STATEMENT OF SACRAMENTO MUNICIPAL UTILITY DISTRICT

Mr. Chairman and members of the committee, the Sacramento Municipal Utility District (SMUD) is a political subdivision of the State of California. It provides electric energy to California's capital city and surrounding area. Its service area comprises over 650 square miles embracing a population of some 600,000. By 1970, it is estimated that this population will increase to about 800,000 and by 1975 to well over 1,000,000. In 1965, the peak demand within the District's service area was 576,590 kilowatts. The energy consumption during that year was about 2.5 billion kilowatt-hours. It is estimated that by 1970, the District's peak demand will have risen to 1 million kilowatts and the energy consumption to about 4.2 billion kilowatt-hours.

The District's generation and transmission facilities are physically connected with the U.S. Bureau of Reclamation and the Pacific Gas and Electric Company. These two systems in turn are intertied. After completion of the construction of the Northwest-Southwest Intertie within the next few years, constructed in part by these two entities, they will be directly interconnected with all of the major power systems on the West Coast. This will mean that, in effect, SMUD too will be a part of this great transmission pool. Additionally, the operation of SMUD's generation is integrated with PG&E and is dispatched so as best to meet the area load requirements.

With this background, the Committee will understand the District's interest in S. 3136 which is designed to provide a vehicle under which the District, along with other public agencies and private utilities, can secure advance approval from the Federal Government for future pooling and interconnection arrangements and thus avoid the present uncertainty as to whether such an arrangement may be considered in violation of the antitrust statutes.

It is generally agreed throughout the power industry that further pooling and integration is the way of the future. Only through such coordination can customers be assured of maximum dependability and lowest cost-the goal of the entire power industry. This can best be achieved through voluntary agreements rather than through Government decree. The ever-present danger that such agreements will be determined to be a violation of antitrust laws constitutes a major deterrent. There is little or no precedent indicating court attitude on the subject. However, it seems clear that the fact that the utility business is by nature, and often by law, a monopoly is not considered a defense. Moreover, the views of the Department of Justice on any particular arrangement cannot be formally ascertained. Even if this were possible, the parties would have no assurance that these views would not change. Normally pooling arrangements are tremendously expensive and call for transmission and generation facilities requiring many years to construct. Faced with these uncertainties, power agencies are hesitant to proceed.

We believe that future pooling would be given a significant spur forward if the agencies involved could present their plans to a federal agency such as the Federal Power Commission to determine in advance whether, in the opinion of the Federal Government, the proposal would "unduly restrain competition." If approval is given, the participants could then safely proceed without facing the possibility of criminal prosecution by the Government and possible treble damage actions through civil proceedings.

We feel that the Federal Power Commission is the one federal agency having the expertise to thoroughly and intelligently examine proposed pooling arrangements. We think the Commission is best equipped to carefully balance the needs of society involved between pooling arrangements on one hand and the maintenance of competition on the other.

For the reasons set forth, the Sacramento Municipal Utility District respectfully urges the Committee to adopt S. 3136.

STATEMENT OF MUNICIPAL ELECTRIC ASSOCIATION OF MASSACHUSETTS My name is Michael F. Collins, and I appear here in behalf of the Municipal Electric Association of Massachusetts, of which I am Secretary-Treasurer. I am also manager of the Wakefield, Massachusetts, Municipal Light plant.

Our association is opposed to S. 3136 because we feel that the municipal Electric utilities in Massachusetts need the full protection of the anti-trust laws, and we do not believe that Commission approval of interconnection and pooling arrangements is an adequate substitute.

It is argued that possibility of prosecution or litigation under the anti-trust laws inhibits voluntary arrangements. (Note Mr. Magnuson's statement of March 25, 1966.) It is difficult to understand how a pooling arrangement among utilities, which lets in on a fair and reasonable basis, all utilities in a region, would subject the participants to a fear of prosecution or litigation. Rather, it would appear that the fear is present when a group seeks the benefits of pooling for themselves, but would exclude others. We think it best that such fear remain, even if the Federal Power Commission is given explicit and full power to require the pool to desegregate, and allow in municipal members.

