PROJECT OKLA 2-5, SHEET E-3 (PLANS) Direct burial secondary service cable furnished and intalled by O.G. & E Co. Ditching and back fill for primary and secondary services cables accomplished by agreement between O.G.E. Co. and the local housing authority. NATIONAL ELECTRICAL CONTRACTORS ASSOCIATION, INC., Re Hamilton Courts, Low Rent Housing Project, Oklahoma 2-5. Secretary, Oklahoma City Housing Authority, DEAR SIR: The Western Oklahoma Chapter of the National Electrical Contractors Association hereby protests the installation of the electrical underground service and distribution system proposed by a public utility company on the site of the Oklahoma City Public Housing Authority. Our objections are principally as follows: 1. It authorizes and requires the electric utility to go past the normal delivery point with pipes and conduits or wire to serve this area This is discriminatory against other consumers who have had to pay for such work. It increases the investment of the company that all of us must pay for and deprives independent contractors, their workers and suppliers of business that normally goes to real private enterprise and not a protected public utility. 2. The utility lines should be terminated at or near the property lines, the same as gas lines, and from there on to the actual consumer the construction should be by a private enterprise operator. 3. That the proposal results in a much higher rate for electric service to the ultimate consumer than would be possible under alternative proposals that we shall mention and should be considered. This proposal results in no benefit to anyone except the utility and is detrimental to the groups we represent, the occupants of this area and all consumers of electric service who must help pay for this unnecessary investment by the utility. Additionally there are serious problems as to use of easements and insurance liability in the proposed operation. We have reason to believe that the electric utility has not carefully followed all national and local safety and fire codes in many projects and used foreign or sub-standard material. If this project goes on as planned, we of course, shall expect your organization will be careful to see that this utility complies with all reasonable, proper and legal safety requirements as to design, workmanship, and material. At this time, in many instances in Oklahoma, the regulated public utilities are delivering electricity at one delivery point to apartment houses, shopping centers and other similar projects, and the owners or managers of these projects then in turn after accepting delivery at this master meter, have their own distribution system installed that delivers and sub meters to each tenant the electricity used. This has been used successfully in many housing projects in the nation under utility laws similar to ours. In view of the foregoing, it seems to us, that if it is the desire of the Oklahoma City Public Housing Authority to provide low income families with housing and utility service at the lowest possible cost consistent with sound fiscal policies, that some consideration should be given to arranging for O.G. & E. to make delivery of electricity at one meter point at the edge of the property affected, and then the housing authority by contract or otherwise construct its own distribution system and metering system to each dwelling or unit and collect as rates an amount sufficient to pay for the electricity, the investment, and operation and maintenance of the system. These rates could easily be tailored to give O.G. & E. a fair return on its initial sale, bear all of the costs of distribution and result in a much lower rate to the tenant. This has been a universal, or at least common practice, among many shopping centers and apartments, where the tenants are much more able to pay high rates than tenants in a public housing project, and why in this instance the utility should be permitted to adopt the most expensive way to render service to these unfortunate people is beyond comprehension. We are business men. Naturally we want to make a profit. We want the utility to make a profit. But today we find O. G. & E. being authorized to legally make 6 percent on investment in Oklahoma and actually according to filed reports making in excess of 8 per cent, plus advantages from fast tax write offs. This results in rates and charges in Oklahoma being millions of dollars a year above established legal rate of return. It is our view that rather than blindly enter into an agreement with the utility which deprives independent contractors and labors and supplymen of business which normally should be theirs, resulting in increasing the investment of the utility for the rate payer to pay for and actually costing the rate payer more money, that this body, in the interest of the low income families should explore with us, other rate payers and tax payers some alternative and cheaper means of rendering service, which does not deprive