not publish of Mr. Morgan's? PAGENO="0133" ADMINISTRATIVE PROCESS 129 Mr. SwIDLIut. Oh, I know the incident you mean. No, sir. Do you want me to give you this story, sir, now? Mr. BROTZMAN. Yes; I do. Mr. SWIDLER. Well, this is the dissent in the Pacific Power c~ Light case. Mr. BR0TZMAN. You say the Pacific Power and- Mr. SWIDLER. The Pacific Power & Light security issue case that I was talking about. It raised the question of suppression that Mr. Moss mentioned. To my mind, this is not a correct view of the matter and I would be glad to tell you the circumstances. We decided this case on March 28, 1962. Mr. BROTZMAN. Would you identify the docket number so we are all talking about the same thing? Mr. SwIDLER. I have it here. I am talking about docket Nos. E-7024 and E-7025. The CHAIRMAN. Is that included in the record, if the gentleman will permit? Is that included in the record that you submitted to us this morning? Mr. SWIDLFAR. No, sir; it was not included. I will be glad to, as I mention these papers, offer them for the record. The CHAIRMAN. I think the entire matter that you referred to ought to be in the record so that whoever reads it may know what the whole story is. Mr. SWIDLER. Very good. (The document referred to follows:) PAGENO="0134" 130 ADMINISTRATIVE PROCESS / UNITED STATES OF AMERICA PEDERAL POWER COMMISSION Before Commissioners: Joøeph C. Swidler, Chairman; Howard ~oran, J~. J. O'Ccnnnr, Jr. and Charles R. Roes Pacific Power & Light Company ) Docket Nos. E..7o2L~ and E-7025 OPINION NO. 35~ OPINION ON AUTHORIZING ISSUANCE OF SECURITIES (Issued April 17, l9~2) By the Commission. The central question in this case is whether, under Section 2OL~ of the Federal Power Act, ~J approval of the security issues proposed by Pacific Power and Light Company should have been withheld because one of the many facilities to be financed thereby, the northern half of a transmission line running a distance of approximately 110 niles from Klaxnath Falls, Oregon, to Round Mountain, California, is to be designed and constructed so that it can be operated at 500 kv when and if 500 kv terminal facilities are provided, although it is to be operated initially at only 230 kv. There is no question that the line is fully justified as a 230 kv line. ~/ The narrow issue,therefore, is whether, in exercising our jurisdiction over security issues, we should make an independent assess- ment of the wisdom of the decision of management to invest now the additional amounts required to construct the facility in such a way as to enable it to be operated at a higher voltage in the future. ~/ The pertinent language of that Section, contained in Subsection (a) thereof, is as follows: No public utility shall issue any security, or assume any obligation or liability as guarantor, indorser, surety, or otherwise in respect of any security of another person, unless and until, and then only to the extent that, upon application by the public utility, the Commission by order authorizes such issue or assumption of liability. The Commission shall make such order only if it finds that such issue or assumption (a) is for some lawful object, within the corporate purposes of the appli- cant and compatible with the public interest, which is necessary or appropriate for or consistent with the proper performance by the applicant of service as a public utility and which will not impair its ability to perform that service, and (b) is reasonably necessary or appropriate for such purposes. * X * ~/ `All state and federal authorities are agreed that a 230 kv line is justified and would be useful in the proposed location' (dissenting opinion). PAGENO="0135" ADMINISTRATIVE PROCESS 131 On Pebrwu'y 19, 1962, Pacific Power and Light Company (Applicant) ftl ed applications for authorization to issue $35,000,000. principel amount of first mortgage bonds and up to 696,695 shares of common stock, par value of $3.25 per share. ~/ Applicant will use the proceeds of approximately $19,900,000 ~ to be obtained from the issuance of the common stock, together with the proceeds of the bonds, to repay $1~2,OOO,00O in promissory notes and will apply the balance toward the cost of its present construction program, which is expected to require the expenditure of approximately $14~,00O,OOO for 1962 and $56,000,000 for 1963. Applicant is a successful enterprise, with over $189,000,000 of capital stock and surplus in a total capitalization of $58L~,l~99,OO0, as of December 31, 1961. Applicant's 1962.l963 construction program is composed of a multiplicity of items, including hydroelectric projects, a new generating unit in a steam plant, electric distribution facilities, additions to steam heating and water and telephone utility systems, end ten transmission lines. Of the total program for 196?..1963, amounting to $100,000,000, $5,000,000 will be used for the IO.amath Fal1s..Rou~d Mountain line. ~/ A sub~ steutially smaller amount, estimated at $1,500,000, is attributable to the extra cost involved in building the line in such a way that its capacity can subsequently be enlarged by conversion to 500 kv. The line in question will interconnect with the system of Pacific Gas & Electric Company, which will build the southern portion The record indicates that the new intertie will provide for the exchange of energy between the two systems and will be available for use by the Bonneville Power Administration or other utility companies in the Pacific Northwest A letter~agreement between Pacific Power and Light and Pacific Gas & Electric, dated January 5, 1962, and filed with the Commission as a rate schedule for each company, provides for the building of' a 500 kv intertie to be operated at 230 kv until such time as both parties agree that 500 kv operation is economically ~justified, and for the sale and exchange of electric services. ~/ ~/ The applications were supplemented on Pebruary 27, March 0, and March 13, 1962. ~ This was the estimate at the time of our approval of the initial order for the additional shares of common stock. By reason of a decline in the market price of the Applicant's outstanding common stock, the addi-. tional shares of common stock produced net proceeds of about $10,000,000. 2/ In using this term, we refer to ~be northern half of the line, i.e., the portion which Applicant will build. ~,/ The filing was completed on February 23, 1962. By letters of March 30, 1962, we allowed the rate schedules to go into effect as of the following day. We note that the January 5 letter-.agreement' is attached as Exhibit F to the dissenting opinion. PAGENO="0136" 132 ADMINISTRATIVE PROCESS Our staff made a careful examination of the applicatio~is and the attached exhibits and filed a detailed report with the Commission recommending that they be approved. j/ There were no petitions to intervene in these proceedings, and no timely objections to the appli- cations were received from any source. The security issues had the prior approval of the state utilities commissions of California, Oregon, Washington, Wyoming, Montana and Idaho. The matter was considered at length by this Commission at its meeting of March 23, 1962. On the basis of the applications and the staff's recommendations, and in light of the policy of the Commission to encourage public utilities under its jurisdiction to anticipate future loads and to establish and strengthen inter-regioial transmission interconnections, a majority of the members were satisfied that the statutory standards bad been met and that the purposes for which the securities were being issued were corn- patible with the public interest. However, in order to give. further con~ideration to Commi~sioner Morgan's differing view, it was decided to postpone final action until the next meeting. At the Commission meeting of March 28, 1962, the applications were once again the subject of extended discussion .. All members adhered to their earlier views and on March 28, 1962 we issued orders authorizing the proposed security issues. It should be emphasized that the surveillance exercised by the Commission under Section 2O1~ is far more limited in scope than that we would exercise if, for example, we were issuing certificates of public convenience and necessity for the construction of facilities. Congress ha snot given the Commission certificate jurisdiction in this area. Xnd.eed, a provision which would have granted us such authority was deleted from H. R. 5I~23, one of the bills which culminated in the Federal Power Act. In explaining this deletion, the relevant committee report pointed out that: While it may ultimately be found desirable to adopt a pro- vision of this kind, the Committee is of the opinion that for the present there is no imminent danger of excessive extensions that would prove disadvantageous to consumers. The specific provisions of Section 2O~~ make it a particularly unsuitable vehicle for comprehensive licensing-type regulation such as that exercised by this Commission under Section 7 of the Natural Gas Act. Under its pro- visions, for example, had Applicant elected to finance the construction of its transmission facility out of surplus or from the proceeds of a ~ort- term loan, it could have built the line without so much as notifying the Conm~ission. Again, subsection (f) of Section 201# specifically exempts i/ We reject the suggestion in the dissenting opinion that the Commission was importuned to make undue haste in its disposition of the ~pplicati~ns. 6/ Senate Report No. 621, Senate Committee on Interstate Commerce, 7!~th Cong., 1st Seas. (1935), p. 20. PAGENO="0137" ADMINISTRATIVE PROCESS 133 those companies "organized and operating in a State under the laws of which its security issue~ are regulated by a State commission." By -iirttia of this provision, this Commissiou would have had no jurisdiction over the present security issues if Applicant had happened to be incor~ pcrated not in Maine but in one of the states in which it operate ~ and in which scourity iscues of domestic utilities are subject to scrutiny by the state commission. Thus, any securities issued by the company building the scuthern half of the iCamath Falls ~Round Mountain line would not come before this Commission. Furthermore, under Section 318, a security issue which is subject to the regulation of the Securities and Exchange Com~ mission under the Public Utility Holding Act is withdrawn from the juris~ diction of this Commission. Under Section 20)4(e) our authority is further restricted, for it does not extend to notes of less than a years maturity aggregating less than 5% of the company's outstanding securities. If Congress had intended Section 20)4 to do service as a grant of certifi- eating authority, it would hardly have confined the exercise of that authority to the relatively few companies which are not exempted from that Section. The plain purpose of Section 20)4 is to prevent the issuance of securities which might impair the co~npany's financial integrity or its ability to perfnrm its public utility responsibilities. The Senate Committee report on the bill which included the present Section 20)4 stressed that "control over capitalization of operating utilities is plainly an essential means of safeguarding the public against unsound financial practices which make impossible the proper and most economic performance of public utility functions." 9/ The concern with "financial practices" is further indicated ~y the fact that the criteria for approval of security issues in Section 20)4(a) are copied almost verbatim from Section 20a of the interstate Commerce Act, ~9j a measure which was enacted as part of the Transportation Act of 1920 in an effort to put an end to abuses which had threatened many railroads with bankruptcy. For several years prior to 1920, the Interstate Commerce Commission, in response to resolutions i~assed by the Senate and requests by the House of Representatives, had conducted ~ investigations into the financial dealings of certain carriers. The theme of its ~bagnosis of the railroad problem was that "a most prolific source of financial disaster and complication to railroads in the past has been the desire and ability of railroad managers to engage in enterprises outside the legitimate operation of their railroads, especially by the acquisition of other railroads and their securities." 11/ Ct was to cure this evil that the Commission recommended that "every interstate railroad should See Senat.e Re~ort N.. 621, Senate C.r~~Iitee oo Interutate Commerce, 7)4th Cong., let `ess. (1935), p. 50. loJ )4J. Stat. i~9)4; )49 U.S.C. ~ 20a. ~j The New England Investigatioii (No. )481~5), 27 I.C.C. ~i56O. 616 (1913). PAGENO="0138" 134 ADMINISTRATIVE PROCESS be prohibited from expending money or incurring liability or acquiring property not in the operation of its railroad or in the legitimate improvement, extension or development of that railroad" and thst no securities be issued by an interstate railroad except for those purposes and without the approval of the Federal Government. The leading historian of the Thterstate Commerce Commission summed up the purposes of Section 2~ as follows ~.2~1: 1~Jhile thts extension of the Commission' s authority was designed, ~ndireetly, to protect the investing public against the dissipation of railroad resources through faulty or dishonest financing, its dominant purpose was to maintain a sournt etructure for the rehabilitation and support of railroad credit, and for the consequent development of the transportation system. It aimed to render impossible the recurrence of the various financial scandals, with their destruction of confidence in railroad investment, which had become notorious, and to prevent the subordination of the carriers' stake as trans~ portation agencies to the financial advantage of alien interests. - i~/ 1 Sharfman, Interstate Commevce ~ 190 (New ~k i~l). PAGENO="0139" ADMINISTRATIVE PROCESS 135 It is apparent that) in modelling Sectioxi 204 upon Sectinu 20a of the Interstate Commerce Act, Congress must have had similar objectives. 1~/ In testing a security issue by the statutory standard, the Commission must satisfy itself, of course, that the object is lawful and within the corporate purposes. Beyond that, we must inquire whether the contemplated investment would impair the company's ability to perform its normal functions as a public utility. The Commission might look to whether the investment is so improvident, frivolous, or speculative, that it threatens to squander the corporate substance without reasonable hope of return, By no stretch of reasoning can the construction of the Klamath Falls-Round Mountain line be fitted into one of these categories. The dissenting view that the Commission should have withheld its approval appears to rest upon two grounds: (a) that the line is politioally controversial, particularly in that it could be used to take Bonneville power away from the Northwest if public authoritje~ were to authorize the sale; and (b) that the construction of a line at a voltage of ~00 kv represents a "gamble" that Congress will eventually decide to make the 33/ The two state decisions cited in the dissent are inapposite. In the l4assachusetts case, 62 PUB NS 238; 64 N.E. 2d 64o, the State Commission held, that the issuance of pre~'erred stock in exchange for common stock was for the sole purpose of furthering the financial interests of persons in 98% control of the company and tha.t,in its jud~ent, this was not a "reason.. ably necessary" purpose in the furtherance of the company's public utility business. In the Virginia case, the State Commission held, at 86 PUB NS 136, that, under the different la1i~age, coverage, and legislative history of its Act, a. Commission order authorizing the issuance of securities is equivalent to a certificate of public convenience. The State Commission then applied a different test than that set forth for an order under Section 204(a), which is not equivalent to a óertificate of public convenience and necessity, as pointed out above and as the dissenting opinion concedes. The dissent also cites Pacific Power and Li t Co. v, Federal Power Commission, 111 F. 2d 1014 (~~cff'TT 0 as support for ~"~~~Tng ~~t~tutory phrase "compatible with the public interest." The holding in that case, however, was that the phrase "consistent with the public interest," which appears in Section 203 and which the court equates with the concept of compatibility) "does not connote a public benefit to be derived or suggest the idea of a promotion of the public interest." The court notes that "it is beyond our immediate purpose to inquire into the precise nature of the interests to be safeguarded by the Commission in pass.. ing upon these applications;" yet that is precisely the question at issue here. PAGENO="0140" 136 ADMINISTRATIVE PROCESS Bonneville surplus available for transmission by a privately owned intertie of which this line will be a segment. We not only can but must put aside the consideration that there may be controversy ccncernifl~ the disposition of BonzievilletS surplus. Whether a publicly owned interconnection should be constructed, whether such inter~nnectiofl would meet the growing demand for power in the region and. thus remove any economic justification for Applicanttms proposed expansion of the intertie, and whether Bonneville power should be made available to Applicant for transmission tc California, are not for us to decide. It is not for this Commission to exercise the role of Congress as arbiter of these competing claims. That responsibility Congress has yet to dele gate. The remaining question, then, is whether, from an economic standpoint, the extra investment required to make the facilities capable of carrying a voltage in excess .f initial requirements--an investment incontrovertibly within the lawful corporate purposes of the Applicant--represents a totally improvident business decision. Any anticipation of future growth is a gamble, and failure to anticipate such growth may be a worse gamble. The electric industry, above all, is one in which making provision for future expansion is customary and prudent. We have no reason to think the ~amble in this case, that is, the balancing of the carrying charges on the additionaçl investment against the additicnal cost~ or losses which will be incur~red in the future if the capacity of the facility cannot be expanded whenand if needed, is unusual or atypical. Even if the future usefulness of the added investment is contingent upon moving Bonneville power, we cannot say that this is not a contingency Applicant is entitled, and perhaps compelled, to consider. To conclude otherwise is to arrogate to ourselves the right to determine how and by whom Bonneville power should be transmitted. The movement of Bonneville power, moreover, is not the sole justifica- tion for making provision now for a later expansion of capacity. The enormous and continuing growth of the power industry makes it of doubtful wisdom to attempt to restrain electric utilities from taking measures to anticipate future need for greater capacity. This Commission estimated only last January that the demand for electric energy in 1980 will he 3.75 times the requirements in 1960, reflecting a continuation of the industryt s recent trend of dc~ubling almost every ten years. The supply of energ~r needed t~ nr~t the P~rnexid. in the ~cjfjc Northwest si~ Pacific Southwest areas WiJ.i come from a variety of sources. In view of the industr~r~vide ten~ncy toward the use of higher voltages, there is no occasiofl for surprise that the company has prem,arel its J I me, hewing a life e~pec ency of upwatd~ of PAGENO="0141" ADMINISTRATIVE PROCESS 137 50 years, for ~the growing 4eznands of the' future, We repeat, however, ;that even were we to assume with, the dissent that the project would be under-. utilized if Bonneville power were not obtainable, that fact alone would not justify the Commission in withholding its approval of.~hi~ security issue.' So long as there is a significant possibility that Congress will* ultimately decide to make some Bonneville power available fox' trans~. mission over the Applicant's line and such possibility manifestly exists this Commission is in no position to deny that the decision to prepare the line `for that eventuality was an' exercise of business judgnent for which we should not attempt to substitute our own. The dissenting opinion urges that the Commission should have scheduled a hearing.; We declined. to do so because we did not see `how a hearing would illuminate any material issue. The political questions now confronting Congress would not' properly be before us The nature of the Klaniath Falls-. Round Mountain line was known, as were the contingencies affecting its future use. No amount of testimony would enable us to predict that future* use with accuracy or warrant us in exercising jurisdiction over security issues in such a way as to "second-guess' what is essentially a managarial decision, It should also be observed that `procedures for considering security issues must be expeditious If, in view of changing marketing conditicx~s, utilities are to be able to raise the money needed to carry out their - responsibilities. In the present case, no objections were raised to the purposed issue. No person, public or private, sought timely intervention.l~J' It would be a serious abuse of. power for this CommissIon to require a hear- ing and thus delay' a $55,000,000 security issue, merely because a small fraction of the proceeds are to be devoted to the construction of facilities which, at extra cost, are susceptible of improvement to enlarge their capacity for a future use which may not materialize. it would be an even more serious abuse of power were we to "hold up this security "issue' merely because questions relative to the disposition of Bonneville' s power are politically controversial, ~/ The dissent observes that on. March~ 27, 1962, ~he Comznission.,rece.ived a telegram from the Chairman of' the State of Washington' Utilities and Transportation Commission requesting that we qualify any `approval granted. so as to prevent the transmission, of' federally* generated power until Congress has acted. The thrust of the telegram `goes to political and policy considerations'witb respect `to'tkxe use of. the line which this Commission cannot consider in a security case. No question was raised as to the economics of the facility or the soundness of the Applicant's financing program. The telegram, moreover, was superseded and withdrawn by a later letter. PAGENO="0142" 138 ADMINISTRATIVE PROCESS Although we believe that the above considerations are dispositive of this case, we wish to point out that the construction of a high capacity interconnection between the two regions is in harmony with the results of studies of eleatrical interconnections made by our staff, the Bonneville Power Administration and the Department of the Interior. Such studies ~ere made by our staff in 1950 ~/ and 1953 16/ and show that an interconnection between the electric utility systems in California and the Pacific Northwest would be economically feasible and desirable. In 1960 the Bonneville Power Administration submitted to the Senate Committee on Interior and Insular Affairs a study fl/ of possible interconnections between the Pacific Northwest and California. The Bonneville study noted that a proposed intertie between Applicant's predecessor and Pacific Gas and Electric similar to the one here involved would be less costly than an interconnection, then considered, between the federal systems. In commenting on this report in a letter of April 6, 1960, to the Senate Committee, the Chairman of this Commission stated that the findings of the Bonneville Power Administration indicate that a high voltage interconnection between the Pacific Northwest and California would be desirable and economically feasible regardless of whether the regional facilities were constructed and financed by the Federal Government or private interests. As recently as December 15, 1961, a s.~ecial task force of the Department of the Interior submitted a report lt3/ recommending that immediate steps be taken to interconnect the electric generating plants of the Pacific Northwçst and Pacific Southwest by lines having a voltage of either 750 kv d-c or 500 kv a-c. Later, in a press release of January 17, 1962 (Appendix C to the dissenting opinion) the Bonne- ville Power Administrator stated that the plans of Applicant and Pacific Gas & Electric "for a 110-mile 500-ky California intertie are consistent with engineering recommendations of our /!onnevill~7 Task Force report on a Pacific Northwest-Pacific Southwest intertie. 15/ Study of an Interconnection between the Electric Systems in the Pacific Northwest and California, Federal Power Commission, February, 1950, pp. 26-27. 1~/ Report on Feasibility of California -- Oregon 230 kv Interconnection, Federal Power Commission, I~4arch, 1953, pp. 66-67, 69-72. 