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plaintiff will be hampered and hindered in its commerce and business affairs, and will suffer divers other great and irreparable harm and injury, all to its great injury and irreparable loss and damage; and plaintiff will be deprived of its property and civil rights without due process of law, and denied the equal protection of the law, and its papers and effects will be subject to unreasonable search and seizure in violation of the fourteenth amendment to the Constitution of the United States of America and section 6 of article 2 of the Constitution of the State of Illinois, and plaintiff's interstate commerce will be burdened and obstructed and hampered in violation of the Constitution and the laws of the United States of America.

15. The penalties provided by said Public Utilities Act for violation of or nonobedience of the orders of the Illinois Commerce Commission are so large and so severe as to intimidate the plaintiff, its officers and agents, and to render it impracticable for the plaintiff to risk the imposition of said penalties or to resist said unlawful order except in this honorable court. Unless the Illinois Commerce Commission and the said Otto Kerner are restrained and enjoined as herein prayed, they will proceed with the proposed and threatened inquiry and investigation of the plaintiff's affairs as set out above, and will compel the plaintiff, its officers, agents, and employees to comply with said order of the said Illinois Commerce Commission herein complained of, and enforce the penalties prescribed by the laws of the State of Illinois for violation of or nonobedience to said order, and plaintiff, its officers, agents, and employees will be coerced by the threat of said penalties into compliance with said order, to the great inconvenience, expense, and irreparable loss and damage of the plaintiff.

16. The plaintiff has no adequate and complete remedy at law, and only in a suit in equity and by the final decree and order of injunction of this court can the plaintiff be protected in its property and constitutional rights, and the plaintiff states its willingness and intention and hereby offers to do equity in the premises.

Wherefore, plaintiff prays:

(a) That the order of said commission, dated March 3, 1937, and herein described and complained of, be decreed to be in violation of the Constitutions and laws of the United States of America and of the State of Illinois and beyond the scope of the powers of the Illinois Commerce Commission, and to be totally void ;

(6) That a three-judge court be constituted as provided in section 266 of the judicial code, and that the defendants and each of them and all other persons be temporarily and permanently restrained and enjoined from enforcing said order.

(c) That the defendants and each of them, and all other persons, be temporarily and permanently restrained and enjoined by said court from taking any steps or proceedings against the plaintiff, its directors, officers, agents, or employees, to enforce any penalties, or any other remedy for disregarding said order described above;

(d) That the Illinois Commerce Commission and the said Otto Kerner and each of them be temporarily and permanently restrained and enjoined by this court from taking any action directly or indirectly to enforce said order of March 3, 1937, in any manner or degree, and that said defendants be temporarily and permanently enjoined and restrained from exercising or attempting to exercise any jurisdiction or control over this plaintiff, its officers, directors, agents, or employees;

(e) That the plaintiff have such other and further relief as may be just and equitable in the premises.

May it please your honors to grant unto the plaintiff a writ of subpena of the United States of America, issuing out of and under the seal of this honorable court, directed to said defendants, James M. Slattery, Andrew Olson, Charles E. Byrne, James E. Marname, and Harry A. Barr, the persons presently constituting the Illinois Commerce Commission of the State of Ilinois, and Otto Kerner, attorney general of the State of Illinois, commanding them and each of them on a day certain to be named therein, and under a certain penalty, to be and to appear before this honorable court, then and there to answer, but not under oath, answer under oath being expressly waived, all and singular of the premises, and to perform and to abide by such order, direction, or decree as may be made against them in the premises, and that, pending the hearing and determination of the application for a permanent

injunction herein, a temporary restraining order may be issued as above
prayed.
And the plaintiff will ever pray.

NATURAL GAS PIPELINE Co. OF AMERICA,
By

Its vice president and general manager,
Attorneys for said Natural Gas Pipeline Co. of America.

Of Counsel for the Plaintiff. STATE OF ILLINOIS,

County of Cook, ss: Floyd C. Brown, being first duly sworn, on oath deposes and says that he is the vice president and general manager of the plaintiff herein; that he has read the foregoing bill of complaint and knows the contents thereof and that the same is true of his own knowledge, except as to the matters therein stated to be alleged upon information and belief, and as to those matters he believes it to be true.

Subscribed and sworn to before me this 11th day of March, A. D. 1937.

Notary Piiblis Now, I should like to call your attention to some statements which were made before this very committee about a year ago by two men who represent the Natural Gas Pipeline Co. of America and who indicated to this committee that the regulation of interstate natural gas wholesale rates, was not necessary because of the fact that in their opinion the States were adequately able to deal with the situation.

