The CHAIRMAN. And so the Power Commission has authority to waive that prelicense agreement if in their judgment they think wise? Lieutenant Colonel TYLER. Well; this is not required by the law, sir. The CHAIRMAN. I see. Lieutenant COLONEL TYLER. The law states that upon completion of the project they will file a sworn statement of the cost. The CHAIRMAN. So this is a policy? Lieutenant Colonel TYLER. This is a policy. Not a legal require ment. Senator PINE. What was the total amount claimed by the company, and what was the amount that was rejected by the auditor? Lieutenant Colonel TYLER. The auditor takes exception to those items. I added them up The CHAIRMAN. About $200,000? Lieutenant Colonel TYLER. It is something over $200,000 as I added it. Senator PINE. And what is the total amount of the statement of the company? Lieutenant Colonel TYLER. The total amount of the statement of the company was, I think, $460,000. Now that does not mean, of course Senator KEAN. In other words, if all these items were allowed, why, the public would have to pay on $200,000; that is, 33 per cent? Lieutenant Colonel TYLER. No, sir; that is not quite correct. Senator KEAN. Why not? Lieutenant Colonel TYLER. Because this capital investment under any existing authority does not enter into any rate base. The CHAIRMAN. Is that the same Mr. Stone that has just been appointed to the Smithsonian Institute? Lieutenant Colonel TYLER. Stone? The CHAIRMAN. Of Stone & Webster. Lieutenant Colonel TYLER. I do not know; sir. Senator PITTMAN. Let us get that again, Colonel. You say that the investment does not enter into the rate-making basis? Lieutenant Colonel TYLER. No, sir; the Federal Power Commission has no authority to enter into fixing of rates where a State has its own public-utility commission. Senator KEAN. In the making of the rate base by the Public Utility Commission of Virginia, or wherever this is located, they must take into consideration the values that you, the leasing authority, have practically authorized these people to set up? Lieutenant Colonel TYLER. Yes; in that way it would enter. Lieutenant Colonel TYLER. If the Public Service Commission of Virginia accepts the determination of the Federal Power Commission then they would be using the same figures, that is correct. The CHAIRMAN. Is any of the power in this case transmitted between the States of Virginia and North Carolina? Lieutenant Colonel TYLER. This project is not built, and I do not know where it will be transmitted. The CHAIRMAN. Is it close to the line? Lieutenant Colonel TYLER. It is close to the line, very near the line. The CHAIRMAN. So in all probability there will be power transmitted in interstate commerce? Lieutenant Colonel TYLER. Yes. The CHAIRMAN. So in that case this arrangement of accepting these figures will be very important as a rate base, would it not? Lieutenant Colonel TYLER. Yes. Senator PITTMAN. That is what I wanted to say. Whether the War Department has any authority to fix rates or not is not the question, or whether the Federal Power Commission has. You stated that it was not the subject of a rate basis. You were in error in that? Lieutenant Colonel TYLER. Not unless it is accepted by some other body. Senator PITTMAN. Well, undoubtedly, but it is a subject of rate basis? Lieutenant Colonel TYLER. But what I meant to say is that when there is a State public utility commission the Federal Power Commission is not authorized by the law to go in and fix the rates in the State. Senator PITTMAN. I know. The CHAIRMAN. But it is perfectly apparent that that would be a very strong argument as the rate base, would it not? Lieutenant Colonel TYLER. Yes. The CHAIRMAN. You may complete your statement. Thus, by using those services for field cost determination, at least 80 per cent of the accounting work can be done at practically no added expense and instead of a check of papers we will secure a check of the facts. Not more than 20 per cent of the accounting work consists of checking overhead charges, stock transactions, professional fees, management and holding company charges and the like. Such work should be done by a small headquarters staff of experts with experience in that line of work. SUMMARY As a summary, this witness believes that the licensing of federally controlled water-power sites is a separate and distinct problem from the Federal regulation of rates. Federally controlled water-power sites should be licensed by a board or commission composed of representatives of the Departments of War, Interior, and Agriculture. That the board or commission should be