17/ Study of High Voltage Electrical Interconnection between the pacific Northwest end California, Bonneville Power Administration, February, 1960, p. 62. Pacific Northwest-Pacific Southwest Extra-High Voltage Common Carrier Interconnection, Special Task Force of U.S. Department of Interior ~-6 (December 15, 1961). PAGENO="0143" ADMINISTRATIVE PROCESS 139 The dissenting opinion raises a question as to the adequacy of our notice and the length of the notice period. The notice procedure in these cases was in nowise inconsistent with the Commission's regular practice in these matters. In each of the present proceedings, a notice was prepared, describing the securities, setting forth the amounts involved., and, stating that the proceeds of the proposed. issues would be applied to the payment of outstanding notes and the prdirstion of the Applicant's construction program. These notices were in the form which has been customary in this agency for twenty-seven years. They did. not, to be sure, describe the items in the pr~gram as set forth in the voluminous applications. The notices recited, however, that any permen desiring to be heard or make protest should do so on or before March 21, 1962, and that the applications were on file and. available for public inspection. The notices were dated and sent on March 1, 1962, along with copies of the applications, to the State Commissions of Oregon, Wyoming, Washington, California, Montana and Idaho. The notices were also sent to the Governors and Senators of each of those states and were published in the Federal Register on March 8, 1962, 27 FR 2259. The Covering letters to the State Commissions invited the attention of the Commissions to our Plan of Cooperative Procedure, asked whether the Commissions desired to engage in such procedure, and, if net, whether they had any comments or suggesti~ns. The letters t~ the Governors also asked. for cemnents or suggestions. A notice in the Federal Register could not, as a practical matter, reproduce the full applications and exhibits thereto. As observed above, the notice advised that all of the documents were available for public inspection. In our view, therefore, the notice was adequate. Nor was the notice period unreasonably short. All persons were on notice as of March 8, 1962. Certainly, thirteen days, ~ until March 21, 1962, was an adequate period within which to file a protest or to declare a desire to be heard. Since the security.~issue jurisdiction of this Commission does not embrace a certificating authority, it follows that the approval of the issuance of the securities is not tantamount to an approval of the Klamath Falls-Round Mountain line, or any other facility. Our action in this case implies no opinion or cono1usi~n on the questions whether, how or by whom Bonneville power should. be transmitted t~ California. Conimiss loner Morgan d4.s~~u hc~ - ~mni es I on~r Woodvard. did. not par- ticipate in these prc~eec1in.gs. Gordon M. Grant A~t1ng Secretary PAGENO="0144" 140 ADMINISTRATIVE PROCESS ~NITED STATES OF AMERICA FEDERAL PC~ER COIvli~ISSION Pacific Power & Light Company ) Docket Nos. E-70214 and. E-7025 ERRATA NOTICE (May 3, 1962) OPINION NO. 3~L~ OPINION ON AUTHORIZING ISSUANCE OF SECURITIES (Issued April 17, 1962) Page 5, first full paragraph, line 2, add "~~/" after ?tfoilOWs:fl Page 5, quotation, line 1, change "estensi~n" to read. "extension'. Page 5, quotation, line 2, insert the word "the" before the word "dissipation". Page 5, add the following footnote: "12~~ 1 Sharfman, Interstate Commerce Ccinrnission 190 (New Yor~ 1931)". - - /~<~-c~ ~ Joseph H. Gutride, Secretary. PAGENO="0145" ADMINISTRATIVE PROCESS 141 ~ ALL COMCAr~O1~ ~OThe~R~TA~Y FEDERAL POWER COMMISSION WASHINGTON ~ /~c~- DOC~cE~pjj~%~>\ 1~j-R 1 ~ 19d2 Docket Nos. E-702Lt and E-702S OOO~~S~TIO~t Pacific Power R Tight Company, et el. April 12, 1962 TO THE PAftTY ADDRESSED Gent1~men: Enclosed Is a copy of the dis$enttng opin~n by CommIssioner Morgan In the above-designated i"~tters, Very truly yours, ,/,V'3~seph H, C~tride, Secretary. 99-948 0 - 63 - 10 PAGENO="0146" 142 ADMINISTRATIVE PROCESS Pacific Power & Light Company ) Docket Nos. E-7024 and E-7025 April 12, 1962 MORGAN, Commissioner, dissenting: "To be, not merely to seem" must be the objective of every regula- tory agency deserving of public confidence and respect. A Commission content with mere seeming, as in this case, substitutes ceremony and ritual for that perceptive, vigilant guardianship of the public inter- est expected of the great regulatory commissions of the United States. In this order, which seemingly is concerned only with a routine security issue, the staff and majority of the Commission seem to have dealt alertly with all those technical details possibly entailing later difficulty or unnecessary public expense. The "findings" of the major- ity seem to indicate that thorough investigations were made at both State and Federal levels. Thus the unknowing reader of this order would never suspect the truth: that there has been no meaningful in- vestigation of all the proposed construction to be financed by this security issue by any agency at any level. Who, reading this order, would imagine that no member of the Commission and no member of the staff is presently able to attest from his own knowledge whether any of the projects are in fact "compatible with the public interest" as the law plainly requires and as the order blandly recites? What private citizen or public official, after reading the order -- or, for that matter, after reading the preliminary public Notice of Application 1/ circulated among the various Commissions and Governors of the States in which Pacific Power & Light Company operates -- would dream that one of the projects proposed to be financed by this issue of securities is an jnadequate, highly controversial, and financially questionable substitute for the extra-high-voltage intertie between the Bonneville Power Administration and the Central Valley project in California recently proposed by the Department of the Interior and scheduled for consideration by the current session of Congress? Does a public notice which fails to notify the public concerning a fact of that magnitude actually offer "opportunity for hearing" under the Federal Power Act? I hold that it does not. While applicant had publicly discussed its proposed line in a general way by means of press announcement as long ago as last January, neither the general public nor public officials in the affected States regarded the proposal as a device for exporting BPA surplus to California or understood that the proposed construction was involved in the finance issue here under discussion. Thus the Commission's Notice of Appli~ation, 1/ Appendix A attached hereto. PAGENO="0147" I ADMINISTRATIVE PROCESS 143 addressed to Governors and Utility Commissions in the affected States, seemed -- but only seemed -- to notify them of an "opportunity for hearing" on an important issue. That notice states: "Any person desiring to be heard or to make any protests with reference to said application should on or before the 21st day of March 1962, file with the Federal Power Commission, Washington 25, 0. C,, petitions or protests in accordance with the requirements of the Commission's Rules of Practice and Procedure (18 CFR 1.8 or 1,10), The application is on file and available for public inspection." The difference (and the importance of the difference) between the Commission's Notice of Application and a genuine public notice is amply illustrated by the following telegram, dispatched and received while the order was still under consideration as the direct result of my telephone call on March 26, 1962, informing the Chairman of the State of Washington Utilities and Transportation Commission exactly what was contained in the pending application. The telegram, addressed to all Commissioners, was received at 8:~40 a.m., March 27, 1962. "Re your Dockets E-702~ and E-7025 it is requested that FPC give full consideration to position of Pacific North- west area that no means be provided for the transmission of Federally generated electricity outside present service area Bonneville Power Administration unless and until proper Congressional safeguards be first provided this area. As early as April 1959 in hearings before the Senate Irrigation and Reclamation Subcommittee stated op- position to any California tie-line until such adequate safeguards existed. We therefore respectfully request that in acting on foregoing dockets FPC qualify any ap- proval granted so as to limit any expenditures for inter- connection to capacity not in excess of power resources of applicant exclusive of Federally generated power until Congress can fully consider required safeguards." Does all this throw a new light on the majority's recital, con- tained in the order, that, on various dates immediately following distribution of the Notice of Application to the Utility Commissions of the States in which PP&L operates, each of those States approved the security issue with no reservations as to the use of the funds raised? It clearly seems so to me -- particularly in the case of those States, Oregon and Washington, whose Commissioners testified be- fore the Senate against any intertie proposal such as is now before us. This seemingly routine financial matter, decided without a hearing and upon the basis of applicant's representations and assertions alone, actually is deeply involved irk a controversy which has been raging with PAGENO="0148" 144 ADMINISTRATIVE PROCESS increasing intensity for nearly 15 years. It is the most important mat- ter affecting the people of Washington, Oregon and California to come before the Commission during the incumbency of any of its present members. In its ultimate implications this issue is perhaps as important to the States of the Pacific Northwest as any development since construction of the first Federal main-stream dam across the Columbia more than 25 years ago. In the light of these facts, I am persuaded that the "period of public notice given in this matter" was unreasonably short, and that the Notice of Application published and circulated by this Commission was gravely deficient in that it conveyed not the slightest inkling of the serious issues actually involved. Further, I am persuaded that the Commission has not, in actual fact, found that all of the proposed con- struction is "compatible with the public interest" as required by law, for the reasons that: (a) the applicant has not shown that there is or will be enough non-Federal power to loa4 the intertie in question here; and (b) the availability of surplus Federal power -- which might make the line economical -- depends upon a policy decision that must be made by the Congress. These being the facts, and they are the facts, it was not only premature but impossible for the staff and the majority to "find" that all aspects of the proposal are "compatible with the public interest." I suggest there has been no such finding, that no record exists to sup- port such a finding and that, to those who know and understand the rele- vant circumstances, the alleged "finding" does not possess even the sem- blance of reality. Although no adequate record has been made in this proceeding, there is a voluminous public record, most of it contained in Committee prints and hearings of the United States Senate, 2/ concerning various proposals 2/ (a) Hearings before the Subcommittee on Irrigation and Reclamation - of the Committee on Interior and Insular AfIairs, United States Senate, Eighty-Sixth Congress, First Session, on the Bonneville (Pacific Northwest)-California Intertie, April 8 and 9, 1959. (b) Committee Print of the Committee on Interior and Insular Affairs, United States Senate, titled "Pacific Northwest (Bonneville) California Intertie," Nay 3, 1960. (c) Hearing before the Subcommittee on Irrigation and Reclamation of the Committee on Interior and Insular Affairs, United States Senate, Eighty-Sixth Congress, Second Session, on the Pacific PAGENO="0149" ADMINISTRATIVE PROCESS 145 for marketing seasonally-surplus Columbia River power in California by means of physical interconnection to be built either by privately-owned companies or by the Federal government. Discussion of such an intertie goes back at least as far as 1948. During the intervening years, every consideration of such an inter- tie has involved complex problems posed by extension of the marketing area of BPA and by the likelihood of conflicts between the Pacific North- west and the Pacific Southwest over the possible use of the "preference clause" to export power from the Pacific Northwest which is not surplus to that area, but is, in fact, badly needed there. As a consequence of these long-continued discussions, all Senators and Governors, as well as all Public Utility Commissioners of the Pacific Northwest States, and, in addition, both Senators and the Gov- ernor of California, are on record in Opposition to any physical inter- connection involving the sale of Bonneville power to California-oregon Power Company (now a part of Pacific Power & Light Company) or to Pacific Gas and Electric Company, or to any other public or private agency in California, unless and until protective legislation is adopted by the Congress effectively quieting all controversy with respect to such exports of power to California. On July 21, 1960, the Senate Committee on Interior and Insular Affairs adopted a resolution 3/ setting forth the foregoing facts and requesting the Secretary of the Interior to: (a) " -- continue to suspend negotiations looking to the sale and transfer of surplus power or energy from the Pacific Northwest to California," pending com- pletion of surveys and preparation of protective legislation, and 2/ (c) continued - Northwest (Bonneville)-California Intertie, May 5, 1960. (d) Hearing before the Subcommittee on Irrigation and Reclamation of the Committee on Interior and Insular Affairs, United States Senate, Eighty-Sixth Congress, Second Session, on the Pacific Northwest (Bonneville)-California Intertie, June 15, 1960. (e) Senate Committee on Interior and Insular Affairs, Resolution adopted July 21, 1960. 3/ Appendix B attached hereto, PAGENO="0150" 146 ADMINISTRATIVE PROCESS (b) " -- submit to the Committee for consideration at the next session of the Congress a draft of proposed leg- islation designed to guarantee to consumers in the Pacific Northwest States first call on power generated by Federal agencies in that region, as requested by the Governors of the Pacific Coast States." Let us dispense with theoretical discussions of the doctrine of separation of powers and the question whether a single Committee of the Senate has authority to cbntrol the policies of an agency such as BPA through Committee resolution: the pragmatic fact is that such a resolution, coming from that particular Committee and backed by every Governor and Senator from the states involved (as well as at least two of the Utility Commissions of the states), is a resolution which the Interior Department regards as binding upon it. In compliance, it has suspended negotiations concerning the sale of BPA power in California and the suspension is in effect now. This means that BPA power is not nOw available før export to California by the applicant in this case, or by any other private or public agency, and will not be available un- til the Congress has settled the important issues of public policy involved. In the midst of this situation, and clearly for the political pur- pose of influencing that policy decision of the Congress, applicant has asked approval from this Commission for financing (and in an associated proceeding has asked approval for rate filings covering certain inter- changes of power), involving a most singular construction project to be built jointly with Pacific Gas and Electric Company. This is to be a transmission line, approximately 110 miles long, from Klamath Falls, Oregon, to Round Mountain, California. 1t seems probable, though be- cause of the absence of any hearing or record or meaningful investiga- tion it is not certain, that the southern (PGEE) end of the line will not initially be connected to the PG~E Company Pit No. 3 hydro project, thus hopefully avoiding the Commission's preliminary licensing author- ity, but will be thus connected after construction is completed. The line is planned to include pylons of extra carrying capacity, and 500 kv conductors and insulators. However, it will not initially, if ever, include 500 kv terminal facilities and will be placed in operation at 230 kv. The projected line is situated in such fashion as to consti- tute an almost mile-for-mile parallel and duplicate of a segment of the EHV line proposed by the Interior Department and now under consider- ation by the Congress. This similarity of location and engineering design was highlighted in a news release by the Administrator of SPA on January 17, 1962 ~4/ in response to inquiries of reporters. The Administrator, in guarded language, noted that applicant's proposed line was "consistent" with en- gineer~~ recommendations of the Interior Department for its own proposed 14/ Appendix C attached hereto. PAGENO="0151" ADMINISTRATIVE PROCESS 147 line, that the proposal "could provide an important link" in a full- length intertie, and that applicant had "expressed willingness to lease capacity in the intertie to Bonneville and other northwest utilities," The Administrator pointedly did not endorse applicant's proposal, nor did he comment on the terms of lease offered to BPA by applicant, Instead he volunteered this significant comment: "In view of our region's concern for protecting its power supply, BPA will make no commitment to export surplus Bonneville power outside the region until Congress has acted upon regional preference legislation. Announcement of the companies' plans makes it imperative that our en- tire region get behind the enactment of such legislation," It is important that we take note of the significant differences between the two proposed lines, The Federal line is to be nearly 900 miles long, instead of 110; it is to have all the necessary terminal facilities for EHV operation between the Columbia River and the major California market areas; and it is to operate at extra high voltage from its inception, The circumstances allow it to be said with complete fairness and accuracy that the main characteristics of applicant's proposed line, viewed in the light of the impending policy decisions in the Congress, are political, Its location was chosen for political effect, Its de- sign and intended use have clear political overtones, The timing of its application before this Commission and the urgency with which im- mediate construction is advocated, reflect and reveal the forces of the political arena rather than the sober, deliberate business judgment with which utility executives ordinarily approach such an investment. Because of the absence of an investigation, hearing, or adequate record in this proceeding, it is impossible, as I have already pointed out, to "find" that an isolated segment of line such as this, located in sparsely populated country with no heavy industry, connected at both ends to several hundred miles of lower-voltage conductors, and lacking any high-voltage terminals of its own, is "compatible with the public interest," The anomalies in its design and intended use are enough to give anyone immediate pause for reflection. It is equally, and for the same reasons, impossible to reject the line out of hand as being uneconomic, imprudent or otherwise incompatible with the public interest, There simply is no record on which to base either approval or rejection, I therefore have not advocated rejection of the project in the present proceeding and I do not advocate rejection now. On the other hand, it is comparatively easy to point out facts, probabilities and possibilities concerning this proposed line which at PAGENO="0152" 148 ADMINISTRATIVE PROCESS the very minimum require the most detailed investigation and sober con- sideration before giving it approval. What I have advocated, and what I believe is clearly required by Sec- tion 20'~ (a), (b) and (c) of the Federal Power .Act, is careful investigation and genuine opportunity for a hearing to determine whether the line is "com- patible with the public interest" as alleged by the order. Failing this, we confront the public not merely with negligent failure of the Commission to secure the necessary information, but with the Commission's pointed and obdurate refusal to ask the necessary questions. Let us consider the fragmentary facts available to us. All State and Federal authorities are agreed that a 230 kv line is justified and would be useful in the proposed location. The line as proposed would initially and for an undetermined period carry 230 kv but would be built (except for ter- minal facilities and connecting lines) to 500 kv capacity. The amount of over-building and over-investment has not been identified, but that it is a substantial amount cannot be denied. Clearly this over-building represents a complex gamble by PP&L and PG~E that (a) the building of a Federal or other publicly-owned intertie can and' will be prevented; that (b)e$entually the projected line will become a segment in a privately-owned Pacific North- west-Pacific Southwest intertie; carrying (c) the Bonneville surplus load, in addition to company-generated surplus and other purchases. In any gamble involving three essential and interdependent elements such as those, the hazard factor increases geometrically. If this three-ply gamble is successful, presumably the excess capacity of the segment under discussion here would at some future date become fully utilized and therefore economically justified. It follows that, whatever the eventual outcome, for an indeterminate period (during operation at 230 kv) the opposite would be true -- the facilities could not be used to full capacity and would not be economically justified. It also follows that if the gamble is unsuccessful, i.e., if a tie-line or system of tie-lines is built under Federal or other public ownership, it is probable if not certain that the excess capacity of the projected line will remain permanently, or for a very long period, unused and therefore permanently or semi-permanently unjustified from an economic viewpoint. 5/ Here we enter an area in which the responsibilities of the Federal Power Commission are to me very clear and of major importance. Let me say at the outset that building excess capacity, in reasonable amounts for a future market that has been carefully assessed, is not only proper but commonplace in the utility industry, and on many occasions has had the support of this Commission, after proper investigation. But here we are not dealing with a solid and assured source of supply, and hence we 5/ Lest the foregoing reasoning be dismissed as theoretical, Appendices 0 and E are attached and should he studied carefully. Both are articles from Electrical World, a leading trade journal of the electric utility industry. A~RxD, published before the order was issued, illustrates how little was Ju~own of the purposes behind the application in this case, even within the industry itself. Appendix E, published after the order was issued and received b me after this dissent was written confirms the purposes anft sTra egy an~g~e ~ app icant~ready outlined in this dissent. PAGENO="0153" ADMINISTRATIVE PROCESS 149 cannot measure -- in any case we have not measured the market, its size, its rate of growth, or the degree to which it can predictably carry the costs of the proposed construction so as to render it econoni- ically feasible. We have not done all these things, I repeat, because we are not dealing with, and applicant has not shown, and very probably cannot show, an assured source of power sufficient to load this pro- posed line. It is persuasively clear from the applicant's filed rate documents and correspondence, as well as from the wording of contracts between applicant and FG&E, 6/ that the proposed intertie is hopefully based on the seasonal Bonneville surplus (though applicant has access to smaller surplus supplies through other channels), and it may be presumed there- fore that the Bonneville surplus is necessary in order to load and justify the proposed construction. Further, it is clear that the future contract which the applicant and its associate company hope some day to conclude with the Bonneville Power Administration is substantially the same as, if not identical with, the contract under negotiation between PG~E and BPA in 1959, prior to adoption of the Senate Interior Committee resolu- tion in 1960 which effectively halted negotiations for such a contract. To say, therefore, that the source of power to load this line is nebu- lous and speculative is to put the matter very charitably indeed. Brought together, all of the foregoing elements add up to a pro- posal which I do not believe can any longer be described as a "calcu- lated business risk," in the wards of Mr. Robert H. Gerdes, executive vice president of Pacific Gas & Electric Company, testifying in 1959. j/ Mr. Gerdes so described PG&E's proposal to spend several million dollars on a tie-line in 1959, after admitting that under his proposed contract with BPA: "I will stipulate right now that the power can be curtailed at any time." 8/ If the proposal was a "calculated business risk" under those condi- tions in 1959, what does immediate construction of a tie-line look like now, with BPA under effective prohibition against even discussing a con- tract for export of power to California? Senators Kuchel and Jackson called the proposed construction a gamble in 1959, though Mr. Gerdes did not agree. 8/JI believe it i~ indisputably a gamble now; a straight-out heads-or-tails political gamble depending entirely upon 6/ Appendix F attached hereto. 7/ Hearings before the Subcommittee on Irrigation and Reclamation of the Committee on Interior and Insular Affairs, United States Senate, * Eighty-Sixth Congress, First Session, on the Bonneville (Pacific Northwest)-California Intertie, April 8 and 9, 1959, Page 165, 8/ Ibid., Page 161. PAGENO="0154" 150 ADMINISTRATIVE PROCESS policy decisions still to be reached by the Congress. Yet the Commis- sion was orally urged by the staff to approve the security issue in this proceeding at once because PP&L had construction crews in the field and wished to start construction of this line immediately in order to avoid penalties. And Staff said, "Let there be haste;" and there was haste. The paraphrase may be slightly irreverent but it is entirely on point. 