private industry of employment, and if necessary an examination of the whole rate structure and earnings of the utility. Frankly, we do not intend to stand idly by and see this arrangement that is proposed go into effect without some protest. We would like to be able to work out a sensible proposal with a line of demarcation where the utility quit taking business from us and our workers. If this is not possible by conference, we have instructed our attorneys to prepare to take such action as may be necessary to stop these unfair practices and examine the entire rate structure and operation of the electric utility involved. We have no desire to do this, but we may have no other recourse if we do not hear from you within the next ten days. Sincerely, Hon. JOHN D. Dingell, F. D. "MIKE" BEHRINGER, Chairman, Governmental Affairs Committee. ATLANTIC CITY ELECTRIC Co., Chairman, Subcommittee on Regulatory Agencies, House Select Committee on Small Business, Washington, D.C. DEAR REPRESENTATIVE DINGELL: In order to save the time of the Committee at the hearings, I respectfully request that the following statement be included in the record in lieu of oral testimony. On May 13, 1968, your honorable Committee heard testimony of Kenneth L. Estabrook, Esq., an attorney-at-law of New Jersey, on behalf of Mechanical Contractors Association of America, Inc., which constituted an extensive recital by Mr. Estabrook of his experiences in a matter in which he represented certain mechanical contractors and fuel oil dealers in an action brought before the Public Utility Commissioners, questioning the promotional practices of a New Jersey utility which Mr. Estabrook did not name in the record but which obviously is Atlantic City Electric Company. These practices had been unsuccessfully challenged by Mr. Estabrook's clients. All of Mr. Estabrook's contentions have already been carefully considered and expressly rejected by the New Jersey Board of Public Utility Commissioners. This matter was the subject of some twenty-seven hearings conducted over a period of more than two years. The transcript alone exceeds three thousand pages. Almost all hearings were conducted by a member of the Board (rather than a hearing examiner). In addition to hearing representatives of the Company and expert witnesses presented by it, the Board heard testimony from the Company's unregulated competitors (who had instituted the proceeding) and from expert witnesses hired by them. Attorneys from the New Jersey Attorney General's office as well as an engineer from the staff of the Board also participated actively. Mr. Estabrook's chief grievance appears to be based on our payment of cash allowances to builders who purchase electric heating equipment for installation in homes or other buildings they are constructing. Although electricity as a heating source is essentially competitive with other energy sources on an operational basis, electric heating equipment itself may be more costly for a builder to purchase and install than other types of heating equipment. Builders are understandably anxious to keep their own costs down and will typically select the least expensive heating equipment. Accordingly, a system of promotional allowances was adopted to reimburse the builder partially for the increased costs which would accompany his installation of electric heating equipment. With this kind of program, the builder was able to select the system that would best serve his customer on an operational basis without incurring any financial loss by doing so. The net purpose and effect of the program therefore was not to stifle competition but to create competition where almost none had previously existed. It is quite clear from the testimony given by Mr. Estabrook before your Committee that he was not satisfied with the decision of the Board. Yet it is interesting to note that Mr. Estabrook took no appeal from the decision of the Board but rather seeks to use this Committee as a forum in which to make a collateral attack on the considered action of a duly appointed regulatory agency. For more than two years during the course of this extensive litigation, the Board gave Mr. Estabrook almost complete freedom in discovery in the books and records of the Company and literally thousands of man-hours were spent by Company personnel in obtaining and producing records, the production of which was demanded by Mr. Estabrook and ordered produced by the Board. If this Committee wished to examine in detail that proceeding, Mr. Estabrook should have furnished the transcript. The Company has already defended itself in one forum; it should not be obliged to engage in a reprise of a matter fully explored by the regulatory body having jurisdiction in New Jersey. Mr. Estabrook's suggestion that these payments were made out of capital and that we "merely pass... (ed) the purchase price on to... captive rate users" is without foundation. During the investigation, the New Jersey Board required our Company to