Mr. HORAN. I do not believe it is, especially eastern Massachusetts. The second part-the second example that I put in this report was the Boston Edison and I just took their single account, 912, which was demonstrating and selling expenses. They escalated from $500,000 in 1961 to $2,389,000 in 1965, which was a figure that nearly quintupled in the 5 years or 4 years. So, I think escalation is clearly evident in these figures which are the Department of Public Utility figures. Mr. DINGELL. It is fair to say that these are not necessarily all of the figures that go into promotion. Mr. HORAN. That is correct. They would not all find their way here. I was assured of that, and when we get into the question of utility bookkeeping, it is a can of worms I would not like to get into because it is a little bit too complicated for me. This next exhibit, Mr. Chairman, shows a photostat of a letter written by an official of the Massachusetts Electric Co. on June 9, 1967, offering to subsidize a public housing project in Leicester to the tune of $6,400 providing the apartments were electrically heated. Mr. DINGELL. Without objection, that appeal referred to and the previous ones will be scrutinized by counsel to ascertain the appropriateness of insertion into the record. You may proceed. Mr. HORAN. Thank you, Mr. Chairman. I think anything else I might say would be repetitive. I think in summing up we can agree that the legitimate way to succeed in any business is to have a good product or service, to try to be competitive in price and performance, to use ethical promotional and advertising methods, and to employ skilled management and capable sales personnel. Mr. DINGELL. And to have all your competitors do the same thing. Mr. HORAN. Have them all do the same. Even if they did not, I think if your product is as good as you try to say it is, in most cases the public will buy it and even demand it of you. I do not think you should have to pay anyone to use it. From where I sit the fuel oil dealer has been placed in an intolerable situation because of this frantic promotional fight and the utility ratepayer is about as badly off if not worse, because in many cases he is footing the bill. As a small businessman who wishes to remain in the business I know hest, I am not asking for special preferences or privileges but I do elieve that these utility promotional programs are legally and morally onestionable. They give an unfair and unintended advantage to a competitor who already has the advantage of a Government granted franchise. All I ask from the committee is an opportunity to start even with the competition and I will take my chances on the outcome. That, Mr. Chairman, is why I have appeared before the committee and I thank you very much for your consideration and attention. Mr. DINGELL. Mr. Conte? Mr. CONTE. Mr. Horan, first of all, I want to congratulate you on the fine statement here today. Mr. HORAN. Thank you. Mr. CONTE. You mentioned the search of DPU records before you brought these figures before us. Could you tell me whether or not DPU questions these figures at all before they go up for their rate structure hearings? Mr. HORAN. These, I cannot say how much attention-in all honesty I would say that the Massachusetts DPU has been understaffed. I have had conversations with Mr. Bertolucci, the chief accountant, and Mr. Mason, one of the commissioners. I think they are getting to things as fast as they can and they are getting into the promotional problems. The thing that frightens us and brings us to Washington is, I think, particularly with out new chairlady that we may get some help, and some relief, but perhaps at our own funeral. So, I think that is the reason we are down this way. We really could go into this. They have the jurisdiction to say, look, you are passing this off to the other users of the utilities in Massachusetts and instead of doing this, let us lower rates. I think a real strong commission could get into this and if the laws were not there, perhaps request corrective legislation, but there is good argument there whether the State laws would allow them to get into every phase of these promotional programs. They are separate from the rates. Mr. CONTE. I asked one of the previous speakers if they had this sale promotion and all these other gimmicks that you have mentioned. This would mean an increased used of the utility and, therefore, a decrease in rates for the utility user. Granted that they make a profit on all these deals, and that all rate payers share the profit in lower rates, the question is: Is this sufficient justification to allow a protected utility to compete in this way with small business? Mr. HORAN. Of course, this is why we are here, Mr. Conte. We definitely challenge this. We say we just cannot compete with this. If you want to take us out of the picture and say we should disappear, then perhaps it is just a question of the utility users and utility companies whether they are going to benefit in the long run. I do not know. All I know is that Massachusetts, if they are lowering rates, I think we are 49th in the Nation, and I do not know where or how high up is. Perhaps if someone gave me another 4 or 5 million gallons of fuel oil to sell I could benefit the rest of my customers. It is an academic question. But, I know at this point, deal for deal, situation for situation, we are going out of business if it gets any worse. Mr. CONTE. This is a sizable amount of money that you presented here for demonstration expenses, advertising and miscellaneous sales expenses. Just for Massachusetts Electric it is $3.2 million, and for demonstration and selling expenses, $2.3 million for Boston Edison. This is a sizable piece of money that certainly could lower those rates in Massachusetts and get us out of that category of being the State with the 2d highest rate. Mr. HORAN. Right. We raised that specific argument at the Consumers Council but it has not been acted on since it left the council as of yet. Mr. CONTE. Now, if I may deviate, Mr. Chairman, to one question on another subject matter in which I am vitally interested. I asked one of the previous witnesses from Chester, N.J., whether he had experienced any shortage in No. 2 oil. Have you