9/ Is there a possible basis in the public interest for allowing the construction of major excess capacity by a public utility to the extent proposed and under the conditions prevailing in this case? In justice to the rate-payers who will eventually defray the costs of construction under rates having the force of law, I cannot conceive of such a basis. The argument has been made (and rejected by every regulatory com- mission worthy of thename) that regulatory authority is powerless to interfere with an adventure such as this because it lies within the in- violable prerogatives of management. It would be a waste of time and paper to cite all the cases which have held that, while there are some areas of management discretion which should not be invaded unless re- quired by the public interest, every improper or improvident decision of management which threatens unduly to burden the rat&payer or other- wise to damage the public interest is subject to review and reversal. If it were otherwise, no regulatory law would ever have been enacted or could ever have been enforced. Virtually every manager, and certainly every manager of a public utility in this country, who handles and spends other people's money is rightly-subject to public scrutiny and control under law, including the Federal Power Act, and I will not lengthen this dissent by laboring the point. Another favorite thicket of the utility lawyer defending practices such as those under discussion here is the argument that no interference with an enterprise such as this one is proper because the impact of the actions complained of is not sufficient to bankrupt the company even if the worst consequences were to ensue, and the effect upon the individual rate-payer, while not exactly a happy one, would not be disastrous. This begs the question and raises a smokescreen of sophistry into the bargain. There is a principle involved here, and a supremely important 9/ Judge Henry J. Friendly, of the United States Second Circuit, on February 13, 1962, in an Oliver Wendell Holmes lecture before the Harvard Law School adverted to the same subject in the following words: "In these large agencies a considerable amount of delega- tion is inevitable; definition of standards is required if the agency members are to be masters of the staff rather than the slaves of anonymous Neros, each fiddling his own tune." PAGENO="0155" ADMINISTRATIVE PROCESS 151 one. How can we condone practices on a limited scale which, if in- dulged on a larger scale, would unquestionably threaten the solvency of an entire utility system? Where is the line of demarcation beyond which `tolerable" practices become intolerably dangerous? Here too the respected regulatory agencies have refused to be led down the primrose path. There are industries, particularly in the extractive mineral field, wherein gambling is such an essential and customary part of their business practices that the courts have, with- out prejudice, likened them to a poker game. The electric utility in- dustry has never been considered one of these. It should not become one under the aegis of the Federal Power Commission. Section 204 (a) provides that pub'ic utilities may not issue se- curities unless the Commission finds, among other things, that the purpose for which the proceeds will be spent is "compatible with the public interest." This provision has never been interpreted by the courts. Nevertheless some light as to the responsibility and burden which it imposes on the Commission and utility, respectiveiy, can be gleaned from the court's interpretation of the similar but less stringent requirements of Section 203. The latter section prohibits electric util- ity mergers unless the Commission finds them to be "in the public inter- est." In Pacific Power and Light Co. et al. v. Federal Power Commission, 111 F. 2d 1014 at 1016, t e court explained that the purpose of this pro- vision is to insure "against public disadvantage through a requirement of a showing that mergers . . . will not result in detriment to consumers or investors or to other legitimate na- tional interests." For this reason, it continued, "the Commission properly requires applicants to make a full disclosure of all m~E~ial facts. The burden is on them of showing affirmatively that the acqu~sition or merger is consistent with the public interest. The Commission must necessarily take an over-all view and in many cases it will * . * be called upon to weigh considerations pro and'con." (Emphasis supplied.) In the light of that pronouncement, I am unable to agree that the applicant here has made, or has been required to make, the showing clearly called for by the Act prior to granting the authorizatian re- quested. Section 204, as will be seen, is prohibitory in character; it permits authorization of securities "only if'4 the Commission has obtained information on which it can make the detailed findings that are conditions precedent to its action thereunder. In pertinent part, Section 204 (a) of the Federal Power Act (16 USCA 824c) provides that: PAGENO="0156" 152 ADMINISTRATIVE PROCESS "No public utility shall issue any security, . . . unless and until, and then only to the extent that, . . . the Commission by order authorizes such issue . . . The Corn- mission shall make such order only if it finds that such issue . (a) is for some lawful object, within the corporate purposes of the applicant and compatible with the public interest, which is necessary or appropriate for or consistent with the proper performance by the applicant of service as a public utility and which will not impair its ability to perform that service, and (b) is reasonably necessary or appropriate for such purposes . . To determine these matters, the Act then at 204 (b) says that the Commission may hold a hearing, and "may grant any application . * . in whole or in part, and with such modifications and upon such terms as it may find it necessary or appropriate" -- depending, that is, upon the extent to which it finds that the purpose of the issue has or has not been shown to meet the established standards. Any doubt as to the decisiveness and finality of the Commission's authority in this area is removed by Section 204 (c). It states that "no public utility shall . apply any security or any proceeds thereof to any purpose not specified in the Commission's order . . . or otherwise in contra- vention of such order." In any event, if the Commission after investi- gation and hearing finds any matter inconclusive, premature or unsettled, it may retain continuing jurisdiction for the purpose of modifying its original order in the light of subsequent developments (Section 204 (B)). The only reasonable construction of Section 204 (a), as I read it, is that the language of clause (a) requires this Commission to obtain affirmative proof that the purpose for which the securities will be is- sued is not only lawful and within the corporate powers of the applicant, but that such purpose is also "compatible with the public interest" and appropriate to the proper performance of public utility service. It further appears that clause (b) requires the applicant to show, and the Commission to find, that the particular means proposed is either "reasonably necessary or appropriate." Faced with this latter choice, the majority "found" the proposed facilities to be neither "reasonably necessary" nor simply "appropriate", but "reasonably appropriate." If this Commission properly is to exercise the responsibilities entrusted to it by the Congress under Section 204, it must examine into the purposes for which electric utility companies wish to issue secur- ities. There is no other conclusion we can come to. And in determining the scope and extent of the efforts it must exert in discharging that responsibility, it is of little help to say that the Commission's in- vestigation under Section 204 must be narrowly confined because the Commission does not have the power to issue or deny certificates of convenience and necessity for electric company construction. As that power was denied to this Commission in 1935 (See Senate Report No. 621, on 5. 2796 in the 74th Congren~s, at p. 20), we obviously cannot disapprove PAGENO="0157" ADMINISTRATIVE PROCESS 153 or deny proposed construction on that ground. But that is no reason for suspending or confining our inquiry, for the fact remains that this Commission can disapprove proposed utility construction under its power to approve or disapprove the purposes and projects for which utility securities to finance that construction will be issued. Indeed, this has been done by state regulatory commissions armed with only security approval powers whenever, after an investigation a nd hearing, those commissions were satisfied that the purpose for which securities were to be issued was not "reasonably necessary" to carry out the stated purposes of the electric utility concerned. Old Dominion Electric Cooperative, 86 PUR NS 129, is a case partic.. ularly in point -- where a regulatory commission armed only with the power of approval or disapproval over security issues used that author-' ity to prevent construction of generating and transmission facilities which the commission found not "reasonably necessary" for carrying out the company's utility responsibilities. The matter is discussed there in full. "Counsel for Old Dominion argue", the Virginia Commission began, "that the only question for the Commission to de- cide is whether or not $16,000,000 is needed to acquire the structures described in the application, . . . Under that interpretation of the statute thefl only issue before the Commission would be whether the amount of $16,000,000 is reasonably necessary. Since that amount obviously is necessary, it would lighten our labors if that were the correct interpretation of the statute. "In our opinion that is not what the statute means. The purposes of the law as well as its language show that the words `reasonably necessary' mean not merely that the amount of money sought through the issuance of securi- ties must be necessary to acquire the proposed structures, but also that the proposed structures themselves must be reasonably necessary for the accomplishment of some pur- pose having to do with the obligations of the utility to the public and its ability to carry out those obligations with the greatest possible efficiency. * * * If the utility, by deciding to build a $16,000,000 plant automatically had the right to borrow $16,000,000, there would be no function for the State Corporation Commission to perform except solemnly to record the fact that $16,000,000 would be rea- sonably necessary to build a $16,000,000 plant. The gen- eral assembly, in passing the statute, could not, in our opinion, have intended that result, because it would appear to be very much better to have no statute at all than to have one that produced only that result. IC IC IC Evidence that the general assembly meant for the Commission to PAGENO="0158" 154 ADMINISTRATIVE PROCESS consider the public interest and not merely the question of whether the amount of money sought was necessary to acquire the proposed plant is found in the following pro.. visions of § 56-6l: `The Commission may by its order grant permission for any such issuance or assumption in the amount or on the terms applied for, or in a less amount, or on different terms, or not at all, and may in~ dude in its order such terms and conditions fairly relating to the matter of such issuance or assump~ tion as it may deem reasonable or necessary.' "The quoted language gives the Commission authority it could not usefully exercise if its only function were to pass on the amount of money needed to acquire the plant and not on whether the plant itself was reasonably neces~. sary to perform the public duties of the public utility." The Supreme Court of Massachusetts interpreted the words "reason~ ably necessary," as used in a statute dealing with the issuance of se~ curities by public utilities, in the same manner. Speaking in Lowell ~as Light Company v. De~partment of Public Uti11tIes~, 62 PUR MS ~ at ~43; 64 NE 2d ~ that Coü~ Sa3~ that: "since the words `reasonably necessary' are not employed solely with reference to the amount of a proposed issue but refer also to the necessity of the issue itself, it follows inevitably that the Department must' inquire whether the declared purpose of the proposed issue is in fact in the circumstances a reasc5nably necessary purpose. And having in mind that the function of the Department is the protection of public interests, we, think that `reason~ ably necessary' means reasonably necessary for the accom~ plishment of some purpose having to do with the obligations of the company to the public and its ability to carry out those obligations with the greatest possible efficiency." In this case, perhaps for the reasons spelled out in the Virginia and Massachusetts cases cited, the Commission avoided finding that the proposed construction wa~ "reasonably necessary;" choosing to find in- stead that it was "reasonably appropriate." I disagree, There are grave doubts, as I have shown, whether the proposed construction is or can be made "compatible with the public in- terest" in the existing circumstances. Until it passes that first and essential test on the basis of f1ndin~gs of fact, it is not helpful, to talk about the proposed cànstrtict~on as~ being `11reasonably appropriate." Such talk is, in fact, fuzzy, premature, and represents a conflict in terms. PAGENO="0159" ADMINISTRATIVE PROCESS 155 The doubts concerning the projected construction are serious. They are genuine, They relate to the public interest which the applicant is required by law to serve and we are required by law to protect. Thifl order should be reconsidered by the Commission for the pur- pose of determining whether the projected construction is, in fact and in law, compatible with the public interest, If any portion of it is found wanting in this respect, restrictions should be placed upon the use offUnds raised by this security i~sue for advancement of the spe- cific project or projects involved, until such time as full compatibility with the public interest can be, and has been, factually demonstrated. I repeat that, to the extent we fail to do this, we confront the rate-paying public -- and its elected and appointed representatives at both State and Federal levels -- not merely with our failure to insist upon the necessary information but with our specific and repeated refusal to ask the necessary questions. Whether such behavior is caused by legal obfuscation, confusion or timidity I am unable to say, but I heartily disagree with and dissent from it. Howard Morgan, Co~missfoner PAGENO="0160" 156 ADMINISTRATIVE PROCESS Appendix A UNITED STATES OF AMERICA FEDERAL PO1~ER COMMISSION Pacific Power & Light Company ) Docket No. E-'702l~ NGPICE OF APPLICATION (March 1, 1962) Take notice that on February 19, 1962, an application was filed with the Federal Power Commission pursuant to Section 2Ol~ qf the Federal Power Act by Pacific Power & Light Company ("Applicant"), a corporation organized under the laws of the State of Maine and doing business in the States of Oregon, Wyoming, Washington, California, Montana and Idaho, with its principal business office at Portland, Oregon, seeking an order authorizing the issuance of $35,000,000, in principal amount of First Mortgage Bonds, Series due 1992. Applicant proposes to issue the aforesaid Bonds under its presently existing Mortgage and Deed of Trust, dated July 1, l911?j', to Guaranty Trust Company of New York (now Morgan Guaranty Trust Company of New York) and Oliver R. Brooks (Wesley L. Baker, successor), as Trustees, as heretofore supplemented by twelve supplemental indentures and as to be further supplemented by a Thirteenth Supplemental Indenture to be dated as of April 1, 1962. The Bonds, to be dated April 1, 1962, will be sold at competitive bidding and will bear interest at the rate per annum to be fixed by competitive bidding. Applicant states that the net proceeds of the issuance and sale of the Bonds and of not to exceed 696,695 additional shares of its Common Stock of the par value of $3.25 per share (proposed to be sold separately - Docket No. E-7025) will be applied to the payment of notes then outstanding (not expected to exceed $1~2,O00,000 in principal amount) under a Credit Agreement dated as of August 15, 1961 and to the carrying forward of Applicant's construction pro- gram - estimated at $1~,O00,O00 for 1962 and $56,000,000 for 1963. Any person desiring to be heard or to make any protests with reference to said application should on or before the 21st day of March 1962, file with the Federal Power Commission, Washington 25, D.C., petitions or protests in accordance with the requirements of the Commission' s Rules of Practice and Procedure (18 C1~R 1.8 or 1.10). The application is on file and available for public inspection. ,`-~. /~? ~ 7/ -` Joseph H. Gutride Secretary PAGENO="0161" ADMINISTRATIVE PROCESS 157 Appendix A UNITED STATES OF AMERICA FEDERAL POWER COMMISSION Pacific Power ~CG Light Company ) Docket No. E-7025 N~ICE OF APPLICATION (March 1, 1962) Take, notice that on February 19, 1962, an application was filed with the Federal Power Commission pursuant to Section 2OL~ of the 1~edera1 Power Act by Pacific Power & Light Company ("Applicant"), a corporation organized under the laws of the State of Maine and doing business in the States of Oregon, Wyoming, Washington, California, Montana and Idaho, with its prin~ cipal business office at Por~1and, Oregon, seeking an order authorizing the issuance of not to exceed 696,695 shares of its Conanon Stock with a par value of $3.25 per share. Applicant proposes to offer the aforesaid Common Stock initially on a pro rata basis to holders of record of Applicant's presently outstanding Common Stock on the rights offering record date, in the ratio of one share of additional Common Stock for each twenty shares then held. The price of the additional share~ will be determined by Applicant's Board of Directors shortly before the proposed offering date, at an appropriate dis- count. Each common stockholder of record will receive a transferable sub- scription ~arrant expressed in terms of rights which will have a life of not less than twenty days. Where the number of rights evidenced by a warrant is not evenly divisible by 20 or is less than 20, then the holder will be entitled to subscribe for one full share with the number of rights which exceeds a multiple of 20 or is less than 20. Applicant will not accept sub- scriptions for fractional shares. Any shares of the additional Common Stock not subscribed for by warrant holders pursuant to the aforesaid subscription offer will be sold by Applicant to underwriters at the sane price at which the shares are to be sold to Applicant's stockholders. The underwriters' compensation for commitments to purchase any unsubscribed ~bares is to be fixed by competitive bidding. Applicant states that the net proceeds of the additional shares of Common Stock and of $35,000,000 in principal amount of First Ivbrtgage Bonds, Series due 1992 (proposed to be sold separately - Docket Mo. E-7O2l~) will be applied to the payment of notes then outstanding (not expected to exceed $k2,000,000 in principal amount) under a Credit Agreement dated as of August 15, 1961 and to the carrying forward of Appli- cant' s construction pr~gran - estimated at $1&4,000,000 for 1962 and $~6,oO0,00O for 1963. 99-948 0 - 63 - U PAGENO="0162" 158 ADMINISTRATIVE PROCESS Any person desiring to be lisard. or to make any protests with reference to said application should on or before the 21st day of March 1962, file with the Federal Power Couanission~ Washington 25, D.C., petitions or pro - tests in accordance with the requirenents of the Commission's Rules of Prac- tice and Procedure (18 CFR 1.8 or l.1~). The application is on file and available for public inspection. Joseph H. Gutridè Secretary PAGENO="0163" ADMINISTRATIVE PROCESS 159 A~dix B (The following resolution was adx)pted by the Senate Committee on Interior and Insular Affairs on July 21, 1960:) PACIFIC NORTBWRST (BoNNEVILI~) CALIFORNIA INTSRTIE Whereas the Committee on Interior and Insular Affairs by resolution on May 19, 1959, requested the Secretary of the Interior to suspend all negotiations for the interconnection and the sale of surplus power from the Bonneville or Columbia River Basin system to California until a study and analysis of the feasibility and desirability of a high voltage inter~. connection for the disposal of surplus secondary energy between the Fed- eral power systems of the Pacific Northwest and California; and Whereas a report on the analysis requested was submitted to the coin- mittee under date of February 17, 1960; and the committee held public hearings May 5, 1960, and June 15, 1960, on the subject; and Whereas the Governor of California, in cooperation with the Governors of Oregon and Washington, has requested further tine for a study and analysis of a high voltage interconnection pending the completion of the report of consultants retained by the Governor of California in cooperation with the Governors of Oregon and Washington, and in consideration of legislation that would effectively protect the interests of the United States and the power consumers of the Pacific coast areas; and Whereas the quantities of surplus energy which may be interchanged between the Pacific Northwest and California range from ~ billion kilowatt.. hours in a dry year to 25 billion kilowatt-hours in a wet year; and Whereas the committee has heard testimony asserting very substantial benefits accruing from the construction of a high-voltage interconnection between the Pacific Northwest and California and indicating that further studies are required to make a full disclosure of the potenttalities of the proposed intertie; and Whereas the committee finds that the public interest in the inter- connection and transfer of power or energy within the Pacific coast areas may require legislation to insure protection of. the Federal power and multiple-purpose projects in ~the systems; and Whereas a completion of the independent study and analysis of the proposals is essential before any ~ionmii1~nent is made on behalf of the tinited States with respect to the transfer of power or energy from one area. to the other of the Pacific Coast States; Therefore be it Resolved, That the Committee on Interior and Insular Affairs requests the Secretary of the Interior to continue to suspend negotiations looking to the sale and transfer of surplus power or energy from the Pacific Northwest to California, pending the completion of the survey and analysis by the consultants retained by the Governors of the Pacific Coast States; the submission of their report to the committee; and the consideration of PAGENO="0164" 160 ADMINISTRATIVE PROCESS legislation that will protect the interests of the United States and the power consumers concerned; be it further Resolved, That the committee requests the Secretary to submit to the committee for consideration at the next session of the Congress a of proposed legislation designed to guarantee to coi~sumers in the Pacific Northwest States first call on power generated by Federal agencies in that region, as requested by the Governors of the Pacific Coast States; be it further Resolved, That the Secretary advise the committee of his action with respect to compliance with the request in this resolution. Approved by the Committee on Interior and Insular Affairs on cY~ine 21, 1960. James R. Murray, Chairnan PAGENO="0165" ADMINISTRATIVE PROCESS 161 dix COMMENT BY BONNEVILLE POWER ADMINISTRATOR CHARLES F. LUCE ON THE PROPOSED NEW INTERCONNECTION BETWEEN PACIFIC POWER & LIGHT COMPANY AND PA~TFIC GAS AND ELECTRIC COMPANY: The plans of Pacific Power and Light Company and Pacific Gas and Electric Company for a 110-mile 500-ky California intertie are consistent with engineering recommendations of our Task Force report on a Pacific Northwest-Pacific Southwest intertie. The companies' proposal could provide an important link in a full length extra high-voltage common carrier intertie between the generat- ing plants of the Northwest and California, Pacific Power has expressed willingness to lease capacity in the intertie to Bonneville and other northwest utilities, In view of our region's concern for protecting its power supply, BPA will make no commitment to export surplus Bonneville power outside the region until Congress has acted upon regional preference legisla- tion, Announcement of the companies' plans makes it imperative that our entire region get behind the enactment of such legislation. PAGENO="0166" 162 ADMINISTRATIVE PROCESS Appendix 0 A 110-mile line built for 500-ky operation will he the third trans mission intertie between Pacific Gas S Electric Co and Pacific Power and Light Co. Each company will build half the line, which will run from Klamath Falls, Ore., to Round Nountain in Shasta County, Calif. Cost is estimated at $10 million. Construction will begin as soon as possible, and completion is ex- pected by the fall of 1963. Initial operation will be at 230 kv, and conversion to 500 kv will be made when joint studies of load and oper- ating requirements indicate the increase to EHV should be made. The line closely parallels a line proposed by POSE in 1960, which was not built after Sen. Murray's (D-Mont) Interior and Insular Affairs Committee indicated that the Committee felt it would conflict with larger proposals also being studied at the time. That proposal, however, was contingent on sale of surplus power by Bonneville Power Administration to PGSE, while no such agreement is