Mr. WHITE. We will supply it for the record, sir. This was basically a group of individuals appointed by the Federal Power Commission during its National Power Survey, to inquire into all of the legal problems that presented themselves during the course of the Commission's Survey. Basically these were lawyers representing all segments of the power industry in the United States. (The following material was subsequently submitted:) FEDERAL POWER COMMISSION, Hon. WARREN G. MAGNUSON, Washington, D.C. DEAR MR. CHAIRMAN: This letter will answer the question raised at the hearing on S. 3136 on July 12, 1966, on page 25 of the transcript of the hearings regarding the composition and status of the Legal Advisory Committee of the National Power Survey. I am attaching the Commission order of March 22, 1962, which established the National Power Survey Advisory Committees. The members of the Legal Advisory Committee were: Herbert B. Cohn 12. 1 1 Herbert Squires David K. Kadane.. Franklin Hollis. Irvine Fane__. James B. Liberman.. Northcutt Ely. Sincerely, American Electric Power Service Corp. Pacific Gas & Electric Company. Wisconsin Public Service Commission. Ely, Duncan and Bennett. I hope this information fully answers the question. LEE C. WHITE, Chairman. 1 Members of the subcommittee which prepared the chapter on problems arising from the antitrust statutes. 2 Chairman of the subcommittee. UNITED STATES OF AMERICA FEDERAL POWER COMMISSION Before Commissioners: Joseph C. Swidler, Chairman; Howard Morgan, L. J. O'Connor, Jr., and Charles R. Ross. ORDER ESTABLISHING NATIONAL POWER SURVEY ADVISORY COMMITTEES AND PRESCRIBING PROCEDURES (Issued March 22, 1962) The Federal Power Commission is directed by Section 202(a) of the Federal Power Act (16 U.S.C. 792-825r) to promote and encourage voluntary interconnection and coordination of the nation's electric power facilities in the interest of economy and conservation, and is authorized by Section 311 of the Act to conduct broad investigations covering all aspects of the entire power industry. In order to accomplish these objectives more effectively and in accordance with Executive Order No. 11007 of February 26, 1962 (27 FR 1875) relating to the Formation and Use of Advisory Committees, we have concluded that it is in the public interest that National Power Survey Advisory Committees be, and they hereby are, established. 1. Purpose. The Committees shall advise and make recommendations to the Commission in planning and carrying out the Commission's proposed national power survey. 2. Selection of Committee Members. All Committee members and alternates shall be selected by the Chairman of the Commission. 3. Conduct of Meetings. The Chairman of the Commission, or in his absence, the Vice Chairman of the Commission, or any other full-time employee of the Commission designated by the Chairman of the Commission, shall act as Chairman of Committee meetings and shall be responsible for opening and conducting meetings and for adjourning meetings when, in his judgment, adjournment is in the public interest. 4. Minutes. The Chairman of the Commission having made a finding that maintenance of a verbatim transcript would be impracticable and not in the public interest, there shall be kept by the Secretary of each Committee, in lieu thereof, a record of persons present, a description of matters discussed and conclusions reached, and copies of all reports received, issued, or approved by the Committees. 5. Secretary of the Committee. The Chairman of the Commission shall appoint a Secretary of each Committee from among the members of the Commission staff who shall be responsible for preparing summary minutes of all Committee meetings, preparing agenda, notifying members of the meetings, and maintaining all records related to organization, membership and operations of the Committees. The Secretary shall be present during all meetings and shall certify the accuracy of all minutes. 6. Location and Time of Meetings. Meetings will convene at the call of the Chairman of the Commisssion at the Office of the Federal Power Commission, located at 441 G Street, N.W., Washington 25, D.C., unless otherwise directed. Ordinarily, these meetings will be held during the regular working hours of the Federal Power Commission. 7. Advice and Recommendations Offered by the Committee. The advice and recommendations of the members of the Committees may be presented to the Commission at Committee meetings either orally or in written form. The advice of all Committees shall be limited to matters relating solely to the planning and carrying out of the national power survey and ultimate decisions based on the Committees' advice or recommendations are reserved to the Federal Power Commission. 