Power Commission is empowered and directed to encourage the voluntary interconnection and coordination of facilities for the generation, transmission, and sale of electric energy.

The Natural Gas Act was enacted in 1938 and expanded substantially in 1942. It gave the Commission jurisdiction over the interstate transportation of natural gas and sale of natural gas for resale. This statute provides for regulation of the interstate operations of natural gas companies, including jurisdiction over rates and accounts and certificate regulation of new sales and new construction. In 1954, the U.S. Supreme Court ruled that under the Natural Gas Act the rates and sales of independent producers selling natural gas in interstate commerce were subject to Federal Power Commission jurisdiction.

The Federal Power Commission's activities have been enlarged over the years under various other congressional acts and executive orders. Among other things, the Commission is responsible for approving the rates for power generated at certain Government-owned hydroelectric projects, and for recommending installation of facilities for the generation of electric power at dams constructed by the Corps of Engineers.

The Commission is a member of the Water Resources Council, created in 1965, and participates actively in its work.

Under Reorganization Plan No. 9 of 1950, the Commission's Chairman is designated by the President and is responsible for the executive and administrative functions of the agency subject to the authority of the full Commission on substantive policy matters, on approval of the Chairman's staff appointments to head major administrative units and on approval of budget estimates and distribution of funds according to major programs.

THE ELECTRIC AND GAS INDUSTRIES

The electric and gas industries are the largest and sixth largest in the country in terms of assets. Our responsibilities include licensing, rate regulation, and investigations. We have included in your kits maps showing major electric facilities projected to 1980 and major gas pipeline facilities to give some picture of the extent of these industries.

The electric industry is divided into four ownership segments. The largest segment is investor-owned, serves over three-quarters of the customers and owns over three-quarters of the generating capacity. The other segments consist of federally owned systems; municipal and State-owned systems; and rural electric cooperative systems.

The gas industry is predominantly divided into three functional segments: Producers, pipeline companies and distribution companies. In some instances, a single company performs two or three of these functions, but that is unusual rather than normal. The gas industry is generally investor-owned, although there are a number of municipally owned distribution systems.

PRINCIPAL FUNCTIONS OF THE FPC

Hydroelectric licensing cases involve considerations of economics and power supply, of esthetics and recreation, of fish and wild life conservation, of water pollution abatement, of irrigation and naviga

tion. When we consider a potential dam site, we try to figure out how it can best be used to satisfy the spectrum of public needs. The work combines the talents of civil and electrical engineers, naturalists, accountants, lawyers, and economists. We also work closely with other agencies of the States and Federal Government, such as the Interior Department's Fish and Wildlife Service.

In regulating wholesale electric rates, we act to prevent unjust rate levels or unduly discriminatory rate structures. The coordination function poses a particularly vital challenge in view of the 3,600 separately owned utility systems of varying sizes and ownership type which comprise the electric utility industry. The Commission and its staff seek to influence these numerous systems to coordinate their activities so as to provide the most efficient and reliable power supply without regard to ideological differences or differences in corporate or organizational structure. One aspect of this work is our promotion of voluntary coordination. An outstanding example is the National Power Survey program which brings together all segments of the industry in matters of common concern. In limited cases, the Commission may require an interconnection between two utilities. In reviewing those merger applications that come before us, the Commission can assist the parties to achieve the most meaningful public coordination of power supply facilities. These areas of our work with the electric utility industry call for the talents of electrical engineers, accountants, economists, financial analysts, public utility rate specialists, and lawyers.

Our natural gas work includes review of the prices which producers charge pipeline companies and which pipeline companies charge distributors and other pipeline companies to prevent unjust rate levels or unduly discriminatory rate structures. We are authorized to suspend increased rate proposals. Gas certificate regulation includes study of the adequacy of a company's gas supply; competition between two or more companies to supply a single market; and review of proposed rate structures. The work enlists the talents of chemical, petroleum, and mechanical engineers, of geologists, public utility rate specialists, economists, accountants, and lawyers.

Uniform accounting regulation, audits and public disclosure requirements provide assistance to investors, financial analysts, State regulatory commissions and all others interested in gas pipeline and electric utility companies.

