experience, this will provide another 3,144 jobs annually for which customers are now advised to call a contractor.

Thus, our change in policy has resulted in at least 4,700 additional customer ! service calls for appliance dealers and contractors. I think you can see why we feel the recent changes in our service policy are a two-way street and why we are sure that most of the traffic will be to the plumbing and heating contractors. I also want to call your attention to the fact that we have begun to sell our stock of appliance parts. We are hopeful of selling these to contractors or serv ice agencies in North Shore's area so that your customers and ours will have the advantages of close availability.

I hope that the facts and figures in this letter have been helpful to you in understanding the objectives of North Shore Gas Company. If you still have doubts about our program, why not talk to some of the heating and plumbing contractors in Chicago with whom Peoples Gas has worked for years?

In the battle between the fuels which promises to grow more intense in the coming years, we at North Shore Gas need your cooperation for our greater mutual success.

Very truly yours,

J. P. HAPP, Vice President.

Mr. POTVIN. As you know, there were general "alarms" and excur sions sounded by people in that area. We have had a great number of letters with regard to them. I am sure I do not doubt anything that you say, but any steps that you might take to reassure these small businessmen might serve a useful purpose in terms of goodwill for your outfit, as well as others.

Mr. CONDON. Thank you for the suggestion. We are constantly calling on them, have engineers constantly calling on them, offering assistance and bringing this to their attention. I think ultimately they will see that whenever we do something like this we actually stir up market, the volume of business goes up.

the

Mr. POTVIN. This young lady sitting here has to answer all the 200 letters when we get a bundle like that, so I would suggest that for your good and ours

Mr. CONDON. I am terribly sorry.

Mr. POTVIN. I have no more questions, Mr. Chairman.

Mr. CONTE. Mr. Williams, do you have any questions?

Mr. WILLIAMS. No questions, Mr. Chairman.

Mr. CONTE. Thank you, Mr. Condon, for a very fine statement.
Mr. CONDON. Thank you, sir.

Mr. CONTE. Mr. Lee, I understand you are under subpena?

Mr. LEE. I am.

Mr. CONTE. Please raise your right hand. Do you solemnly swear that you will tell the truth, the whole truth, and nothing but the truth, so help you God?

Mr. LEE. I do.

TESTIMONY OF W. L. LEE, ATLANTA GAS LIGHT CO.,

ACCOMPANIED BY JOHN H. BOMAN, JR.; AND ALBERT NORMAN, COUNSEL, OF HANSELL, POST, BRANDON & DORSEY, ATLANTA, GA.

Mr. LEE. Thank you, Mr. Chairman.

To my right is Mr. John H. Boman, Jr.; to my left is Mr. Albert G. Norman, Jr., of Hansell, Post, Brandon, & Dorsey, attorneys, floor, First National Bank Building, Atlanta, Ga.

Mr. Chairman my name is W. L. Lee. I am president of the Atlanta Gas Light Co. My address is 235 Peachtree Street NE., Atlanta, Ga.

!

I speak only for the Atlanta Gas Light Co. In September 1967, we filed an answer to this committee's inquiry concerning Atlanta Gas Light Co.'s utility marketing promotional practices.

I am here today to explain these policies, to tell you about the competitive situation in Georgia, and its probable impact upon our future policies and practices.

Atlanta Gas Light Co. is a public utility organized and existing under the laws of the State of Georgia. Its principal business is the distribution and sale of natural gas in 78 counties in Georgia.

Approximately 580,000 customers are served in 178 municipalities and surrounding territory, including the metropolitan areas of Atlanta, Savannah, Augusta, and Macon.

We have 2,350 employees, 155 of whom are engaged in sales or new business activities. Of this number, 48 are in our retail sales force. Atlanta Gas Light Co. is subject to the jurisdiction of the Georgia Public Service Commission. The Federal Power Commission has issued an order, pursuant to the Hinshaw amendment, exempting Atlanta Gas from the operation of the Natural Gas Act.

Our principal competitor is the $3 billion Atlanta-based Southern. Co., which owns and controls the Georgia Power Co., who supplies. about 854,000 retail customers and 335 wholesale customers in Georgia. Our competitor in the Savannah area is the Savannah Electric Co., which serves about 64,000 customers.

At the outset, I want to make it clear that Atlanta Gas Light Co. is strongly opposed to the so-called promotional allowances and tactics now in vogue in utility marketing in many places, particularly as instituted and practiced by the electric industry.

