The focal point of the meeting was a request on the part of the Illinois Association of Plumbing Heating Cooling Contractors that the Commonwealth Edison Company and Peoples Gas discontinue the practice of giving away water heaters as part of their subsidy program. A statement was made that the merchandising of water heaters was primarily the responsibility of licensed bonded plumbing contractors, and it was the responsibility of the installing plumbing contractor to take out the necessary permit for the installation of this equipment.

Mr. B. H. Wittmann, Vice President, Peoples Gas, immediately responded that Peoples Gas did not give away water heaters and that they did not intend to do so.

Mr. Pierron of the Commonwealth Edison Company admitted that they had given away water heaters as a part of their subsidy program, however, he committed himself, and Edison, to a cessation of this program.

The Labor Union that was represented at the meeting took the position that they would refuse to connect water heaters that were not furnished by the plumbing contractors.

Subsequently, because our plumbing contractors continued to complain that they were being asked to connect electric water heaters supplied by Commonwealth Edison at no cost to the builder, I wrote to Mr. J. W. Karber, Chairman, Illinois Commerce Commission, complaining of this condition. I was directed to write this letter as a result of a motion passed unanimously at a meeting of the Board of Directors of the Illinois Association of Plumbing Heating Cooling Contractors. The final paragraph of the letter contained the statement-"We hope that you will take whatever action is necessary to stop this illegal program."

Under date of April 27, 1966, Mr. Karber answered my letter to the effect hat the sale of appliances is not a public utility service and the Commission does rot regulate the activities of the utilities in regard to the same.

Under date of April 29, 1966, I responded to Mr. Karber's letter, stating that "the sale of appliances is not the issue or complaint in our letter of April 25, regarding the Commonwealth Edison Company promotion program. The fact that the utility company is giving away electric water heaters at no cost to the builder and charging this cost to the other customers should be a concern of the Illinois Commerce Commission. If you still do not consider this a matter for the Commission, we will take our problem to the Federal Trade Commission."

Shortly thereafter I received a call from Mr. Pierron, Vice President, Commonwealth Edison Company, who wished to make an appointment to see me at my office. I agreed to see him, and at the meeting Mr. Pierron indicated that word had been sent out to the outlying offices of Commonwealth Edison Company to discontinue the practice of giving away electric water heaters. However, in checking into the matter they found in some instances their field men were guilty of this practice without proper authorization.

On May 20, 1966, I received another letter from Mr. Karber to the effect that that he had been advised by Mr. Pierron of the Commonwealth Edison Company, that he (Pierron) had discussed the matter of our recent correspondence with me, and he (Karber) had been given the impression that he (Pierron) had explained to me that they had not violated their commitment, but had explained the matter to my satisfaction, and if this were not true, to please advise him (Karber).

On May 9, 1966, Mr. H. R. Swade, President of the Plumbing Contractors Association of Chicago, wrote to Mr. Karber informing him of a business policy involving the Commonwealth Edison Company of Chicago. Mr. Swade stated that he had received information to the effect that Edison had made donations of electric water heaters to three buildings, and listed the addresses of the buildings in question.

On May 16, 1966, Mr. Swade received a letter from Mr. R. B. Thomas, Chief Engineer, Illinois Commerce Commission, to the effect that his letter of May 9, 1966, had been referred to his office.

On May 25, 1966, Mr. Swade received a second letter from Mr. Thomas indicating that they had investigated the three buildings in question and found that one of the buildings was using gas water heating, another building had received a promotional allowance which included an amount for a utility room electric water heater, but the heater was bought by the builder from a supplier of his choice. In the third building the Edison Company admitted they supplied three water heaters that were left over from an experiment conducted in gas stations wherein small electric water heaters were used. The letter went on to say they provided these water heaters as a special situation and it was not a standard practice.

I continued to receive complaints from members of our Association; however, I decided not to do anything about them because I knew that the National Association of Plumbing Heating Cooling Contractors had sent out a Questionnaire to all of its members attempting to ascertain the subsidy programs that existed in utilities in their areas. I also had knowledge of the fact that answers to this Questionnaire would result in the filing of a complaint order before the Federal Trade Commission.

The fact that Edison indicated they were going to discontinue the practice certainly raised a doubt in my mind as to the legality of the program—and also raises the all important question-"Who supplied the give away water heaters?'” "Were they supplied by Commonwealth Edison, or were they supplied by an electric water heater manufacturer?"

It is my sincere hope that your committee will see that give away programs and subsidies are discontinued by Utility Companies so that the small business man can survive and continue to service the people in our communities.