Most of the cases which come to the Commission are handled informally and expeditiously, without recourse to full hearings. Where the circumstances require, however, we follow formal hearing procedures in compliance with the Administrative Procedure Act. Our regulatory orders are subject to review in the U.S. courts of appeals and, ultimately, the U.S. Supreme Court.

One could easily overlook the sweeping impact our cases can have because they superficially resemble a single lawsuit between one company and the Government or between two private parties. In fact, one case often involves policy decisions affecting a whole region of the country. Our decisions are more comparable to those which the legislative branch is called upon to make than to those in the ordinary lawsuit.

To illustrate the legislative quality of utility regulation we have attached two charts concerning Texas Eastern Transmission Corp.,

one of the largest but by no means the largest gas pipeline company. Texas Eastern supplies over a third of the natural gas consumed in the northeastern United States comprising Ohio, Pennsylvania, New York, New Jersey, and the New England States. Texas Eastern sells over $300 million worth of natural gas a year to its 74 wholesale customers. These customers, plus additional distribution companies that purchase at wholesale from them, total 157 businesses which depend upon Texas Eastern for part or all of their natural gas requirements. All told, they serve a total of almost 12 million ultimate retail customers, that is to say, homes, commercial establishments, industrial plants, schools, hospitals, military installations, and the like, who depend upon Texas Eastern for all or part of their natural gas supplies. These customers are located in 16 States of the Union. In four States, over 90 percent of the gas customers depend on Texas Eastern for all or part of their gas supply. These States are New Jersey, New York, Ohio, and Pennsylvania. Thus an order which at first blush seems to affect only the company, really in a meaningful way determines policy for millions of our citizens.

HOW THE DECISIONS ARE MADE

My fellow Commissioners and I consider it our duty to make the policy decisions, of course living within the statutory framework given to us by the Congress. Our contested cases are complex and even uncontested cases can raise some thorny issues. Accordingly, we need professional assistance in securing a complete factual background and in analyzing the issues. I am glad to say we have an able and conscientious staff which assist in these functions. But the responsibility for making the policy choices is our own, and we five Commissioners are acutely aware of it. We bear the burdens, as we properly should.

We meet as a Commission weekly and also schedule special meetings from time to time. Our meetings are attended by the Executive Director and Secretary; by the Bureau Chiefs, the General Counsel and their top assistants; and by our own personal staff. In addition, we will call in special assistants on particular matters, as, for example, the individual assisting the Commissioner who prepares the formal opinion in a particular case under discussion. Our regular weekly agenda includes up to 100 items, but detailed discussion is usually necessary on only a few major items each week. In some instances we deal with large issues in a special meeting. And we schedule special meetings after each oral argument to discuss the cases which have been argued before the full Commission.

COMMISSION ORGANIZATION

We have included in the kit handed to the committee a Commission organization chart, a descriptive statement of organization as published in 18 CFR 3.1-3.7, and a breakdown of Commission employees by staff unit. Authorized positions as of January 1, 1967, numbered 1,172.

The Commission receives immediate assistance from the General Counsel who also supervises the Office of the General Counsel— from the Office of Special Assistants, the Office of the Secretary, and the Office of Hearing Examiners.

The Office of the Secretary performs such duties as handling the agenda of the Commission meetings, issuing orders adopted by the Commission, signing correspondence for the Commission, exercising delegated authority to grant limited extensions of time in proceedings before the Commission and similar duties normal to such an office.

The Office of Hearing Examiners includes the 17 examiners who preside at public hearings and prepare initial decisions, subject to Commission review, on matters at issue. The office includes the usual secretarial staff and a limited number of technical advisory personnel. The Office of Special Assistants to the Commission includes six lawyers who draft opinions and orders expressing the Commission's decision of cases coming before it. These attorneys perform no other function.

Each of the Commissioners also has a small personal staff which assists in the preparation of Commission decisions and opinions of individual commissioners, and performs other work as assigned by the individual commissioner.