We believe these practices have assumed the proportions of a national scandal. They seemed to break out practically simultaneously and with great similarity in many places around the country about

1960.

In fact, by 1963 they had developed to the extent that the theme of the April meeting of the Edison Electric Institute, as reported by G. F. Taubeneck in Air Conditioning, Heating, and Refrigeration News (Apr. 15, 1963, p. 24), a trade journal, was "Shut Out Gas Entirely-Bury It," which was symbolized at the meeting by a mock funeral for the gas industry.

In Georgia alone at least $10 million per year is being spent by electric companies for various promotional allowances, rebates, bonuses, waived demand charges, and payments to dealer salesmen, all of which are used as leverage to force utility customers to boycott gas or oil.

Mr. POTVIN. Mr. Lee, for the record, could you define demand charge, and explain what it means to waive a demand charge?

Mr. LEE. Generally, in utility rates, particularly in electric rates, there are two components. There is a demand component or demand charge, which is based on the capacity tied up to serve the particular customer facility. There is also a commodity charge which is based on the amount of energy-which represents the cost of the amount of energy that is consumed by the customer facility.

For instance, the usual electric demand in our area is a kilowatt demand integrated over a 30-minute period. The commodity or the consumption would, of course, be the amount used in a month of kilowatthours.

Mr. POTVIN. So, in essence, the electric utility undertakes to say when you need it, we guarantee it will be there, and this entitles them to a charge quite apart from the amount actually consumed?

Mr. LEE. That is right. That is the general practice in commercial or industrial rates.

Now, residential rates are not quite so complicated and cost for the demand on a residential rate is normally imbedded in the steps of the rate itself.

Mr. POTVIN. Could you give us a ball park figure on the sort of arithmetic involved in the typical industrial demand charge? Are you talking about waiving a thousand dollars a year or a hundred dollars a year!

Mr. LEE. Well, the practice in Georgia would be-let me cite a ratesay, the Georgia Power Co.'s B-10 rate. It has two components, one of which is a straight demand commodity operation, although there is a sliding scale in the commodity. There is also a waived or counted demand in which, if you have certain tied electrical services, like electric heating or electric cooking, the demand for those components is waived.

Let us take, for instance, a customer in a commercial building who has lighting and who has air conditioning. Let us say that his actual lighting demand is 100 kilowatts and his actual air-conditioning demand is, let us say, 500 kilowatts. If that customer would put in electric heating, the practice of the Georgia Power Co. under their B-10-B provision is to waive both the demand for the heating and for the air conditioning, so that you would wind up with the man paying $100 or less even though he had, say, 600 kilowatts demand on the electric system.

Now, the customer who has gas heating will have to pay the 600 kilowatt demand charge. That is a rough illustration. The customer who is not the favored customer, who has gas air-conditioning, his demand is actually metered. The customer who is under the B-10-B provision of that rate, his demand is counted and the heating and air-conditioning components waived.

It could easily result, and does in many, many cases, result in the customer getting more total kilowatt-hours with a combined electric air-conditioning and electric heating than the customer who did not use the electric heating at all.

Mr. POTVIN. So that of two customers in the same class, the one that actually consumed the most energy might actually pay the fewer consumer dollars?

Mr. LEE. Right.

Mr. PorvIN. This might offer some problems of discrimination within the same tariff customers, would it not?

Mr. LEE. We think it does.

If the electric companies are permitted to continue these practices, the only recourse of the gas companies will be to attempt in every way possible to devise and implement counterpromotional practices--some of which admittedly may take forms as objectionable as the present practices of Georgia Power and Savannah Electric. The cost of this spiraling of promotional practices and counterpractices will be paid for entirely by the ratepayers. History proves that such practices lead inevitably to a mutually destructive escalation of promotional programs which is totally against the public interest.

In Georgia, in addition to innumerable ad hoc promotional arrangements, such as those involving supplying a standby generating plant for an airline computer center, free electric lines in office buildings, and withholding higher voltage unless the customer goes "all electric," there are many discriminations and tying arrangements imbedded in the electric tariffs.

Mr. POTVIN. Mr. Lee, when you say withholding higher voltage unless the customer goes "all electric" are you saying that the customer says I simply must have more voltage for the following reasons and they say, "Charley, you cannot have it unless you go electric on your heating or whatever"?