included in the present line. Capacity of the new line was not disclosed, but the capacity of the 230-ky line proposed in 1960 was 200 Mw, At present there are two inter- connections between PG&E and PP&L -- the 110-ky Cottonwood line and the 69-ky Stillwater line, which run from separate POSE switching stations in Shasta County to PP&L's transmission system in Siskiyou County, Ore. In announcing the line POSE's president Norman R. Sutherland said, "We have had interconnections for many years with the utility company to the north of us, as well as with the companies borderin~ our service territory to the East and to the South, Such interconnections have been cugmented and expanded as needed, This new line will assure transmission capability for the additional power that will become available as we and the other companies expand our capacities in the years ahead," A paragraph in the contract between the two companies reads: "We shall continue to study jointly the economic feasibility, in the light of developing circumstances, of converting the line to operation at not less than 500 kv and also of extending it in a northerly and southerly direction to provide an EHV intertie between the Pacific Northwest and California, It is understood that we will convert the line to operation at not less than 500 kv and extend it in both directions at such time as we jointly determine that such actions are economically justified." Charles F. Luce, Bonneville Power Administrator and chairman of the special task force that proposed an EHV tie linking California and the Northwest (EW, Dec. 25, 1961, p. 34), called the PGSE-PPSL proposal "con- sistent with engineering recommendations of our task force report." Luce also noted, "The companies' proposal could provide an important link in a fu1l-len~th CMV common carrier intertie between the generating plants of the Northwest and California, Pacific Power and Lig~it has ex- pressed willingness to lease capacity in the intertie to BPA and other Pacific Northwest utilities." PAGENO="0167" ADMINISTRATIVE PROCESS 163 Luce's statement emphasized that SPA would "make no commitment to export surplus power outside the region until Congress has acted upon regional preference legislation." He said that the announcement "makes it imperative that our entire region get behind the enactment of such legislation." (From Electrical World, January 29, 1962, pp. 55-56) PAGENO="0168" 164 ADMINISTRATIVE PROCESS Appendix E FOUR CALIFORNIA UTILITIES MAKE EHV TIE OFFER Principal state investor-owned companies make proposal to transport Northwest power into Southern California California's four principal investor-owned utilities have offered to construct an extra_high-voltage transmission line to carry Northwest power to southern California. The offer is in effect a competing proposal to the Interior De- partment's task force proposal for a 750-ky, dc line between Bonneville Power Administration and California (EW, Dec. 25, 1961, p. 34). The joint proposal by the four utilities -- Pacific Gas 6 Electric Co., Southern California Edison Ccl, California Electric Power Co., and San Diego Gas & Electric Co. -- was made contingent upon Northwest power being available and on terms that will make construction of the line economically feasible. These four utilities recently formed the Calif- ornia Power Pool (EN, Dec. 25, 1961, p. 34). The offer, referred to in PG&E's just-issued 1961 annual report, was believed to have been made during a meeting with BPA chief Charles Luce and other officials several weeks ago. To be constructed in stages The report goes on to say: "This line will be constructed In stages as needed and existing transmission capacity of the California companies will be used to the maximum extent to avoid uneconomic dupli- cation of facilities. In view of the transmission lines now existing and to be constructed by the California companies, there is no need whatever for the federal government to spend vast sums of taxpayer's money to construct the transmission facilities recommended by the (Interior) task force. The lines to be built by the California com- panies will be at no cost to taxpayers and, furthermore, will be pro- ductive of substantial tax revenue." The proposed line (of not less than 500 kv) would extend south from PG&E's Round Mountain Substation in the Shasta area. North from Round Mountain will be the previously announced $11-million, 103-mile, 500-ky intertie with PP&L~s 230-ky system at Klamath Falls, Ore. (EW, Jan. 29, p. 55). No mention is made in the PG&E report of a further extension north from Klamath Falls to The Dalles or some other point in the BPA system. Presumably, some sort of extension would have to be built if the California Pool offer Is accepted. PAGENO="0169" ADMINISTRATIVE PROCESS 165 Meanwhile, the California Pool operation is moving ahead. The first step occurred last December with the closing of an existing 220-kv tie between PG&E's Midway Substation and SoCalEd's Magunden Substation, both near Bakersfield. The 250-Mw tie, which will be used for emergen- cies, has been open for some years. Previously, PG~E used it to buy surplus power from SoCalEd when that company was taking power from Hoover Dam. The four pool members are presently working on details of further interconnections and other arrangements to permit full operation of the pool. \Finally, details have been released on the 500-ky Round Mountain-. Klamath Falls line. Some 600 latticed steel guyed H-frame structures will be used to carry the ACSR cable. Maximum design voltage will be 550 kv. The line will be completed in~the fall of 1963 and will be operated first at 230 kv. (From Electrical World, April 2, 1962, p. 26.) PAGENO="0170" 166 ADMINISTRATIVE PROCESS Appendix F Pacific Gas and Electric Company 2145 Market Street San Francisco 6, California N. R. Sutherland President January 5, 1962 Pacific Power & Light Company Public Service ~iilding Portland 14, Oregon Gentlemen: This letter states our agreement to au~nent our existing elec.. tric interconnection facilities by the construction of a new large ca- pacity transmission line to provide for the sale and exchange of energy between our companies and for the parallel operation of our systems, and to provide facilities and arrangements that make possible the sale and exchange of energy between other electric systems in the Pacific Northwest and PG&E, either directly or indirectly through PP&L. We agree to continue to maintain our respective portions of our existing interconnecting transmission lines. These lines, which connect our electric systems at two points, both located at Delta in Shasta County, are the `Cottonwood Line", a llO..kv electric transmission line running from PG&E's Cottonwood Substation via Delta to PP&L's COPCO No. 2 Power House in Siskiyou County, and the "Stiliwater Line", a 6O~kv elec. tric transmission line running from PG&E's Stillwater Substation "B" via Delta to PP&L's COPCO No. 2 Power House in Siskyou County. In addition, we agree to construct, operate and maintian a new transmission line running from Klamath Falls to Round Mountain, with the point of interconnection on or in the immediate vicinity of the township boundary line between Townships 142 N and 1#3 N in Range 1 H, MDB&M. PP&L will construct, own, and operate the norther section of the line, with terminal facilities at Klamath Falls, and PG&E will construct, own, and operate the southern section, with terminal facilities at Round Mountain and also, if it wishes, at Pit 3. The line shall be capable of operating at not less than 500 kv, and shall be designed and constructed in an- cordance with specifications acceptable to both parties. However, the line will be operated initially at 230 kv, and accordingly the terminal facilities shall be constructed for initial operation at that voltage. PAGENO="0171" ADMINISTRATIVE PROCESS 167 The construction of the line and terminal facilities shall be commenced. promptly after the execution of this agreement, and shall be completes. as soon as practicable. We shall continue to study jointly the economic feasibility, in the light of' developing circumstances, of converting the line to operation at not less than 500 lot and also of extending it in a norther.. ]zy and southerly direction to provide an extra high voltage intertie be- tween the Pacific Northwest and California. It is understood that we will convert the line to operation at not less than 500 lot and extend it in both directions at such tine as we jointly determine that such actions are economically justified. After supplying customers off of the Cottonwtod and Stillwater Lines, the primary use of the three interconnecting lines shall be for firm service, exchange service (including emergency service) and sales of surplus energy between PP&L and PG&~. It is contemplated that PP&L mgy have transmission capacity in its system that will not be required for purposes deemed necessary by PP&L. PP&L intends to make such excess transmission capacity, along with any excess capacity in the three inter.. connecting lines after serving their primary use, available for service between Bonneville Power Administration and utility companies in the Pacific Northwest and PG&E. In such case PP&L will make a reasonable charge for transmitting the energy of any other company or agency over its system, the exact enount of the charge to be as agreed upon between PP&L and the owner of the energy. PG&E and PP&L will plan and operate their systems so that the flow of reactive power will not adversely affect the system of' the other, and they shall `operate, or provide for others to operate, adequate tie line and frequency control equipment so as to minimize the power swings over the lines and to contribute a proportionate share of the total inter~. connected system frequency regulation. In addition, an operating commit- tee consisting of an equal number of representatives from each company shall meet from time to time to agree upon methods of operation and related matters in order to achieve the purposes of this agreement, and such matters shall include, but not be limited to, reactive power, voltage regulation, tie line control settings, clock corrections, deviations from energy de- livery schedules, emergency operations, estimates of deliverties during meter outages, arid scheduling arrangements. Prom time to time PP&L may desire to purchase energy from PG&E. PG&E agrees to sell ?P&L energy provided that PG&E has surplus energy and the parties have mutually agreed as to the price to be paid, the period to be covered and the time of day deliverties are to be made. The power sale agreement dated July )A, 1952, as heretofore ememded and supplemented, between ?O&E and The California Oregon rnower PAGENO="0172" 168 ADMINISTRATIVE PROCESS Company and to which PP&L is the successor, is hereby in its entirely cancelled effective ~bruary 1, 1962. Appropriate notice shall be given to the ~deral B~wer Commission immediately upon the execution hereof and the necessary schedules filed with the Commission in accordance with the terms of this agreement. Service will commence under this agreement and in accordance with the attached rate schedules on February 1, 1962, and the agreement will remain in effect until February 1, 1972, and from year to year thereafter, tereinable on one year's written notice given by either one of us at any time after January 31, 1971. If this letter and the attached schedules correctly state our agreement, please sign and return one of the enclosed copies hereof. Yours very truly, PACIFIC GAS MID ELECTRIC COMPANY By______________ We agree: PACIFIC P(MER & LIGI~ CO~4PANY By D.R. McClung PAGENO="0173" ADMINISTRATIVE PROCESS 169 ADDJtIS$ AU. COMMUNICATIOP~ ~o mi UC~ErA~y FEDERAL. POWER COMMISSION WASHINGTON 25, D.C. Docket Hoe. E-7024 and E-2025 Pacific Power & Light Company December 7, 1962 ID THE PARTY ADOHESSED: Enclosed is a copy of a statement filed by Commissioner Morgan "dissentThg further" in the above.~dea1gnated matter. ~:::2'~ Joseph H. Gutrid* Secretary PAGENO="0174" 170 ADMINISTRATIVE PROCESS Pacific Power & Light Company ) Docket Nos. E-7024 and 5-7025 MORGAN, Commissioner, dissenting further: On March 28, 1962 the Commission published orders in these dockets authorizing, as of that date, the issuance of securities for the purpose of financing a number of projects, including a particular transmission line from Klamath Falls, Oregon to Round Mountain, California which was, and remains, a highly questionable undertaking, Because of the importunities of the applicant and its associates in the financial community, the majority of this Commission were anxious to issue their order on March 28, without waiting for my dissent to be prepared, and as noted in the order I consented to that arrangement. Because the order was effective as of March 28 and time for appeals for reconsideration or a hearing was running, I prepared my dissent as rapidly as possible, filed it with the Secretary of the Commission on April 3, and on that date distributed copies to the Governors, Senators, Congressmen and Public Utility Commissions of the states involved so that they might have prompt understanding of the important questions bearing on the public interest which theretofore had been obscured, both by the Commission's earlier "public notice" and by the order. Acting under instructions not concurred in by me, the Commission's Secretary thereafter withheld my dissent from publication by the Commis- sion while the majority prepared an opinion attempting to explain their position in the case. After post-dating it to April 12, the Secretary published my dissent on that date, and the majority opinion was published five days later, on April 17, while I was in Canada fulfilling a speaking engagement. This procedure, involving the post-dating of my dissent which had not been agreed to by me, created a situation giving the un- avoidable impression that the dissent and the majority opinion had been exchanged for examination by the respective authors prior to publication, and that arguments made in the majority opinion and unanswered in the dissent were either unanswerable or were acceptable to me. That any such impression can only be wholly false is clear from the foregoing statement of the facts. Further, as I shall show, the focus of the majority opinion was so narrowly directed toward rationalization of the majority's position, rather than toward the public interest, that it repeatedly distorted the facts, the law, and commom logic and, as an end result, virtually emasculated Section 2G~ of the Federal Power Act which sets forth the Commission's responsibilities with respect to security issues. Since this was the first and only occasion on which the Federal Power Commis- sion has ever expatiated on its powers and duties under Section 2O~#, PAGENO="0175" ADMINISTRATIVE PROCESS 171 this unfortunate series of circumstances has resulted in publication of a majority opinion virtually repealing that portion of the Federal Power Act, while serving as a precedent for nonfeasance in the future even more scandalous, if possible, than that of the past. In the months which have intervened since publication of the ma. jority opinion it has already served as a reference..guide for examin~~ err, for staff members, and for Commissioners themselves who wish to avoid the duties and responsibilities in service of the public inter es. spelled out clearly by the Congress in the Federal Power Act. In these circumstances I have the unavoidable duty, in behalf of the public interest, of commenting further in this matter. In doing so it is not my purpose to prolong or exacerbate the controversy, but to bring all aspects of this matter into proper perspective for the benefit of those who may refer to this case and its important issues in the future. In an attempt to explain their refusal to discharge a duty Congress assigned this Commission, my colleagues have repeatedly misstated my position. Contrary to their claim, I never suggested that "the Commis~ sion should have withheld its approval" of and "should have scheduled a hearing" on a $55 million security issue, "merely because a small frac~ tion of the proceeds ~estimated by the majority at $1.5 million, or 2.7% of the total issue] are to be devoted to the construction of fa~ cilities . . for a future use which may not materialize," Throughout our deliberations, as my colleagues well know, I raised no question regarding the undertakings to be financed with the bulk of the issue. I was concerned, and I remain concerned, solely with the question of whether or not the expenditure of an estimated $1.5 million to enlarge the proposed Klamath Falls.~Round Mountain tieline is com~ patible with the public interest. I was unable, and I remain unable, to state the confines of that concern more clearly than I did in my first dissent, viz: "It is . . . impossible to reject the line out of hand as being uneconomic, imprudent or otherwise incompat- ible with the public interest, There simply is no record on which to base either approval or rejection. I therefore have not advocated rejection of the project in the present proceeding and I do not advocate rejec~. tion now. "What I have advocated, and what I believe is clearly required by Section 2O~ (a), (b) and (c) of the Federal Power Act, is careful investigation and genuine PAGENO="0176" 172 ADMINISTRATIVE PROCESS opportunity for a hearing to determine whether the line is `compatible with the public interest' . . ." As this was the sole and separable question of the case, its determi~ nation did not require us to delay the remainder of the issue. The sections of the Act referred to above specifically give us the power to separate a si~igle project for detailed investigation; to withhold approval of the expenditure of capital for such a project pending completion of the investigation; and to approve the issuance of capital securities and the expenditure of the proceeds on all other projects while such an investigation takes its course. That is~~procedure and it is the ~ procedure which I advocated in this case. Regardless of the "politically controversial" nature of such an inquiry, our statutory responèibility and oath of office require us to consider questions which can only be answered by such an inquiry. The majority's obdurate refusal to inquire cannot be concealed by distorting my position. But the more serious result of the majority's position is not their refusal to determine whether "the constr,~iction of facilities . for a future use which may not materialize" is "compatible with the public interest." Nor is it the majority's refusal to define or even discuss "the public interest" as a standard. The more serious result is that acting on behalf of the Federal Power Commission, and in the first and only exposition this Commission ever made of Section 2O~ the majority have totally discarded "the public interest" as a standard, despite its unobscurable presence in the statute! Section 2OL~ (a) clearly and with no trace of ambiguity states that before it may approve a security issue this Commission must satisfy it~ self that the specific undertaking to be financed (1) is lawful, and (2) that the company is legally authorized to perform it, and (3) that its performance "will be compatible with the p~~ic interest," and (~) that it will be consistent with the proper performance of public utility service, and (5) that it will not impair the company's ability to serve as a public utility. PAGENO="0177" ADMINISTRATIVE PROCESS 173 As each of these constitutes an independent standard, we are legally forbidden to approve an issue unless we can find, in fact as well as in fine-spun legal theory, that the proposed undertaking meets each test.~ - Obviously, the fact that Congress refused to prescribe an alter- native standard -- one under which the Commission could have approved or disapproved an undertaking in its discretion -- in no way diminishes the Commission's to determine whether a proposed issue meets the five standards Congress did prescribe. Nor does it diminish the Com- mission's authority and to disapprove an issue if the undertaking fails to meet any one of the five standards, each of which has a sep.. arate efficacy.~j In their anxiety to avoid decisional responsibility, the majority have perverted the public law. The first two and one-half pages of their statement describe the application and staff's "careful examina- tion" thereof. Then, after explaining for three pages that the test of "public convenience and necessity" is more discretionary than the test of "the public interest," they rule that we need not apply "the 1/ The Commission, of course, must make the additional finding that - "such issue . . . is reasonably necessary or appropriate" for an undertaking if it satisfies each of the five prior standards. 2/ As introduced, the bill that contained what became Title II of the Federal Power Act (S. 1725 and its House companion H.R, 51423, 714th Cong. 1st) made no reference to "the public interest" whatsoever, or to any of the other standards, in what is now Section 204 (bill Section 206). Instead, the bill provided at Sec. 204 (of the original) chat: "No public utility shall undertake the construction of or extension of any facilities . . . unless and until there shall first have been obtained from the Commission a certificate that the present or fu- ture public oonvenience and necessity require or will require such new construction , . ." As this authorized the Commission to exer- cise precedent, unrestrained certificating authority over all util- ity construction for interstate purposes, the securities section merely stated that utilities could only issue securities for au- thorized purposes. But the Senate and House Commerce Committees chose not to vest un- confined certificating power in this Commission. Accordingly, they deleted the certificating section in its entirety, and inserted five specific standards in the securities section instead. (See S. 2796, in the nature of a substitute for S. 1725, as reported by each Committee and as passed.) 99-948 0 - 63 - 12 PAGENO="0178" 174 ADMINISTRATIVE PROCESS public interest" test because Congress rejected the discretionary test of "public convenience and necessity"! Specifically, the majority opinion rules that, "in testing a security issue by the statutory standard," the Commission need only satisfy itself that the specific undertaking to be financed (1) is lawful, (2) that the company is legally authorized to perform it, and (3) that it will not impair ("squander") the company's ability to serve as a public utility. As can be seen, this ruling is in flat and flagrant opposition to the law. The remainder of the majority's statement consists of a series of question~begging assertions that this Commission is not empowered to determine whether a publicly~-owned interconnection should be con~ structed (a determination I have never suggested we should or could make), or whether the company's proposed interconnection should be used to transmit surplus Bonneville power to the Pacific Southwest (another determination never sugges~ed by me), plus an assertion that applicant's proposal is not "totally improvident."~/ It concludes with references to the desirability of an effective regional tie-line, the alleged "harmony" of applicant's proposal with certain of the Bonneville Power Administration's engineering recommendations, and an explanation (which does not explain) why the Notice herein did not give notice. 3/ The majority tested the proposal by (only) three standards. It - says the question "is whether from an economic standpoint . an investment incontrovertibly within the lawful corporate pur~ poses of thc Applicant represents a totally improvident busi~ ness decision." But the majority did not apply the economic test either, having previously ruled that "whether [a publicly~.owned] interconnection would . . . remove any economic justification for Applicant's proposed expansion . . . [is] not for us to decide." Instead, as a substitute for the investigation it refused to make, it merely provided a series of hollow official recitals, such as: "we have no reason to think" that the investment would be "totally improvident"; "this Commission estimated only last January that the demand for electric energy in 1980 will be 3.75 times the re~ quirements in 1960"; and so on. This orotund approach will not prevent undertakings "which make impossible the proper and most economic performance of public ut5T[ty functions." (Sen. Rept. 621, 714th Congress, emphasis suppliod.) In sum, the majority de~ dined to scrutinize the matter at all. PAGENO="0179" ADMINISTRATIVE PROCESS 175 The majority refused to consider, discuss, or acknowledge `- and labored to obscure the only question of the case: namely, whether or not it is in "the public interest"~' for a company, in the face of. an effective prohibition against the export of surplus Bonneville power and in order to protect its private monopoly position, to expend capital underwritten by the ratepayers in a risky attempt to prevent the con- struction of an admittedly needed extra-high..voltage regional inter- tie by the construction of a designedly inferior substitute, Manage.. ment here, as in all similar cases, obviously considers the risks justified as a means of achieving the ends chosen by management; but the question is whether these means or these ends should be imposed on the ratepayers who must ultimately pay the bill. Our duty is to answer that question. And abdication is not an acceptable substitute for a duty discharged. In an attempt to extract from the majority some sort, of lucid ex- position of their refusal to answer the question I included the fol- lowing passage in my dissent: "Another favorite thicket of the utility lawyer defend~. ing practices such as those under discussion here is the argument that no interference with an enterprise such as this one is proper because the impact of the actions complained of is not sufficient to bankrupt the company even if the worst consequences were to en- sue, and the effect upon the individual rate-payer, while not exactly a happy one, would not be disastrous. "This begs the question and raises a smokescreen of sophistry into the bargain. There is a principle in- volved here, and a supremely important one. How can we condone practices on a limited scale which, if in- dulged on a larger scale, would unquestionably threaten the solvency of an entire utility system? Where is the line of demarcation beyond which `tolerable' practices become intolerably dangerous? "Here too the respected regulatory agencies have refused to be led down the primrose path. There are industries, particularly in the extractive mineral field, wherein gambling is such am essential and customary part of their business practices that the courts have, without prejudice, likened them to a poker game. The electric utility indus- try has never been considered one of these, It should not become one under the aegis of the Federal Power Commission." 