$10,000 and apply to the Public Utility Commission for an increase in our subscriber rates. This relocation work cost us over 30 percent of our total annual revenues.

There is another job which might occur this summer involving 4 miles of our line. We are too small to continually absorb these costs over which we have no control.

What we could not understand was that we had signed right-of-way agreements for most of this line. These were completely ignored when we sought reimbursement, with the excuse being that the agreements were signed before 1921, when the legislature increased the highway right-of-way.

We still think that we should receive some reimbursement for this work, and are afraid that any more of it under the proposed highway programs might easily put us out of business. We cannot keep going to the PUC for increased rates every time these highway jobs come along. After all, our subscribers will only stand for so much in increased rates.

Mr. FALLON. Thank you very much, Mr. Houck.

Mr. MILES. The next witness, Mr. Chairman, is Mr. J. Theodore Wolfe, executive vice president of the Baltimore Gas & Electric Co. Mr. Wolfe.

Mr. FALLON. Mr. Wolfe, we are very happy to have you here.

STATEMENT OF J. THEODORE WOLFE, BALTIMORE, MD., EXECUTIVE VICE PRESIDENT OF THE BALTIMORE GAS & ELECTRIC CO.

Mr. WOLFE. Mr. Chairman and gentlemen. My name is J. Theodore Wolfe. I am executive vice president of the Baltimore Gas & Electric Co.

This is a large company. We serve in about 2,300 square miles of territory and we have nearly a half a million customers.

Mr. DONDERO. That includes our chairman.

Mr. WOLFE. That includes your chairman. Yes, sir.
Mr. FALLON. I hear from them every month.

Mr. WOLFE. If you please, I am here today representing your chairman along with others. I am not here so much really to speak for the Baltimore Gas & Electric Co. as I am to speak on behalf of the nearly 500,000 customers of the company. I may as well be quite frank with you. The problem of financing relocation of our facilities in connection with highway projects is not a particularly serious one for a company the size of mine, but it is a serious problem for the company's rate payers.

The one question to which I wanted to speak today is not whether the Congress should protect the financial interests of public utility companies such as mine, but whether it should protect the users of electric and gas services and other utility services against unfair treatment.

Rather than speak in any abstract way about this question, it might help for me to illustrate it with a specific example. This example has to do with a tunnel under Baltimore Harbor. It does not happen to be a part of a Federal highway program because it is a toll project, but in magnitude it is typical of a number of projects which will be coming along under this proposed Federal highway program. The

figures on it are, therefore, at least illustrative. The construction of the Baltimore tunnel and its approaches will require my company alone to spend upward of $2 million for the relocation of its electric and gas facilities. That $2 million under standard accounting and regulatory procedures will be a capital expenditure. We will probably get the money from people who buy our stocks and bonds. Being a capital expenditure, it will go into our rate base. Each year after it goes into our rate base it will have the effect of increasing our property taxes and our annual depreciation taxes. It will increase the amount we must earn and are entitled to earn each year in order to have a fair return on our rate base. Before we get to that return we will have to pay more Federal income taxes.

These items constitute the annual carrying charges on any capital investment that we make. Taken together, they amount to 16 percent of the investment.

The significance of this is very clear. If we are obliged to stand a $2 million cost of relocating our facilities on this or on any other project or group of projects, the users of our electric and gas services. will thereafter have to pay for these services $320,000 a year more than they would otherwise have to pay, and they will have to go on paying it until long after I am retired, and probably after I am in my grave for 30 years or more. They will have to bear this additional burden in many cases not for their own benefit at all, but for the benefit of highway users, most of whom are simply passing through our territory.

This will patently be unfair. That is why I believe that the proposal to reimburse utilities for the cost of relocating their facilities in connection with the Federal highway program is just and equitable and should be adopted by the Congress.

That is the only point on which I intended to speak, but the gentleman from Michigan asked a question on which I would like to make a comment. It had to do with who determines where the facility is to be placed when it has to be relocated in connection with the highway project.