Mr. Gallagher's statement appears beginning with page 139 of the hearings in connection with H. R. 11662. I wish to call your attention to that part of the statement beginning on page 142. Mr. Gallagher failed to mention the fact that he was a director of the Natural Gas Pipeline Co. of America. He stated that when the company first brought natural gas into Chicago that they voluntarily produced all of the information that the commission requested at that time and that for that reason regulation of interstate wholesale rates is not necessary. At page 142 he says they were required to present all of the facts relative to the cost of the natural gas to be delivered to the city gate by the transportation company:

By that I mean the transportation investment of the pipe line, cost of gas in the field, and the operating cost incident to piping gas from the field to the market.

Now, of course, the pipe-line company might have said, “We won't make these facts available", and they would have been within their legal rights if they had made that statement. For all practical purposes they were brought under the regulatory powers of the Illinois commission because they had some $70,000,000 invested in facilities to bring gas to the Chicago market, which is of no value without a contract with the Chicago market, and that contract could not be made without the approval of the commission. In other words, the commission had control over the rates which were to be paid by consumers of Chicago regardless of the legal situation.

Now, what happened was this: Mr. Gallagher was the representative of the Natural Gas Pipeline Co. of America who was produced as a witness by the Chicago District Pipeline Co., the Illinois wholesale company. Mr. Gallagher presented estimates as to the profits which in the opinion of the Natural Gas Pipeline Co, and his own pipe-line company would be earned by the Natural Gas Pipeline Co.

arising out of the sales of natural gas to the Chicago District Pipeline Co.

That data was presented in 1931 and 1932.

The Natural Gas Pipeline Co. of America was then beginning operations. It was extremely difficult for our commission or any regulatory body to then determine whether or not the estimates made by Mr. Gallagher would in fact turn out to be the actual profits which the Natural Gas Pipeline Co. of American would earn.

When the Peoples Gas Light & Coke Co. asked our commission for this very large increase in its rates, we asked the Chicago District Pipeline Co. to again make available to us the information which would show the profits Natural Gas Pipeline Co. was actually making out of the sales of gas to the Chicago District Pipeline Co. in order that we might check the estimates previously submitted with actual revenue under normal operations,

This request was denied by Natural Gas Pipeline Co. of America.

On March 3, as I have indicated to you, the commission issued an interlocutory order directing the Natural Gas Pipeline Co. of America to submit its books and records and reports showing its profits and of its sales of gas to Chicago District Pipeline Co.

Well, we did not get any information from the Natural Gas Pipeline Co. of America directly and as I have indicated they have gone into the Federal courts and are seeking to enjoin our commission from even obtaining any information from them.

The information which we have obtained—we have obtained certain information from the Securities and Exchange Commission and also information from the Chicago District Pipeline Co.-indicates that the profits of the Natural Gas Pipeline Co. of America were very substantially greater than was originally estimated by Mr. Gallagher would be earned by the Natural Gas Pipeline Co. out of the sales of natural gas to the Chicago District Pipeline Co. and indirectly to the Chicago consumers.

Under those circumstances, it is absolutely vital that the Federal Power Commission be given full and complete authority to deal with the question of interstate wholesale rates.

I would just like how to refer to one or two amendments.
Mr. MAPES. Mr. Chairman-
The CHAIRMAN. Mr. Mapes.

Mr. MAPES. Before you take mp your amendments, may I ask you some questions? The Crosser bill proposes to regulate natural gas pipe-line companies engaged in transportation of natural gas as common carriers and the Lea bill to regulate natural gas companies. What is the distinction in the two terms, if any?

Mr. Booth. Well, I think I have not had a full opportunity, or the full opportunity that I feel is necessary, to discuss the Crosser bill in detail. I have given more attention to the Lea bill.

I think the only distinction is this, that there is a legislative declaration in the Crosser bill that natural gas transmission companies are common carriers or public utility companies. In the Lea bill the Commission is given power to regulate the interstate rates of natural gas transmission companies, so that in effect, apparently that substantially the same result is arrived at.

Mr. Mapes. Is any natural gas transported in interstate commerce except through natural gas pipe-line companies, that are acting as common carriers? Do not some producing companies transport their own gas exclusively that do not act as common carriers?

Mr. Booth. I think that under the decisions of the courts, that it is possible to hold that any company which sells at wholesale to one or more distributing companies or other wholesale companies, would be subject to regulation as a public utility, without the legislative direction that such a company is a common carrier or a public utility.

Mr. MAPES. You think that the regulation of pipeline companies would cover the whole field ? Is that your theory? Mr. Booth. I think that the Lea bill will confer

upon

the Federal Power Commission authority to regulate the interstate wholesale rates, wholesale contracts of natural-gas transmission companies, whether they sell to one pipeline company, or one distributing company, or a number of them.