4/ Apart from its quotation of the statute, and its attempt (both - footnoted) to obscure the court holding that says this Commission must require "full disclosure of all material facts" before it can find a proposed undertaking "compatible with the public inter- est," the majority barely mentions "the public interest" standard. PAGENO="0180" 176 ADMINISTRATIVE PROCESS The majority's response to this was dramatic, if nothing else. After boldly retreating from one of the plain 3tandards set up by Section 2O'~ (a) of the Act (requiring us to "find," before approving an issue of securities, that the project on which the proceeds are to be expended will not "impair" the performance of public utility serv- ice), the majority erected their own standard in its place by fanci- fully embroidering the standard set up by Congress. This new stand- ard turned out to be a banner with a strange device indeed. Under it the majority see no need to examine a particular project unless it is "so improvident, frivolous and speculative that it threatens to squander~ the corporate substance without reasonable hope of return" or is "a totally improvident business decision." One can only pre- dict that snow and ice will prevail in the nether regions for many years before the members of this Commission discover any need to venture forth in battle for the public interest under that banner -- nor is it altogether impossible that this very prediction played a part in the design of the new standard. The background facts, as evident to the majority at the time they wrote their opinion as now, clearly indicated that this proposal night very easily serve to prevent the distribution and sale of elec- tric power at the lowest possible cost to the public of the Pacific Coast regions.~/ Obviously, a proposal which on its face raises the 5/ The realities, "extra record" though they necessarily must be (there being no record), were and remain as follows: (a) the export of seasonally-surplus Bonneville power to California markets is necessary to preserve the continuance of low Bonneville rates; (b) before it can be exported, legislation is probably necessary to prevent the preference clause from operating in such fashion as to create chaos in the existing BPA marketing area; (c) upon the enactment of such legislation, passed by the last Senate but not considered by the Ho~ise, an extra-high-voltage transmission line, planning funds for which have been appropriated, may be constructed to convey surplus Bonneville power to California, and surplus Central Valley Project power to the Northwest; (d) the purpose of the proposed substitute line is to foreclose later con- struction of the designedly superior Federal line; (e) the inferior line has not been made available to wheel surplus power between Bonneville and California; (f) no demonstration has been made that it will effectively integrate the two power-producing and marketing regions; (g) the success of applicant's grand design may force an increase of Bonneville rates; (h) this Commission must approve Bon- neville's rates; and (i) those rates must be set at levels designed "to extend the benefits of an integrated transmission system and encourage the equitable distribution of the electric energy devel- oped at . . . Bonneville," 16 USCA 832e. A complete discu~ Lon of (continued on next page) PAGENO="0181" ADMINISTRATIVE PROCESS 177 possibility that it may militate against "an abundance of electricity at the lowest possible cost " cannot be p!~umed to be "compatible with the public interest."~.? Those backgro~~Tfacts plainly signaled a situation that should be investigated thoroughly, and set for hear ing if necessary, for the purpose of determining whether the operation of the undertaking, as proposed, would be "compatible with the public interest" and "consi~tent with the proper performance . . . of services as a public utility," or could be made "compatible" and "consistent" therewith by the exercise of our conditioning power.!! The standard of "the public interest" is not surplusage or Congress would not have placed it in the statute, Its meaning is contained within the four corners of the Act of which Section 2O'~ is a part (not the railroad law). Its statutory environment shows that the standard of the "public interest" by which the subject proposal must be tested, and with which it mitht be "compatible," is that method of "interconnec- tion and coordination? which will assure, or at least not frustrate or preclude, "an abundant supply of electric energy . . . with the great- est possible economy and with regard to the proper utilization and conservation of natural resources,"!/ As a matter of fact, its legis- lative history shows that the attainment and safeguarding of the pub- lic's interest in this particular matter was the primary reason for (continued) 5/ each of these elements appears in the documents cited in footnote 2 - at dissent page 3; and again in the hearings on S. 3153 in the 87th Congress before the Senate Subcommittee on Irrigation and Reclamation, and in hearings on the Bonneville inter-tie planning funds before the House and Senate Appropriations Committees. Some of these matters lie within our jurisdiction and some do not, But all of them affect and are affected by the public interest. An understanding of them is necessary to an understanding and identification of the public interest, 6/ The issue is not that applicant failed to demonstrate that its proposal will "promote" the public interest or provide a "public benefit," Pacific Power & Li ht v. FPC, infra, The question is whether app icant s un ertak ng "wiff be compatible with the public interest" as defined by the entirety of the Federal Power Act. 7/ "Section 201+ (b) The Commission, after opportunity for hearing, nay grant any application under this section in whole or in part, and with such modifications and upon such terms and conditions as it may find necessary or appropriate, . . 8/ Sec. 201 (a) and Sec. 202 (a) - (a). PAGENO="0182" 178 ADMINISTRATIVE PROCESS enacting Title II of the Federal Power Act. Senate Report No. 621 of the 7'+th Congress made this unequivocally clear. It said "The necessity for Federal leadership in securing planned coordination of the facilities of the in- dustry which alone can produce an abundance of elec-' tricity at the lowest possible cost has been clearly revealed in the recent reports of the Federal Power Commission, the Mississippi Valley Committee and the National Resources Board . . . The new part 2 of the Federal Water Power Act seeks to bring about regional coordination . . The "precise nature of the interests" that should have been " . safeguarded by this Commission in passing upon . . ." the subject ap-' plication,~.,/ thereføre, is the public interest in an "abundance of electricity at th~ lowest possible cost," and calls for careful scru-~ tiny of any undertaking under our jurisdiction which may be incompat- ible with, or designed to prevent, the attainment thereof. In addition to several misstatements of my position herein, the majority employ a variety of additional devices to justify their some-' what self-conscious refusal to consider this matter. First they say "we should not attempt to substitute our judgment for that of manage-' ment." The answer is that Congress long ago found that management decisions in the electric power field often are contrary to the public interest; and that Congress established and directed this Commission to substitute its judgment for all management decisions that are not compatible with the public interest. Next, the majority say they did not feel that a hearing would "il-' luminate any material issue." The answer to that is that our scheme of Government, including the Federal Power Act, presumes that the facts upon which decisions affecting rn~or issues of public ~o1i~ must be based are rarely knowb un~dl a public ~aring is hel~ in which all in-' terested parties may participate; and that such decisions should not be made in camera and without public notice. Presumably the countless public and private officials who journeyed to Washington, both before and after the majority acted on this matter, for the sole purpose of testifying before Congress for and against the proposed Federal line would have had at least a few words to offer, if a hearing had been held regarding the extent to which the substitute line was, or by our condi-' tioning power could be made, "compatible with the public interest." Next, the majority say they did not hold a hearing on the substi-' tute line because it involved "political and policy" considerations which this Commission cannot consider. The answer is that the Federal 9/ Pacific Power C v. Federal Power Commission, ill F.2d, lOl'~ at ~Ld1~! ~ l9L~O )~"~ PAGENO="0183" ADMINISTRATIVE PROCESS 179 Power Commission is a political entity; its seats are occupied by poW. litical appointees; and they serve for the purpose of deciding matters affected by and affecting public policy. If this is a bad thing, which I deny, it is very late in the game to begin worrying about it now. Next, the majority say they did not hold hearings because "no ob. jections were raised to the proposed issue." The answer, as the ma~ jority explain, is that the public and its officials were not notified. Next, the majority say that the Chairman of the Washington Utili~ ties and Transportation Commission withdrew the strong request for safe- guarding conditions which he immediately filed after learning that, in this innocuous "securities" matter, the FPC proposed to determine whether the substitute line was "compatible with the public interest." Specifically, the majority say that his telegram was "superseded and withdrawn" by a later letter, The answer to this is that it is simply' not true. No such letter is in the docketed files on this matter, and it is hard to see how one ever could have been, because the Chairman of the Washington Utilities and Transportation Commission never wrote such a letter. Next, the majority say that a hearing would have been inappropri-. ate because "procedures for considering securities issues must be ex~ peditious," (But they "reject" any suggestion that their expedition was indistinguishable from haste.) The answer is that Congress directed this and other regulatory agencies to hold hearings, if necessary, to determine whether an undertaking to be financed with the proceeds of security issues is "compatible with the public interest"; and that other agencies do so. Finally and principally, the majority seek to clothe their refusal to investigate in those respectable outer garments which, though thread~ bare, are sought after more avidly than sables in situations such as this, I refer to legalisms, Specifically the majority allege that, because the Interstate Commerce Commission interprets Section 20 (a) of the Transportation Act of 1920 narrowly, this Agency must therefore interpret Section 20'4 (which is patterned after Section 20 (a)) in a narrow fashion. Arguing their point, the majority quote "the leading historian" of the ICC as stating that the: " . . . dominant purpose [of Section 20 (a)] was to maintain a sound structure for the rehabili- tation and support of railroad. credit . . There are several answers to this claim, but two will do. (1) In the first place, when they issued their opinion the major- ity refrained from saying that it was Sharfman they were quoting; or from what part or portion of his massive multi-volume work on the ICC PAGENO="0184" 180 ADMINISTRATIVE PROCESS they excerpted the interior portion of one paragraph which formed their quotation. Had they done so,~.2! they would have enabled their audience to find quickly that in the very next paragraph, Sharfman explains that "The considerations set up~for the Commission's guidance are stated in very general, and somewhat vague, terms. The Commission is directed to approve the application and authorize the proposed transaction only if it finds it to be, first, for some lawful object within the car- rier's corporate purposes, compatible with the ublic interest, which is necessary or appropriate or or con- ~Th~E~nt with the proper performance of service to the public as a common carrier and will not impair its abil- ity to perform that service, and second, reasonably necessary and appropriate for this purpose. It thus ap- pears that large discretioflar control is vested in the Commission no on y over t e amount an character o new ii~ies of railroad securities and of new assumptions of financial responsibility, but over the uses towhich the proceeds of securities are to Bi~ ut and over the~t~~ tion o intercorpOrate agreements involving financial liabilities. In other words, pur~p~ as well as the expedients of permanent financing are subjected to the ~ ~ In order that essential financial projects may not fail for want of complete compliance with the statutory standards, the Commission is empowered not only to grant or deny any particular application, but to ~rantit!11 part and deny it in ~part, or to grant it with such modifi- cations and upon such terms and conditions as it nay prescribe." (emphasis supplied.) (2) The second answer to the majority's misreading of the law on this matter, is that the Interstate Commerce Commission has the power to issue certificates of convenience and necessity, and in the exercise of that power it holds extensive hearings before approving each certificate application for ra~iiroad construction, consequently a proposed construction undertaking has been thoroughly investigated (under a different section of the Act) before that Commission is called upon to approve the issuance of securities to finance it, and the results of that prior investigation substitute for or supplement the investigation that it makes under Section 20 (a). In other words, the scope of an actual inquiry by the ICC under Section 20 (a) is not necessarily a measure of the scope of the inquiry authorized t~reby; 10/ Specifically, I. L. Sharfman, The Interstate Commerce Conrni~ssiOfl, Vol. 1 at p. 190. PAGENO="0185" ADMINISTRATIVE PROCESS 181 and that Commission's practice in no way limits the scope of the in. quiry we are authorized and directed to make under the statutory counterpart of Section 20 (a). The following excerpts from the deci~. sions of the ICC itself make this clear: "We are required to make investigation of securities before authorizing their issue."ll/ "Our powers, in the public interest, to grant or with.~ hold approval of sec~ity issues are broad,"l2/ "In any application to us for authority to issue se- curities, we are hound to measure the proposal by the test of the public interest in whatever phase that interest may appear to be affected."13/ And, from the Supreme Court of New York: "Whatever may be the language used in its decisions, it is clear that when the [Interstate Commerce] Commission is called upon to approve the issuance and sale of secu~ rities under ~ 20a it has felt itself free, and properly so, to exercise its own independent judgment for that of the directors where in its opinion the public interests would best be served thereby. * * * Obviously, it would be futile [for an applicant] to propose a security issue which the Commission would be bound to disapprove as not `compatible with the public interest' or with the proper performance by it of service to the public,"~/ In sum, the majority's attempt to obscure the unobscurable intent of Section 204 of the Federal Power Act by an overlay of legalisms simply will not do. 11/ In the Matter of Wheelin & Lake Erie Railwa Corn an , 67 ICC 293 12/ Th the Ma ter of New York~~ Lo ailr 13/ 2ckofNew~~s~1~pdiana5IfliflojsR., 94 ICC 727 at 729 1L~/ ~ v, Woodruff, at al,, 49 N.Y,S, 2d 625 at 6'40 (1944), PAGENO="0186" 182 ADMINISTRATIVE PROCESS Neither will the attempt, although it is understandable, to brush aside the Virginia commission's refusal to shirk its statutory duty in a similar situation. In that case the Virginia commission refused to approve an issue of securities by an electric utility on the ground that the facilities to be financed thereby would not be "in the public interest." If I understand their position correctly, the members of the majority imply the case is "inapposite" because that Commission possessed the power to issue or deny certificates of convenience and necessity when it held that the issue was not "in the public interest" as determined under its secur~~aPpD9Val statute! The majority have BiThread the case. The case involved the 1931+ Public Securities Law of Virginia (7 Va. 56-.75). "The 1931+ statute is concerned ~ with the issuance of securities," the Virginia commission explained, and it "says this commissiOn must grant the authority applied for unless it finds that the loan is~i~ `reasonably necessary' to carry out one or more of the [public utility] purposes set forth in the application" (emphasis sup~ plied). The Commission then went on to find that the application "filed December 12, 191+9," and on which "public hearings began April 21+, 1950," iã~ not "in tT~i~ublic interest" (emphasis supplied). It is true that the Virginia Code now provides the Virginia comrn mission with the (additional) power to issue certificates of convenience and necessity. Specifically, it states at Section 50 265.2 that "It shall be unlawful for any public utility to construct, enlarge or acquire, by lease or other- wise, any facilities for use in public utility service . . . without first having obtained a certificate from the Commission that the public convenience and necessity require the exercise of such right or privilege. Such certificate shall be issued by the Commission only after formal or informal hearing and after due notice to interested parties." But below, at Section 56 265,8, the law unequivocally states that such certificating authority * . $ shall not apply to or in any way affect any proceeding before the * * . Commission on or before July firsts nineteen hundred fifty~" (emphasis One has only to read that date and compare it with the filing date and date of commencement of hearings before the Virginia commission to agree with my statement that in the particular case, the Virginia commission was "armed only with the power of approval or disapproval PAGENO="0187" ADMINISTRATIVE PROCESS 183 over security issues" and that it "used that power to prevent construc.~ tion," The majority in this case were not willing to use that power to initiate an inquiry. There is the difference between the two cases. The majority opinion includes numerous statements irreconcilable with the facts, which I have neither the time nor the inclination to comment on in detail. The following sentence is selected only as an example. In it the majority assert: "The record indicates that the [applicant'sJ new intertie will provide for the exchange of energy between the two systems and will be available for use b the Bonneville Power Administration orotherutaitycom es in teaciicNorthwest." In the first place there was and is no "record" indicating the fore~ going, or, for that matter, anything else, In the second place there is only one intelligible reading of that sentence, particularly the por~- tion I have emphasized, It indicates that P.P,&L, and P.G.&E, have of fered to allow the use of excess line capacity b other public and ri ower agencies for wheeling their own power to t eir own wholesale customers over the companies' line. I have made every pos~ sible effort to substantiate this statement, including discussions with company officials, and every effort has ended in a finding that the statement was and still is in flat contradiction of the facts, The companies have, indeed, offered to be the sole purchasers and sell~~ ers of power between the two regions but they have ~ maäe the line ~~ilable to other agencies in a genuine wheeling a~ement, At this date there appears to be every reason to believe they never will, Let me add that the public interest would probably benefit materially if this prognostication should later prove to be wrong, but as of now it is very far from wrong, Construction of the line has not yet begun, more than eight months after hurried approval of securities, because of the companies' inability to obtain permits to build across public lands, and there is reason to believe that the permits are being with.~ held as the direct result of the companies' refusal to share costs and benefits of the line in the public interest, This is not the impression conveyed by the sentence I have quoted from the majority's opinion, The foregoing is set forth as a caution to attorneys and scholars reading this case, so that they may examine asserted facts with care. As can be seen, some of them are not facts. The majority make much of the undeniable fact that our jurisdiction over security issues of electric companies is limited by the peculiar wording of the Federal Power Act, It is certainly true that many elec.. trio companies are required to expose their security issues and the projects to be financed thereby to our scrutiny either not at all or only because of rather irrelevant factors having to do with place of incorporation and the like, But that is no reason for us to refuse to exercise the jurisdiction, spotty and sketchy though it may be, PAGENO="0188" 184 ADMINISTRATIVE PROCESS which Congress has seen fit to give us, and which we could and should have exercised i~Tthis case. Nor is there any reason in the public interest for our failing to call the attention of Congress to the in. adequacies of the statute which the majority opinion outlined. No move has been made toward doing so in the eight months since the majority opinion was published. One finds it hard to escape the con- clusion that the majority failed to take action in this case not be- cause they lacked the power but because they preferred inaction then and have continued to prefer it since. The same is true with respect to our lack of certificating power over such newly-important developments as long-distance extra-high- voltage regional inter-ties. I will not lengthen this dissent by a recital of the many ways in which the new transmission technology may now affect the public interest for good or ill in this vital field. The very case here discussed is a fairly illustrative, though by no means a complete, example. Suffice it to say that the technological and economic circumstances affecting the public interest are now radi- cally different from those in which the Congress, in 1935, decided not to grant certificating authority to us. Bills which would close this gap for the protection of the public were introduced in the last ses- sion of the Congress. We have been as~ed to support those bills and I believe we should. But in the eight months since publication of their opinion the majority herein have made no move and have spoken no word in support of those bills despite the present inadequacies of the statute which they themselves have pointed out. In this case we have been faced with a clear choice: like the Virginia commission in the case cited above we could have used the tools we already have, inadequate though they might prove to be in other cases, while asking that we be provided with the additional tools n~E~ sary for full protection of the public interest in all cases. Or we could, as the majority have done with superb illogic, point to the missing tools (and some which are not missing) as an excuse for refusal to use the ones we have, and then conspicuously refrain from asking that the missing tools be supplied. The latter course was chosen by the majority in this case. I re- spectfully suggest that it is not good enough. The public interest, like the law available to us but not employed in this case, looms large to those who search for it. If the public is to be given the protection from monopoly which it deserves and expects, the law must eventually match the public interest. I believe the law adequately enabled us, in the public interest, to dispose of the issues posed by this case, In the future the law must be changed so that it matches the public inter- est in every case, and the law must be used. Ho~ârd Morgan, Lomn1S~~fler PAGENO="0189" ADMINISTRATIVE PROCESS 185 Mr. SWIDLER. Now, these security issue cases usually are decided by a formal order. They are tied in to the mechanics of issuing securi- ties in the financial markets, and we try to act on them with enough speed so that the companies can take advantage of the underwriting commitments which frequently