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In conclusion, Mr. Chairman and gentlemen of the committee, let me reiterate a statement made the other day, that if an investigation is ordered, whatever may be its scope, the Public Service Commission of the Commonwealth of Pennsylvania will supply all the data which it has or can reasonably secure and make the same available to any committee of Congress or to any other official or unofficial body of character.

JOHN E. BENTON. Mr. Chairman, may I ask leave to add when this hearing comes to be printed to the statement made by Chairman Gettle for his committee, which was presented at your second day's hearing, the names of the members of the committee who were not present to sign that statement but who desire their names to be included.

The CHAIRMAN. Very well; that may be done.
Mr. BENTON. I thank you.

The CHAIRMAN. Judge Ransom is recognized for a statement. And, Senator Walsh, I will say that before you came in I arbitrarily fixed the time for to-day's hearing, giving to Judge Ainey 20 minutes, Judge Ransom 40 minutes, and you the remaining hour.

Senator Walsh of Montana. Í thank you.


Mr. RANSOM. Mr. Chairman and gentlemen of the committee, I will say that although my appearance here is in behalf of the Joint Committee of National Utility Associations in opposition to the resolution pending before your committee, yet in the course of my professional work I represent a number of utility companies, and some holding companies, in several parts of New York State and also some which operate in other States.

It seems to me that on this closing day there remain simply two questions:

1. Whether a prima facie case has been made out here for any investigation of the utilities by a committee of the Congress; and

2. If that were so, what, under the decisions and public policy, are the sound and reasonable principles or limitations of the scope of

power of investigation and legislation as to the matters contained in the resolution.

And, as briefly as I can in the few minutes you have allotted to me, I shall discuss, and analyze in some measure, the charges that have been made here during the hearings, the instances cited, and the jurisdictional question to which several Senators have referred.

Inasmuch as you have limited my time, I shall be grateful if questions may be reserved until I am near the end, at which time I shall be glad to answer any questions that I can during such time as remains.

First, let me refer to two or three questions which I understand to be no longer in controversy before this committee: In the first place, Senator Walsh has soundly conceded that power to investigate is limited by the power to legislate, and that the Congress has not the power and jurisdiction of investigation in relation to matters concerning which it can not legislate. So that, as I take it, that is out of this situation.

In the second place, Senator Walsh has soundly, and I think necessarily, conceded that holding companies are not engaged in interstate commerce because of their ownership of stocks or bonds of companies situated in one or more or many States. This is in accord with the statement of the Senator made on February 28, 1927, in which he said that a holding company, although it exercised supervision and control over subsidiaries operating in half of the States of the Union, is not engaged in interstate commerce. And if a holding company owning stock in several States, and if that holding company, as he says, even though it exercises supervision and control over operating utilities in half the States of the Union, is not engaged in interstate commerce, then it follows by the same token that the local bank and the local contracting company and the local engineering concern, which furish service to the utilities in these local communities, are not possibly within the scope of investigation or legislation as interstate commerce.

Both of these reasonable concessions have cleared and clarified, I think, the situation a great deal, and I venture to refer to a third aspect which seems to me to have come to a general realization and acceptance in the course of these hearings

Senator WALSH of Montana (interposing). Having in mind your request not to be interrupted, did you hear my opening statement to this committee !

Mr. RANSOM. Yes, sir; and I shall quote from it in a moment. Senator WALSH of Montana. All right.

Mr. RANSOM. That is a situation that has come to be a general realization and acceptance, I think, although perhaps not an express confession.

It is a round phrase, Mr. Chairman and gentlemen of the committee, to talk about investigating an industry. But the thing to keep in mind when you investigate an industry, if you call it that, is that what you really investigate is companies, local companies; that what you really bring here is not the industry in the abstract, but what you bring here is Tom Brown and Ralph Jones and books and papers of the companies operating in the States of the Union. And what you adopt when you talk about investigating an industry is that, at the election of your committee, the officers, accounts, vouchers of 3,500 companies in every part of this country or in any part of the country may be brought by subpoena of any Senator for overhauling

And by the same standard when you put in the resolution vague phrases, or leave in the resolution phrases about financial institutions, engineering companies, construction companies, and I ask you to think about that in the terms of what that concretely means in the local communities as to the companies and the financial institutions which do work and render service for our far-flung utilities. The resolution as it stands means the banks in any town. It means the local companies and concerns that do construction service in any county or in any town; the local citizens engaged in local business in any city, village, or section of the United States; not only capitalization of utilities, not only capitalization of holding companies, but the capitalization and the increase in capital assets and capital liąbilities of all these nonutility corporations.

And although Senator Walsh has stated this morning that he withdrew his amendment, and his amendment might have excluded some operating companies of a local character, yet he had left in the amendment, by reason of the limitation as to operating companies, those local business concerns which deal with the utilities and own their stock and furnish engineering and other services to them in the countless communities of this country.

With respect to the general proposition which is advanced here, that if a committee may inquire into the affairs of all the utilities in the United States in order to find out whether the Congress may and should legislate as to some of them, the same reasoning would empower such a committee to inquire into all financial institutions, construction concerns, and the like, of the sort enumerated and under the circumstances specified in the resolution, to see perchance whether any stockholder of any holding company, even a purely intrastate holding company, as many of them are, 1 say, whether any stockholder of any holding company is perchance a stockholder therein.

There have been indicated here four possible grounds of claimed jurisdiction of the Senate to legislate or to make investigation as to the utilities:

1. The transmission of electrical energy and gas in interstate commerce.

2. The interstate sale and transportation of utility securities.

3. Restraint of trade in purchasing and financing properties and exclusion of competition from areas occupied by existing companies.

The suggestion, I believe, came not from Senator Walsh but from Senator Wheeler.