We do not actually move many of these facilities. What we do is build a new one and then abandon the old one. I think what you might properly have in mind is whether, in the event the Federal Government does reimburse utilities for relocations, the utilities will be able to make any kind of a grab bag out of this and be able to get better and more facilities just the way they want them, and get them at the expense of the Federal Government or the taxpayers. The answer to that is, clearly, "No." These costs will be accounted for either to the State roads commissions working with the Public Roads Administration, or directly to the Public Roads Administration. We would be reimbursed under their regulations, I am sure, only for the legitimate costs of replacing the facility that has to be moved.

If there are any improvements or betterments, as we call them, the value of those is deducted from the cost for which we are reimbursed. There is also deducted under the standard regulations an allowance for the fact that the old facility does have some depreciation upon it. I hope that will be helpful.

Mr. FALLON. Thank you very much, Mr. Wolfe.

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Mr. JONES. May I make a parliamentary inquiry? Are we waiting for all of the witnesses to complete their testimony before we are given the right to examine them?

Mr. FALLON. Thank you very much, Mr. Wolfe, for a very credible explanation of your problem.

This last week, Mr. Jones, the committee met in executive session and limited the time on the hearings. A resolution was adopted that the hearings terminate today. We have lots of people who wanted to be heard. Two organizations in particular have asked at the very beginning of the hearings that they be included and given time to present their case. They are scheduled to be heard this morning. The reason was, they wanted to be heard at the committee's convenience, but when the time was limited for the hearings and we were to complete them today, we had to schedule many witnesses this week. Today we have the utility representatives and also the representative of the Association of American Railroads.

The only way that we can possibly get through today is to limit the committee's interrogation to a period of time after the witnesses have all appeared.

Mr. JONES. Thank you.

Mr. MACHROWICZ. In view of the fact that I understand we have some witnesses this afternoon, Senator Gore and others, would it not be a good idea for the chairman to suggest, since a lot of this information is cumulative, that if any of the witnesses would care to present their statement in lieu of reading it, that that would be acceptable to the committee?

Mr. FALLON. If that is the committee's wish.

Mr. DONDERO. It would help to conserve time.

Mr. FALLON. As I understand it, you feel the witnesses' statements here this morning are repetitious?

Mr. MACHROWICZ. They are cumulative. I presume some of the witnesses would prefer to have their statements put in the record, rather than go to the trouble of reading them. They should be given that privilege if they so desire.

Mr. SCHERER. I understood that was to be the practice.

Mr. FALLON. That was to be the practice and the announcement was to come at the end of the hearing that any witnesses who want to be heard and who have not been heard will be given the right to extend their remarks in the record as of this day. The time limit will be 10 days from today in which they may incorporate any remarks or statements on the part of witnesses who had not been heard.

Mr. GENTRY. May I make a statement? It seems to me that this is a most important hearing. Is it obvious from the limitations of time if it is to be confined to the next hour or two and you have the Association of American Railroads in back of these witnesses, and Senator Gore then to be heard, that unless the time limitation is extended it is in the interests of justice that this question should at least be thoroughly explored.

Mr. FALLON. The Chair will abide by the wishes of the members. Mr. GENTRY. This is one of the most important things that has come up here and it is something I never anticipated would be before this committee.

Mr. DONDERO. It is a matter that has been here before, Mr. Gentry.

May I suggest, Mr. Chairman, wherever the witnesses this morning are on the list and can very conveniently put their statement in the record, that we ask them to do so, because that will save some time, and then we can hear the rest anyway. I think that will help us. Mr. FALLON. Do any of the members have any other suggestions? Mr. Miles, would you continue? You understand the wishes of the membership at this point. Due to the fact that you are handling the utilities, if you can in any way expedite it, we would appreciate it. I might also say for the benefit of the people here today that this committee has been sitting on these hearings for over 6 weeks. Last week the membership thought there should be some termination date, or else we might be here until the House adjourns sometime in August. That was the reason for putting a limit on the hearings.

Mr. MILES. There is one witness whom I would like to present. Perhaps the remaining two can be asked to file their testimony, but I ask indulgence to hear Mr. Austin L. Roberts, Jr., who is general solicitor for the National Association of Railroad and Utilities Commissioners.