expire in a matter of hours or days. In this case, because of the transmission-line problem to which I re- ferred in my testimony this morning, Mr. Morgan dissented, and, at the meeting, a statement of that dissent was made a part of the formal order. There is no statement in the March 28, 1962, order of all of the vigorous pros and cons which `had been mooted in the meetings we had held; this case had been discussed on several occasions. But we simply took the formal order prepared by the staff and issued it in order to enable the company to sell its securities. But we did attach a short statement of the dissent, and it read as follows: Commissioner Morgan dissents on the grounds that the period of public notice was unreasonably short, that the notice of application was deficient, and that the construction of one of the facilities to be financed from the proceeds of the securities authorized herein-the Oregon-California intertie as proposed by ap- plicant-has not been shown to be compatible with the public interest, and should not be authorized pending policy decisions relative to such an intertie scheduled by the current session of the Congress. A Commission opinion and Commissioner Morgan's dissent will be issued later. This was issued through our information office in the usual way. Mr. BROTZMAN. What was the date of issuance? Mr. SWIDLER. The date was March 28, 1962. The press release which was prepared to give notice to the public of what we did stated the facts about the issuance of this order, and included the following statement of the dissent: Commissioner Howard Morgan dissented on the grounds that the period of public notice was unreasonably short, that the FPC's notices of application were deficient, and that construction of the Oregon-California intertie "has not been shown to be compatible with the public interest and should not be authorized pending policy decisions relative to such an intertie scheduled by the current session of the Congress." The press release concluded, as the order had. "A Commission opinion and Commissioner Morgan's dissent will be issued later." Now, Mr. Morgan felt that this did not do justice to his dissent, and he prepared a separate press release which was issued by the Commis- sion's information office and was made a part of the release, together with the formal opinion. I will read this press statement. It is headed as follows: "Press statement by Commissioner Howard Mor- gan for dailies in the Pacific Northwest States." Commissioner Morgan's release then continued: Commissioner Morgan, a resident of Oregon and former Oregon public utility commissioner, commented further: "All three of the Pacific coast Governors, all six of the Senators, and the public utility commissioners of Oregon and Washington, are on record against this sort of an intertie, in the absence of legislation protecting he Pacific Northwest against power raids under the prefer- ence clause. The Governors and State utility commissioners were informed of this proceeding, but did not understand its significance amid did not investi- gate its interstate aspects deeply enough to discover what was involved. The result was that while the Governors remained silent, the. State utility com- missioners actually approved the security issue with no reservations as to the projects involved. The majority of the FPC followed their lead. PAGENO="0190" ADMINISTRATIVE PROCESS 186 "When I discovered that a California intertie was involved, I Informed the commissioners in the Northwest through Chairman Pearson of the Washington commission. Mr. Pearson promptly protested, and asked the FPC to hold up authorization for the intertie. Unfortunately, this proved not to be enough to stop the majority of the FPC from acting, and at the time final action was rushed through this morning, we still had not heard from anyone in Oregon. "I shall file a full and vigorous dissent, but I am afraid the Northwest States must now look to Congress for the protection they will shortly need." The final paragraph: "This is already a mess. and it can be a dangerous and expensive mess." Mr. BROTZMAN. This is all from the press release? Mr. SWIDLER. This is all from the press release issued by the Fed- eral Power Commission information office. This is the separate press release by Commissioner Morgan. Mr. BROTZMAN. These all came out- Mr. SwImmER. They were issued together. They all come out to- gether. The order, with the notation of the grounds of his dlssent, and a statement that a full dissent and a majority statement would be issued later, the Commission's formal covering press release, Mr. Morgan's supplementary press release, were all issued as a package on March 28. I offer this package for the record, Mr. Chairman. The CHAIRMAN. Let it be received for the record. (The document referred to is as follows:) [Federal Power Commission Docket Nos. E-7024 and E-7025, release No. 11,920] FPC AuruonizEs PACIFI0 Pownn & LIGIIT Co. To IssuE $35 MILLION IN Fntsr MORTGAGE BoNDs AND 696,695 SHARES or COMMON Srocx WASHINGTON, D.C., March 28, 1962.-The Federal Power Commission today authorized Pacific Power & Light Co., of Portland, Oreg., to issue $35 million, in 30-year first mortgage bonds and 696,695 shares of common stock, par value $3.25 per share. Proceeds from the stock, of about $19,900,000, and from the $35 million bond issue will be used by the company to repay an estimated $42 million of outstand- ing promissory notes and to help finance its current construction program. The bonds will be sold at competitive bidding. The common stock will be offered to Pacific Power's stockholders for subscription on the basis of one share for each 20 shares held. Any unsubscribed shares will be sold at competitive bidding. Pacific Power's current construction program is expected to require about $44 million for 1962 and $56 million for 1963. The construction expenditures include $250,000 for completion of the company's Iron Gate hydroelectric project, and $18 million for installation of a 150,000-kilowatt unit at Its Glenrock, Wyo., Dave Johnston steamplant. Other items are $5,500,000 for a new hydroelectric project, and $20,865,000 for electric transmission facilities, including a 230-kilovolt line extending from Kiamath Falls, Oreg., into California where it would interconnect with Pacific Gas & Electric Co.'s system. Pacific's share of this line is estimated to cost $5 million. Commissioner Howard Morgan dissented on the grounds that the period of public notice was unreasonably short, that the FPC's notices of application were deficient, and that construction of the Oregon-California intertie "has not been shown to be compatible with the public interest and should not be authorized pending policy decisions relative to such an intertie scheduled by the current session of the Congress." A Commission opinion and Commissioner Morgan's dissent will be issued later. PAGENO="0191" ADMINISTRATIVE PROCESS 187 Piums STATEMENT BY COMMISSIONER HOWARD MORGAN FOR DAILIES IN THE PACIFIC NORTHWEST STATES Commissioner Morgan, a resident of Oregon and former Oregon Public Utility Commissioner commented further: "All three of the Pacific Coast Governors, all six of the Senators, and the public utility commissioners of Oregon and Washington are on record against this sort of an intertie, in the absence of legislation protecting the Pacific Northwest against power raids under the pref- erence clause. The Governors and State utility commissioners were informed of this proceeding but did not understand its significance and did not investigate its interstate aspects deeply enough to discover what was involved. The result was that while the Governors remained silent the State utility commissioners actually approved the security issue with no reservations as to the projects involved. The majority of the FPC followed their lead. "When I discovered that a California Intertie was involved I informed the commissioners in the Northwest through Chairman Pearson of the Washington Commission. Mr. Pearson promptly protested and asked the FPC to hold up authorization for the. intertie. "Unfortunately this proved not to be enough to stop the majority of the FPC from acting, and at the time final action was rushed through this morning we still had not heard from anyone in Oregon. "I shall file a full and vigorous dissent, but I am afraid the Northwest States must now look to Congress for the protection they will shortly need. "This is already a mess, and it can be a dangerous and expensive mess." UNITED STATES OF AMERICA FEDERAL POWER COMMISSION Before Commissioners: Joseph C. Swidler, Chairman; Howard Morgan, L. J. O'Connor, Jr., and Charles R. Ross Pacific Power & Light Co. Docket No. E-7024 ORDER AUTHORIZING THE ISSUANCE OF FIRST MORTGAGE BONDS (Issued March 28, 1962) Pacific Power & Light Company (Applicant), a corporation organized under the laws of the State of Maine and doing business in the States of California, Oregon, Washington, Wyoming, Montana and Idaho, with Its principal business office at Portland, Oregon, filed an application on February 19, 1962, as supplemented on February 27 and March 8 and 13, 1962, for an order, pursuant to Section 204 of the Federal Power Act, authorizing the Issuance of $35,000,000 principal amount of First Mortgage Bonds, due 1992, to be sold at competitive bidding. Applicant proposes to issue the Bonds under its Indenture of Mortgage and Deed of Trust, dated as of July 1, 1947, to Guaranty Trust Company of New York (now Morgan Guaranty Trust Company of New York), and Oliver R. Brooks (Wesley L. Baker, successor), as trustees, as heretofore supplemented and as to be further supplemented by a proposed Thirteenth Supplemental Indenture to be dated as of April 1, 1962. On or about March 29, 1962, Applicant proposes to invite sealed, written bids for the purchase of the Bonds, by newspaper publication and by distribution of a Form of Bid, together with a statement of the terms and conditions relating thereto and a recital of the terms of purchase which will constitute the purchase agreement herein. All bids, whether from a single bidder or from a group of bidders, must be submitted on the Form of Bid provided by the Applicant and each counterpart must be signed by the bidder, or by the representative in the case of a group of bidders. Each bid must be for the purchase of all the Bonds and must specify: the coupon rate, which shall be a multiple of one-eighth of 1 percent; the price exclusive of accrued interest to be paid to Applicant for the Bonds, which price shall be not less than 981/2 percent nor more than 102~/4 percent of the principal amount thereof; and, that Applicant shall be paid the amount of the accrued Interest on the Bonds from April 1, 1962 to the date of PAGENO="0192" 188 ADMINISTRATIVE PROCESS payment therefor and delivery thereof. Each bid must be accompanied by a certified or official bank check or checks in the aggregate amount of $1,050,000, payable in New York Clearing House funds. Unless postponed all bids for the proposed issuance of Bonds must be presented to Applicant before 11 :00 a.m., New York Time, on April 11, 1962, at Room 2033, Two Rector Street, New York 6, New York. Unless Applicant rejects all bids, which it reserves the right to do, or excludes a bid or bids for reasons specified in the statement of the ternis and conditions, it will accept the bid which will provide it with the lowest annual cost of money. Applicant will utilize the proceeds of approximately $35,000,000 to be obtained from the proposed issuance of Bonds, together with proceeds of approximately $19,900,000 to be obtained from the proposed issuance of additional Common Stock (Docket No. E-7025), to repay an estimated $42,000,000, principal amount of Promissory Notes, which Applicant has already issued or will have issued under the authority granted by this Commission in Docket No. E_7011,* arid toward the cost of its current construction program which is expected to require the expenditure of approximately $44,000,000 for 1962 and $56,000,000 for 1963. Applicant's estimated construction expenditures for 1962 and 1963 include $250,000 for completion of the Iron Gate Hydroelectric project in 1962, and $3,000,000 in 1962 and $15,000,000 in 1963 for installation of a 150,000 kw unit at the Dave Johnston Steam Plant at Glenrock, Wyoming. Applicant allocates $5,500,000 to the Salt Caves Hydroelectric project-subject to obtaining required regulatory authority permits. Other items, for 1962 and 1963, respectively, are: electric transmission facilities, $14,265,000 and $6,600,000; other facilities, $5,031,000 and $4,500,000; electric distribution facilities, $15,383.000 and $17,000.- 000; additions to steam heating, water and telephone utility systems, $1,827,000 and $1,540,000, and, other plant facilities, surveys and investigations, $1,845,000 and $5160000. Written notice of the application has been given to the Public Utilities Com- mission of California, the Idaho Public Utilities Commission, the Public Service Commission of Montana, the Public Utility Commissioner of Oregon, the Wash- ington Utilities and Transportation Commission, and the Public Service Com- mission of Wyoming, and to the Governor of each of those States. Notice of the application has also been given by publication in the Federal Register on March 8, 1962 (27 F. R. 2259), stating that any person desiring to be heard or to make any protest with reference to the application should file a petition or protest on or before March 21, 1962 with the Federal Power Commission, Washington 25, D.C. No protest or petition or request to be heard in opposition to the granting of the application has been received. On March 13. 1962. the Public Utilities Commission of California; on March 6, 1962, the Idaho Public Utilities Commission; on March 7, 1962. the Public Service Commission of Montana; on March 16, 1962, the Public Utility Commis- sioner of Oregon; on March 16, 1962, the Washington Utilities and Transporta- tion Commission; and, on Mnrch 8, 1962, the Public Service Commission of Wyoming approved the proposed issuance of $35,000,000 principal amount of Bonds, in the manner and for the purposes set forth above. The Commission finds: (1) Applicant, a Maine corporm~tion, owns and operates facilities for the trans- mission and sale at wholesale of electric energy which is transmitted between the States of Oregon and Washington, from the State of Oregon to the State of California, and between the States of Montana and Wyoming, and is consumed outside of the States in which it is generated. These facilities are in addition to and do not include facilities used for the generation of electric energy or facili- ties used in local distribution or only for the transmission of electric energy in intrastate commerce, or facilities for the transmission of electric energy con- sumed wholly by the transmitter. Applicant is, therefore, a public utility within the meaning of that term as used in Section 204 of the Federal Power Act. *By order issued October 6, 1961, in Docket No. E-7011, Applicant was authorized to issue up to $45000000, principal amount of Promissory Notes, under a Credit Agreement of August 15, 1961, between Applicant and various banks. The notes were to be dated as of the dates of the borrowings; were to mature eleven months after dates or on March 31, 1963, whichever should be earlier; and, were to bear interest at the New York prime rate. The notes were to be issued for the following purposes: to discharge notes aggregating $10 000,000 issued by The California Oregon Power Company and assumed by Applicant in the merger of California Oregon into Applicant; to discharge notes aggregating $18,000,000 issued b~ Applicant to obtain construction funds; and, to provide additional funds required for Applicant's construction program. The application for the issua'ce of the notes stated that Appl'cant's construction program had an estimated cost of $30034000 in the last six months of 1961 and an estimated cost of $12,000,000 In the first three months of 1962. PAGENO="0193" ADMINISTRATIVE PROCESS 189 (2) The proposed issuance and sale of Bonds, as described above, will con- stitute an issuance of securities within the purview of Section 204 of the Act. (8) Applicant is not organized and operating in a State under the laws of which the security issue here involved is regulated by a State commission within the meaning of Section 204(f) of the Act; and the proposed issuance of securities is, therefore, not exempt by virtue of that Section from the requirements of Sec- tion 204 of the Act. (4) The proposed issuance and sale of Bonds, as hereinafter authorized, will be for a lawful object, within the corporate purposes of Applicant and compatible with the public interest, which is appropriate for and consistent with the proper performance by Applicant of service as a public utility and which will not im- pair its ability to perform that service, and is reasonably appropriate for such purposes. (5) The period of public notice given in this matter is reasonable. The Comrnis$ion order8: (A) The proposed issuance and sale of Bonds, upon the terms and conditions and for the purposes specified in the application, as described above, are author- ized, subject to the provisions of this order. (B) The proposed issuance and sale of Bonds at competitive bidding shall not be consummated until- (I) Applicant shall have amended its application pursuant to the require- ments of Section 34.2i~k) (3) of the Commission's Regulations under the Federal Power Act relating to compliance with competitive bidding require. ments, and Section 84.2(k) (4) of those Regulations relating to affiliation, and shall have either filed such amendments or shall have mailed them and advised the Commission by telephone and telegraph, as contemplated in Section 34.9 of the Regulations. (ii) The Commission, by further order, shall have approved the price to be received by Applicant for the proposed issuance of Bonds and the interest rate thereof. (C) This authorization shall expire unless the transaction hereby authorized is consu - within 60 days from the date of issuance of this order. ping authorization is without prejudice to the authority of this y other regulatory body with respect to rates, service, accounts, `~s or determinations of cost,. or any other matter whatsoever ~"h may come before this Commission. `~ order shall be construed to imply any guarantee or ~ f the United States with respect to any see iritiec~ LO wi on C r M~ its ot ice wa bly ~ cci ion or ai estim~ rents i. A `s dissent ~ 1 be issued later. JOSEPH H. Gurnion. secretary. i Morgan, PAGENO="0194" 190 ADMINISTRATIVE PROCESS Section 204 of the Federal Power Act, authorizing the issuance of up to 696,695 shares of Common Stock, par value $3.25 per share. Applicant proposes to offer up to 696,695 additional shares of Common Stock to its Common Stockholders of record at the close of business on March 26, 1962, for subscription on the basis of one share of additional Common Stock for each twenty shares of outstanding Common Stock held on such record date, with a supplementary subscription privilege if the number of shares held on the record date is not evenly divisible by twenty or is less that twenty. Rights to subscribe for the additional Common Stock will be evidenced by transferable subscription warrants. The subscription price per share will be determined by Applicant's Board of Directors shortly before the proposed offering date, and will be fixed in relation to, and at an appropriate discount from the then market price of Applicant's presently issued and outstanding Common Stock. The subscription offer will expire at 3:30 p.m., New York Time, on May 1, 1962. In addition, Applicant proposes to sell to underwriters any shares of additional Common Stock for which Applicant's Common Stockholders do not subscribe, at the same price at which shares of additional Common Stock will be offered under the sub- scription offer, and to fix by competitive bidding the compensation of the under- writers for their commitments to purchase the unsubscribed Stock. On or about March 29, 1962, Applicant proposes to invite sealed, written bids for the purchase of the unsubscribed Stock by newspaper publication and by distribution of a form of bid and a form of purchase agreement together with a statement of terms and conditions relating thereto. All bids, whether from a single bidder or a group of bidders, must be on the form of bid furnished by Ap- plicant and must be for the purchase of all of the unsubscrlbed Stock. Each bid must specify, among other things, (1) the price per share to be paid to Applicant for the unsubscribed Stock, which price shall be the same as the sub- scription price to Applicant's Common Stockholders; and, (2) the aggregate amount to be paid by Applicant to the bidder or bidders as compensation for their commitments and obligations in connection with the purchase by them of the u scril ock. em ned PAGENO="0195" ADMINiSTRATIVE PROCESS 191 Applicant's estimated construction expenditures for 1962 and 1963 include $250,000 for completion of the Iron Gate Hydroelectric Project in 1962, and $3,000,000 in 1962 and $15,000,000 in 19tk~ for installation of a 150,000 KW unit at the Dave ~ohnston Steam Plant at Glenrock, Wyoming. Applicant allocates $5,500,000 to the Salt Caves Hydroelectric Project-subject to obtaining re- quired regulatory authority permits. Other items, for 1962 and 1963, respec- tively, are: electric transmission facilities, $14,265,000 and $6,600,000; other facilities, $5,031,000 and $4,500,000; electric distribution facilities, $15,383,000 and $17,000,000; additions to steam beating, water and telephone utility sys- tems, $1,827,000 and $1,540,000; and, other plant facilities, surveys and investi- gations, $1,845,000 and $5,160,000. Written notice of the application has been given to the Public Utilities Com- mission of California, the Idaho Public Utilities Commission, the Public Service Commission of Montana, the Public Utility Commissioner of Oregon, the Wash- ing Utilities and Transportation Commission, and the Public Service Commis- sion of Wyoming, and to the Governor of each of those States. Notice of the application has also been given by publication in the Federal Register on March 8, 1962 (27 F.R. 2259), stating that any person desiring to be heard or to make any protest with reference to the application should file a petition or pro- test on or before March 21, 1962 with the Federal Power Commission, Washing- ton 25, D.C. No protest or petition or request to be heard in opposition to the granting of t~ie application has been received. On March 13, 1962, the Public Utilities Commission of California; on March 7, 1962, the Idaho Public Utilities Commission; on March 6, 1962, the Public Serv- ice Commission of Montana; on March 16, 1962, the Public Utility Commissioner of Oregon; on March 16, 1962, the Washington Utilities and Transportation Commission; and on March 9, 1962, the Public Service Commission of Wyoming approved the proposed issuance and sale of Common Stock by Applicant in the manner and for the purposes described above. The Commission finds: (1) Applicant, a Maine corporation, owns and operates facilities for the transmission and sale at wholesale of electric energy which is transmitted be- tween the States of Oregon and Washington, from the State of Oregon to the State of California, and between the States of Montana and Wyoming, and is consumed outside of the States in which it is generated. These facilities are in a4dltlon to and do not include facilities used for the generation of electric energy or facilities used in local distribution or only for the transmission of eiectrir energy in Intrastate commerce, or facilities for the transmission of elec- tric energy consumed wholly by the transmitter. Applicant is, therefore, a public utility within the meaning of that term as used in Section 204 of the Federal Power Act. (2) The proposed Issuance of Common Stock, as described above, will con- stitute an issuance of securities within the purview of Section 204 of the Act. (3) Applicant Is not organized and operating in a State under the laws of which the security issue here involved is regulated by a State commission within the meaning of SectIon 204(f) of the Act, and the proposed issuance of Common Stock is, therefore, not exempt by virtue of that Section from the re- quirements of Section 204 of the Act. (4) The proposed issuance of Common Stock, as hereinafter authorized, will be for a lawful object, within the corporate purpOses of the Applicant and com- patible with the public interest, which is appropriate for and consistent with the proper performance by the Applicant of service ~s a public utility and which will not impair Its ability to perform that service, and Is reasonably appropriate for such purposes. (5) The period of public notice given in this matter i~reasonable. The Commission orders: (A) The proposed issuance of Common Stock, upon the terni~ and conditions and for the purposes specified in the anplieatioh, as described ab~ove, is hereby authorized, subject to the provisions of this order. (B) The proposed issuance and sale of Common Stock at competitive bidding shall not be consummated until- (1) Auplicant shall have ammended its application pursuant to ~the re- quireinent of Section 34.2(k) (3) of the Commission's Regulations under the Federal Power Act relating to compliance with competitive bidding requirements, and Section 34.2(k) (4) of the Regulations resulting to afilil- PAGENO="0196" 192 ADMINISTRATIVE PROCESS ation, and shall have either filed such amendments or shall have mailed them and advised the Commission by telephone and telegram as contem- plated