and then be questioned. Have you finished your statement, Mr. Ballard?

Mr. BALLARD. There are one or two other things which I would like to present, Mr. Chairman, in further outline, and perhaps directed a little more definitely to the question of the position of the

company.

The next thing I wish to present is something in relation to the apparent conflict between the municipal power officials of Los Angeles and the Southern California Edison Co. I believe it is necessary for the committee to know something of the Los Angeles story to fully realize the situation and to act with fairness and to the best interests of the public in this matter.

Los Angeles some years ago constructed an aqueduct for the bringing in of water to the city, and in connection with the aqueduct certain power possibilities were developed, because of the fall of the water, and certain hydroelectric power plants were constructed by the city.

The question then arose as to the market for that power. It was determined by the city officials that the power would not be sold at wholesale to existing power companies.

The question then was for the acquisition of a distributing system: Should the city of Los Angeles construct its own system paralleling the systems of the companies already operating; or should the city attempt to buy one or more of the systems then existing?

Both of the plans were tried. The paralleling plan was tried for a little while not for the distribution of this aqueduct power, however, but for the distribution of some preliminary power that Los Angeles secured elsewhere.

But finally, in 1917, when the aqueduct power was about to come in-I think the day before the aqueduct power came in--an agreement was reached between the city officials and the Edison Co. and another company, which has since been affiliated with the Edison Co., providing for an option to the city upon the distributing properties of the company within the city, and an operating agreement under which the company would continue to operate the systems for some time and make use of the city's power, supplementing that power with its own power so far as might be necessary.

That agreement was fairly satisfactory to all parties; but in some respects not satisfactory, causing a suggestion, I think, from both sides for some modifications, and a modified agreement was finally arrived at in 1919, after some eight or nine months of conferences between the city of Los Angeles power officials and the Edison Co. officials: the conferences being called by the railroad commission of the State of California and presided over by the chairman of that commission.

Those conferences resulted in the firm agreement which was finally made, and which was at that time satisfactory to all parties, on the 26th of May, 1919.

I have a copy of that agreement here; it is very long and probably it will not be necessary that I should read it all, because I can get over my point by telling you approximately what is in the agree

ment.

Mr. RAKER. Will you submit the agreement for the record?

Mr. BALLARD. I will submit the agreement for the record, if you like; yes, sir.

(The agreement referred to is as follows:)

PURCHASE AGREEMENT

This memorandum of agreement, made and entered into this 26th day of May, 1919, by and between Southern California Edison Company, a corporation organized and existing under the laws of the State of California, hereinafter referred to as "the company or said company," and the city of Los Angeles, a municipal corporation of the State of California, and board of public service commissioners of the city of Los Angeles, hereinafter sometimes refered to collectively as "the city" or "said city," witnesseth :

First. The company, for and in consideration of the sum of ten dollars ($10) lawful money of the United States and other good and valuable considerations, receipt whereof is hereby acknowledged, and of the covenants, conditions and obligations hereinafter specified to be fulfilled and performed by said city, agrees to sell, transfer and convey unto said the city of Los Angeles, and said the city of Los Angeles and the board of public service commissioners of the city of Los Angeles hereby agree to purchase the entire electric distributing system owned by the company, situated within the present corporate limits of said city, and consisting generally of the following, to wit: "Lands and improvements thereon, rights of way, easements, franchises, local distributing substation equipment, high tension and low tension lines, cables, wires, conduits, manholes and equipment, transformers and line devices, electric services, meters, public lighting equipment, domestic and commercial lighting equipment, local telephone systems, and commercial engineering records useful in the location, identification, operation and maintenance of said distibuting systems, and in furnishing electrical service by means of such systems, excepting therefrom any franchises or right of said company. its successors or assigns, to maintain and operate transmission lines across the city, now existing or hereafter built, and transmission and distributing lines and works solely for supplying and delivering electric current to railways for their own use, or to said city under the provisions of this agreement; a more particular description of the properties embraced in such purchase being contained in Exhibit A,' hereto attached and made a part hereof," at and for the price of eleven million dollars ($11,000,000), together with such sum as shall be equivalent to the amount of money necessarily expended by the company on extensions and betterments to its said distributing system made within the city after June 30, 1919, less such credit as the city shall be entitled to under paragraph third hereof; such agreement to sell, transfer. convey, and purchase being subject to the covenants, conditions, and stipulations hereinafter set forth.

