I say that condition is not wholesome, Mr. Chairman, and I feel, therefore, returning to the beginning of the statement that I made, that I think this particular proceeding is a constructive thing if it does no more than provide an opportunity to reappraise some of the standards and some of the policies of the regulatory institution, the Federal Power Commission mainly on the staff side.

I think the Commission has been trying to meet some of these problems, but you still have to face up to them, because once you lose the credit standing of the industry, then we will go the same road that the railroads went and for the same reasons.

Thank you.

Mr. CONNOR. May I ask a question of Mr. Fournier, Mr. Chairman? The CHAIRMAN. Yes.

Mr. CONNOR. Do you have specific reference, Mr. Fournier, to the adherence by the Commission rigidly to the 6-percent rate of return in view of the rising costs?

Mr. FOURNIER. I am referring not alone to the position of the staff on rate of return which has been unduly inflexible. I am referring also to the position of the staff on field price and in both producers' price of gas at the wellhead and the pipeline companies' price for its own produced gas, the position of the staff of the Commission with reference to the treatment of depletion and intangible well-drilling benefits in rate cases, and so forth.

I could spell them out at greater length.

Mr. SPRINGER. Might I ask one question, Mr. Chairman?
The CHAIRMAN. Mr. Springer.

Mr. SPRINGER. Mr. Gatchell, I will ask you this.

Has the Supreme Court laid down rules of what a Commission may do in a regulatory matter with reference to the earning rate? Mr. GATCHELL. Well, the Supreme Court has not fixed any precise. rate. They have said that certain rates of return were perfectly OK. They have not as yet and I hope they never will-said, however, that only 6 percent may be earned. That matter is left flexible for the regulatory agency itself to decide.

Mr. SPRINGER. I am only referring now back to Justice Holmes' decision which, as you know, is an old one wherein he referred to the 6 percent.

Mr. GATCHELL. Yes, sir.

Mr. SPRINGER. Has that been modified by the Supreme Court in subsequent decisions?

Mr. GATCHELL. We have had cases up before the Supreme Court 614 and I think there was one up 612 percent, one of the other agencies, so that they have gone over a 6-perdcent return; but, on the other hand, the Federal Power Commission has allowed as much as 9 percent to some of the producers.

I think Mr. Fournier is talk about a 6-percent view of the staff on the interstate pipeline companies, is that right?

Mr. FOURNIER. I might add that in our last rate decision handed down by a trial examiner and supported by the staff, which is only a matter of 6 months old, in the face of the extreme rise of the cost of money they recommended that we be allowed 534 percent return. Mr. GATCHELL. Was that not for a locked-in period where your costs have already been incurred and everything was known, your revenues were known?

Mr. FOURNIER. It was based on a previous decision of the Commission, Mr. Gatchell, which related to a test period going back to 1952 and we are now in 1959 and the period went from January 1, 1955, until September 30, 1958.

Mr. GATCHELL. But it was not dealing with present day conditions. Mr. FOURNIER. It certainly affects our ability to raise money today. The CHAIRMAN. Gentlemen, does anyone else have any comment you wish to make?

Mr. KUYKENDALL. Mr. Chairman.

The CHAIRMAN. Mr. Kuykendall.

Mr. KUYKENDALL. First I intended to have further discussion with Mr. Fournier but I think I will not because that case of his company is pending before the Commission and, although I might be able to discuss it abstractly, probably anything I said would be construed as my views for certain in that case.

I would like to say this in regard to what Mr. Springer has been asking about and he has referred to the judicial process in a divorce case. Maybe I could clarify our work to you by explaining it this way. We have adversary proceedings where various parties raise divergent contentions and differing contentions, but our function in these proceedings is really not to umpire an adversary proceeding but to find the facts. It is a fact finding proceeding. If parties come in who are in dispute, we have hearings so that we can get their various contentions on the record.

If there is nobody to come in and dispute, then the Commission and its staff test the contentions of the moving party by the procedures we have outlined, which is a quasi-judicial and an administrative and a quasi-legislative process also and we test it not through a formal hearing but through getting information from the moving party, getting other information on our own volition, and always what we have to do is protect the public interest, which is what distinguishes our work from a simple judicial matter.

Sometimes we have a formal record of hearing with testimony of witnesses and exhibits but our goal in any case is to get the ultimate facts and base a decision which is in the public interest on them.

The CHAIRMAN. Gentlemen, does any other member of the panel have any comment on this or any other problem that has been discussed this afternoon?

