Mr. LUCCHETTI. To the power company?

Mr. CRAWFORD. Yes, sir; that is what I paid. I paid the bill here. Mr. LUCCHETTI. For 44 kilowatt-hours?

Mr. CRAWFORD. Surely; I have the bill right here.

Mr. LUCCHETTI. For the power company?

Mr. CRAWFORD. No; I am talking about Washington, D. C. I would pay $2.06 to the P. R. R. L. & P. Co. in Puerto Rico.

Mr. LUCCHETTI. Washington may have a lower rate for these stages. Mr. CRAWFORD. Let us take the Puerto Rico Power & Light; that is, $2.06.

Mr. HAWKS. Washington has a high rate.

Mr. LUCCHETTI. No; in Washington they have a low rate. They have a low rate compared to New England.

Mr. ROBINSON. What is that Puerto Rican rate?

Mr. CRAWFORD. $2.06 as against his $2.

Mr. LUCCHETTI. You can't expect a city like Washington, with 600,000 people, more or less densely populated, to have a rate lower than that rural area in our island. What does it cost for service? Rates are fixed on two bases-the cost of rendering the service and the value of the service. That is the reason why I say that the kilowatthour itself is a very poor measure of the service. One kilowatt-hour for operating a motor is one kilowatt-hour exactly the same kilowatthour as you consume in burning a lamp. You may pay for burning a lamp 6 cents, and for the motor you pay three-quarters of 1 cent. You can see how misleading that measure is, and that is what we are getting away from, and that is why a year ago we set up this type of rate which I had been studying and trying to evolve for some time, and it paves the way for this other step. There is no reason why utilities should be required to bill every month. If you could hold your bills for 3 months, you would cut down the expense of meter reading and billing 33 percent.

Mr. HAWKS. And it would build up the delinquence in collections for your company just as surely as you are sitting there.

Mr. LUCCHETTI. It might and it might not.

Mr. HAWKS. It would.

The

Mr. LUCCHETTI. After all, a month is an arbitrary measure. idea is we in the electric business have gone to the limit in saving money in the design and construction of generating units, in the design and construction of transmission and distribution systems, the design and construction of transformers, the design and construction of appliances of all kinds. But there is one feature in the whole business which instead of decreasing in cost is increasing, because of the refinement in accounting and records and all that, and that is the meter reading and the billing. That is a big factor, and if we could cut that by one-third

Mr. HAWKS. How are they billing on the plant where you are holding up the franchise?

Mr. LUCCHETTI. Once a month. We are billing once a month now, but I was going to say these rates of ours pave the way to permit of billing every 3 months and cutting down the expense of meter readers and the accompanying expenses, billing, and so forth, by about onethird, because with a flat rate you can just bill-mind you, the idea is, our plan is, to collect in advance, just as you pay for other services here. You pay in advance. If there is any cost over the flat amount

allowed you collect it at so much per kilowatt-hour. This is really a comprehensive plan of developing along intelligent and considerate lines for everybody concerned, for the people who use the power and for the enterprise which is rendering the service.

Mr. HAWKS. My point is just this; if they can't collect $2 per month from the people in this particular area, how in the world are you going to collect $6 every 3 months from them?

Mr. LUCCHETTI. You know the way these poor people do, they put a penny every day to get their 25 cents at the end of the month. That is just psychology; the power companies require, for instance, or have been requiring all these years a deposit of $5. If you are very poor you put in $5; the large consumer also puts in the $5. That money is there, tied up.

Mr. ROBINSON. Mr. Chairman, I wish to call your attention to the fact that the House is in session and I think we are going far afield in this. I think we ought to confine this to something that is within

reason.

Mr. HAWKS. This all has to do with rates.

Mr. ROBINSON. In a way it does.

Mr. HAWKS. He is trying to develop that you cut down the expense of operating one-third.

Mr. ROBINSON. I appreciate that, but I believe a lot of the record could be saved if there wasn't so much talk, and if he would just answer questions. I don't want to criticize the witness, but it seems to me the witness is asked one thing, and then he starts to talk about something else and we just don't get any place. It is just around and around.

Mr. LUCCHETTI. But it will answer the question

Mr. ROBINSON. The question before you is just whether or not in your opinion it is better to have a 3 months' rate or a 1 months' rate. You have answered that. You think the other is cheaper. What else can we get out of that?

Mr. LUCCHETTI. I brought that part in to justify our structure of

rates.

Mr. ROBINSON. I don't want to criticize, but you have been going on here hour after hour, making a record here that is just going to be so long that no one will read it. It will not be understandable to most of the Members of the House or even to most of the members of the committee.

Mr. LUCCHETTI. May I make this closing statement then; the government of Puerto Rico in establishing these rates is only guided by one purpose, to make the power as cheap as possible to the users, and to keeping revenues at a point where they are needed to cover expenses, and our expenses are as low as anybody can make them. That is all I can say about our rates. That is the whole gist of the question.

Mr. ROBINSON. There is one fact in this rate structure that I think has been brought out, and that is on the 44-kilowatt rate, your rate is $2 and the Puerto Rican Light & Power Co. is $2.06.

Mr. LUCCHETTI. Yes.

Mr. HAWKS. And Washington is $1.72.

Mr. ROBINSON. And the city of Washington is $1.72.

Mr. LUCCHETTI. You can't compare Washington with our case. The CHAIRMAN. That is an answer to some of the questions of Mr. Crawford.

Mr. CRAWFORD. Let me ask one other question on that same point. I have 11 months here, 916 kilowatt-hours, say an average of 80 per month. Suppose, on experience, I said, "Well, I use about 82 kilowatt-hours per month." What would you recommend I take? Mr. LUCCHETTI. About 82?

