cating that in our biennial review any contract which was committed, let us say for 10 years as an example, after the expiration of the eligibility period for the first rate we prescribed from January 1, 1973 through December 31, 1974, would be eligible for the new biennial rate. In other words, we eliminated what I thought and what other Commissioners thought, was a deficiency in our initial decision. Mr. MAGUIRE. That was 6 months later. During that intervening 6-month period, presumably people didn't know that you were going to do that. Mr. NASSIKAS. It is true that nobody can predict exactly what we are going to do. Mr. MAGUIRE. I wish that were true, that people couldn't predict what you were going to do. I think it might discourage the slowing down of the natural gas production. The difficulty here is that you are on the record in favor of deregulation. The difficulty is that your agency issues an opinion in June 1974 which signals very clearly the fact that a different rate could be received, presumably a higher rate, after the first of the following year, and then we in New Jersey all during that very same winter experience tremendous difficulty in getting natural gas. I don't understand why you would want to announce in advance that you were going to revise rates on a biennial basis. What sense does that make? Mr. NASSIKAS. I, personally, thought, and other Commissioners didn't, as I say, that we should amend the procedure to induce gas commitments to the interstate market by indicating that if they committed gas to the market under one rate review they would get the new price in a later rate review. Mr. MAGUIRE. A higher price, presumably. Mr. NASSIKAS. It could be lower, but presumably with a 10-percent inflation rate it would be a higher price for the moment. But, later on, no, it might be a lower price. As I say, we revised the procedure. I don't believe that the fact that we announced that rate and indicated that we were going to have a biennial review would deter sophisticated gas producers from making commitments because our biennial review may take a lot longer, and they know it, than our expression of how long it would take for a biennial review. There were other optional procedures, Mr. Maguire, that were available to producers apart from the national rate, where they could get an even higher price if they would come in to us and prove it. That is under our optional procedure: if they could show that a project was a high-cost project, they could get a higher price under our optional procedure than under the national rate or under any foreseeable biennial review of the rate coming on ton of our first review. I agree with you that some would be deterred if we reexamine the position and I think we came out with the right decision in the end. Mr. MAGUIRE. We had the Mitchell energy people here for an earlier hearing during the course of which it developed that gas that was to have been brought on line in the summer or early fall of 1974 somehow mysteriously, through a whole history of developments that I will not ecapitulate, did not become available until well into 1975. I can't imagine a more compelling reason to be dilatory about getting my gas on line than the knowledge announced 6 months in advance by the regulatory agency that the price was going to go up for gas that was brought on line after a certain date as opposed to gas that was brought on earlier than that. I think that was a very stupid decision on the part of the FPC to make that announcement in advance and thus in effect encourage gas to be withheld. I have not the slightest doubt that that was the practical effect of that particular announcement. Now, I would encourage you to review the biennial rate review commitment as to whether or not it really is going to help us. It seems to me that you might be better advised to make it clear that you will review the situation when needed and not open the thing up this way. It just strikes me as a very stupid decision, and I think that we have to assign some of the responsibility for the crisis that we had last winter directly at the doorstep of your Commission. Unfortunately, I have run out of time, Mr. Chairman. I have a whole series of questions I would like to pursue. Mr. NASSIKAS. May I say I don't agree with Mr. Maguire in attributing a gas shortage to the Federal Power Commission. I think the Federal Power Commission alleviated the gas shortage and specifically in New Jersey by extraordinary efforts to preserve dwindling gas supply and allocating it to New Jersey industries as well as others. Mr. Moss. The committee will now stand adjourned until 10 o'clock on Monday, the 21st, when we will again convene here in this room. At that time, Mr. Maguire will be recognized for the remaining time. Mr. NASSIKAS. May I submit the July 11, 1975, letter with attachments? Mr. Moss. Without objection, the record will be held open to receive the material. [Testimoney resumes on p. 1550.] The letter and attachments referred to follow:] OFFICE OF THE CHAIRMAN FEDERAL POWER COMMISSION WASHINGTON. D. C. 20426 July 11, 1975 Honorable John E. Moss Chairman Subcommittee on Oversight and Investigations Committee on Interstate and House of Representatives Dear Mr. Chairman: In further response to your letter of July 7, 1975, enclosed is a "Data List" and an "Analysis and Evaluation of Basic Data" used by the Commission relating to natural gas supply and decontrol of the price of natural gas. The list is not complete since there are many publications by various academicians, technicians, institutes, foundations, law or business review articles, Congressional publications, committee reports and evidence presented in various Commission or other regulatory proceedings which would be relevant to the Commission's evaluation of the most efficient methods of allocating our natural gas resources whether by central regulation or by the economics of a workably competitive market. - You also requested in your letter of July 7 that I should bring with me to the hearing "copies of any attorneys' manual describing Commission procedures for the conduct of investigations and copies of Commission regulations applicable to the conduct of public and non-public investigations." I have enclosed the following information in advance of the hearing to facilitate your review of these procedures: 1. Memorandum from Drexel D. Journey, General Counsel, to me, dated July 10, 1975. ON Mr. Journey will bring to the hearing the applicable. the Commission's Administrative Manual and operating 2. Memorandum from Morris R. Fitzgerald, Chief, Division of Audits, through Lorin H. Drennan, Chief, Office of Accounting and Finance, to me, dated July 10, 1975, concerning nonpublic investigations through regular audit program for review of compliance with the Commission's Accounting and Related Reporting Regulations. Mr. Drennan will bring the program manuals for 3. Memorandum from Morris R. Fitzgerald, Chief, Division of Audits, through Lorin H. Drennan, Chief, Office of Accounting and Finance, to me, dated July 10, 1975, relating to nonpublic type investigations through special purpose audits. Sincerely, John N. Vasicher John N. Nassikas Enclosures See attached list cc: Central Files (public), OPI (public), Inter. files, Each Commr., Messrs. Journey, Allen, Wald, Drennan Enclosures: 1. Data List and Analysis and Evaluation of Basic Data 2. Memorandum from Drexel D. Journey, General Counsel, (A) (B) (C) (D) (E) (F) (G) (H) (1) (J) (K) Order Instituting Investigation and Order to Order Instituting Investigation and Order to Show Order Reopening Proceedings, Providing for Hearings Errata Notice dated June 13, 1975, to above order Order Instituting Investigation of Status of Non- - Order Instituting Rate Investigation, Consolidating - Order Rejecting in Part, Accepting and Suspending Order Denying Motion for Protective Order, Alabama Power Company, Project No. 2146, issued April 11, 1975 Appendix II: (Continued on p. 4) |