I do want to say that I am very sorry that I was unable to be here for the entire time of the discussion, but requirements beyond my control would not permit. Consequently, I have not had the benefit of the full discussion, but will, I am sure, benefit by reading the record that you have made here today.

Mr. Gatchell, you had a statement which I am sure you have discussed extensively today.

Would you like your full statement to be included in the record in the appropriate place?

Mr. GATCHELL. Please, Mr. Chairman. I would appreciate that.
The CHAIRMAN. It will be included at an appropriate place.
Mr. GATCHELL. Thank you.

Mr. Chairman, the Commission submitted a report on H.R. 6774. The CHAIRMAN. We are talking about these four topics here today. We are going to hold hearings on that legislation and that will go into the record at that time.

Since you mentioned that, have you also submitted a report on H, 4800?

Mr. GATCHELL. I am working on that now.

The CHAIRMAN. It came to you long before the others did.

Mr. GATCHELL. I know that it did. The Chairman has been aft me about that. I regret that I have not been able to submit my repo to the Commission. It is a much more complex bill than the ABA bi and I hope to have my recommendations up to the Commission f their consideration very shortly.

The CHAIRMAN. How about other staff reports that you requir before you make reports, Mr. Chairman?

Have you had them in yet or do they all come through the Genera Counsel's office?

Mr. KUYKENDALL. On bills?

The CHAIRMAN. Yes. I am talking about H.R. 4800.

Mr. KUYKENDALL. That all funnels through the General Counsel The CHAIRMAN. We can expect a report within a reasonable time! Mr. KUYKENDALL. I certainly hope we can. You can, Mr. Chair man. We will have a report up in the near future in plenty of time for your hearing wherever it may be scheduled on that legislation. The CHAIRMAN. It is going to be my intention to set hearings on the specific legislation as soon as the schedule of the committee will permit. We have some other hearings which have been set which will carry us beyond the 4th of July. I certainly hope that at the end of the month of July that we will have time to hold some hearings on those specific bills. We will try to get ready for them to clarify some of the feelings and, I think, misunderstandings.

I threw out a general invitation to everybody 5 months ago to take that apart in every way you wanted and see how much of it can survive or what might be better to substitute in part if not in toto for it.

As I stated yesterday, it is quite apparent to us from our study of this problem over a long period of time that most everybody seems to think that there is something that needs to be done but when we get down to specifics in trying to do something so many try to dig up all kinds of reasons why nothing should be done. That is just not a consistent position.

I think there is enough wisdom among the practitioners and in the Government and with this committee and the Congress to come up with the right kind of an answer.

As I said this morning, the lives of people are affected by it. We also have a report from the Federal Power Commission pursuant to request as to the organization of the Commission, and the workload, and so forth.

Without objection, that will be included.

I believe you advised me that certain organizational charts will be coming up right away and they will be received for the record, too. (The information referred to follows:)

Hon. OREN HARRIS,

FEDERAL POWER COMMISSION,
Washington, June 11, 1959.

Chairman, Special Subcommittee on Legislative Oversight, House of Rep resentatives, Washington, D. C.

DEAR MR. CHAIRMAN: The Commission will be glad to provide the subcommittee with Federal Power Commission's organizational and functional chart and of a

OFFICE OF HEARING EXAMINERS

Presides at public hearings and at prehearings and other conferences: administers oaths and affirmations; issues aut poenas as authorized by law; rules upon offers of proof and the relevancy and materiality of evidence, receiving or rejecting proffered evidence accordingly: takes or causes dispositions to be taken whenever the ends of justice and jood procedure would be served there by: regulates the course of the nearings: holds conferences for the settlement or simplification of the issues by consent of the parties disposes of procedural requests, motions and objections; makes decisions and, in special instances, recommends decisions: receives, provides for and considers briefs: hears oral argument. analyzes all issues both of law and fact; makes findings of facts and conclusions of law upon which decisions or recommended decisions are based: and certifies the records of hearings.

Designs and interprets unifore systems of accounts for public utilities, licensees and natural gas companies and investigates compliance therewith; Investigates and reports on the claimed cost of hydroelectric projects licensed by the Commission; advises the Commission with respect to proposed mergers and consolidations of public utilities and the disposition of properties by them; develops forms of reporting financial, operating, rate and other information and to compile therefrom statistical reports and economic studies; analyzes and reports on proposals of public utilities to issue securities and of natural gas companies to finance properties covered by applications for certificates of public convenience and necessity: prepares rate of return studies for introduction into evidence in the formal rate proceedings: reports on applications to hold interlocking directorates under the Federal Pover Act: acts as consultant to other members of the staff and to the Commission with respect to matters involved in rate proceedings.