If a group of utilities is planning and combining together against other utilities, be they investor-owned, cooperative-owned, or municipal-owned, in a manner that violates the anti-trust laws, the approval of their pool agreement should not insulate them from the responsibility for their acts.

In short, the main case in which companies would need immunity from anti-trust violations are cases in which the pool is not open to all parties. Presumably, under S. 3136 FPC would either not approve the pooling arrangement, or it would condition it upon admission of the other members. In either case, if the pool companies remain adamant, the excluded utility would not get in, but the pool would be dissolved to the detriment of the customers of the pool companies.

Accordingly, as a minimum, the Bill must be amended to give the Commission explicit and plenary power to control the pool and its admission procedures. Even this, however, does not obviate the need for continuation of anti-trust protections because there may still be a broad area beyond FPC reach.

For example, in New England there is the Electric Coordinating Council of New England which describes itself as an informal association of individual chief executives of investor-owned electric utilities. There are 19 members of this Council. The coordinated planning of generation and transmission for New England as a whole, purportedly on a "single system" basis is accomplished through this Council, and arrangements are made whereby ownership and power allocations are divided up between the members as to future facilities.

Although Massachusetts municipal electric utilities, if considered as a system acting through their association represent the third largest Massachusetts electrical system, they are not represented on this Council. They have never been asked to join, and their request for membership has been pending unanswered for some 21⁄2 months. Yet, obviously the municipals have a stake in the combinations, understandings and agreements which emerge from the Council, and have the same business-like need to develop bulk power supplies which are coordinated and integrated into a regional plan and network.

The Municipal Electric Association of Massachusetts expects to work this matter out amicably with the Council, and we are not saying that these have been violations of law. It must be recognized, however, that this is the kind of combination of opposition which could be abused and converted into an instrument hostile to the excluded utilities. This is the kind of a problem that the Federal Power Commission, even with vastly expanded authority over the electric utility industry, is not too well equipped to handle. It is the kind of problem with which the Federal Trade Commission and the Anti-trust Division of Justice is familiar, and the nature of this problem does not change much whether the combination is one of electrical equipment manufacturers or electric utility companies, if the purpose of the combination is inimical to the anti-trust laws.

We think it important, in an industry with mixed forms of ownerships, where a certain amount of misunderstandings and even hostilities develop between the segments, that the coverage of anti-trust laws be retained in full force. The mere existence of this coverage has a healthy deterrent on the industry and prevents the emergence of abuses which require frequent utilization of the anti-trust laws.

STATEMENT BY W. BERRY HUTCHINGS, PRESIDENT, COLORADO RIVER BASIN CONSUMERS POWER, INC.

Mr. Chairman and Members of the Committee:

My name is W. Berry Hutchings. It is a privilege to submit a statement to you as President of the Board of Directors of Colorado River Basin Consumers Power, Incorporated, of Salt Lake City, Utah.

The Colorado River Basin Consumers Power, Incorporated, is an organization representing the interests of the consumers having preference in the purchase of power under Reclamation Laws in the area served by the Colorado River Storage Project of the Bureau of Reclamation. This area comprises the States of Wyo

ming, Utah, Colorado, New Mexico, and Arizona, and the southern part of Nevada, and a small fringe along the eastern border of California. The preference-type customers supply electric service to about 30 percent of the people in this area. We have noted with a great deal of apprehension the introduction of S. 3136 which would place within the authority of the Federal Power Commission the right to exempt from the antitrust proceedings any combination of utilities who might enter into an agreement for the interconnection, pooling or coordination of power systems. This appears to us as a backward step in the attempt to make it possible for smaller utilities and non-profit operators to secure some portion of the economies that are made possible by large central station developments and system interties.

It appears that the proposed legislation is for the primary purpose of relieving any of the utilities involved in the Northwest-Southwest Intertie from danger of prosecution under antitrust laws. The utilities involved in this interconnection have refused to allow the smaller municipalities and REA Co-ops to participate in the benefits from this intertie and we fear that the proposed legislation would make it easier to refuse such participation to such smaller users in any contemplated future developments of like nature.