8. Duration of the Committee. All Committees shall terminate not later than two years subsequent to their date of establishment, unless the Commission determines in writing, not more than 60 days prior to the expiration of such twoyear period, that continued existence of a Committee is in the public interest. A like determination by the Commission shall be required not more than 60 days prior to the end of each subsequent two-year period to continue the existence of each Committee thereafter. By the Commission. GORDON M. GRANT, Acting Secretary. Senator LAUSCHE. The advisory committee was a creature of the Federal Power Commission, is that correct? Mr. WHITE. Yes, although I think it is probably more accurate. to note that it operated as one of the industry groups set up to conduct the National Power Survey with guidance of the Commission and assistance of its staff. Senator LAUSCHE. And who set up that group? Mr. WHITE. The Federal Power Commission. Senator LAUSCHE. Thank you very much. Mr. WHITE. But we will submit, sir, for the record a list of those people who participated on that advisory committee. One of the most pressing antitrust concerns of the electric utility industry at the present time relates to the division of markets discussed by the legal advisory committee. Might I say for the benefit of Senator Lausche, attached to my statement is an excerpt from the Commission's National Power Survey report and this excerpt includes the report of the legal advisory committee, together with the correspondence with the Justice Department, on this point. Because of the heavy investment the electric power business. requires, it is economically wasteful to duplicate local distribution facilities. Thus investor-owned, municipal, and rural electric systems commonly believe that monopolistic service areas are desirable. In some States, a regulator agency is authorized to establish service areas. In the absence of State action, utilities have no choice but to compete, often wastefully, or to agree among themselves on service areas. If they pursue the latter course, however, the danger of antitrust litigation may be a serious obstacle. I understand that on occasion large systems have refused to enter into service area agreements with smaller neighbors on the basis of possible antitrust litigation. A new and more challenging aspect of this problem seems likely to arise as two or more groups of utilities attempt to coordinate. The development of the Pacific Northwest-Southwest intertie involves such coordination on the largest scale yet attempted in this country. As Chairman Magnuson has noted, the creation of the intertie seems to have brought to the fore some of the latent antitrust problems involved in this sort of complex coordination. Under the Federal Power Act the coordination agreements are not filed with the Commission until after they have been executed by the parties. However, it is not difficult to visualize the kinds of problems which may well arise in these arrangements. To the extent that each of two interconnected power pools falls under single ownership, and their relationship does not affect their dealings with third parties, there appear to be no antitrust impediments. On the other hand, it is not at all clear that power pools consisting of independently owned systems-public and private-can enter into the same arrangements without risking antitrust litigation accusing them of conspiracy to fix prices or divide markets. Even though these coordinating arrangements of independently owned systems are subject to FPC review and revision, to the extent that they involve public utilities-as defined by section 201 of the Federal Power Act and interstate commerce, court decisions, as indicated earlier, suggest that FPC regulation does not immunize them. This potential vulnerability to the restraint-of-trade provisions of the antitrust laws is one of the factors which may tempt independently owned members of a power pool to give up their independence and merge or affiiliate within a single holding company system. The spate of important electric utility mergers and consolidations in the last few months makes this hearing on S. 3136 particularly timely. S. 3136 does not promote merger which is another way of achieving the benefits of coordination; it attempts instead to facilitate those coordinating arrangements through which independently owned utilities are enabled to retain their separate organizational integrities and which are determined to be in the public interest. Specifically S. 3136 would do two things: First, it would concentrate in the Federal Power Commission responsibility for evaluating anticompetitive dangers and other factors involved in electric utility coordination agreements. This would take jurisdiction initially to pass upon the competitive effect of a transaction from the Federal district courts throughout the country, but not eliminate the role of the Department of Justice. As Chairman Magnuson explained, in introducing the bill, the Justice 67-170-66- 2 Department, as well as interested private parties and State agencies, could request and participate in hearings before the Federal Power Commission under S. 3136. A private litigant would also be required to bring his complaint before the Federal Power Commission, and private antitrust litigation, I should note, now seems at least as serious a potential problem as Justice Department litigation. Moreover, while the bill transfers original jurisdiction to consider the competitive problems from the district courts to the Commission, it does not preempt the appellate courts since any FPC determinations under the bill would be subject to judicial review by the U.S. courts of appeals and the Supreme Court of the United States. Second, S. 3136 would apply only to contracts required to be submitted to the Commission under section 205(c) of the Federal Power Act for filing and review under our general regulatory powers. While we are now authorized to revise these contracts, if the public