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would be in the position of being forced to obtain the finances put the money on the table before they came here to obtain the permi Mr. PETTENGILL. Thank you.
Mr. DICKEY. That would make it difficult, I think, for them to e Mr. PETTENGILL. Of course, if it were an old-established coDAY going into the field, it would be different.
Mr. DICKEY. Yes.
Mr. PETTENGILL. You are dealing now with new ones: bur are dealing with old companies, already occupying the field. the IP cial problem might not be of great significance. But a new coMTV. organized for the purpose of developing a new field and buil transmission pipe lines into the territory, it seems to me. wo itself under very great difficulty from the practical standor Mr. DICKEY. Yes; it would.
There is one phase of that matter that you called my and I am very glad that you raised the question. It seem the well-established companies would not come in due t they must have some sort of a working arrangement lished company that is there, so we are unable to outar tition from them.
Mr. PETTENGILL. It seems to me that the establiser sufficient protection because of the close contact in te: 2 it is fully protected, it seems to me.
Mr. DICKEY. Well, I think so. Now, the situatie.. well as other places I am familiar with, is somer that is as long as the established company due tition they are pretty hard to deal with. Tue the usual phrase that gas usually flows in market is offered. Of course, in the East ter cases they have had artificial gas, the oute than it would be locally. But here we ar hour to 2 hours' ride to the gas field, an section of Ohio some gas is produced. au 37 cents a thousand at the gate when g charging 40 cents at the burner tips. -even a contract; we are operating tus contract.
Now, those are some of the conditions particularly to call the attention of to them, because I know when people ommend laws they are interested in d and interested, of course, in the resu I simply wanted to point out to and the interest we have in the pre States district court,
Mr. MARTIN. When you pay 37 cents for gas at the gate, what does the consumer pay in Portsmouth, Ohio?
Mr. DICKEY. We are paying 85 cents for the first thousand and 68 cents for the remainder, less 5-percent discount if paid within 15 days.
Mr. PETTENGILL. What do you think of the question which I asked before with reference to section 7 (c) of an established company that is already in the field, and the investments in the business were made long before this bill became a law or was thought of, as to any moral obligation that we might owe to the established company, if we attempted to impose by law control on the source of supply; that is, if we put that new hazard on the business, we are under some obligation to protect them from unnecessary and ruinous competition.
Mr. DICKEY. In answering that I would say this: That I do not believe we have much moral obligation toward these people that could have helped themselves a long while before they ever did anything, since they have been charging 37 cents to us, and at the same time they have been charging the Wheeling Steel Corporation 25 cents, and distributing gas some 40 or 50 miles away at Ironton and other places where the charge is lower and they have been getting by with it simply because there was no jurisdiction in the State, and no Federal jurisdiction, so I do not believe we owe them much moral obligation. I believe they could have helped themselves a long while ago and could have helped us if they would.
Mr. PETTENGILL. Well, the property investment of these companies is pretty heavy, if you look at the income on the invested capital, and so forth. But, the point I am trying to make is the ordinary operating expenses, depletion, and things of that kind; that is what I would like to think of in passing upon the investment and the hazards in the business, depreciation, depletion, which falls upon the operation of the business.
Mr. DICKEY. Well, I do think they are making more than a fair return on the amount invested.
Mr. PETTENGILL. What do your engineers set up as reserve against depletion in a natural-gas field? That would depend entirely upon the facts, I assume?
Mr. DICKEY. Upon the local facts and other things that are taken into account.
Now, these reports, I will say, come from their own auditors and it is pretty hard for us to answer that question definitely. We have not yet had the opportunity of going into their books and auditing them. But I will say this, that they buy gas from the individual producers over there as low, I am told, as 7 cents; and I have some rather authentic reports in my investigation, that it runs up to 9, 11, and 12, wherever they can get it, and they sell it for 37 cents. with only 60 miles transportation expense. That is undoubtedly a nice sum of money for that charge, and it looks to us like it would be a pretty good investment. Now I do not know whether I have answered your question but it is pretty hard for me to give you anything definite due to the fact that we have not been able to go into the records of the United Fuel Gas Co., and therefore we cannot say.