Our agency is opposed to any subterfuges which would tend to discriminate against small users of any category in gaining benefits from large interconnections and central power plants and wishes to express its objection to the passage of S. 3136.

We respectfully request that this statement be entered into the record of the hearings on S. 3136.

STATEMENT OF GUS NORWOOD, EXECUTIVE SECRETARY, NORTHWEST PUBLIC

POWER ASSOCIATION

Mr. Chairman and members of the Committee, my name is Gus Norwood. For the past 19 years I have served as Executive Secretary of the Northwest Public Power Association comprising 125 public and cooperative electric systems of Alaska, British Columbia, Washington, Oregon, Idaho and Montana.

Consumer-owned electric systems serve about 51% of the regional population, own about $3 billion in electric plant and have about $1.6 billion of new plant under construction generate about five million kilowatts and pay about $45 million per year into the United States Treasury for power from federal dams.

STATUS OF TESTIMONY

Because S. 3136 was so recently introduced our Association has no resolution specifically on S. 3136.

In a related area our Association successfully opposed the Potter Amendment S. 2643 before the Senate Committee on Commerce at hearings ten years ago on April 17, 1956 and May 24, 1956 to change the definition of public utility so as to exempt combinations or syndicates of electric utility companies to jointly build nuclear generating stations. We did not oppose joint ownership or construction but we did oppose exemption of such plants and syndicates from public regulation.

We consider our testimony on S. 3136 to be consistent with previous policies of our association in this area.

STATEMENT OF POSITION

We wish to state two positions regarding S. 3136.

First as to timing, we urge a thorough public hearing followed by publication of the hearing record so it can be available for detailed study by our electric systems and by the industry generally. This will provide time for our Association and all parties to develop policy positions by the time the next Congress convenes. Accordingly we urge that no action be taken on this bill during the present Congress.

Second, we respectfully suggest that the lack of previous showing of a need for legislation such as S. 3136 and the gravity of any action to tamper with the antitrust laws is so great, that we must respectfully oppose enactment of S. 3136 in its present form at this time.

In any event we urge the most thorough study of the problems which are alleged to exist and to test the possibly grave consequences of broad exemption from the antitrust laws.

Our further comments are in support of the above recommendations for careful study and the granting of at least a six-month period for review of the hearing record.

NATURE OF S. 3136

The fundamental purpose of S. 3136 is to set aside the antitrust laws and to exempt electric utility companies from all Federal, State and municipal antitrust laws in connection with contracts "for the sale or exchange of electric energy or the interconnection, pooling, or coordination of power systems or for the joint use of facilities for the generation or transmission of electric energy."

EXPERIENCE REVEALS NO NEED FOR EXEMPTION

The electric utility industry generally dates from the inauguration of the Pearl Street Station in New York City in 1882.

The Sherman antitrust law was enacted July 2, 1890.

Thus the electric utility industry and the Sherman Act have lived together for more than 76 years.

Apparently no case is on record of an antitrust action being brought against an electric utility at any time in the 76 year history.

This long period of history would suggest that no problem exists. At least this long record suggests a heavy burden of proof as to whether a special exemption from the antiturst laws is now needed.

It is recognized that the era of power pooling does not go back to 1882. However, many decades of experience exists with transmission interties, power pooling and intersystem sales and exchange contracts. Probably hundreds of such contracts now exist and up to this time apparently none have been challenged on antitrust grounds.

SHIFT IN CRITERIA

An obvious area of concern is the criteria set forth in S. 3136 that electric power pooling, interconnection or coordination contracts shall be completely exempt from the antitrust laws if they do "not unduly restrain competition."

Restraint of competition is a new word of art. It is a minor, narrow criteria compared to the board standard of the antitrust laws, namely "not in restraint of trade.' This could be a case of horse-rabbit stew, or a case of throwing out the baby with the bath water. In other words merely meeting the minor criteria "to not unduly restrain competition" does not warrant exemption from the entire body of anti-trust laws.

SHIFT IN JURISDICTION

The findings and judgment even as to the narrow, limited criteria "not unduly restrain competition" is not to be made by the Department of Justice which is the normal, traditional expertise agency in this field.