required by law to do its work by and through the three departments and should be allowed only a small headquarters staff. The CHAIRMAN. That concludes your statement? Lieutenant Colonel TYLER. Yes. The CHAIRMAN. Have you had any experience in auditing any account except the one that you just enumerated? Lieutenant Colonel TYLER. I have kept construction cost accounts or been responsible for them for twenty-six odd years. The CHAIRMAN. Yes, but I mean, have you had any experience in auditing holding companies and the other charges such as you just enumerated in the case of the Virginia people? Lieutenant Colonel TYLER. No, sir. I did not audit this. Lieutenant Colonel TYLER. It was stated by the chief accountant that he had no auditor to put on it, and the people wanted the license. I suggested to the executive secretary that we could get help from the department. And the chief accountant agreed to that. And we got this man in, and he gave him some instructions, and we sent him out in the field, and we got this result. The point I am trying to make is that if the commission had used the facilities which were available a great many of these cases which are now cited as being in arrears would be settled. The CHAIRMAN. Well, have you any opinion of your own as to the delay in requesting the departments to get this information or audit these accounts? Lieutenant Colonel TYLER. Well, it seems to me that good judgment was not used, or that the responsible people in the commission's staff were not conversant with the facilities which these departments had. Now I think they are ignorant of the departments and the set-up of the departments. The CHAIRMAN. You heard Mr. Bonner testify that it was his opinion that there had been deliberate delay in getting this accounting work done for the purpose of creating more bureaucracy in the Federal Power Commission? Lieutenant Colonel TYLER. Well, Senator, it is awful hard when you do not know what is in somebody else's head to ascribe reasons for it. It does appear to me, though, that if facilities are available and they are not used that certainly somebody is at fault. The CHAIRMAN. Well, can you conceive a general accountant being on the job there for all the years that Mr. King has and not realizing the facilities of the other departments? Lieutenant Colonel TYLER. Yes, I can conceive of such a thing. The CHAIRMAN. How would you conceive it to be possible? Lieutenant Colonel TYLER. Well, I think you will find in the Government service frequently that men do not know anything outside of their own department. The CHAIRMAN. I am glad you put in there "outside of their own department." Senator PITTMAN. Who is this Federal Power Commission? Lieutenant Colonel TYLER. The Secretary of War, Secretary of the Interior, and the Secretary of Agriculture, sir. Senator PITTMAN. Well, do you not think that they know of the facilities of these departments? Lieutenant Colonel TYLER. I do not think in past commissions that these matters got to the commission. Senator PITTMAN. Well, it is their duty under the law, is it not? Lieutenant Colonel TYLER. Yes, sir. Senator PITTMAN. That is the duty of the commission? Lieutenant Colonel TYLER. That is right. Senator PITTMAN. And still you want that same commission maintained, do you not? Lieutenant Colonel TYLER. I think it is sound, absolutely, in principle. Senator PITTMAN. But you think the commission ought to be instructed as to facilities they have in their departments, is that it? Lieutenant Colonel TYLER. I do not think the matter ever got to them under past executive secretaries. Senator PITTMAN. Why to them? They were it. Lieutenant Colonel TYLER. They did not know all about it, that is. Senator PITTMAN. Well, the law imposed the duty on them to know it. When are they going to learn it? Lieutenant Colonel TYLER. I think they know it. Senator PITTMAN. They now know it? Lieutenant Colonel TYLER. I think so. Senator PITTMAN. Well, that is encouraging. The CHAIRMAN. Have you had any experience with the former executive secretary, Mr. Merrill? Lieutenant Colonel TYLER. Not in a business way. I know him personally; yes, sir. The CHAIRMAN. Do you know if he is in any way responsible for the delay in getting this accounting work done? Lieutenant Colonel TYLER. I think he is entirely responsible. The CHAIRMAN. You think he is entirely responsible. A matter perhaps not particularly relevant to this inquiry, but a matter that has some relation to the charges of delay and lack of action in the commission. I would like to know what you know about the Allegan, Mich., water application