оте, 200 erg 3 change Act of 1934 and Rule X-15C1-2 thereunder, and that it is in the public interest to revoke its registration as a broker and dealer. Accordingly, it is ordered, pursuant to Section 15 (b) of the Securities Exchange Act of 1934, that the registration of Richard Mahoney Company, Incorporated, as an over-the-counter broker and dealer be, and it hereby is, revoked. By the Commission: (Chairman Purcell and Commissioners Healy, Pike, and Burke) Commissioner O'Brien being absent and not participating. [No. 1525] IN THE MATTER OF COLUMBIA GAS & ELECTRIC CORPORATION File Nos. 59-83, 70–263, 70–371, 70-387, 70–430, and 70-481. Promulgated March 31, 1942 (Public Utility Holding Company Act of 1935-Sections 11, 12, and 15) INTEGRATION OF HOLDING COMPANY SYSTEM. Where subsidiary company engaged in business of producing, purchasing, transmitting, and selling natural gas buys only a very minor portion of its gas from, sells no gas to, and has no operating interrelationship with any other company in the holding company system, held that nonutility properties of subsidiary are not reasonably incidental, or economically necessary or appropriate to the operations of any integrated utility system retainable by the holding company; that the utility properties of the subsidiary cannot be regarded as part of any retainable integrated utility system of the holding company; and that under Section 11 (b) (1) the sudsidiary must be divorced from the holding company system. DISTRIBUTION OF VOTING POWER AMONG SECURITY HOLDERS. Disproportion between Investment and Voting Power. Where preferred stock which represents only 1.32 percent of total capitalization and 2.35 percent of capital stock and surplus carries with it the right to elect two directors and a share-for-share vote on all other matters, held that such voting rights are in disproportion to the interest which the stock represents; that the circumstances under which the voting power was acquired are not controlling if, in fact, disproportion exists at the time the issue is presented to the Commission; that at the present time such voting rights constitute an unfair and inequitable distribution of voting power; and that under Section 11 (b) (2) the voting rights must be canceled. APPEARANCES: William R. Nowlin and Sidney Willner, of the Public Utilities Division of the Commission. William H. Button, James B. Alley, and Charles R. Lowther, for Columbia Oil & Gasoline Corporation. Wayne Johnson, Jr., Edward S. Pinney, William Wemple, and Frederick S. Beebe, of Cravath, DeGersdorff, Swaine & Wood, for Columbia Gas & Electric Corporation. Robert J. Bulkley, Arthur Logan, Russell Hardy, and Richard B. Hand, for Missouri-Kansas Pipe Line Company. 11 S. E. C.-35-8415 Edwin N. Goodwin and William L. Glenn, for Panhandle Eastern Pipe Line Company. J.G. Laylin and John F. Meck, for W. H. Danforth. John D. Ellis, for the city of Cincinnati. James H. Lee, for the city of Detroit. Kenneth L. Sater, for the Public Utilities Commission of Ohio. Eugene Bleiweiss, for Abner Goldman. FINDINGS AND OPINION OF THE COMMISSION These proceedings are a consolidation of various applications and declarations filed by the above-named companies and action instituted by the Commission under Sections 11 (b) (1), 11 (b) (2), 12 (c), 12 (f), and 15 (f) of the Public Utility Holding Company Act of 1935. The history and background of the proceedings have been set forth at some length in a prior opinion (Cuba G18 & Electric Corporation, et al., 10 S. E. C. 1037 (1942)) and need not be repeated here.1 Whether Pan Two questions are now before us for disposition: handle Eastern Pipe Line Company may be retained in or must be divorced from the holding company system of Columba Gas & Electric Corporation under Section 11 (b) (1) of the At: and (2) whether by reason of the voting rights of the Cias Breferred stock of Panhandle Eastern Pipe Line Company there is an unfair or inequitable distribution of voting power which rust be rectified under Section 11 (b) (2) of the Act. The hearings on these two questions have been cis been filed and oral argument has been presented. Va questions of jurisdiction and procedure raised by Gasoline Corporation were disposed of in our on of February 10, 1942 (Columbia Gas & Electric 10 S. E. C. 1138 (1942)). Briefs have subsidiary bia Oil & and order zion, et al., I RETENTION OF PANHANDLE EASTERN IN THE MBIA GAS SYSTEM Columbia Gas & Electric Corporation is a regis blic utility holling company whose subsidiaries include gast. companies, electric utility companies, a service company, aranies which are engaged in the production and transmission ral gas. The gas companies operate in Ohio, Pennsylvania, Virginia, Kentaky, New York, Maryland, Virginia, and India Panhandle Eastern Pipe Line Company is a sub of Columbis Oil & Gasoline Corporation, which is in turn a