Most of the staff is organized into bureaus and offices under the general administrative and operational direction of the Executive Director. The Executive Director reports to the Commission as a whole on any substantive matters and to the Chairman on other matters, following the guidance of Reorganization Plan 9.

The Office of Public Information provides copies of Commission decisions to the public, provides access to the public files of the Commission, issues Commission press releases and supplies information in response to numerous public inquiries. We are proud to note that this office came in second last year in balloting by 139 Washington news correspondents covering Federal agencies to select the best information office in the Government. The Department of Justice was first. When we consider the character of our news and the breadth of our readership compared to that of the Justice Department, we are especially pleased that this honor came to the Office of Public Information of the Federal Power Commission.

The administration functions of the commission are conducted by the Comptroller, the Director of Personnel Programs, the Director of Management Analysis and the Director of Administrative Operations.

The principal staff assignments for investigation, analysis and processing of matters submitted to the Commission are concentrated in five major staff units: The Bureau of Natural Gas, the Bureau of Power, the Office of the General Counsel, the Office of Accounting and Finance, and the Office of Economics.

The Bureau of Natural Gas processes certificate applications and rate changes and conducts rate investigations involving natural gas piepline companies and independent producers.

The Bureau of Power has primary staff responsibility for hydroelectric applications, for regulation of electric wholesale rates, for encouraging the interconnection and coordination of electric utility systems, for other aspects of corporate regulation in the electric industry and for statistical services, such as the report on "Typical Electric Bills" which is produced and distributed annually. It has been extensively engaged in analyzing and preparing recommendations on the prevention of major power failures.

The Commission's regional offices are part of the Bureau of Power and are located in Atlanta, Ga., Chicago, Ill., Fort Worth, Tex., New

York, N.Y., and San Francisco, Calif. Their work includes safety inspection of hydroelectric projects, collection of information on electric utilities in the region, and work with the six regional advisory committees, composed of electric utility personnel from all segments of the industry, which are participating in updating the "National Power Survey."

The Office of the General Counsel handles all legal matters for the Commission. It provides counsel to represent the staff in Commission hearings and to represent the Commission in court cases.

The Office of Accounting and Finance prepares and administers the Uniform Systems of Accounts for electric utilities and natural gas companies, in close collaboration with the various State utility commissions. The office conducts audits of companies subject to Federal Power Commission jurisdiction-often in association with the State commission-provides statistical services based on the accounting records of both natural gas companies and electric utility systems, and prepares financial analyses and rate of return recommendations for use in rate proceedings.

The Office of Economics prepares economic studies and policy recommendations for the Commission in exercise of its statutory functions.

MAJOR PROBLEMS

Among the major problems which deserve and are receiving the attention of the Commission at the moment are:

Bulk power reliability.-The Northeast power failure of November 9 and 10, 1965, illustrates the challenge to the electric utility industry— made up of 3,600 different utilities-to coordinate its planning, construction, and operation. Present technology makes it unthinkable for utility systems to go it alone. We are striving to exercise our existing responsibilities in a way that will assist the industry to coordinate its own efforts more effectively. We have also recommended additional statutory provisions in the past and are currently working on proposals to be submitted to this Congress.

Recapture and relicensing.-Hydroelectric licenses are beginning to expire. Congress must decide whether to take over any project. This is the existing law. Last month, we filed our first report on an expiring license recommending against recapture of the Ozark Beach project of the Empire District Electric Co. in Arkansas.

Assuming Congress does not reject our recommendation, we will next have to determine the conditions upon which a new license should be issued for that project. The next expiring license will be for the Bucks Creek project, owned by the Pacific Gas & Electric Co. in California. As more licenses expire toward the end of the decade, the present procedures will burden us and, perhaps, the congressional committees. We hope to develop with the Congress a better procedure to sort out the cases deserving congressional attention from those which could or should be handled administratively.

Interpipeline and interfuel competition and gas imports.-As the gas industry matures, we have encountered increasing competition among the pipeline companies for a chance to serve the growth in markets already served by natural gas. At the same time, interfuel competition, including electric competition, has sharpened.

In the 1950's, the whole effort of the industry was to provide service to every major area of the country. As a consequence, there