It might be more desirable to make a legislative declaration that all such companies are in fact public utilities.

Mr. MAPES. What I had in mind was whether or not the Crosser bill which appears to be confined to pipeline companies engaged as common carriers would cover the entire field.

Mr. Booth. There were one or two questions in my mind, as I read the Crosser bill, as to whether or not the definition of a public utility in there, in subsection 13 of section 3, defining a public utility, means any person who is engaged in the business of producing, transmitting, selling, and exchanging and distributing natural gas for public use—there might be some question under that definition as to whether or not it would cover the sale of natural gas by a company like the Natural Gas Pipeline Co. of America, which merely resells natural gas to other companies or another company, which in turn wholesales that gas, but there seems to be a conflict between subsection 13 of section 3; and subsection 4 of section 4, which is broader in its definitions; but, as I have stated, I have not had an adequate opportunity to study the Crosser bill in detail.

Mr. MAPES. Both the Crosser and the Lea bills propose to give the Commission the power to fix a just and reasonable rate for gas.

What do you consider a just and reasonable rate? Mr. Booth. Well, if you will excuse me, Mr. Mapes, I am merely a lawyer, and the question as to what is a fair and reasonable rate is normally left to experts of a technical character.

You mean what is the fair and reasonable return upon the investment, or do you mean what is a reasonable, fair, and reasonable wholesale rate?

Mr. Mapes. You are the attorney for the Illinois Public Utility Commission.

Mr. BOOTH. That is correct.

Mr. MAPES. The bills provide that the Commission shall have the authority to fix a just and reasonable rate.

Does that mean a 5-percent return upon the investment, or a 10or a 15-percent return!

Mr. Booth. Well, that all depends upon the individual circumstance. It will the Commission will undoubtedly allow a fair return upon the fair value of the property of the pipeline company or a producing company devoted to public service.

Mr. MAPES. What would you, if you were a member of the Commission, think is a fair return?

Mr. Booth. That would depend upon the individual circumstances. It would depend upon the life of the field. It would depend upon current interest rates.

I would say that a fair and reasonable return for natural gas pipe-line companies—is that your question—not distribution companies, but natural gas pipe-line companies, would vary from 51/2 to about 7 percent.

Mr. MAPES. Depending somewhat upon the whim of the individual Commissioner?

Mr. Booth. Well, that whim ought to be limited to a considered discussion of the facts before it, and I have a great deal of confidence in the judgment of the gentlemen who sit on the Federal Power Commission.

Mr. MAPES. Are there any standards set up to guide the Commission in its fixing what is a just and reasonable rate?

Mr. Booth. There is nothing in H. R. 4008, or H. R. 5711 which sets up a definite standard as to what the rates of return should be. In practically all of the statutes that is left up to the judgment and the determination of the administrative body which has jurisdiction over the determination of rates. However, there is an amendment that I am about to suggest for the consideration of this committee, namely, that the Federal Power Commission be given authority to fix temporary rates pending the completion of an investigation which would allow a return of not less than 5 percent upon the original cost, plus working capital of the property.

Now, that bill, that amendment is comparable to the temporary rate provision that is in the New York State statutes and the commission, the New York Commission, notwithstanding the minimum provision of 5 percent interest has been allowing 6 percent in its temporary rate orders.

Mr. MAPES. What is the practice of your Commission in the fixing of rates? How much of a return is allowed on the investment?

Mr. Booth. Well, the Commission has allowed, I would say, 6 to 7 percent in many cases where rates are compromises and no definite finding of a rate of return is made.

Witnesses who have appeared before the commission on behalf of the commission have testified that a fair rate of return for the Peoples Gas Light & Coke Co. is 534 percent and the company experts have asked 7 and 712 percent.

Mr. MAPES. Is it possible to fix standards in the legislation ?
Mr. Booth. I beg your pardon.

Mr. Mapes. Is it possible to fix a standard in the law? Does the Illinois statute fix any standard to guide the Illinois Commission in arriving at just and reasonable rates?

Mr. Booth. No; there is nothing in the Illinois statute which directs the commission to fix any definite rate of return for any public-utility companies. There have been standards laid down by the courts which have stated that a number of factors are to be taken into consideration: The cost of attracting new capital; current rates of interest; the earnings of comparable enterprises, and a number of other factors; but I doubt the desirability of fixing any definite percentage as to what shall be allowed to all companies subject to the Federal Power Commission. I do believe that this amendment, which would have the effect of authorizing the Federal

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