On the contrary S. 3136 strips the Department of Justice of its present jurisdiction and transfers jurisdiction to the Federal Power Commission.

Furthermore the FPC is limited to a perfunctory, ministerial role whereunder FPC must approve the contract unless the FPC can prove that the contract does restrain competition. This is a difficult burden of proof in an area which by nature is a natural monopoly. Thus in effect there is no criteria and FPC must automatically approve the contracts.

We oppose such transfer of jurisdiction and we oppose the substitution of a narrow, limited criteria for the present broad guidelines of the antitrust statutes.

S. 3136 is a new bill.

LACK OF STUDIES

It has not previously been before Congress and no previous hearings have been held. No studies exist and no literature exists to indicate a problem or indicate need for such a drastic solution.

On the contrary, the Report of the Legal Committee published as part of the National Power Survey of the Federal Power Commission (pages 355-387) did discuss power contracts which might limit service area or permissible loads. The Legal Committee received the comments of the Department of Justice and concluded that no new legislation was needed. In other words the Legal committee at that time did not suggest exemption from the antitrust laws.

WEST COAST INTERTIES

Suggestion has been made that S. 3136 is needed in order to make legitimate the sales and exchange contracts in connection with the West Coast Interties. The answer to this suggestion should be obvious. The legislative history of the West Coast Interties is detailed and meticulous with respect to offers, counteroffers and a spelling out of the role of each of the parties, public and private. The Congress has approved these arrangements in approving the West Coast Interties. To relate S. 3136 to the West Coast Interties would be in effect saying that the Congress in approving the West Coast Interties has violated the antitrust laws and the purpose of S. 3136 is to exempt Congress from the antitrust laws. Obviously such an interpretation is absurd. It is equally absurd to suggest that the agreements on which the West Coast Interties were premised are illegal despite approval by Congress of the West Coast Interties.

However, if, for the sake of argument, it appears that contracts in connection with the West Coast Interties require a further sanction from Congress, might this not more easily be done by direct legislation confined to the West Coast Interties?

URGE CAREFUL STUDY

In urging the most careful study by the Senate Commerce Committee, the Senate Antitrust and Monopoly Subcommittee, and the Department of Justice, I must call attention to the latest declarations published by the private electric corporations relative to public and cooperative electric systems.

SELL OUT ALL CO-OPS

Mr. Robert T. Person of Public Service Company of Colorado and President of the Edison Electric Institute recently told the House Agriculture Committee that Congress should put an end to the rural electrification program and that all rural electric systems should be sold to the power companies.

ELECTRICAL A.T. & T.

The May 29, 1966 New York Times quotes Donald C. Cook, President of the seven-state American Electric Power System, "Over a period of years, I believe we shall see a shakedown to about a dozen or fifteen integrated systems

He foresees little possibility of Justice Department opposition in the future to giant power systems "since the existence of national monopolies, such as American Telephone and Telegraph Company, is well recognized as lawful." These private electric corporation executives make no idle threats.

Dozens

of municipal and rural electric systems are being pressured to sell their electric systems, and some are being sold.

PRELIMINARY TESTIMONY

Up to this point no evidence has been presented that S. 3136 is necessary or desirable. When any such evidence is available, our Association and its individual member systems may wish to testify in the light of such evidence.

CONCLUSION

Accordingly we respectfully recommend that S. 3136 not be enacted but that it be laid over at least to the next Congress.

Thank you.

STATEMENT BY AMERICAN PUBLIC POWER ASSOCIATION

American Public Power Association, a national trade organization representing representing 1,400 local public power systems-mainly municipally-owned electric utilities-in 45 States and Puerto Rico, has taken no position in favor of or in opposition to S. 3136, a bill to permit the Federal Power Commission to immunize from local, state, and federal antitrust laws contracts of electric utilities which the FPC finds do not "unduly restrain competition." These comments are submitted to the Senate Commerce Committee for the purpose of outlining specific points and problems which the Committee may wish to take into account in its consideration of this legislation.

S. 3136 was considered by the APPA Legislative and Resolutions Committee at its most recent meeting in Boston on May 8, 1966. In recognition of the com