that the Columbia Broadcasting System case to which I referred is a perfect illustration that an agency can, by a rule, set up something which ties a company's hands and prevents it from doing something or requires it to do something else and substantially affects rights, but nevertheless the public interest that is involved is so paramount that you go beyond what you would do in a case where there are just one or two parties involved.

You go beyond that and you deal more in what you might call legislative considerations than you do when you are dealing with the two parties, although even in dealing with two parties I do not think the Commission can, nor do I think that it has, overlooked the public interest which runs throughout our regulatory process.

Mr. SPRINGER. There is one thing which you have brought to mind on which we have not dealt, and that is that a substantial part of your business is ratemaking; is it not?

Mr. GATCHELL. Yes, sir.

Mr. SPRINGER. Generally speaking, in ratemaking will you or members of the Commission talk ex parte with the parties?

Mr. KUYKENDALL. NO.

Mr. SPRINGER. Do you mean to say never?

Mr. KUYKENDALL. Not about the merits of the case. After it is known that there are other interested parties in the case, we would not talk about the contentions that certain parties wish to urge upon us or the conclusions that we ought to reach.

Mr. SPRINGER. Take this example, more specifically, Mr. Chairman. Suppose that a pipeline files a request for an increase in price. There are no other interested parties. We will say that nobody enters an objection on the record. Let us assume that. That probably is not true very often, but suppose that they do not. Would you feel that you should talk to the pipeline company about that ex parte?

Mr. KUYKENDALL. I would, if it is clear that there is nobody else in the case who wishes to make any contentions or be heard. I think then if that is definitely the fact that there would be no reason why I should not listen to what some representative of the company wanted to tell me.

Mr. SPRINGER. I want to make this a little different. I mean talking with them outside of the record that is made.

Mr. KUYKENDALL. In a case like that there would be no hearing, Mr. Springer. There would not be a written record made. We would act on the advice of our staff, through memorandum of the staff to us and without a hearing and with no further record, and I do not see there that it would be objectionable for us to listen to some representative of the company.

Mr. SPRINGER. You may be right. I might just be talking about semantics here, but actually in that instance, even though there is no objection raised, Mr. Chairman, is not your other party which we will say is not entered on the record, but which you have a duty under the law to protect the public interest?

Mr. KUYKENDALL. Yes.

Mr. SPRINGER. Do you think in that case you should talk with the company about that particular case even though you are there to protect the public interest? I am talking about a record that is made when there is nothing there to indicate what was said even though

there is a public interest involved and that is the only interest other than the interest of the company seeking the raise in rates.

Mr. KUYKENDALL. Well, the Commission, true, is there to represent the public interest. What the representative of the company might say might be in furtherance of the public interest. In fact, freqently, it is. All the contentions these companies make are not contrary to the public interest.

Mr. SPRINGER. I understand that, but I would say that the interest of an attorney appearing before you seeking a rate raise would certainly be a selfish interest, not meaning selfish in the worst sense, but interested in their own interest to get that raise?

Mr. KUYKENDALL. When I say if there is no other party involved in the case at all, I would not object to talking to a person. I don't mean that I would accept everything he says. He might say some things that I would question, and I might ask the staff about it.

Our staff, before we decide it, would have gone into the matter thoroughly and be able to tell me whether or not they thought what he said was true.

Mr. SPRINGER. In other words, your staff made some investigation and that is the record, is it not, together with the recommendations made by the attorney for the company.

Mr. KUYKENDALL. Yes, the records and files become the records in that case, and the staff memorandums.

Mr. SPRINGER. Therefore, if this legislative committee came along and investigated that particular case and said, "We wonder whether or not this rate was deserved," the only record you would have would be the record which the staff made in the particular case; would it not? Mr. KUYKENDALL. Yes; it would be the application that the company had filed which under our rules must give a great amount of data, and a memorandum from the staff analyzing that data for us. We would have records and files which would sustain the commission's action.

Mr. SPRINGER. But it is your feeling, at this time, that there would not be anything unethical in the Commission talking with the attorney for the company even though it might not be on the record? Am I right on that?