interest requires, and must give consideration to competitive factors, S. 3136 would make explicit, that in evaluating anticompetitive problems connected with coordination agreements filed with the Commission, the standard to be applied in deciding their propriety is a broad-gaged view of the public interest. In making this determination, the bill would require us to weigh the values arising from competition against other values prescribed by Congress, such as the public interest in an abundant and economical supply of electricity, in the efficient coordination of facilities, and in the reliability of service. The bill represents a common method of avoiding conflict between the concepts of public control of business through the antitrust laws and through the direct regulation of the prices and practices of public utilities. As our report indicates, there are parallel provisions for regulation and antitrust immunity of analogous agreements in the Federal Aviation Act, the Interstate Commerce Act, and the Shipping Act. Let it be clear that we could not support the principle of antitrust exemption for electric power coordination arrangements if we believe it would provide a device behind which electric utilities could hide and take unfair advantage of or "freeze out" other electric utilities in any of the segments of this most complex industry in the planning and operation of power pools. The Commission currently considers anticompetitive factors in its review of the rates and practices of the companies under its jurisdiction under sections 205 and 206 of the Federal Power Act and, in a recent case, the Commission ordered a utility to eliminate wholesale contract provisions which restricted the competitive position of their distribution-system customers. Although I do not believe S. 3136 adds to this regulatory jurisdiction, it would make crystal clear that competitive considerations are properly a matter for the Commission and would require the Commission expressly to focus upon the competitive problem in any order granting immunity. The standard of S. 3136 would facilitate a reasonable balancing of these factors. It would instruct the Commission to determine whether a contract would "unduly restrain competition when considered in relation to the purposes of the Power Act" as the basis for granting antitrust immunity. Senator LAUSCHE. Mr. Chairman-will you illustrate what occurred in this case? Mr. WHITE. Yes. I think that our general counsel, Mr. Solomon, here to my right, is probably in a better position to give you the specific facts of that case. It was somewhat involved and frankly had been pending before the Commission prior to my arrival there. Senator LAUSCHE. Permission to go ahead? The CHAIRMAN. Has the case been decided? Mr. SOLOMON. Yes; the case has been decided by the Commission. It is pending in the fifth circuit court of appeals at the present moment. It concerns Georgia Power Co., and involves contract provisions that the company had with most of its municipal customers. The provision in question restricted the municipals from selling to any industrial company within their franchised area with more than a certain fixed amount of electric demand. The Commission determined that this restriction was unwarranted and ordered Georgia Power to eliminate this restriction. Senator LAUSCHE. Now will you point out what the adverse impacts were that caused the Commission to decide that the restriction was unwarranted? Mr. SOLOMON. Well Senator LAUSCHE. The economic impact? Mr. SOLOMON. The economic impact on the communities was that they had municipal electric systems trying to attract new industries. They couldn't provide assurances to the industries they were trying to bring in, that they could provide electricity under their municipal rates. They had to say, "Go speak to the Georgia Power Co.' This is the type of problem, but if you wish, we can submit the whole decision for the record. Senator LAUSCHE. No; that is ample. The CHAIRMAN. All right. Mr. WHITE. I think, Senator, that does represent the type of problem that not often, but occasionally does get to the Commission, where there are aggrieved parties who feel that their suppliers are taking unfair advantage of their size and that at the negotiating table they feel that they are outweighed. The Commission feels a responsibility to examine these contracts under the existing authority that it possesses. Mr. SOLOMON. Senator Lausche, I should also point out that in the Georgia Power case, a problem had come up with respect to territorial arrangements between the company and its cooperative customers. Originally there had been a form of unilateral restriction on territorial arrangements, which the Commission questioned. The matter was finally settled by an agreement between the cooperatives and the company, where they did agree to territorial arrangements between the two of them, which the Commission allowed to go into effect, but which were more of a bilateral nature in which both sides got protection from one another. The CHAIRMAN. Do most State regulatory bodies have the authority to issue territorial restrictions? Do most States or is it just a few States? Mr. WHITE. I would say we will supply for the record a complete list. My own understanding is, Mr. Chairman, that it is a comparatively small number of States that authorizes State regulatory bodies to make |