experienced any shortage in No. 2 oil in Massachusetts? Mr. HORAN. No, at our company we did not. We had a pretty good test of it a couple of weeks ago. We had had no problem with the product and availability. We had a little difficulty in getting it delivered fast enough over the cold spell. Mr. CONTE. How about price? Has the price gone up this year? Mr. HORAN. I would say the price on the average on the wholesale level is about a half a cent higher due to the Suez and Vietnam and the worsening of the world supply. Mr. CONTE. Half a cent per Mr. HORAN. That is per gallon. Mr. CONTE. That is quite a bit. Mr. HORAN. I think you could go back to the last Suez crisis 10 years ago and find that the prices were about the same. Mr. WILLIAMS. One question. You gave in your illustration this nursing home and the requirement of approximately 30 years for return of their promotional investment. Would you say that this is typical of the allowances that are being given? Mr. HORAN. I would not try to classify it as typical. I was tempted, of course, to pull out a dramatic and drastic example and particularly to show the disproportionate offer when it was compared to the Boston Gas Co., who was offering $5 or $10 on the same formula. So, I would not want to just offhandedly say it was typical. Mr. WILLIAMS. Thank you. Mr. DINGELL. Any further questions? Mr. Horan, we are grateful to you that you would be present with us this morning. We appreciate your testimony. The Chair announces that further hearings will be held on this matter at a later time. It is anticipated tentatively that it will be sometime early in March. If there is no further business to come before the committee at this time, the subcommittee will stand adjourned until the call of the Chair. (Whereupon, at 1 p.m., February 1, 1968, the hearing was adjourned, subject to the call of the Chair.) (The following were ordered to be inserted at this point :) Hon. THOMAS E. MORGAN, RESCINTI MOBILE HOMES SALES, DEAR CONGRESSMAN MORGAN: I am writing to you in reference to the investigation by Sub-Committee No. 5 on Regulatory & Enforcement Agencies of the House of Representatives Select Committee on Small Business chaired by Representative John D. Dingell of Michigan. As a small businessman in a fairly new business, part of our work is that of installing and servicing Electric Furnaces in Mobile Homes. Our expenditures must be kept at a minimum if we are to succeed. I must say, in all sincerity, that without the help of promotional funds & the Utility assistance in the promotion of our product this past year, we would have had to cut our advertising over 50%. As you know, the more advertising one is able to do, the more they are able to promote their product, the more their men are able to work full time & the more supplies they are able to purchase from other companies, etc. (the circle goes on & on). Without sufficient advertising, none of this would be possible. People are truly the backbone of our country but advertising is the backbone of people. I'm sure you can understand how the Utility Companies and advertising assistance is helping us & quite a few others that are in the same boat that we are, just in the city of Washington alone. I, as with others, depend to a large extent on these promotional funds. In closing, I hope I haven't taken up too much time & I do hope you can help 18. Anything at all, that you could do for us & others, would be greatly appreciated. Sincerely, 91-056-69- -6 NICHOLAS RESCINITI Hon. THOMAS E. MORGAN, STANTON ELECTRIC HEAT & INSULATION CO., DEAR CONGRESSMAN MORGAN: I would like to express my opinion as a heating and cooling contractor in reference to Subcommittee No. 5 on Regulatory and Enforcement Agencies of the House of Representatives' Select Committee on Small Business regarding anti-utility promotional funds legislation. The termination of Utility cooperative advertising funds would have a very severe and adverse effect upon my business. Without utility assistance in promotion of my business, volume would be drastically reduced and would necessitate a layoff of a number of employees. I urge you to vote against any legislation that would eliminate Utility assistance in promotion of my business as a heating and cooling contractor. Sincerely, G. WAYNE Ross, President. PROMOTIONAL PRACTICES BY PUBLIC UTILITIES AND THEIR IMPACT UPON SMALL BUSINESS TUESDAY, MARCH 12, 1968 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ACTIVITIES OF REGULATORY AGENCIES Washington, D.C. The subcommittee met, pursuant to call, at 10:05 a.m., in room 2359, Rayburn House Office Building, Hon. John D. Dingell (chairman of the subcommittee) presiding. Present: Representatives Dingell, Corman, and Conte. Also present: Representatives Burton and Morton of the full committee; 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 Subcommittee on Regulatory and Enforcement Agencies of the House Small Business Committee will continue its scrutiny into the matter of promotional activities in the electrical and gas power industry. The committee has a very busy schedule and a large number of witnesses who have come a considerable distance to be with us today, and the Chair wishes to express the thanks of the committee to everyone who is helping us with respect to the hearings in which we are engaged. The Chair will hear, for the first witness, the distinguished Senator from Massachusetts, Senator Edward M. Kennedy. Senator, we are privileged to have you with us this morning and we would be most happy to welcome you for such statement as you choose to give. Do you have any of your staff with you, Senator, who you would like to have sit at the table with you? TESTIMONY OF HON. EDWARD M. KENNEDY, A U.S. SENATOR FROM THE STATE OF MASSACHUSETTS Senator KENNEDY of Massachusetts. I think I am fine, Mr. Chairman. Mr. DINGELL. You are very welcome. Senator KENNEDY of Massachusetts. Thank you very much, Mr. Chairman and members of the committee. First of all I would like to pay a special word of tribute to you, Mr. Chairman, for your interest in this difficult problem. I think you have manifested a considerable concern for the consumer interests of the people throughout our country, and I want to commend you (75) |