Mr. LEE. Let me give you an illustration. It is very desirable to the designer of a multistory office building that he have 400 or 600 voltage for lighting. It is much more economical for him to design this electric system than if he builds a 220-volt distribution system. We have cases in Georgia where potential customers have told us that great pressure has been put on them to go all electric if they wanted that higher voltage. If they did not go all electric and used gas for heating, the electric line that they had to connect to was four, five, or six blocks down the street, and the cost-they would have to pay that cost. Yet if they went all electric for the air conditioning and the space heating, that line miraculously appeared right around the corner of the building.

Mr. POTVIN. Are there cases where they literally refused, literally withheld the higher voltage, absent whatever

Mr. LEE. All we have is the customers' statements.
Mr. POTVIN. You have had reports of that?

Mr. LEE. Yes, we have had reports of that.

Mr. POTVIN. Thank you, sir.

Mr. LEE. In the case of Georgia Power's A-12, TE-2, and B-10 rate schedules, its residential wiring plan, the discriminations and ties are obvious. This wiring plan provides for payment to the customer's electrical contractor of various allowances ranging from $50 to $200 per unit tied to the use of certain appliances competitive with gas or oil. Ostensibly, the purpose of the plan is to provide adequate wiring. However, local building codes independently require adequate wiring. The plan, therefore, becomes a device for passing on a promotional payment; otherwise unneeded.

In the case of Savannah Electric the cash payments range from $15 to $200 under a promotional payment plan also tied to the elimination of competitive gas or oil equipment. The wiring plans of Georgia Power and Savannah Electric do not provide for payments based upon any captive electric loads-by "captive electric loads," Mr. Chairman, I mean that normally there are certain electric uses, that an electric company has, that has no practical competition, such as illumination, small electric motors, and the like. So the wiring plans of Georgia Power and Savannah Electric do not provide for payments based upon any captive electric loads, nor do they provide for payments based upon loads of gas or oil air-conditioning or heating equipment. Gas air conditioning uses a considerable amount of electric power. If that load is added, no benefit under the wiring plan accrues from that. The benefits of the wiring plan are tied entirely to anticompetitive equipment.

The plan of Savannah Electric provides for a schedule of payments as follows:

Gold Medallion (total electric home).

All electric (Gold Medallion) heating, cooking, water heating, lighting, and refrigeration..

Electrically heated.

Cooking and water heating combined.

Range only.

Water heater only..

Dryer only..

It will be noted that cooking and water heating combined receives a larger cash payment than either separately.

Mr. POTVIN. Mr. Lee, how do they handle URD? Do you cover that

later?

Mr. LEE. I cover that later; yes.

Mr. POTVIN. Thank you, sir.

Mr. LEE. It is evident that any gas or oil dealer attempting to compete for cooking, water heating, clothes dryers, space heating, or air conditioning is faced with only two alternatives either match this electric payola or lose the business.

In February 1966, Atlanta Gas Light Co., along with Gas Light Co. of Columbus, Ga., the city of Austell, which has a municipal gas operation in the Atlanta area, propane dealers, oil dealers, and certain customers of Georgia Power filed complaints against the rates and promotional practices of Georgia Power Co. We took this step most reluctantly. In addition to the direct anticompetitive thrust against our company, we felt that our customers, most of whom were also captive customers of Georgia Power, were being mistreated and unreasonably discriminated against by the rates and promotional policies of the power company.

As a result of these complaints, the Georgia Public Service Commission ordered an investigation and public hearing on the rates, promotional practices and allowances of Georgia Power, Atlanta Gas & Gas Light Co. of Columbus, Ga. The proceeding resulted in 12 days of hearings covering 1,623 pages of transcript and 149 exhibits. The record was closed April 1, 1968, and the matter is pending before the commission for decision.

Practically every legal issue under existing law concerning utility promotional rates and practices has been raised in this proceeding. These issues include attacks on the promotional practices of Georgia Power on the ground that under State law they constitute unlawful rebates and bonuses, unreasonable discriminations, monopolistic prac tices, and misleading and deceptive advertising practices. Issues as to whether these practices constitute tying arrangements, monopolistic practices and other anticompetitive practices under the Federal antitrust laws have also been raised.

We, of course, are hopeful that the Georgia commission will invalidate these rates and practices and establish reasonable guidelines for utility promotional practices.

The gas companies have specifically urged the Georgia commission to eliminate all forms of payola to builders or prospective customers;