Mr. KUYKENDALL. That is true. If the time for people to intervene has gone by, and I know that there is no other party interested in it, I think then the real reason for not having these ex parte contacts has gone by, does not apply. Now, I don't care to have those contacts very often. If these people get in the habit of running to a Commissioner on every little thing they use up all our time. I want them to do most of this discussing with the staff. I do not see any impropriety in such a case where we know there are no other interested parties involved to listen to a representative of the interested party. Mr. SPRINGER. On this question, I will end, Mr. Chairman. For instance, suppose that in a court case, talking about a court having been a judge, even in a matter so small as a divorce where it is a noncontested case, I doubt if a judge would ever seriously entertain talking to an attorney even though it was a noncontested case in which the other party was not represented. I think his only justification would be a record which has been made and which he does introduce into the evidence and you have to prove that the divorce action can stand

on the evidence under a particular section of the statute before it can be granted. I do not believe that a judge would talk with the party even though the defendant was not present and was not represented. This may be because, in your instance, there are so many factors you have to have which they only can supply, but I would think that any conversation would be on the record.

Mr. KUYKENDALL. I am contemplating a situation where there would be no trial, no hearing, and, of course, in a divorce case there always is. There always has to be.

Mr. SPRINGER. There always is a hearing.

Mr. KUYKENDALL. I am contemplating these situations where we know that there will be no contest and where the Commission acts in an administrative matter not after hearing, but only after becoming convinced through its staff and through the records and files of the Commission on the case.

Mr. SPRINGER. That is all, Mr. Chairman.

Mr. GATCHELL. Mr. Chairman, may I bring out one further thing? The gentleman from Illinois may have overlooked this. When an application for rate increase is filed, the Commission has 30 days within which to decide whether it will suspend that increase. During that time, the staff may, and frequently does, contact the company to find out something further in support of or in explanation of the rate increase. Now, those contacts by the staff are made very informally.

Our time is so short that we have to do it that way. We always have in mind that the party we represent is the general public, the consumers who ultimately have to pay for the gas that is sold, so that what we are looking to is to see that those companies do not do those things which are improper, and the staff gives to the Commission a report which is drawn with the interests of the consuming public in every instance.

Mr. SPRINGER. May I ask this supplementary question? In those cases where it is noncontested does your staff make an independent investigation other than the figures and facts that are supplied by the company?

Mr. GATCHELL. I cannot answer that generally. Frequently, we use just the figures that the company has, but many times they have given us other figures because our records are kept up day to day by the many filings and things that go on so that when they do come to a rate increase what is presented in the particular document is not all by any means that we have available for advising the Commission. We frequently have other sources right in our files that we have obtained from the company and from our own investigations which pertain to it.

Of course, we use that, whatever we think will be of assistance in giving the Commission a complete statement of facts. That is all that we try to do and then they decide whether or not they will go ahead and suspend or permit it to go into effect.

Mr. SPRINGER. In this case there is a contest. We will say that a rate increase is requested and proper proceedings filed and we will say the city of Cleveland objects and the city of Akron objects. Then, in that case, do you talk with the company about any of these facts, either the staff or the Commission separate from the record?

Mr. GATCHELL. In a contested rate case?

Mr. SPRINGER. I am talking about in this particular instance where the company asks for a rate increase and the city of Cleveland, which is being served, objects to it and the city of Akron objects. It then becomes at least one petitioner and two objectors. Do you or any of your staff then talk with the company about any facts or figures? Mr. GATCHELL. We try to get what information we think is necessary for a complete independent staff analysis of what is proposed and we go to the companies and get figures out, without telling them just exactly what we have in mind quite frequently, because we want to supply what looks to us like a deficiency and to give on the hearing record a complete statement so that we will frequently talk not only to intervenors like that or to the applicant but we will talk to those other people ex parte.

Mr. SPRINGER. You will also talk with the city of Cleveland and the city of Akron if they request it?

Mr. GATCHELL. Most certainly; yes, sir.

Mr. SPRINGER. That is all, Mr. Chairman.