Second. The sums mentioned in paragraph first hereof to be paid by the city shall be paid to the company, or its assigns, in lawful money of the United States on or before June 30, 1920.

Third. The company shall at all times, until the transfer and delivery of possession of said properties to the city as herein provided, maintain and keep said properties in good operating condition and extend and improve the same so as to supply all consumers within the territory served by said system, and entitled to be served thereby.

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The company shall, beginning July 1, 1919. provide and maintain a fund, to constitute and be known as a depreciation fund," into which the company shall pay in equal monthly installments until said transfer and delivery of possession an amount equivalent to 3.36 per cent per annum on the following items, to wit:

(a) Beginning July 1, 1919, on eight million eight hundred and seventy thousand dollars ($8,870,000) of the aforesaid purchase price of said properties.

(b) On the actual cost to the company of extensions and betterments to said properties, made subsequent to June 30. 1919, from the date of the completion of such extensions and betterments.

The sums so paid into said "depreciation fund" shall be held in trust by the company and bear interest at the rate of four per cent (4) per annum, accruing for the benefit of the fund and chargeable against the company; Provided, That all necessary replacements after June 30, 1919, and until the

transfer and delivery of possession of said properties to the city as herein provided, shall be paid for at actual cost, out of said fund; And, provided further, That, in the event that the purchase of said properties is consummated and the same are transferred and conveyed to the city in pursuance of this agreement, then any unexpended balance then remaining in said fund, together with the accrued interest, as aforesaid, shall be credited to the city on the aforesaid purchase price, but in the event the city does not purchase and take over said properties as aforesaid, then said balance, and accrued interest, if any, shall remain the property of the company.

Fourth. The sums mentioned in paragraph first hereof to be paid by the city to the company, or any part thereof, shall be payable, and said properties shall be transferred and conveyed, as aforesaid, only in the event that on or before June 30, 1920, an issue of bonds of sa'd the city of Los Angeles, authorized by the voters of said city, for the purpose of acquiring the above described properties or for that and other purposes, shall be issued and sold, and said sums shall be paid only out of the proceeds of the sale of said bonds. Fifth. The city shall, as soon as may be practicable, but not later than June 30, 1920, issue and sell such bonds of the city of Los Angeles as may be authorized, as aforesaid, for the purpose of acquiring said properties fron the company, and out of the proceeds of the sale thereof, pay to the company the sums payable to the company as hereinabove provided, and the company will then and there, in pursuance of a resolution of its board of directors theretofore duly and regularly adopted, execute and deliver, or cause to be executed and delivered, to the city a good and sufficient deed or deeds granting, conveying, transferring, and assuring unto said the city of Los Angeles unincumbered title to the aforesaid properties, including all franchises owned or held by the company for constructing, operating, or maintaining electric works within the city for distributing electricity to consumers therein other than to the city under the provisions of this agreement, or to railways for their own consumption and use; and also including all extensions, betterments, and additions of and to said properties, and will, with all conveyances of real property, deliver, or cause to be delivered, a certificate or certificates of title issued by the Title Insurance and Trust Company or the Title Guarantee and Trust Company, of Los Angeles, showing title to such real property to be vested in the grantor free and clear of all incumbrances, excepting taxes for the then current fiscal year and rights of way, restrictions and reservations now of record in the office of the county recorder of Los Angeles County; provided however, that the sale, conveyance, and transfer by the company to the city of the aforesaid properties, under and in pursuance of this agreement, shall not include, nor be deemed to include, or to affect any franchise or right of the company, its successors or assigns, to maintain and operate transmission and distributing lines and works solely for supplying and delivering electric current to railways for their own use, or transmission lines across the city, now existing or hereafter built.