by Section 34.9 of the Regulations; (Ii) The Commission, by further order, shall have approved the sub- scription price per share to be received by Applicant for the Common Stock and the compensation to be paid to underwriters under the proposed ar rangement as described above. (C) This authorization shall expire unless the transactions hereby authorized are consummated within 60 days from the date of issuance of this order. (D) The foregothg authorization is without prejudice to the authority of this Commission or any other regulatory body with respect to rates, service, accounts, valuation, estimates or determinations of costs, or any other matter whatsoever which is now pending or which may come before this Commission. (B) Nothing in this order shall be construed to Imply any guarantee or thli- gatlon on the part of the United States in respect to any securities to which this order relates. By the Commission. Commissioner Morgan dissents on the grounds that the period of pub'ic notice was unreasonably short, that the notice of application was deficient and that the construction of one of the facilities to be financed from the proceeds of the securities authorized herein-the Oregon-California inter-tie as proposed by Applicant-has not been shown to be compatible with the public interest and should not be authorized pending policy decisions rela- tive to such an inter-tie scheduled by the current session of the Congress. A Commission opinion and Commissioner Morgan's dissent will be issued later. Josurn II. OuTRIDE, Secretary. Mr. ROGERS of Florida. Would the gentleman yield? Mr. Swmn~R. I am not through-excuse me. Certainly. Mr. ROGERS of Florida. I will let you finish in just a minute. Is it a normal procedure for individual Commissioners to issue press releases? Mr. SWIDLER. No, sir; it :was the first time this had happened. This was a great shock. The Commission has never been the same. Mr. ROGERS of Florida. I would think maybe some Governors and other people mentioned in the press release might not be the same. What I want to know, the point I want to make, in your press r~iease, do you comment on matters outside the purview of the actuai~order? Mr. SWIDLER. No, sir. Mr. ROGERS of Florida. In press releases? Mr. SWIDLER. No, sir. Mr. ROGERS of Florida. Was this done with the concurrence of the other members? Mr. SWIDLER. No, sir. Mr. ROGERS of Florida. I am rather amazed. I yield back. Mr. Moss. Will the gentleman yield? Mr. BROTZMAN. Yes. Mr. Moss. I think we should recognize here that we are dealing with something other than content. There were complaints made to my Subcommittee on Information, and in all respect, Mr. Chairman, the levity you are attempting to engender you did not attempt to en- gender when you visited my office to discuss it. The Comm~~s~ion acted here and suppressed a dissent, and I am going to request permission to put into this record the chronology und the fact of the suppression and the fact that the Commission sub- sequenly acted by appropriate minute to make certain that this type of suppression not occur again. As a result of it, we interrogated other Commissioners and we found one other where rules tended to suppress dissents. PAGENO="0197" ADMINISTRATIVE PROCESS 193 So we are not dealing with content here and my committee was not concerned, as I told you very definitely, with either your opinion or Mr. Morgan's, but we were gravely disturbed over the suppression, the difficulty, the refusal to make available after it was really ready, the material which people had a right to expect they could receive and did not. And I think you should make the record here on your own abund- antly clear and not try to mislead. Because I think inherent in what you are saying is an attempt to deal with content and with avoidance of the procedural problem which was involved here, the rather out- rageous conduc~t of the Commission in that instance. Mr. SWIDLER. I told Mr. Rogers I had not finished. I am going to try to tell the whole story. Mr. Moss. I am taking it in the way you intended. You were at- tempting to distort here what in my judgment was a serious act by the Commission. Mr. SWINDLER. Maybe we did wrong,. but I will tell you what the whole story was. Mr. ROGERS of Florida. May I ask one question if the gentleman will further yield? The CHAIRMAN. Comments and reflections are being made on the Chairman of the Commission, and I think he should be given an op- portunity to get the whole picture here before he is taken under attack. I think the members should give him an opportunity to get the story to us. Mr. ROGERS of Florida. I agree with you. I just wanted to fix in my own mind the exact phraseology of the press release. I thought the press release said "I shall write a dissenting opinion." \Was that true? M~. SwWLER. "I shall file a full and vigorous dissent." Mr. oo~ss of Florida. I shall file. The press release was issued, evidently~ before he had filed this dissent Mr. SWIIL&~. Yes. This was a p~$ if the order. We had had no chance yet to prepare a formal dissent. Mr. BROTZMAN. The \purpose I yielded was to clarify statements you had made down to th4t ~unctnre relative to press releases I think you were about to continue ô~ with the rest of the transaction. It is entirely new to me I know nothing about this and was merely ask ing for information, so the other irn~ertions I know nothing about at this juncture. But I think I can cIeft~ down to the press release. You intend to proceed at that point? Mr SWIDLER I intend to proceed and intend to tell the whole story I wonder if this would be a convenient time, Mr. Chairman, for a short recess? The CHAIRMAN. Yes. The committee will recess for ~ minutes. (Short recess.) The CHAIRMAN. You may proceed, Mr. Brotzman. Mr 13i cYPZM ~N Before the recess, Mi Ch'uiman, by youi testi mony, you h'id est'tbhshed the fact that there was a press re1ea~e, `t press release that went to the Northwest, I think you said~ and you were going to proceed to tell the rest of the story in your ~i ords as to~ what happened. PAGENO="0198" 194 ADMINISTRATIVE PROCESS Mr. SWIDLEE. Yes, sir. Mr. BROTZMAN. Then I yielded and we kind of got off the track for a moment. We are back to that point. Mr. SWIDLER. Well, the next event in this chronology was that Mr. Morgan completed his draft of dissentS on April 3 and lodged a copy with the Secretary, who held it. This was in accordance with the usual procedure in the Federal Power Commission and all other regu- latory agencies of which I am aware, that opinions are issued together. However, Mr. Morgan-I am now referring to nothing off the rec- ord. He has said this in statements that he has made-had 50 copies mimeographed which he sent to Members of Congress. And he sup- plied at the time a copy of a typical letter of transmittal. This one is dated April 4 and is addressed to the Honorable Maurine B. Neu- herger, U.S. Senate, Washington, D.C.- DEAR SENATOR NEUBERGER: The enclosed material refers to a most important controversy affecting your State, as well as affecting questions now being con- sidered by the Senate Committee on Interior and Insular Affairs. I am confident that a few minutes spent reading this material will be of great value to you. Very truly yours, HOWARD MORGAN, Cominissio~ver. This is 1 of 50. I offer this for the record. The CHAIRMAN. You read its whole content, didn't you? Mr. SWIDILER. I read its whole content. The CHAIRMAN. Yes. Mr. Swiimiui. Subsequently, when word of the dissent became known, in response to a request from the press, another 50 copies were distributed to the press. This was in the period from April 4 to April. 11, 1962. / On April 11, Mr. Morgan, for the first time, raised with mithe question about the suppression of his opinion and the same,4ay, as I recall, Mr. Moss raised the same question. I responded, as I recall, to Mr. Morgan that this w~ my under- standing-and the entire Commission's understaiuMng_of the ar- rangement that was made at the meeting that bo~th'opinions would be issued together. I might say that I believe now that Mr~,~Morga.n had a different un- derstanding `tnd did not think that h~w~t~ bound by `my oblig'ttion or promise not to release his opinioji~earlier.. Mr. BROTZMAN. Do I understand that the dissent was issued prior to the majority decision? Mr SWIDLER Yes, sir, and I am about to give more det'uls of th'Lt Now, this dissent had now been published all over the country and, of course, from April 3 on, everybody knew what the situation was and there had been not only the summary of his dissenting position in the order, but also the statement in the press release, and his own press release and from April 3 on he had sent out 100 copies to the press. So that you had `i fairly n'Lrl ow question, which w is whether the failur~ to issue the formal dissent by our own Information Office con- stituted suppression. Up to this point we had said not one word, sir, in defense of our order. PAGENO="0199" ADMINISTRATIVE PROCESS 195 I told Mr. Moss, in response to his inquiry, what he considered to be a case of suppression, that I would take it up with the Commission, and at our regular meeting on April 12 we took the matter up and we officially released the dissent. This, of course, created no sensation because everybody had it any- way, but we officially released it on April 12. I think I said that the question was first raised with me on April 11. I think it was April 10, sir, just to correct the record. On April 17, after his opinion had been in circulation for exactly 2 weeks, the majority first issued its own opinion explaining its reasons for issuing its order. Now, this is the case of the suppression of Mr. Morgan's opinion. Mr. BROTZMAN. When was the majority opinion- Mr. SWIDLER. What is that, sir? Mr. BROTZMAN. When was the majority opinion first ready? Mr. SWThr~ER. On the 17th, sir. It took a while to write. Mr. BROTZMAN. That was the first time it was ready? Mr. SWIDLER. Yes, sir. Mr. BROTZMAN. So you couldn't have published it earlier had you wanted to? Mr. SWIDLER. No, sir. There were four of us. We all had to agree on it and circulate it. Of course, we had no opportunity to persuade Mr. Morgan because he had already issued his. I think that this was not good practice; that in an agency no opin- ions should be issued, if possible, until they are all issued. Mr. BR0PZMAN. Well, let me ask you- Mr. SWrnLER. But I do think there is a special point here, that Mr. Moss made and which has merit: This was a case where an order was is~ied first. I think that in such `1 e ise perhaps there is re'tson for permitting a statenie~t of the reasons for the dissent in an exceptional case promptly. Our present risgulations which we `tdopted after the intervention of Mr. Moss, provide that as a matter of agreement among us, that in the circumst'tnces in the future, `t dissenting opinion m'ty be issued on 24 hours' notice to the ethers, unless the dissenter happens to think that this would be unwise iii a particular situation, in which case he may-he doesn't need to give evei~ the 24 hours' notice, but I might say that since that time there have heen no further instances of opin- ions being issued separately, and the majority and minority opinions have always been issued together. Mr. BROTZMAN. Now let. me ask you this: Now, normally, when your Information Office issues a press re- lease, do you do this on a limited basis, and by that I mean, do you send it to a p'trticul'~r loe'ile where it is ptrt~cul~irly involved with the issue presented, or do you send it out on a general basis? Mr. SWIDLER. Oh, we send it out on a general basis. We have a list of people who get. all of our press releases and it goes out to everybody. Mr. BROTZMAN. I would like to move on to one other area- Mr. SWIDLER. Our press releases are all issued about 3,000 copies, ordinarily, and they are the bread-and-butter type of releases which PAGENO="0200" 196 ADMINISTRATIVE PROCESS go around to the people in the industry, who want to know what we are doing. Most of them get very little attention from the general press but, of course, they are quite important in the natural-gas and electric-power and associated industries. Mr. BROTZMAN. Now, we have listened to almost 2 full days of testi- mony and there seems to be some debate as to whether or not this particular letter was an attack or whether it was not. However, taking the letter and the record, I think we can pin it down to one specific, and this is one sentence, and that is basically this: Ordinary men yield too quickly to the present-day urge toward conformity, timidity, and personal security. Mr. Morgan, in his testimony, on two occasions has stated in one way or another that an example of this was the Idaho Power case. You have been in the hearing room, have you not? Mr. SWIDLER. Yes, I heard that; yes, sir. Mr. BROTZMAN. Now, also originally he stated that the decision in that case was predicated upon a set of facts or certain principles stated in the decision, but that this, in fact, was not the reason for~ the ç decision. You heard that statement? Mr. SWIDLER. Yes, sir. Mr. BROTZMAN. One reason he gave, I believe, was that someone~ some Commissioner, had stated it would disturb the industry. Yesterday I think when I was questioning him he added to that that there was some other reason given by a Commissioner, which he didn't think was tenable, namely th'tt the Id'tho Power Commis sion was studying the matter or had the matter under considerationv Now, pinning it down to this p'~trticular point, I ask you tMs question: Does this decision, the Idaho Power Company decision,~ftthte the reasons for the opinion in that. particular case? Mr. SWIDLER. The Idaho Power decision is a form .1 order. The majority did not undertake in that case to resp~i~ to the dissent. The formal order had already been issued, an4 *e thought that our differences in approach with Mr Morgan were already `~dequatily stated in the two opinions that had been~flled in the Pacific Power and Light case. So that there is no majority opinion replying to the dissent in the Idaho Power case. But I have explained in~'my testimony here at some length, evi- dently whe~i you were out, what the considerations were in that case and how the point of view that we took in the Pacific Power and Light case applied uflder~the fact of the Idaho situation. And in sn~$ance, this was a case where there was no reason to question the soundness of the securities or the need of the company for the money or the capital structure of the company, where we felt it would not be an appropriate use of our authority over the issuance of securities to initiate the numerous collateral investiga- tion~ which were proposed on the company's rates, which were al- ready under investigation by the State Commission, not because they were high, incidentally, but because they were too low; its deprecia- tion practices, not because they charged too much depreciation but PAGENO="0201" ADMINISTRATIVE PROCESS 197 because they charged too little; whether it was violating the terms of its license for the construction of the lower Hells Canyon project, its problems with fish passage and various other things that we thought we could handle in a more orderly way or which did not represent a provident use of staff or which went entirely beyond our province. And we declined to use this security issue proceeding as the fulcrum for these investigations. Mr. BROTZMAN. So you predicated that order on those reasons and not on a desire to conform or the fact that you were timid or had a desire for personal security? Mr. SWIDLER. Yes, sir; I have no fear whatever of the Idaho Power Co. Mr. BROTZMAN. And one other thing: When you write these cle- cisions and these opinions, you predicate them upon the evi(ieflce that has been presented to you and the facts adduced in evidence, and not on some other hidden purpose or meaning, is that correct? Mr. SWIDLER. We try very hard, Mr. Brotzman, to decide a case on the record and to be a model of impartiality and handle it with administrative justice. Mr. BROTZMAN. The reason I am interested in this matter particu- larly, of course, as the chairman stated initially, is we are trying to improve the process and having had a small bit of experience in this general area at the State level, it is of great importance, of course, to the attorneys and to the people and to everyone concerned that we know why you are deciding a decision a certain ~yay. It is of great importance. Mr. SWIDLER. Well, I think you can be assured, Mr. Brotzman, that we are doing our level best on the record. I don't claim that we are not making some mistakes; I am sure that we are. Mr. BEOTZMAN. I have no further questions, Mr. Chairman. The ONAIRMAN. Mr. Swidler, you have in my judgement presented a very vigorous defense in behalf of yourself and the Commission and have fairly given the committee your feeling about this entire matter. I gather from the overall picture that this is a matter that devel- oped rather competitively within the Commission, culminating in the action that was taken. I gather that you take your work very seri- ously. From my observation you hav~è~ made a very great effort to do your 1ob as chairman as you see it, With the organization and per sonnel at your disposal and with the Oom~uission in carrying out its duty and responsibility. you feel that your actions have be~. in `the public interest? Mr. SwIDr~ER. Yes, sir. The CIIAIRMAN. Do you feel that your ad~iithstration and actions in the Commission have been in the intereet of the coilsumers? Mr. SWIDLER. Yes, sir. . The CHAIRMAN. You have had that in mind as you have worked in an effort to serve the people who have appeared before you? Mr. SWIDLER. To the best of our ability, sir. The CHAIRMAN. Do you feel that the industry must have the deci- sions of the Commission before it can serve the public? 99-948 O-68----14 PAGENO="0202" 198 ADMINISTRATIVE PROCESS Mr. SWIDLER. I am sorry, sir; I didn't hear the question. The CHAIRMAN. Do you feel that the industry must have decisions of your Commission on the matters under your jurisdiction before they can adequately serve the public? Mr. SWIDLER. Yes, sir. I think that a good many of the business decisions of the industry are dependent upon our moving; that we can either make the industry stronger or we can hold them back and make them weak. And I don't think it would be to anybody's interest if we should not attempt in any way we can to help them at the same time that we help the consumer. The CHAIRMAN. In other words, you feel that we have got to con- sider the problems of the industry in line with your duty as a member of the Commission in order for it to be able to serve the public? Mr. SWIDLER. Yes, sir. All segments of both industries. The CHAIRMAN. Now, you have had some observations in the past with similar matters, as to how it affected other boards or commis- sions, have you not? Mr. SWIDLER. I have worked for the Tennessee Valley Authority, sir, for many years. The CHAIRMAN. When you were a young lawyer, did not a similar situation develop among the TVA Board? Mr. SWIDLER. Yes, sir. There was another "Morgan" case, I might say, in the. TVA, Arthur E. Morgan. The CHAIRMAN. Ironically the one who dissented in that was named "Morgan," too? Mr. SWIDLER. Yes, sir, Arthur E. The CHAIRMAN. And didn't Mr. Leland Olds have something to do with the Tennessee Valley Authority back in those days? Mr. SWIDLER. No, sir. The CHAIRMAN. Was Mr. Lilienthal- Mr. SWIDLER. Mr. Lilienthal, yes, sir. The CHAIRMAN. Then, from your experience as to what can happen to a board or a commission, you of course felt this eveii more keenly? Mr. SWIDLER. Yes, sir. I think it is a matter that'effects each mem- ber of the commission very deeply. The CHAIRMAN. As a matter of fact, didi~t't that instance provoke a joint congressional committee investig~t'ion? Mr. SWIDLER. Yes, sir. The CHAIRMAN. More far re~hing than this has been, wasn't it? Mr. SWIDLER. Yes, sir. T~~wa.s an investigation that Mr. Francis Biddle was employed to I~d and occupied the time of the joint com- mittee for a number o~-fnonths, and it came out with a 20 or 30 vol- ume report. I don't know t1~iàt I want to carry the parallel any further, Mr. Chairman. The CEAIRMAN. No, I know that is true, but I merely mentioned that to let the record show that even as a young man in public serv- ice you had occasion to observe what happened in a situation such as this that affected the particular board involved. MF. SWIDLER. Yes, sir. PAGENO="0203" ADMINISTRATIVE PROCESS 199 The CHAIRMAN. Now, I know there has been a lot of discussion and many questions asked about the interpretation of the letter that pro- voked publicity on this matter, and it is not my purpose to rehash that again, but I hold in hand an article which I believe was the first article on it. And it is dated on Saturday, January 26. The headline is "FPC Member Raps Agencies For Conformity." Now, that was the interpretation that was placed by the publicity on this letter that was called to your attention? Mr. SWIDLER. Yes, sir. The CHAIRMAN. You felt that pretty deeply, didn't you? Mr. SWIDLER. Yes, sir. The CHAIRMAN. The very first paragraph: A fellow Power Commissioner announced yesterday that he would not accept reappointment because of "the urge for conformity, timidity, and personal in- tegrity" in the regulatory agencies. Do you feel that that was directed to you, among other Commis- sioners? Mr. SWIDLER. Yes, sir; I so understood it. The CHAIRMAN. And `it is the interpretation that the press placed on it then thiit strengthened your feeling that this was an attack on the Commissioners themselves? Mr. SWIDLER. Yes, sir. The CHAIRMAN. Now, Mr. Swidler, you started a year and a half ago, did you not, approximately? Mr. SwIDLER. I became Chairman, sir, on September 1, 1961. I had served on the Commission as a member for 2 months before that date. * The CHAIRMAN. One of the things that this committee has tried to bring about in the last several years is a policy to do something about the long, unnecessary delays before the various regulatory agencies. Did you start with the intention of trying to do something about such uniteeessary delays and long, drawnout decisions before the Commission? Mr. SWIDLEE. Oh, yes, sir. This was the great challenge of the job, to see whether I douldn't help improve the administration of the Federal Power Commission. Hhe CHAIRMAN. And you feel that you have done that? Mr. SWIDLER. I feel we have made a lot of progress, yes, sir. The CHAIRMAN. Well, I must say so far as the administration of the program is concerned I am strongly of the opinion that you have. Do you know, in dollars and cents, how many pipeline applications have been approved since you went down there in the last year and a half or a little more? Mr. SWIDLER. I think it was over $600 million last year. May I put that figure in the record, sir. The CHAIRMAN Yes Well, until we get it more nearly correct, you estimate it about $600 million last year? Mr. SWIDLER. Yes, sir. The CHAIRMAN. 1962? ` Mr. SWIDLER. Yes, sir. PAGENO="0204" 200 ADMINISTRATIVE PROCESS The CHAIRMAN. You kept in mind the interest of the public in each one of those, I believe you said? Mr. SWIDLER. Oh, yes, sir. The CHAIRMAN. Is it not a fact that with the approval of $600 million in construction, uniform throughout the United States, that it helped the economy of the country to that extent? Mr. SWIDLER. Yes, sir, it is particularly important in the steel rn- dustry, sir. A lot of that is pipe. The CHAIRMAN. Well, isn't it also important, insofar as employ- ment is concerned, too? Mr. SWIDLER. Yes, sir. The CHAIRMAN. Now, how many applications, in dollars and cents, approximately do you have pending before the Commission today? Mr. SWIDLER. That figure is in the quarterly report which is part of the record. It is appendix A to my statement, and I believe it is about $800 million. I can now give you the exact figure for the pipeline certificates, sir. In 1961 the amount authorized was $309 million. In 1962 it was $628 million and for January 1963 it was $66 million. The CHAIRMAN. Well, I for one want to compliment you and the Commission for your efforts in bringing about a decision in these matters in order that the public can be served and protected and the economy of the country improved to that extent. I have before me, as of January 30, 1963, recent activities of the Federal Power Commission. I am talking about the reports, and in which there are set out, insofar as the natural gas indust.ry is concerned 18 items. You are familiar with that, are you not? Mr. SWIDLER. Yes, sir. I would hope that you would see fit to put that in the record, Mr. Chairman. The CHAIRMAN. Well, I was going to ask you if it was included in your report that you submitted to us this morning. Mr. SwIDLER. Not in as complete a way, sir. The CHAIRMAN. Well, I should like to include this in the record because I think it contains positive facts as to what has been accom- plished by the Commission. In the same report, in the electric power. industry, it will he noted 12 specific items. You are famiiia~*lih that, are you not? Mr. SWIDLER. Yes, sir. The CHAIRMAN. Well, I think thnt that should go into the record, too, in order that it might be available to see what has been accom- plished respecting these problems before the Commissior~ And I would like to submit it for the record at this point. (The report mentioned above follows:) RECENT ACTIVITIES OF THE FPC NATURAL GAS 1. In the past 18 months the Commi~sion has disposed of two-thirds of the billiofi-doilar backlog of pipeline rate cases it inherited and has ordered inter- state pipelines to refund $350 million and reduce their rates for the future by over $62 million annually. 