for a municipal plant? Lieutenant Colonel TYLER. I have a memorandum here on that if you want me to get it. The CHAIRMAN. Well, I would like to have it as an illustration of why the delay. This matter has been pending for years and years. Lieutenant Colonel TYLER. This is made up from our records and not from personal knowledge. The CHAIRMAN. Those are from the records. I assume that you believe them to be correct? Lieutenant Colonel TYLER. Yes, sir; I believe them to be correct. [Reading:] Fargo Engineering Co. made application in November, 1926, for a preliminary permit for a power project on the Kalamazoo River, Mich., near Allegan. In March, 1927, the city of Allegan made application for a preliminary permit which conflicted with that of the Fargo Engineering Co. The CHAIRMAN. Just at that point. The law requires you to give the municipality preference? Lieutenant Colonel TYLER. Yes, sir. Senator PITTMAN. The Secretary of the Interior denies that. I want to correct you. The CHAIRMAN. Do you mean that the Secretary of the Interior denies that the law requires them to give the municipalities the first right? Senator PITTMAN. That is, unless it is in the public interest, which he determines himself. Lieutenant Colonel TYLER (continuing reading): As a result of its status as a municipality, a preliminary permit finally was issued in August, 1928, to the city of Allegan for its proposed project, and in July, 1929, a preliminary permit was issued to Fargo Engineering Co. for a modified project which did not conflict with that proposed by the city. That is, it took away the part from the power company which conflicted with the city's application. The CHAIRMAN. What does your record show with reference to the ownership of the Fargo Engineering Co.? Does your record show that? Lieutenant Colonel TYLER. I could not state that, sir. The CHAIRMAN. Mr. Bonner, do you know who owns the Fargo Engineering Co.? Mr. BONNER. No, sir; I do not. The CHAIRMAN. Will your records show? Mr. BONNER. I am not sure of that. The CHAIRMAN. Will you please look it up? Lieutenant Colonel TYLER. I have the file here, but I do not know as it shows the ownership. The CHAIRMAN. You need not stop now. Please look it up. In August, 1929, the city made application for license for its project, which application was promptly referred to the Chief of Engineers, War Department, for report and recommendation. In November, 1929, Fargo Engineering Co. filed application for license for the same project for which it had originally requested a preliminary permit. This application was returned to the company because of its conflict with the development proposed by the city, and the company was advised that it would be given an opportunity to revise its application for license to be in accord with the preliminary permit which it holds. In other words, they were told again that the city was to have the preference. Continuing reading:] Subsequently the Fargo Engineering Co. submitted a brief in support of its contention that consideration should be given to its larger proposed development, even though it did conflict with that of the city. This brief was forwarded to the Chief of Engineers with the request that the district engineer be directed to give it attention in connection with his forthcoming report on the application for license by the city. The report of the district engineer on the city's application for license is expected to be received by the chief engineer some time this week. And I also may state that I asked them to wire out yesterday for a brief of his recommendation, but I did not get it. I hoped to have it this morning. The CHAIRMAN. May I ask you this: In this list of licenses filed by Mr. Bonner it shows here that the Fargo Engineering Co. were granted a preliminary permit on July 10, 1929. And in the case of the city of Allegan the preliminary permit was issued on August 27, 1928. Do I understand you to state that there is no conflict between those preliminary permits? Lieutenant Colonel TYLER. No, sir; there was no conflict between the permits as issued. The CHAIRMAN. In other words, it was quite possible for the city of Allegan to proceed under its permit and the Fargo Engineering Co. to proceed under its permit? Lieutenant Colonel TYLER. Yes, sir. Mr. BONNER. May I answer your question, Mr. Chairman? Mr. BONNER. Major Newcomer, Assistant Chief of Engineers, says that the ownership of the Fargo Engineering Co. is in the Consumers Power Co. The CHAIRMAN. The Consumers Power Co. already have permits from the Federal Power Commission on the Kalamazoo River? |