INVESTIGATION OF FEDERAL REGULATION OF POWER

TUESDAY, FEBRUARY 25, 1930.

UNITED STATES SENATE,

COMMITTEE ON INTERSTATE COMMERCE,

Washington, D. C.

The committee met at 10 o'clock a. m., pursuant to adjournment on Thursday, February 20, 1930, in room 416, Senate Office Building Senator James Couzens presiding.

Present: Senators Couzens (chairman), Pine, Fess, Brookhart, Kean, Hastings, Pittman, Dill, Wheeler, and Tydings.

Present also: William C. Green, special counsel to the committee. The CHAIRMAN. The committee will come to order. Is Mr. Bonner here?

Mr. BONNER. Yes, Mr. Chairman.

The CHAIRMAN. You will please come around and take the stand. TESTIMONY OF F. E. BONNER, EXECUTIVE SECRETARY OF THE FEDERAL POWER COMMISSION, WASHINGTON, D. C.Resumed

(The witness was duly sworn by the chairman of the committee when he appeared Thursday, February 20, 1930.)

The CHAIRMAN. Mr. Bonner, at the last hearing I gave you a memorandum of what the committee desired with respect to applications for licenses and controverted valuation items in excess of $5,000, I believe. I have understood from the clerk of the committee that you have prepared that information. Have you the information here this morning?

Mr. BONNER. Yes, sir.

The CHAIRMAN. Have you that information in written form? Mr. BONNER. Yes, sir. But may I have the privilege of making a short statement first, Mr. Chairman?

The CHAIRMAN. You may.

Mr. BONNER. It seems to me that there are several points in your record that should have some clarification before we go further in considering some of this other information. I shall not attempt to try to correct all of the inaccuracies in the testimony of some of the previous witnesses, but I should like to cover a couple of points. One is that Mr. Russell testified I ordered him out of the Flathead hearing

The CHAIRMAN (interposing). Will you just direct your conversation to the committee reporter and speak out so that we may all hear you?

Mr. BONNER. I say, Mr. Russell's testimony that I ordered him out of the Flathead hearing is not correct. The circumstances were just these: Mr. Russell was in that hearing, as I think he told this committee, as assistant to the chief counsel, and that was due primarily to his previous residence in Montana. When Colonel Brown, who was chief counsel to the commission, left to go to Senator Burton's funeral, Mr. Lawson was designated as the acting chief counsel to take Colonel Brown's place. But after Colonel Brown left Mr. Russell began injecting himself into the hearing, rather unnecessarily. So the next morning I told him that he should

The CHAIRMAN (interposing). Speak out a little louder, so all of the members of the committee may hear you.

Mr. BONNER. I told him that he should respect his position, that he was merely there as assistant to the chief counsel and should be guided accordingly. Mr. Russell immediately got angry and said that if he could not be in a front seat, at the main table, and be free to inject himself as he pleased he would not attend at all. I told him that was perfectly all right with me, and that if he was needed we would be glad to call him. Inside of 10 minutes we had calls from Senator Frazier's office, and from the United Press, the former protesting Mr. Russell's so-called exclusion, but nothing was done about it. But a couple of days later the acting chairman of the commission asked me to see that Mr. Russell should come up on account of questions being raised about an opinion he had rendered in that case. That is as far as that occurrence went.

Senator PINE. I wish you would tell us what Mr. Russell had said or done that you objected to.

Mr. BONNER. It was simply that he was making an effort to take up or was going into irrelevant issues, Senator. You will understand that that hearing was called primarily to determine the relative merits between the applicants, and the course of Mr. Russell's inquiries was a going off into irrelevant issues. The hearing was going to unnecessary and unreasonable lengths anyhow, and we were endeavoring to shorten it as much as possible.

Senator BROOKHART. What particular issues did Mr. Russell raise?

Mr. BONNER. I can not recall offhand right now, Senator, but I should be glad to have the record brought here for the information of the committee.

Senator DILL. Let me read from the testimony of Mr. Russell in that record. He states that Mr. Brown had suggested that he appear at that hearing, and then proceeds to say:

I then spoke to Mr. Bonner about it and he said it was all right with him, whatever Brown said.

So when the hearing began on Monday I sat with the other members of the staff in the hearing, and on Tuesday when one of the applicants, Mr. Wheeler, was on the witness stand, I asked him some questions about whether or not he intended to have his company operating its plant supervised by some management corporation, like the Electric Bond & Share, or the Byllesbys, and he said "no," he did not.

Then on Wednesday, the next day, a Mr. Burch, an engineer whom I have known away back in my Wisconsin days, was on the witness stand, and was testifying about the rates of this applicant company, and during his testimony I asked him a question as to whether or not the fact that a corporation was managed and controlled by one of these management corporations would affect the rate to be charged, and he said that it would; that that would simply create additional expense that would have to be met in the rates.

That is what Mr. Russell says in his testimony before this committee, that he asked these questions, and that you objected to them. Mr. BONNER. Well, our record will speak on that.

Senator DILL. This is the record. I am reading from the record. Mr. BONNER. Oh; I mean the record of the Federal Power Commission hearing.

Senator DILL. I see.

Senator BROOKHART. Were those the issues that Mr. Russell was making?