Mr. PETTENGILL. It is a big problem; the fundamental problem is free competition rather than trying to regulate monopoly.
Mr. DICKEY. Yes; now, I do not want to be misunderstood on this matter. Corporations are essential and have their rights; they are usually financed by the individual's money and they should not be trampled and hampered. We must deal fairly with them. But I do think that if they want to be fair with the individual, with the stockholders, and with the public as well they ought to be willing and should be willing to place their cards upon the table and go along with us, which they have absolutely refused to do.
Now, Mr. Chairman, there is one thing further, if you will give me permission, I would like to give you a brief résumé in writing of the situation in Portsmouth in order that you may have it for your records. With your permission, I will submit that.
The CHAIRMAN. You will be permitted to place that in the record. Mr. DICKEY. All right. That will be very fine. Are there any further questions you gentlemen want to ask? If not, I thank you for this opportunity.
The CHAIRMAN. Thank you, Mr. Dickey.
Our next witness will be Mr. Robert D. Garver.
STATEMENT OF ROBERT D. GARVER, DIRECTOR, KANSAS CITY GAS CO., KANSAS CITY, MO.
Mr. GARVER. Mr. Chairman and gentlemen of the committee, my name is Robert D. Garver. I am a director in the Kansas City Gas Co., and for the past 12 years I have been vice president and general counsel for the Gas Service Co., of Kansas City, Mo., and operating natural-gas distributing systems in some 200 towns and communities in Kansas, Missouri, Oklahoma, and Nebraska.
During that period of time I have handled all of the rate hearings for the distributing companies as well as the pipe-line companies serving all of them.
I am not appearing here as a proponent or as an opponent of this bill. I am appearing here merely to correct the record which we believe would be an injustice to us if it goes unchallenged, and it possibly might happen that our silence might be construed as a consent to the statements made.
The statements I refer to are those made by Mr. Smith yesterday and by Mr. Scheer this morning. They stated that the gate rate at Detroit, Mich., is 33 cents, whereas at Kansas City it is 43 cents, notwithstanding the fact that Detroit is three times as far away from the gas supply.
That statement is not correct and is misleading. In the first place, I think it is necessary to understand the situation. Detroit is perhaps three times further away from the gas supply than Kansas City, but it has one pipe line and extends from the Texas and Hugoton field to Detroit.
Kansas City gets its gas from practically the same location in the Texas Panhandle but it has three pipe lines connecting it with that field as well as some 30 other fields, so that the investment in serving Kansas City and guaranteeing service to it is, I should say, three times as great as at Detroit.
Detroit has had interruption in service since the pipe line was built, as they will. Kansas City, on the other hand, has had some 15 years of uninterrupted service, although the pipes have repeatedly burst. But there are other differences between the two. Kansas City has had natural gas for quite a number of years and it is extensively used in the houses, and the winter peak in Kansas City is 70,000,000 cubic feet per day. In the summertime it drops down to 10,000,000. I am using approximate figures. So that if that distributing company was distributing entirely domestic gas the great part of its facilities and the greater part of its investment would be idle for a great part of the time.
In Detroit, which has had artificial gas, the use is practically limited to cooking and water heating which make a steady load on the company's investment which is employed practically all of the time.
The result is that in Kansas City the load factor, which was explained to you by one of the witnesses this morning, is 30, whereas in Detroit it is 70.
Now all of those things would in themselves make for a higher rate in Kansas City than in Detroit, but that still is not the fact. The statement was made that the city gate rate at Kansas City was 40 cents, the inference being that the pipe-line company gets 40 cents for delivering gas to the Kansas City company for all purposes. The pipe line gets for the gas it delivers, for all purposes, on an average of 25.9 cents as against 33 cents in Detroit.