Mr. FALLON. Very well. We are glad to have you, Mr. Roberts. STATEMENT OF AUSTIN L. ROBERTS, JR., GENERAL SOLICITOR FOR THE NATIONAL ASSOCIATION OF RAILROAD AND UTILITIES COMMISSIONERS

Mr. ROBERTS. Mr. Chairman, in order to cooperate with the committee, I have a prepared statement. If that can be included in the record as presented, I will just highlight it.

My name is Austin L. Roberts, Jr. I am general solicitor for the National Association of Railroad and Utilities Commissioners with offices at 7413 New Post Office Building, Washington, D. C. I am appearing this morning on behalf of that association in support of the proposal that public utilities should be reimbursed out of Federal highway funds for the cost of relocating their facilities necessitated by Federal-aid highway projects.

The association is a voluntary organization embracing within its membership the members of the regulatory commissions and boards, which regulate public utilities and transportation agencies, of the 48 States of the United States and the District of Columbia.

The matter of reimbursement of utilities for relocation expenses necessitated by Federal-aid highway projects was first brought to the association's attention following the introduction of S. 2585, 82d Congress, by Senator McKellar, of Tennessee, and H. R. 6697, 82d Congress, by Congressman Davis of Tennessee. These bills were referred to the association's committee on legislation, which is a standing committee of the association. The committee on legislation considered these bills meritorious and recommended to our association a resolution endorsing the principles expressed therein.

At the 1952 annual convention of the association held at Little Rock, Ark., on November 10-13, 1952, a resolution was adopted in conformity with the recommendations of the committee on legislation. This resolution was reaffirmed at our 1953 annual convention held in New York City on September 21-24, 1953, and again reaffirmed at our 1954 annual convention held in Chicago, Ill., on November 8-11, 1954. A copy of that resolution is attached to my statement.

One of the statutory duties of the State regulatory commissions is the fixing of rates of public utilities. Generally speaking, these rates are based on the cost to the utility of furnishing the service to its customers. In the post-World War II period, constantly increasing costs and higher taxes have necessitated higher rates to the user of utility services. The increased cost added by the necessity of relocating utility facilities due to Federal-aid highway projects, is an additional expense which must ultimately be borne by the user of the utility service. This principle was succinctly stated by Hon. Thomas H. MacDonald, former Commissioner of Public Roads, in his testimony before the House Committee on Roads of the 78th Congress, when speaking in support of reimbursement to the railroads, he stated:

If funds were contributed by the railroads they would have to come from their earnings; that is, they would have to be gathered from the public. (Hearings before the Committee on Roads, House of Representatives, 78th Cong., 2d sess., on H. R. 2426, vol. 2, p. 968.)

The expansion of the Federal-aid highway program to meet increasing needs of interstate commerce and national defense, and changing concepts in the design and construction of modern highways have aggravated the utility relocation cost problem and forewarn even greater costs and aggravation. The problem has become one of such economic importance as to justify a reexamination of and a more equitable Federal policy in the matter.

Any increase in utility operating costs must be passed on to the consumer in the form of higher rates. Thus the utility user contributes twice to the Federal-aid highway projects: once through his proportionate share of the Federal taxes and, second, through the increased rates he must pay for the utility service due to the burden of relocation costs.

Inasmuch as Federal-aid highway projects are constructed primarily in the interest of our national defense and of interstate commerce, it is only equitable that they be paid for out of general tax funds rather than through utility rates. In the majority of instances, the user of utility service does not benefit by the relocation of facilities as he will be receiving the same electric, gas, telephone, or water service after the relocation as he was receiving prior to the relocation. For this reason, it is deemed inequitable to ask the utility user to bear a double burden, that is, in taxes and in rates, when the natural justification for the highway makes it appropriate that the complete cost be paid out of highway funds.

The unfairness of placing this cost on the users of utility services is particularly evident in the case of small localized utility companies who happen to be along the way of an interstate highway. The costs of relocation could be and have been a major hardship and burden to them. There is no justification for incumbering a local utility company with relocation costs due to construction of a highway that will be used to transport interstate commerce through its territory.

The argument might be raised that the possibility of such relocation costs are a condition of which the utility is aware when it accepts a franchise or a license to occupy the public right of way. However, the granting of these licenses and franchises are often premised on the desire of the residents of the area for widespread utility service and such widespread service is of local value in adding to the growth and