demonstrate the effect our payments were having on our over-all rate of return. After making full allowance for the Company's promotional expenditures, the Board found that our over-all rate of return was higher than it would have been without these payments. Since utility rates are established to provide a utility with no more than a reasonable rate of return, a program which operates to raise over-all rate of return either makes rate decreases possible or lessens the need for future rate increases. This was recognized by the Board which declared: "We find that the promotional practices produce benefits not only to the Company but to all customers. Those customers not within the classification entitled to receive promotional payments will share in the benefits which will eventually accrue to all customers." Although issue may be taken with many of Mr. Estabrook's so-called statements of fact, he did make one misstatement so glaring that it warrants specific denial and that is his claim that promotional funds expended by the Company are incorporated in its rate base. That is entirely untrue. Promotional funds are, without exception, treated as operating expenses on the Company's books and under the uniform system of accounting both of the Federal Power Commission and the New Jersey Department of Public Utilities do not constitute any part of rate base. The Company's present practices are neither discriminatory nor preferential, have been sanctioned by the Board of Public Utility Commissioners of New Jersey and are on file with the Board, and the Company has scrupulously observed both the letter and spirit of the Board's decision in the matter of Watkins vs. Atlantic City Electric Company and Fuel Merchants Association of New Jersey, et al, vs. Atlantic City Electric Company, Dockets 642-59 and 644-837, copy of which is on file with your Committee. Respectfully submitted. J. P. HAYWARD. PROMOTIONAL PRACTICES BY PUBLIC UTILITIES AND THEIR IMPACT UPON SMALL BUSINESS FRIDAY, JUNE 28, 1968 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ACTIVITIES OF REGULATORY AGENCIES Washington, D.C. The subcommittee met, pursuant to recess, at 10:25 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; and William H. Loy, acting minority counsel. Mr. DINGELL. The subcommittee will come to order. This is a continuation of the investigation being conducted by Subcommittee No. 5, the Subcommittee on Activities of Regulatory Agencies, into the matters of utility subsidies. Our first witness this morning will be Mr. James W. Karber, president of the National Association of Regulatory Utility Com missioners. You are certainly welcome to the committee this morning, Mr. Karber, for such statement as you choose to present. Before we do recognize you, and we will recognize you, and before you proceed, however, Mr. Potvin has a number of matters that he wants to insert into the record, so that the Chair will at this time recognize Mr. Potvin, the subcommittee counsel. Mr. POTVIN. I would at this time, Mr. Chairman, like to submit for inclusion in the record the 61-page statistical tabulation of promotional expenditures by utility companies and petroleum refiners. The data is derived from the questionnaire which has been hitherto circulated to a number of utility companies and refiners by the subcommittee. Mr. DINGELL. Without objection, that will be inserted into the record at this point. (The statistical data referred to follows:) STATISTICAL TABULATION OF PROMOTIONAL EXPENDITURES BY UTILITY COMPANIES AND PETROLEUM REFINERS, JUNE 1968 A. Electric: B. Gas: SECTION I.-LIST OF RESPONDENTS I. UTILITY COMPANIES 1. Alabama Power Co. 6. Carolina Power & Light Co. 9. Metropolitan Edison Co. 13. New Jersey Power & Light 14. Ohio Edison Co. 15. Ohio Power Co. 16. Oklahoma Gas & Electric 17. Pacific Power & Light Co. Power & Light Co. 20. Portland General Electric Co. 21. Potomac Edison Co. 22. Potomac Electric Power Co. 24. Savannah Electric & Power 25. Southern California Edison 26. West Penn Power Co. 7. Hartford Gas Co. 8. Laclede Gas Co. 9. Lone Star Gas Co. 17. Piedmont Natural Gas Co. 22. Western Kentucky Gas Co. C. Gas and electric: 1. Baltimore Gas & Electric Co. 2. Connecticut Light & Power Co. 3. Consolidated Edison Co. of II. PETROLEUM REFINERS 1. Ashland Oil & Refining Co. 5. Gulf Oil Corp. 6. Humble Oil & Refining Co. 7. Husky Oil Co. 8. Phillips Petroleum Co. 9. Shell Oil Co. 10. Sinclair Refining Co. 12. Standard Oil Co. (Calif.) 15. Sunray DX Oil Co. SECTION II.-DEFINITIONS I. Promotional Allowances. Any promotional payment of financial involvement granted in order to induce the use of a particular power source or to encourage the purchase of a major appliance; also includes commitments that spread payment or involvement over a specified time period. A. Promotional payment.-Any direct payment or subsidy. 1. Installation allowance.-Payment to cover costs incurred by a builder or owner for wiring and piping during installment of systems or |