Mr. KALLINA. If I may, Mr. Chairman, I would like to add one further point. We conduct these studies and verifications of the company's findings and then any of our findings and any data which we prepare for the Commission, not the staff memoranda, but any exhibits prepared for the Commission are served upon the city of Cleveland and the city of Akron as well as on the petitioner.

The CHAIRMAN. All of this information that you describe that you are seeking is additional information to go with what you already have filed with the certificate. It is not any part of the decision making process, is it?

Mr. GATCHELL. In the last case presented where there is a contest, the only way that the Commission gets the staff's views are in the open hearing record through witnesses and exhibits that are subjected to cross examination just like any other bit of evidence. It is right all out on the open hearing record. That is the contested case.

The CHAIRMAN. You mentioned a moment ago, Mr. Gatchell, that the responsibility of the staff was to the consuming public to see that they obtain gas at a reasonable rate, to which I would agree that that would be your duty.

Do you consider that that is as far as your responsibility goes? Mr. GATCHELL. Certainly not, Mr. Chairman. I do not see how the public can be served by a company which is not in good financial shape so that we have recommended increases for which the companies have not asked because we thought that they were entitled to them.

If a company is not in good financial shape, that is of no benefit to anybody.

The CHAIRMAN. Then you would agree with the statement that it is also the responsibility of the staff as well as the Commission to see that the companies are in sound financial condition and to promote the development, the exploration of this product that is used by the company?

Mr. GATCHELL. Yes, and improve the service, yes, sir. Absolutely. The CHAIRMAN. Mr. Fournier.

Mr. FOURNIER. Mr. Chairman, since this probably is the last statement I will make today in this proceeding, I should like to take the

opportunity first to congratulate your committee on the constructiveness of this panel discussion.

The comment that I wish to make relates very closely to the concern that you have just expressed and Mr. Gatchell also expressed for the financial integrity and soundness of the industries that are being regulated.

If you will bear with me for about 2 or 3 minutes, I should like to touch upon that subject because in my capacity as financial officer of Panhandle Eastern, I am very close to the financial community, and it falls to my task to raise the money that our company needs for the large construction projects we have and it also falls to my task to represent the company in our relations with both institutional and other investors.

I should like to call your attention to the fact that although the Federal Power Commission, in my judgment, has tried to conscientiously do a good job of regulation, and I am now talking about the Natural Gas Act, the fact remains that there have been great areas of controversy that have grown up which you yourself, Mr. Chairman, have attempted to correct by legislation and unfortunately have so far not succeeded in passing a bill which secured the signature of the President.

The CHAIRMAN. I would not want it to be overlooked that we managed to pass the bill.

Mr. FOURNIER. We recognize that, sir. I should like to call your attention to the fact that the investment community has been greatly disturbed in the course of the last 2 years, to my own personal knowledge, as to the future of the natural gas industry.

When the Memphis decision was handed down by the court of appeals, the institutional investors particularly were very much concerned about the then condition of regulation and what that decision meant to the companies in which they had very large sums of money invested. In that respect, I think it is commonly know that for the last 14 years billions of dollars have been poured into the natural-gas industry.

Now, then the Memphis decision was decided by the Supreme Court and reversed, there was a feeling that the uncertainty that had existed was past, and a feeling of buoyancy took place all through the financial community, and it was very helpful to the natural-gas industry, but for the last many months since that decision I see plenty of evidence of the fact that the financial community is very much concerned about the future of the natural-gas industry and they have great fears as to the present regulatory situation.

I think, even though the Commission must have knowledge of this fact, that part of the reason for it is in the somewhat inflexible standards adhered to, I am sorry to say, by the staff of the Commission, and which presents a great problem to the Commission itself, in view of the inflation and changed circumstances, and particularly particular circumstances of the production phase of the natural-gas utility, of the natural-gas industry. We have been in a bull stock market now for some time. In the last year and a half, however, natural-gas securities have gone against the trend, and, when it comes to raising money, senior money, you will find that an A-rated bond of a natural-gas company will sell at a lower price or at a higher yield, a higher interest cost, than a similar bond of an electric utility company.