bary of Colu 1 also our statement of tentative conclusions issued it to the requ Columbia Oil & Gasoline Corporation (Holding Company Aet i 16, 3296), sr Bemorandum opinion and order disposing of various motion Columbis Gate Corporation (Columbia Gas & Electric Corporation, età. C. 1138 bia Gas. Panhandle Eastern is engaged in the business of producing, purchasing, transmitting, and selling natural gas. It obtains its gas from the Amarillo and Hugoton fields, and its pipe lines extend through Texas, Oklahoma, Kansas, Missouri, and Illinois to a point on the Indiana-Illinois border near Dana, Ind., where a connection is made with the lines of Michigan Gas Transmission Corporation, a recently acquired wholly owned subsidiary. Gas transmitted through these lines is delivered to the Michigan Consolidated Gas Company, a nonaffiliate which serves the city of Detroit. Indiana Gas Distribution Corporation, a recently acquired wholly owned subsidiary of Panhandle Eastern, owns spurs along the Michigan Gas Transmission lines and sells gas at retail in Michigan and Indiana to approximately 1,800 customers, including one large industrial company. Illinois Natural Gas Company, also a wholly owned subsidiary of Panhandle Eastern, sells gas at wholesale in Illinois. Panhandle Eastern also controls another small line running from Indiana into Ohio and back into Indiana. There are no connections between the lines of Panhandle Eastern and its subsidiaries and those of any other company in the Columbia Gas system, except for a connection with a line of The Ohio Fuel Gas Company (a Columbia Gas subsidiary) in Ohio. At that point there is a connection separated by a valve which is normally closed. The interchange of gas between Ohio Fuel and the Panhandle Eastern lines is negligible and there are no billings for such interchange. Panhandle Eastern and its subsidiaries buy no other gas from, sell no gas to, and have no operating interrelationship with any other company in the Columbia Gas system. The entire capacity of Panhandle Eastern and its subsidiaries is required for its own customers. All parties to the proceedings and all persons who have been heard appear to agree that the properties of Panhandle Eastern and its subsidiaries bear no operating relationship to any other properties in the Columbia Gas system and must be divested from the system. Counsel for Columbia Gas have taken the position that they are "willing not to oppose an order of divestiture so long as that order of divestiture was directed not only to Columbia Gas but to Columbia. Oil as well." Counsel for Columbia Oil stated at the argument before us: "We want Panhandle out of the Columbia Gas system, but we want the cut between Columbia Gas and Columbia Oil, rather than between Columbia Oil and Panhandle." At this stage of the proceedings we are not concerned with the method by which Panhandle may be divorced from the Columbia Gas system. The question before us at this time is whether, under Section 11 (b) (1), we should require that there be divestment. On the basis of the record we find-and apparently all the parties agree 'See Panhandle Eastern Pipe Line Company, et al., 9 S. E. C. 370 (1941). that the properties of Panhandle Eastern and its subsidiaries bear no operating relationship to the properties of any other company in the Columbia Gas system, specifically that the nonutility properties of Panhandle Eastern and its subsidiaries are not reasonably incidental, or economically necessary or appropriate to the operations of any integrated utility system retainable by Columbia Gas and that the utility properties cannot be regarded as part of any retainable integrated utility system. Accordingly, we find that Section 11 (b) (1) of the Act requires Panhandle Eastern and its subsidiaries to be divorced from the Columbia Gas system. Since Columbia Gas' interest in Panhandle Eastern is held through Columbia Oil, our order will be directed against both Columbia Gas and Cobia Oil. However, we again emphasize that we are not at the expressing any opinion as to whether divestment should be accosted by severance between Columbia Gas and Columbia Oil, between Columbia Oil and Panhandle Eastern, or in some other manner. The method of divestment will be the subject of future hearings. IL THE VOTING RIGHTS OF PANHANDLE LAS CLASS B whether it is (2) that The remaining question to be decided at the necessary or appropriate to require under Panhandle Eastern take steps to rectify any un mi equitable distribution of voting power among its security As of September 30, 1941, the pro forma ca; nelzen of Panhandle Eastern based upon the contemplated acquaecurity issues which were subsequently consummated wa #$2.081,485 of debt discount and expense and call premiu September 30, 1941, and have, consequently, been deducted 14. 11 8. E. C. 75, 771 written of plus figur |