2. The rapid increase in the welihead price of gas sold in interstate commerce has been halted. The average price has been virtually stabilized in the past year. PAGENO="0205" ADMINISTRATIVE PROCESS 201 3. The Commission has wholeheartedly carried out its responsibility for regulating sales of gas In interstate commerce by independent producers. We have ordered producers to refund over $30 million. 4. The Commission has underway a comprehensive study in cooperation with the State commissions to determine the extent to which natural gas rate refunds reductions are being passed on to the ultimate consumer. 5. The Commission has pushed forward with area rate proceedings to fix just and reasonable rates for producers, and the hearing in the lead case involving hundreds of producers in the Permian Basin of Texas and New Mexico is well along toward completion. 6. The interim area ceilings for sales of new gas in the important producing areas of southern Louisiana and Texas Railroad District 4 were reduced by 2 cents per thousand cubic feet. 7. The Bureau of Natural Gas was reorganized to pinpoint responsibility `and assure that cases were speeded to a prompt conclusion. 8. The Commission adopted a rule requiring pipelines to file complete backup information with rate increase requests, thus eliminating field investigations and enabling the Commission to set cases for hearing at once and dispose of them promptly. 9. The Commission adopted a rule which outlaws new contracts for the sale of gas by producers that contain indefinite escalation clauses, such as the so- called favored-nations clauses, which have caused much of the inflation in the price of gas in the past. 10. The Commission adopted a rule prohibiting ex parte communications deal- ing with the merits of contested cases. 11. The Commission has taken many Steps to ease the burden of regulation on the small independent producer. (a) We have devised a one-page form in which they can file for Increases which are not in excess of our ceilings. (5) Our area rate policy In which the rates for all the producers in an area are determined in a single proceeding, relieves the small independent producer of the burdens of individual rate proceedings. 1. A field office has been established in Houston, Tex., to insure closer super- vision of personnel working in the field and serve as a clearinghouse for the problems of the producers in the area. 13. We have established an Office of Economics to assist the Commission In planning the future course of regulation of the natural gas industry because economic problems go to the core of regulatory policy. 14. The Commission has established guidelines which limit the evidence in producer certificate cases and will enable the Commission to hold the line on the price for new gas and ~at the same time dispose of certificate applications expeditiously. 15 In opinion No 869 Issued November 30 1962 the Commission rejected a price increase by H. L. Hunt and others that would have created a new, higher price plateau for natural gns In southern Louisiana and Mississippi. The de- cision was the present Commission's first decision in a llth~ated gas producer rate case and demonstrated our determinatIon to hold the line against unjusti- fied increases in natural gas prices, 16. In opinion No. 348, isued October 28, 1961, the Commission held that it had jurisdiction over the sale of all of the gas rnovIn~ in Interstate commerce, even thouo*h some of the gas was consumed In the prothiclng State The Corn mission thus prevented possible increased costs to inter~tste customers by the use of contractual arrangements purporting to seirreonte certain volumes of gas from the Interstate stream and thus to avoid FPC jurisdiction over the price paid to the producers. 17 In opinion No 351 issued January 22 1962 the ~ornm1~eIon decided the famous CATCO case on remand from the Sunreme Colirt. The decision re- duced the initial price for this 1ar~e sale of ~as in southErn Louisiana from 21.4 cents per thousand cubic feet down to 18.5 cents and ordered refunds of the higher amounts previously collected. 18 In opinion No 366 issued October 19 1962 the Con,mis~dOfl decided the rate of ietiirn issue In four rate cages involving El Paso Natural G~s Co nend ln~ before the Commission since 1955. The case was set for hearlri~ In July 1901 and the interim order procedure, which the Supreme Court recent1~7 ap- proved an described as "not only entirely annronriate hut in the best traditions of effective administrative practice," was used by the Commission to expedite PAGENO="0206" 202 ADMINISTRATIVE PROCESS the decision. The Commission ordered refunds which will total over $68 million, exclusive of interest, on the rate of return issue alone and ordered rate reduc- tions of $15.8 million annually which were made effective before the end of 1962 over the protest of El Paso. The reduced rates were, therefore, in effect in time to lower the 1963 price of intrastate gas in California which is controlled by the ranuary 1 price fixed by the FPC for interstate sales. ELECTRIC POWER 1. The Commission Is conducting a national power survey to encourage the voluntary interconnection and coordination of the Nation's power systems on a regional and interregional basis. The Commission's objectives are to promote the maximum use of the latest technology in the electric power field to provide lower rates to consumers. The survey has already stimulated many new inter- connections between companies. The advisory committees we have formed have provided a forum for all segments of the industry-public, private, and coopera- tive-to meet and discuss their expansion plans in light of the national interest in providing low cost electricity In all parts of the country. 2. When the present members of the Commission took office the Commission's electric rkte regulation functions were practically nonexistent. There were only four professional people engaged in electric rate work. The Commission took immediate action to exercise its responsibility to regulate the wholesale rates of electric utilities in interstate commerce which is one of the primary consumer protection functions of the Federal Power Act. 3. The Commission transferred the electric rate staff from the Bureau of Natural Gas where it was buried and made it a prominent part of a new division In the Bureau of Power. We have built up the electric rate staff within the limits of existing manpower and we are seeking funds to enlarge the staff to the mini- mum required to carry out effective rate regulation. 4. Many utilities did not even have their wholesale rates in interstate com- merce on file with the Federal Power Commission. We are requiring that these rate filings be made and where necessary have issued a show-cause order to re- quire the filings. Over 1,000 electric rate filings were made with the FPC in the last 6 months of 1962. 5. The FPC has issued a proposed rule that will require electric companies to support their rate filings with cost information to facilitate meaningful Com- mission review. 6. The Commission is preparing a list of all the public utilities subject to the Commission's jurisdiction which we will publish shortly. 7. The Commission has announced a proposed rule requiring strict and de- tailed accounting for political expenditures by power companies. (The rule ap- plies also to natural gas companies.) 8. The Commission has taken action to carry out its responsibility for collecting the money owed the U.S. Treasury from downstream hydroelectric projects that benefit from upstream Federal developments. (a) A provision Is being inserted in all new licenses which will require annual payments for beadwater benefits based upon a formula. (b) We have announced a rule which will accompll~h the same purpose for existing projects. In this fiscal year we are collecting $1,750,000 In headwater benefits for the Federal Treasury which is three times as much money as has been collected in the entire history of the FPC. We estimate that in the next year we will collect $4 million. 9 The Commission In o~lnion No 356 on April 19 1q62 tuled that a pumped storage hydroelectric project was subject to the Commission's jurisdiction. The Commission emphasized that the Federal Power Act conferred broad authority on the CommissIon to Insure the most comprehensive use of the Nation's water resources, 10. The Commission In opinion No. 357 on April 25, 1962, spelled out a new policy In Issuing licenses for non Federal hydro projects bui t prior to l9~5 and still operating without a license. The FPC concluded that these projects should not be given the benefit of the maximum 50-year licenses allowed under the Federal Power Act but should be licensed for a shorter term. We are making a concerted effort to bring these projects under license. 11. We have accelera ted the pace of our hydroelectric licensing work. In the last 6 months of 1962 licenses were issued for projects whose construction will add $260 million to stimulate the Nation's economy. PAGENO="0207" ADMINISTRATIVE PROCESS 203 12. We have proposed a rule requiring all licensees to submit a comprehensive plan for public recreation with their license applications to assure that the gen- eral public obtains the full benefits of the recreation potential of hydroelectric projects built under FPC license. The CHAIRMAN. Now, I think it would not serve any purpose for me to try to rehash any of the questions and answers further. You have made yourself clear as to how you felt about it. The facts, I think, are very well recorded. As far as I am concerned, the facts speak for themselves. I can appreciate your feeling. My hide may not be quite as thick and tough as Mr. Moss', because I have some feeling when I am spread all over the press in what I think to be a rather critical vein and, being a person who has been elected several times by the public, I am quite sensitive to it. So I have some sympathy with your feeling, too. But we are con- cerned with the administration of laws. That is our business. That is our problem and our responsibility, and when these matters of these regulatory agencies come up, this committee has made it very clear over a period of time that we are going to concern ourselves with them. That is the reason that we are maintained as an organization, to do what we can in carrying out our responsibility. We do not want at any time to interfere, and it will never be our purpose to do that. But it. will be our purpose, so long as I have anything to do with it, and I think I can speak for every member of this committee, to be concerned with these matters with respect to these agencies, as the Congress, as we interpret it, intended it and the law provides, too. I think yoñ have given a good account of yourself here and I am ghd to have had the. opportunity of getting the report of the activity of the Commission from you as Chairman of the Commission. I regret that it has developed this way because the feeling, as I see it, is pretty strong. It is my hope that with any or all of the implications that anyone might have, that th~y will not in any way have any affect on the future work of the Commission, and that you and all members of the Com- mission will continue to do your jobs and assume your responsibilities as you see fit. It is my hope that you will continue to do so in the future. WIth the thanksof the committee-- Mr. Moss? Mr. Moss Mr. Swidler, getting back to the matter of the so-called suppression of dissents- Mr. SWIDLER. Yes, sir. Mr. Moss (continuing). You read the press release Commissioner Morgan issued and characterized it as having been written by hun personally. Mr. SwIDLER. Yes, sir. Mr. Moss. You characterized it as "unusual"- Mr. SWIDLER. Yes, sir. Mr. Moss (continuing). As being an unusual thing in this matter. There was another unusual thing, the issuing of an order where a dissent was indicated without holding it until the dissent and the PAGENO="0208" 204 ADMINISTRATIVE PROCESS majority opinions could be released. That was unusual, too, was it not? Mr. SwmL]iia. No, sir, not in a- Mr. Moss. So my staff informs me- Mr. SWIDLER. Not in a security issues case, sir. Mr. Moss. And you so informed me. Mr. SWIDLER. Not in the security issues case, sir. I said it would be unusual- Mr. Moss. Let me now tell you the instant case. This is one which admittedly differs from a difficult case in that the Commission orders in this case were issued in advance of the opinion- Mr. SWIDLER. Yes, sir. Mr. Moss (continuing). So there was a difference here. How many days does an interested party have to take exception to one of these orders? Mr. SWIDLER. I forget the notice period, sir. Mr. Moss. Thirty days? Mr. SwIDLER. I forget the notice period. Mr. Moss. Thirty days is the period. Mr. SWIDLER. Or whatever it is. Mr. Moss. Or we confirmed this- Mr. SWIDLER. Yes, sir. Mr. Moss. The order was issued on the 28th day of March. I re- ceived a complaint in my committee on the 7th day of April and at that point your staff and my staff started discussions, culminating on the 11th of April by my directing a letter to you of the fact that I expressed grave concern. I said that I firmly believe that the Commission's refusal-nQw, this involved, incidentally, my effort to secure from the Secret~ir3r of the Commission, a proper official, a copy of the dissent, not because I was interested in the dissent but because I had received a complaint that it was not available. I firmly believe that the Commission's refusal to make the dissenting opinion a~ ailable to the public demonstrates a callous disregard for the right and the need of the public to be informed about the activities of the Commis~1on tTnder the Commission's rules, only 30 days are a~aiiable for Interested persons to seek reconsideration of the decision. Now, finally on the 12th, your Commission met. The dissent was redated from April 3 to April 12, and at that time it was issued. This was 15 of the 30 days during which interested parties could not have secured copies either of the dissent or of the majority opinion. Mr. SWIDLER, Except that there were copies of the dissent floating all around the town. He had given 50 to the press. Mr. Moss. Nos~, look, 50 copies in a nation of 180 million people, where an interested party wants to find out where one of those copies is, is not much. How does he do it? Does he call the Commission? Mr. SWIDLER. Well, 50 will-i copy will. You see, sir, the news papea's spread all-out. Fifty will cover the whole country. Mr. Moss. There were- PAGENO="0209" ADMINISTRATIVE PROCESS 205 Mr. SWIDLER. I oniy brought 50 copies of my statement here, and I hoped for national coverage. Mr. Moss. Well, I expect you do. If I was an interested party-incidentally, it was an interested party who called me and complained. It was not Mr. Morgan. I never met Mr. Morgan. I was called and given a complaint. "How do you get this thing? I called the Secretary and I couldn't get it." I would assume you should be able to call the Secretary of the Com- mission and get this type of information and not have to go out on a hunt to find 1 of the 50 copies or a copy of a press story which might or might not embody the whole--- Mr. SWIDLER. Well, Mr. Moss, we have discussed this- Mr. Moss Yes, we have discussed it- Mr. SWIDLER (continuing). And I have explained to you the great importance of the minority and the majority discussing their views to- gether and trying to write their opinions, each in the light of the other. Mr. Moss. I think the record should reflect that there was a period of 2 weeks, and that this was unusual, not only in the issuance of the individual press release but in the fact that the order was issued 2 weeks before there was available from the Commission a copy of the di~sent, and longer than that before there was a copy of the majority opinion. Mr. SWIDLER. Well, I have explained--agreed with you that in the case where an order must be issued first that there is room for an ex- ception. Our rules now make it. But I tried to explain to you that under the particular circumstances of this case it was ridiculous to talk about suppression when 100 copies were in circulation. Mr. Moss. Sir, I don't recall Mr. SWIDLER. Excuse me, sir; I am trying to finish my explanation. Mr Moss All right, go ahead Mr. SwIDLER. When the original order carried a summary of the dissent and when the press release, on March 28. carried a iummary of the dissent, and when a separate press release, ~f which 3,000 copies went out, also noted- Mr. Moss. You know, sir, one of the things- Mr SWIDLFR (continuing) The thssent- Mr Moss (continuing) I criticize news reporting most vigorously for today is the acceptance only of that which is included as a summary in a press release. I don't think that press releases, snmma~r1es of press rele~ses, give us the totality of the information we should seek and upon which we should act. Now, let's just take one other area and I will be very brief I listened with care to this discussion of the Idaho Power case. Do I understand that it is your viei~ that anythmg oth~r than a pro forma finding of the feasibility of the financing plan, that that is as far as you and the Commission should go? Mr. SWIDLER. No, sir. Mr. Moss. Do I understand you to say, and I noticed here a number of times that you have played very, very skillfully on words-you PAGENO="0210" 206 ADMINISTRATIVE PROCESS have emphasized that these discussions of rates were had because they were too low, not too high; too low rates can be as dangerous to a business. They can be uneconomic and as infeasible as rates too high. They can be damaging and destructive and if they, in fact, exist they can also be highly preferential between consuming groups. This normally is not contemplated by law. Is this no matter of concern to the Commission? Mr. SWIDLEE. It could be. It just didn't seem to us that this was that kind of a consideration. Mr. Moss. All right. Well, then, it is not idle to raise the question? Mr. SWIDLER. It seemed to us to be a very unprofitable way to use our staff. I could think of many better ways to use them. Mr. Moss. You think that where a firm is producing a total of 20 percent of surplus of its needs, undertaking to develop further capac- ity, that that should be disregarded? I noticed that the examiner stated in his report that this additional capacity would not be feasible until around about 1975~- Mr. SWIDLER. Well, this may become an issue in the proceeding, Mr. Moss, and I don't know that I want to say something- Mr. Moss. Well, this was part of the dissent. You have been rather harsh in characterizing some of these dissents. But again, was this in Idaho, this excess capacity? Mr. SWIDLER. Our staff had made a report to us that the extent of the Idaho capacity was not abnormal. Every company, to a degree, staggers its construction program- Mr. Moss. Well, of course, they should. Mr. SWIDLER (continuing). And they should, and we had no in- dication that this was a situation which warranted the diversion of staff that would have been required. Mr. Moss. Up my way they project and they build and they have a tough time keeping up with demands. They grow faster than they hope to expand to meet all of the needs. Mr. SWIDLER. I have not said- Mr. Moss. But these are not idle points, are they? Mr. SWIDLER. No, sir, and- Mr. Moss. And are they properly within the jurisdiction of the Commission? Mr~ SWIDLER. No, sir, and I would not- Mr. Moss. Well, now- Mr. SWIDLER. I think t7h~re were proper points to have been made and I would not have ob~icted in any way to a proper dissent. I think there is ample room for reasonable men to disagree in the Idaho case and pe~aps also in the Pacific Power and Light Company case. This is not my point. Mr. Moss. Well, then you made a great play that they were depre- ciating too slowly, not too fast. Mr. SWIDLER. Yes, sir. PAGENO="0211" ADMINISTRATIVE PROCESS 207 Mr. Moss. You know, I was in business before I came here and I think if you have a too-slow depreciation, you are under rather bad management. This can be a problem, too. Mr. SWIDLER. Well, they were using a method of depreciation which conformed with our system of accounts and with the requirements of the Idaho Public tltilities Commission. Now, the big question is going to come when they want to change, after a number of years, to a different system of accounting, and that is a reserved question. I think the real question is not one of too high or too low but of consistency. This is a question we will reach in due course and which must come to us before they change. Mr. Moss. Well, I mentioned it because it seemed to me that the impact of your testimony was that the dissent was idle- Mr. SWIDLER. No, sir- Mr. Moss (continuing). And that you were trying to use a leverage for something improper. Yet these are proper areas to concern the Commission, are they not? Mr. SWIDLER. We thought-I think the majority thought that this would be going too far. Mr. Moss. In this instance- Mr. SWIDLER. I think it was perfectly in order for Mr. Morgan to have a different opinion expressed in a way that was not disruptive. Mr. Moss. This is my question-In this instance was it not a proper area for concern of the Commission? They are, as a matter of fact, t;he Commission's business, are they not? Mr. SWIDLER. Yes,. sir, some of them were. Mr~ Moss. You didn't use- Mr. SWIDLER. Some were; some were. Mr. Moss. Well, which ones were not? Mr. SWIDLER. Well, I think the level of the intrastate rates was a doubtful one. Mr. Moss. Well, most of this, being wholesale, was an interstate, wasn't it? Mr. SWIDLER. No, sir, I think- Mr. Moss. A fair amount- Mr. SWIDLER. Some of it was. Mr Moss As I recall Mr Morgan'a discussion the other day, it was tied to the triggering effect of the Utah Light & Power. Previous Commissions indicated that they might be in need to review these rates at that point. Was that in substance, what the previous Commission had observed ~ Mr. SWIDLER. I think that so far as the level of interstate rates is concerned that this is a propei subject for the Commission and- Mr. Moss. It went to interstate rates as well as intrastate, didn't it? Mr. SWIDLER. What's that? Mr. Moss. It went to interstate rates as well as intrastate, d'~jn't it? PAGENO="0212" 208 ADMIN~ISTRATIVE PROCESS Mr. SWIDLER. There were some interstate rates, oh, yes, sir. Mr. Moss. That is all I have, Mr. Chairman. I just wanted to have the record reflect what I think is accurately involved here. Mr. YOUNGER. Mr. Chairman? The CHAIRMAN. Mr. Younger? Mr. YOUNGER. I would like to state after listening to this testimony for the last 2 days I think you, Mr. Chairman, and the Commission, did a very good job in spite of all of the internal knifing, and I want to compliment you from our side of the fence. Mr. SWIDLER. Thank you. The CHAIRMAN Mr Swidler, I would suggest that one of the lessons we have learned from the experience of this matter is that in the future you should try to have your opinions ready at the time you issue all of them. Mr. SWIDLER. Well, sir, this is not easy to do in a security issue case. We didn't see the dissent and weren't able to address ourselves to the problems of the dissent until April 8, and it is true at that time that it took us 2 weeks to get our opinion out. Now, this is not the only thing that we were working on, and I don't think 2 weeks- The CHAIRMAN In my judgment, it isn't the businesslike pro cedure for the majority opinions to have to be written to direct them'. selves to the dissent. It seems to me as though the normal procedure should be for the majority opinion to be issued and then the dissent. Mr SWIDLER Well, sir, this was a securities issues case where nor'. mally it would have been routine except for the probi~~ems raised in the dissent, The CHAIRMAN Well, I realize it was difficult Well, the record is rather replete on what the facts are It cer tainly speaks for itself, as I said before. Again, I want to thank you again on behalf of the committee for your presentation here and your discussion ~if the problem, which should be helpful all around. Mr SWIDLER Mr Chairman, may I say just one word ~ I think that this hearing has been ~not only a privilege for me but of great benefit to the Commission. This is the way to find out just how much is solid in the informa tion that comes to you as to the workings of the Commission and the members ~f the CommIssion, and for you to sift and reduce the charges to their proper size, and then find out what, the answers are, if any, and arriv~ at an appraisal. It is very bard to come to an issue on these things on the basis of newspaper stories alone, and I believe that this hearing has cleared the air. I am happy that you gave me the privilege of testifying, Mr Chairman. The CHAIRMAN. You have a tremendous responsibility in your job, not only as Chairman but as a member of the Commission, as all of yon have. PAGENO="0213" ADMINISTRATp,r~ PROCESS 209 Of course, as you indicated this morning, electric power is the No. 1 industry from a dollars-and-cents standpoint and natural gas is about fifth or sixth. The consumers of America are depending upon your service. It was the intent of this Congress to establish it that way and to give you an opportunity to provide the people a service at a rate that they can afford and that would be appropriate to the economy of the United States. So we can oniy wish all of you, regardless of who is down there at any given time, the best, and that you undertake the responsibilities, and that, whether you might be ordinary men or exceptional men, everyone do the best job that he can. Mr. SWIDLER. Thank you. The CHAIRMAN. The committee will adjourn. (Whereupon, at 4:40, p.m., the subcommittee was adjourned.) 0 PAGENO="0214"