It is further undertsood and agreed that immediately upon payment by the city of the sums payable to the company, as provided in paragraph first hereof, the city shall be entitled to receive and the company shall deliver to it, full and complete possession of all and singular the properties embraced in such purchase, as aforesaid.

Sixth. If, after the execution of this agreement, territory, whether incorporated or unincorporated, shall be brought into the city by annexation or consolidation, and the company shall own or operate in said territory electric distribution works, then the city will not extend its municipal electric distributing system into such added territory or furnish service therein, unless the company shall, upon demand from the city, refuse to sell and convey such works to the city for a price or compensation to be fixed by the railroad commission of the State of California, or such other public authority as shall at the time have juridiction and power to fix the price or compensation therefor: provided however, That nothing in this agreement contained shall be deemed to deprive the city, or to be a waiver on its part, of the right of eminent domain for the purpose of acquiring such works; provided also, That the aforesaid limitations upon the right of the city to extend its municipal electric distributing system and to give electric service in territory annexed to or consolidated with said city, shall not apply to territory wherein publicly owned electric distributing works are being operated, and control of which works shall pass to the city by virtue of such annexation or consolidation, nor shall anything herein contained preclude the city from furnishing electric

energy to the inhabitants of Inyo County, California; Provided further, That the company shall not extend said distributing works so owned or operated by it, in any such added territory, into any other part of said city, nor exercise any electric franchise granted for such added territory in any other part of said city or exercise any electric franchise granted for such added territory in any other part of said city, excepting however, transmission and distributing lines and works solely for supplying and delivering electric current to railways for their own use, and transmission lines across the city, now existing or hereafter built.

Seventh. The company shall sell, furnish and deliver to the city, and the city shall purchase and take from the company, at the main or central substation of said city located within the corporate limits of the city as they now exist, or may hereafter be extended or modified, and a such other points within the city as the parties hereto may from time to time agree upon, at at rates per kilowatt hour fixed as hereinafter provided, electric energy as follows, to wit:

(a) All electric energy which the city shall require each year for and during the period of ten years from and after the date of the transfer and delivery to the city of said properties of the company embraced in such purchase, as aforesaid, as provided in paragraph fifth of this agreement in order to supply consumers served by the city for use within the limits of the city, as aforesaid, in excess of the amount which the city shall generate at hydro-electric plants now or hereafter owned and controlled by it and also in excess of the electric energy which the city may generate at the steam plant at the Los Angeles Gas & Electric Corporation, in the event that said last-named plant should be acquired by the city, up to the total capacity of said steam plant at the time of its acquisition:

(b) All electric energy which the city shall require each year for and during a period of twenty years immediately succeeding the aforesaid tenyear period, in order to supply consumers served by it for use within the limits of the city, as aforesaid, in excess of the amount which the city shall generate at electric plants of any kind now as hereafter owned or controlled by it, subject, however, to the term nation of this agreement as in paragraph thirteen hereof provided.

Said rates for electric energy to be fixed by the railroad commission of the State of California, or such other public authority as shall have jurisdiction and power to fix the same, from time to time during the life of this agree ment, upon application by either party hereto.

Eighth. The delivery of said electric energy by the company as above provided shall be continuous during the periods it is needed by the city to meet its requirements and shall be made at a normal voltage of 33,000 volts, 3 phase and normal frequency of 50 cycles per second: Provided, That during the daily period of heavy demands on the city's system for electric power, approximately betwen the hours of 6.30 a. m. and 11 p. m., said voltage shall be increased above normal, in conformity with such power demand, but the city shall not have the right to demand an increase in excess of 63 per cent of the normal voltage: And provided further. That the company will, through proper design and maintenance of its system and operation of the same, reduce the extent of interruptions in its service to the city to the lowest possible minimum and maintain the regulation of voltage and frequency within 2 per cent of that provided above, except unavoidable fluctuations of momentary duration to the end that the city's service to its consumers may be at all times reliable and efficient in so far as it may be affected by its power supply from the company. The electrical energy delivered to the city hereunder, except as to any electric energy that may be delivered at other points than the main or central substation of the city as provided in paragraph seventh hereof, shall be delivered over transmission circuits, at least two in number, of ample capacity and devoted solely to such use, connecting between the company's principal center of power supply and said main or central substation of the city, and company's system, including the transmission and other circuits connecting with its said principal center of power supply, shall be so arranged that trouble occurring on any portion of the system, other than the said principal center of power supply. will not, except in rare instances, if ever, cause an interruption or material interference with its service to the city.