Mr. BONNER. I do not recall now what the issues were that were up that afternoon, but the record fully shows what was going on at that time.

Senator BROOKHART. But you did not make all these objections you refer to, to Mr. Russell, in your record, did you?

Mr. BONNER. No, sir.

Senator BROOKHART. You made those in talking to Mr. Russell. Mr. BONNER. Yes, sir; that is correct.

The CHAIRMAN. You may proceed.

Mr. BONNER. There is one other point in Mr. Russell's testimony that I should think the committee would be interested in having corrected, and that is his testimony regarding the fact that there are no experts in the departments to carry on a lot of this accounting work. At least he claimed that there was not substantial aid in that regard.

I find that Mr. Russell said this to you, reading from the record: Agriculture states that they have nobody.

Now, on that point, I should like to read into the record this letter from the Chief of the Forest Service, United States Department of Agriculture, dated at Washington, D. C., February 19, 1930:

Since writing you on December 31, 1929, an investigation has been made of the cases requiring accounting work which involves the use of National forest land. We knew that this work was somewhat behind but our investigation disclosed that the amount of work to be done is decidedly less than we had thought. You have already been advised that we will take on No. 4, the Speel River project in Alaska. We will also take on the following at this time: District 2, No. 792, the Dakota Power Co. (completion); district 5, No. 175, San Joaquin Light & Power Corporation, No. 233, Mount Shasta Power Corporation, and No. 137, Pacific Gas & Electric Co.; district 6, No. 588, Northwestern Power & Light Co., No. 637, Chelan Electric, and No. 933, Inland Power & Light Co. In this district, and in accordance with your request, the Forest Service will assist Mr. Green and the State in handling No. 135, Portland Electric Power Co. In six of the nine cases above mentioned further action by the licensees in the way of presenting cost statements is required. In district 4 we are now cooperating in extensive work on the Utah Power & Light and the Idaho Power Co.

cases.

The data which we have on hand indicate that there are 24 cases in the classes of partly audited, not audited, construction incomplete and active application pending. In 9 of these cases a complete cost statement has not been filed. Taking away these 9 cases and also the 2 projects which are under construction, the 8 projects referred to the joint board, and a dormant project, there remain 4 cases which are ready for accounting. All of these except No. 271. Arkansas Power & Light are included in the list previously given which will be handled by the Forest Service. No. 271 could be undertaken by the Forest Service but since it was reported on by the War Department, it is believed that the commission will desire to have that department handle the accounting work also.

Basing our opinion on the number of cases in the past, we believe that with the accumulations of the past wiped out, we will be able to handle all current

work satisfactorily. This at times may entail temporarily transfers of engineers and accountants from one forest district to another.

As stated in our letter of December 31, 1929, this accounting work will be fitted in with other work of the Forest Service. This coordination of work of course lowers the cost of handling. Also the consideration given the accounting work since receiving your letter of December 12 has convinced us that handling the cost-determination work in connection with the water-power investigation report and supervision work which the Forest Service does for the commission has some very decided advantages. Our engineers and other supervisory officers must make periodic investigations during the period prior to completion of construction and thereby will be very familiar with construction methods, equipment, materials, etc., used and many other features entering into the final cost. The time and expenditure required should be appreciably less than if the cost determination is postponed until construction is completed or is done by those not thoroughly familiar with the actual construction operations.

Senator DILL. Do I understand, Mr. Bonner, that you think the Federal Power Commission should not have its own accountants and its own valuation experts, separate and apart from the departments?

Mr. BONNER. Senator, I think we should have a limited force of accountants at headquarters who are especially qualified and skilled in the handling of those features of certain cases which are of a peculiar or special nature.

Senator DILL. What do you think should be done to bring this situation up to date? The testimony of everybody we have had before us, your own and that of Mr. King and Mr. Russell, shows that the Federal Power Commission has neglected to do the accounting work and to do the valuation work. Now, what do you think should be done to bring it up to date? What is the matter here?

Mr. BONNER. Well, now; as to valuation work, Senator, that I think as Mr. Russell brought out is not great in amount. In fact, there is only one real valuation case that the commission has now before it, and that is the Niagara Falls case, and according to Mr. Russell's recent opinion, even that will not be a valuation case, but a cost determination case.

Senator DILL. I call your attention to his testimony where he says that the Niagara Falls Co. refused access to their books, and that he called your attention to that fact and wanted a new demand made, so that he could go into court with mandamus proceedings, but that you thought it ought to be deferred. What have you to say about that?

Mr. BONNER. I think that was in the nature of a legal opinion, which has now been served on the Niagara Falls Co., and they have been instructed that they will be required to present any objections they have to it when the matter is called before the Federal Power Commission for hearing, in the immediate future.

Senator DILL. In the immediate future?

Mr. BONNER. Yes, sir.

Senator DILL. When was that action decided upon?

Mr. BONNER. Well, I have been recommending that that hearing be held for the last 30 days, but the commissioners felt that it would be desirable to postpone it temporarily.

Senator DILL. How long are they going to postpone it?

Mr. BONNER. I think the hearing will be held quite promptly,

Senator.

Senator DILL. Well, then, do I understand that all valuation matters are up to date except in the case of the Niagara Falls project?