Sincerely yours,

GEORGE F. CONNELLY.

PROMOTIONAL PRACTICES BY PUBLIC UTILITIES AND THEIR IMPACT UPON SMALL BUSINESS

TUESDAY, MARCH 19, 1968

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON ACTIVITIES OF REGULATORY
AGENCIES OF THE SELECT COMMITTEE ON SMALL BUSINESS,
Washington, D.C.

The subcommittee met, pursuant to recess, at 10 a.m., in room 2359, Rayburn House Office Building, Hon. John D. Dingell (chairman of the subcommittee) presiding.

Present: Representative Dingell.

Also present: Gregg Potvin, subcommittee counsel; Myrtle Ruth Foutch, clerk; and John J. Williams, minority counsel.

Mr. DINGELL. The subcommittee will come to order.

This morning the House Small Business Committee, Subcommittee on Regulatory and Enforcement Agencies, is continuing its hearings on promotional practices by public utilities and their impact on small business.

The schedule of witnesses is as follows:

Senator Lee Metcalf, Mr. James E. Ray, Mr. Joseph Paquette, Mr. John Ricca, Mr. Jack Luskin, and Mr. Hopenstein, who is president of the Star Appliance Co., Baltimore, Md.

The Chair is most pleased to welcome an old and distinguished friend, one with whom I have had the privilege of serving in the House, and one for whom I have always had the highest possible regard. Not only is his name well known in the subject matter of the investigation before this committee this morning, but he is well known for his efforts in conservation, and is much revered for his actions in the preservation of our environment, protection of fish and wildlife, and the wise use of the air and the woods and the water.

The Chair is most pleased to welcome Senator Metcalf to be our first witness. I understand you are accompanied by your administrative assistant, Mr. Victor Reinemer.

The committee would also like to welcome you, Mr. Reinemer.
Senator, the Chair is pleased to welcome you.

Senator METCALF. Thank you, Mr. Chairman.

TESTIMONY OF HON. LEE METCALF, A U.S. SENATOR FROM THE STATE OF MONTANA, ACCOMPANIED BY VICTOR REINEMER, ADMINISTRATIVE ASSISTANT

Senator METCALF. Mr. Chairman, may I say I am delighted to appear before this very distinguished committee and before you. As you said, we served together in the House of Representatives. I

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regard the chairman as one of my best and oldest and most valued friends. The people of Montana owe a great debt to Congressman Dingell for his aid in the preservation of our water and our forests and our streams and our resources and our wildlife. I keep reminding them of that debt when I go out to Montana. I feel that the dedication and devotion that you have given to that alone would mean that you have performed in the public interest.

I am delighted to be over here in this palatial room. At the time that I was in the House as a colleague of yours, it wasn't quite as dignified as it is at the present time. But I think that we can do just as useful work in circumstances such as this as we did back in those days.

Mr. Chairman, I am testifying this morning directly on the subject. matter that this subcommittee has been studying.

I have with me Mr. Reinemer, who is a coauthor of the book "Overcharge," which is a study of the activities of utilities, and we devote some part of that book and some of our research to these promotional activities.

I congratulate you on taking up this phase of utility activity in behalf of the small business producers of other kinds of energy.

A number of these small businessmen have expressed to me their concern over certain promotional activities of utilities. More information is needed on promotional programs and expense, so regulators can make sound judgments regarding allocation of the expenses and ascertain that utilities, because of their privileged status, do not work hardship on risk businesses with which they are sometimes in competition.

The public is entitled to know whether it is being required to subsidize a lockout of small business. And homebuilders and homeowners should have as many alternatives as possible regarding use of different types of energy. Your subcommittee, by its questionnaires and by its hearings, is developing the kind of factual information upon which some policy decisions can be based.

I would point out here that I introduced legislation last monthS. 2933-which would require that utilities report various items of information which is pertinent to regulation but is presently difficult or impossible to obtain from the reports filed by the utilities. My bill does not cover this matter of promotional expenses. Perhaps it should. I would welcome suggestions your subcommittee may have.

My general approach to improvement of utility regulation is to keep regulatory responsibility where it now is, which in most important respects is at the State level, but to strengthen regulation by having more information on utility operations reported and published, and by providing competent counsel to represent the public interest and the Federal interest before the various commissions.

Now, applying that general approach to the subject of your inquiry, I think it would be helpful, for example, if your subcommittee could determine the degree to which there is concerted action among electric utilities, their trade associations and electrical equipment manufacturers, such as General Electric, Edison Electric Institute, and the National Electrical Manufacturers Association.