4. There have been some references, although I do not know that anybody has suggested your reliance upon them, of the exclusion of fraudulent securities from the mails of the United States.

Now, I will refer briefly as to the facts in connection with each of these four grounds.

On the opening day of your hearings Senator Walsh stated, page 13 of the stenographic transcript, that there could not be any question that companies which were engaged in interstate commerce were subject to Federal power and legislation. And I agree with his definition as there given of what constitutes interstate business. He said by that, by interstate business : I mean the transfer of electrical energy from one State into another,

The Congress unquestionably has the power, I think, to legislate, and so to investigate, this interstate transmission of electrical energy and gas. But this does not by any possibility call for an investigation by a special committee. The facts as to this interstate transmission, and its extent, are before you, some of them in your record.

And the rather surprising thing is that when this proposal was made to subject the utilities of the United States to investigation by a special committee, that the obvious subject of Federal cognizance is not in the resolution at all.

Now, Senator Walsh has said before the Senate that in the case of electrical energy and gas transferred from one State to another the Supreme Court of the United States has decided that in that event neither the State of its origin nor the State of its consumption has any power whatever of regulation. Before this committee Senator Walsh stated that whatever the distributing company has to pay for energy it becomes the basis for the rates charged by the distributing company. I might just briefly refer to that to say this: That is not the law, and it is not the fact. Under the practices and the rulings of the commissions where a part or all the energy which is sold to the public by a distributing company is derived from a source across a State line, the commission in the State of distribution does not consider itself bound, and it is not bound, by the price which the distributing company pays, and that commission inquires fully into the facts and all the pertinent circumstances, as to whether it is a reasonable price, and in fixing the basis for the rates charged to the public, the commission allows the distributing, or the operating company simply a reasonable price, notwithstanding the cost of the energy which enters into the product being distributed.

Senator SACKETT. Have you any definite instances of where that has taken place?

Mr. RANSOM. There have been a great many of them in different parts of the State of New York, for instance. There was a situation that came up on the southern tier of New York, where electrical energy came to a company in a city in the southern tier from somewhere in Pennsylvania, and it was rather long-distance transmission, I believe, and where there might be some doubt as to whether it was economical; and the commission decided that

Senator SACKETT (interposing). Could you give us the names of the companies ?

Mr. Ransom. I think it was an Elmira company, but I do not recall the name. The State commission inquired into the matter and used as its standard the cost of steam generation of power in the local community.

We have, of course, the same situation with respect to gas in a number of cases that have gone to the United States Supreme Court which I do happen to recall, the Consolidated Gas Co., for instance. It buys gas from other companies with which it is identified by reason of stock ownership. The courts and the State commission—well, first, the United States District Court in findings affirmed by the United States Supreme Court, held that the regulatory power is not limited by the price paid for the power at wholesale, or the cost at wholesale, that the commission or the court may inquire as to what is a reasonable price under all the circumstances.

Senator SACKETT. My question was, whether you could give us the instances. Could you enumerate the different cases and give us a reference, so they could be identified ?

Mr. RANSOM. I can do that, Senator Sackett, and will be very glad to supply that information.

Senator SACKETT. All right.

Mr. RANSOM. So, passing from the matter of the interstate transmission of power, we come to the second question which has been suggested as the basis or the ground of investigation here, interstate sale and transportation of securities.

Senator Walsh's basic charge and his chief reliance for a prima facie case all along seems to have been inflated and excessive capitalization, and that, as he stated on the opening day here: ceeding.

The power of Congress to legislate as to the kind of stock which may pass from one State to another affords a complete and perfect basis for this pro

Before analyzing whether this is so, may I first comment on what is before your committee to sustain his charge of suspicion of overcapitalization? The charge has been reiterated that there is now going into the utility properties about $500,000,000—and the fact is that it is more than that for new additions—and that the securities of the operating companies and of the holding companies are two or three times that much. And Senator Walsh said:

The conclusion is unescapable that part of the vast aggregate is pure water or thin air

Before this committee Senator Walsh charged that half a billion of dollars are annually going into improvements, and that the new securities are two or three times as much. Now, how are these figures made up that are the basis for these charges? In the first place, capitalization figures that are compared with net conditions include refunding issues

Senator Walsh of Montana. I have shown in the part of my speech you have referred to just exactly that state of affairs; I have told just exactly how the figures are made up.

Mr. Ransom. Well, is the charge withdrawn?

Senator Walsh of Montana. Not at all. But if you quote me you ought to quote me in full. You ought not to take out a single expression from my speech entirely dissociated from what I said about it.

Mr. Ransom. I have not done that. The capitalization figures that are two or three times the amount of the property additions are capitalization figures that include refunding issues and which account for a very large part of the difference. And the capitalization figures include amounts of Canadian utility securities, as to properties in Canada, which securities are sold in the United States, whereas the property addition figures which are compared with the capitalization figures are only for continental United States. He compares the total increase of capitalization of utility and holding companies with the property additions for gas and electric purposes only

Senator Walsì of Montana (interposing). I have stated that.

Mr. RANSOM (continuing). Leaving out the fact that these utility and holding companies have some refrigeration and other things, and even street-railway properties.

The CHAIRMAN. What is the amount of it? How much is refunding of the total capital additions ! Mr. RANSOM. Something over 40 per cent. The CHAIRMAN. Did you say something over 40 per cent? Mr. RANSOM. Yes, sir. Senator WALSH of Montana. I did not get that answer. Mr. RANSOM. I say, it is something over 40 per cent.

The CHAIRMAN. What is the aggregate total of the new capitalization?

Mr. RANSOM. If I may just bring this concretely before the committee: In the first place, as to 24 representative holding companies,

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