Now if the city gate rate in Detroit is 33 cents, and if it is 40 cents in Kansas City, it would seem that the customers there would get the benefit of it. As I understand this bill the purpose is not to see that the pipe line makes more money, or the distributor makes more money, but that the consumer is fairly treated and gets a reasonably low rate. As I say, if this statement is true, and the rate to the city gate at Detroit is 33 cents, and the rate to Kansas City is 40 cents, then let us see what the consumer pays.
Now here are the comparative rates in Kansas City and Detroit. For the first thousand cubic feet Kansas City consumer pays $1.29; in Detroit, $1.54; Detroit being 13 percent higher in price.
For 2,000 feet, the Kansas City consumer pays $2.19, and the Detroit consumer $2.55; the Detroit rate being 16.9 percent higher.
On 3,000 cubic feet the Kansas City consumer pays $3.04; the Detroit consumer $3.63; the percentage of increase at Detroit being 19.7 percent.
Three thousand cubic feet is the average consumption of the small consumer. The consumer, I suppose, is the one you are interested in protecting, and so I say that the statements that have been made in this respect regarding the rates at Detroit and Kansas City are misleading and do not reflect what the consumer pays. I have the figures that will give the comparative rates from 1,000 cubic feet up to 10,000 cubic feet. For 10,000 cubic feet in Kansas City, for cooking, water heating, the charge is $7.50.
In Detroit the charge for the same amount is $11.18, or 49.06 percent increase.
Mr. Chairman, that is the situation existing between the two towns. In the first place, the pipe line company of Kansas City does not get 40 cents; it gets less than 30 cents, and the consumers in Kansas City
have a much better rate varying from 14 to almost 50 percent better than the Detroit consumer.
I simply wanted to show the facts for the record. I thank you. The CHAIRMAN. Thank you, Mr. Garner.
Our next witness is Mr. Russell G. Hunt.
STATEMENT OF RUSSELL G. HUNT, ON BEHALF OF THE SYRACUSE LIGHT CO., SYRACUSE, N. Y.
Mr. HUNT. Mr. Chairman and gentlemen of the committee, my name is Russell G. Hunt. I am appearing here for the Syracuse Light Co., which is a local operating company in the city of Syracuse.
Mr. WADSWORTH. Of New York.
Mr. HUNT. Yes. This company buys, at a point near Syracuse, natural gas from the New York State Natural Gas Corporation, which owns a pipe line running from Pennsylvania. The natural gas bought by the Syracuse company is mixed by it with artificial gas and the mixed gas is distributed locally, and wholesale sales are made to three affiliated companies and one nonaffiliated company for resale directly to consumers in localities outside of Syracuse, and where the Syracuse Lighting Co. does not operate. All of these companies are completely regulated by the Public Service Commission of New York and all of their operations are local and within the State of New York.
Because of these wholesale sales of the mixture of natural and artificial gas, it is possible that some question would be raised of Federal jurisdiction over the Syracuse Lighting Co. This arises because of the wording of the definition of "natural gas company" on page 3 of the bill. It might be claimed that the definition of "natural gas company" embraces two things-one, the transportation in interstate commerce of natural gas, and, two, the sale of natural gas or of mixed gas for resale to the public. My objection to the definition is to the second part, because it does not confine jurisdiction to gas sold in interstate commerce, but seems to leave open the claim at some future time that wholesale transactions of the type carried on by the Syracuse Lighting Co. could be subjected to Federal jurisdiction.
To avoid confusion and possible misunderstanding, I would like to submit for your consideration a very brief amendment in the nature of an insertion in line 3, page 3, after the word "sale"Mr. HALLECK. What page is that?
Mr. HUNT. Page 3, third line from the top, insert, after the word "sale", the words "in interstate commerce", so that, as amended, the paragraph would read:
(b) "Natural gas company" means a person engaged in the transportation of natural gas in interstate commerce, or the sale in interstate commerce of such gas for resale to the public, whether or not such gas is mixed with artificial gas.
Mr. PETTENGILL. Do you not think that amendment is a little bit. vague, "sale in interstate commerce"? What you mean is the sale of gas which has moved in interstate commerce previous to the sale. Mr. HUNT. Not exactly that, Mr. Pettengill.