Ninth. If, at any time during the period of fifteen (15) years from and after the date of the transfer and delivery of said properties to the city, the city shall generate surplus electric energy in excess of the amount required to

supply consumers served by the city for use within the limits of the city, as they now or may hereafter exist, and the amount required to supply the city for its own use and consumption, within or without the limits of the city, and to supply the city of Pasadena, in the county of Los Angeles, State of California, for distribution and use within the limits of said city of Pasadena, it will notify the company that it has such surplus electric energy for sale, and the company shall have the right to purchase during the period for which such surplus energy shall be available, all or any fractional part of such surplus, at rates per kilowatt hour to be fixed from time to time during said period, of fifteen (15) years, upon application of either party hereto by said State Railroad Commission or such other public authority as shall have jurisdiction and power to fix electric rates charged by the company: Provided however, That the company shall within thirty (30) days from receipt of such notice by the city, notify the city in writing of its election to exercise its right to purchase such surplus energy, and the city shall be at liberty to sell to any other person or corporation such part of such surplus energy as the company shall not elect to purchase as aforesaid: And provided further, That in the event the company shall at any time during said period of fifteen (15) years knowingly supply electric energy for use within the limits of the city as they may exist from time to time to any other company or corporation engaged in the business of distributing and selling electric energy to consumers within said city excepting in compliance with an order of court or other public authority having jurisdiction in the matter, then, in that event and thereupon, said right of the company to purchase surplus electric power from the city shall cease and terminate.

Tenth. All electric energy delivered by the company to the city, or by the city to the company, shall be measured at the point or points of delivery herein mentioned, or at such other points as the parties may agree upon, by polyphase recording watt-hour meters and polyphase curve-drawing meters. Such meters shall be furnished, installed, and sealed by the party furnishing the current and shall at all times be subject to test and inspection by representatives of both the city and company together, and shall at all times be maintained so as to accurately measure the electric energy delivered.

Eleventh. During the entire period of this agreement the city shall maintain at all times a power factor of all the electric energy distributed by it, as high as shall be reasonably practicable, and the power factor of all the electric energy purchased by the city from the company shall be generally the same and as high as the simultaneous average power factor of the total amount of electric energy so distributed by said city and the power factor of all the electric energy purchased by the company from the city at all times be at least 80 per cent.

Twelfth. Payment for electric energy as herein provided for by said city to the company, and by the company to said city, shall be made on or before the fifteenth day of each calendar month for electric energy furnished during the preceding calendar month, such payment by said city shall be made at the offices of the company and payment by the company shall be made at the offices of said board of public service commissioners, in the city of Los Angeles, California.

Thirteenth. The city shall have the right and option at any time aften ten (10) years and after the date of the transfer and delivery to the city of said properties of the company embraced in such purchase, as aforesaid, as provided in paragraph fifth of this agreement, but only with the assent of the majority of the qualified voters of said city voting on the question at either a general or special election held at any time after eight (8) years from the said date of transfer at which such question may be lawfully submitted, and upon giving the company two (2) years' previous notice in writing of its intention so to do, to terminate all and singular the provisions of this agreement.

Fourteenth. This agreement and its several provisions shall insure to the benefit of and be binding upon the parties hereto, their successors and assigns, and, notwithstanding anything to the contrary herein contained, the obligations of the parties hereto are mutually interdependent, and the obligations of either party are upon the condition that the promises and agreements of the other party hereto are binding, efficacious, and enforceable.

Fifteenth. This agreement, shall not become effective until the same shall have been duly and regularly approved by the railroad commission of the State of California, and until the provisions aforesaid for the sale of surplus

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