Mr. CRAWFORD. Yes. Don't go into a lot of details, but give me your recommendation.

Mr. LUCCHETTI. I would say use the No. 3.7 schedule.

Mr. CRAWFORD. In that case I would pay $3.06; is that right? Mr. LUCCHETTI. For 80?

Mr. CRAWFORD. For 82.

Mr. LUCCHETTI. Oh, for 82; yes, $3.06.

Mr. CRAWFORD. As against your competitor's $3.20?

Mr. LUCCHETTI. That is right.

Mr. CRAWFORD. So they run almost neck and neck?
Mr. LUCCHETTI. Almost, yes.

Mr. CRAWFORD. Just one question. Yesterday at the close, I think when I stepped out of the room-not because I stepped out—you introduced Document 4295-395-17 for the record?

Mr. LUCCHETTI. Yes, I did. That made a comparison of rates. Mr. CRAWFORD. The last paragraph of that statement contained this language:

Apropos of this discussion it seems fitting to call attention to the advisability of the Public Service Commission of Puerto Rico adopting a conservative policy in the matter of checking the company should it request to lower its residential rates below reasonable limits. Aware as they are of public sentiment against the company continuing indefinitely its electrical business, and moved by a spirit of competition with the Government or for the sake of propaganda in a wild attempt to win the good will of the public, they might incur a disruption of the balance that must exist between cost and value of service for the different classes of service. Approaching, as we are, the day when the company's properties will be taken over by the Government through purchase or otherwise as already authorized by an act of the Puerto Rico Legislature, it would seem folly to permit the company to demoralize the market through an undue lowering of rates to such a point that it might place the Government in a difficult position to operate the business when it takes it over.

Mr. LUCCHETTI. I stand upon that statement. I think it correct Mr. CRAWFORD. Has the company ever attempted to demoralize a rate based on these figures?

Mr. LUCCHETTI. If they started lowering, and lowered rates below a reasonable limit, that would demoralize the market.

Mr. CRAWFORD. As long as their rates are higher than yours, are they attempting to demoralize the rate structure of the island?

Mr. LUCCHETTI. Not to demoralize. There is already a law passed by the Legislature of Puerto Rico directing the Governor of Puerto Rico to look into the question of purchasing these properties from the company, and a decision was made to proceed with it if we could buy it, if we could get the money. Whether we can get the money or not depends on how that piece of legislation that was passed in the legislature would be interpreted by the lawyers of whatever agency of the Government is willing to lend the money. That being the case, the company might appear to be making a big effort to lower its rates and to make the people believe they are cutting off those rates, and not let us do anything with our own system.

Mr. CRAWFORD. Has anything happened on the part of the company that would justify that statement, that they might do it?

Mr. LUCCHETTI. They did it in 1936, when that injunction suit filed against the people of Puerto Rico by the company was in the courts. It is in that statement; you can read it. They did not heed the orders of the Public Service Commission. The Public Service Commission ordered a rate cut of nearly $400,000. They appealed to the court, and for 2 or 3 years they kept all their rates in force.

Mr. CRAWFORD. Kept them up?

Mr. LUCCHETTI. They just kept them at the level that they were before. They didn't carry out the order of the Commission. They went to the court and kept on charging the public high rates. Later, when it was their turn to face our answer to the bill of complaint filed in the injunction suit, they came along voluntarily with a proposition to Public Service Commission and said, "Here, we want to cut our rates down," and they cut them down to the level they operated for 2 years, under the pressure of that action in court.

That injunction suit was decided against them in the Federal Court in Puerto Rico. They appealed to the Boston Circuit Court of Appeals and the Boston Circuit Court of Appeals affirmed the decision of the lower court. It came to the Supreme Court of the United States, and the United States Supreme Court refused to review the case, thus upholding the decisions of the two lower courts.

Mr. CRAWFORD. Mr. Robinson, I wanted to ask a question, and I think you were not here when I presented these. We have here a 10-year comparative balance sheet of the U. W. R., which shows the gross value of property which accumulated back of that period and on through the 10-year period up to June 30 last, of $6,049,906. Mr. Lucchetti has testified here that it appears to him that the need for expansion will run approximately $2,000,000 a year for the next 8 or 10 years or so, a minimum of say $16,000,000 or a maximum of $20,000,000, as against an accumulation here up to date of $6,049,906.49. I was wondering where this expansion program is going to lead. That is the reason I am taking so much time to develop this study.

Mr. ROBINSON. I just want to ask one question. The U. W R. doesn't any taxes?

Mr. LUCCHETTI. We don't pay taxes, no.

The CHAIRMAN. The committee stands adjourned until tomorrow morning at 10 o'clock.

(Thereupon, at 11 a. m., the committee adjourned until tomorrow, Thursday, March 28, 1940, at 10 a. m.)

PUERTO RICO WATER RESOURCES AUTHORITY ACT

THURSDAY, MARCH 28, 1940

HOUSE OF REPRESENTATIVES,
COMMITTEE ON INSULAR AFFAIRS,

Washington, D. C.

The committee met at 10 a. m., Hon. Leo Kocialkowski (chairman) presiding.

The CHAIRMAN. The committee will come to order, please.

Mr. Lucchetti I understand is not ready to proceed this morning; he is awaiting the arrival of some documents from Puerto Rico. Mr. LUCCHETTI. That is correct.

The CHAIRMAN. And Mr. Thoron will have an opportunity to be heard further if he desires.

In the meantime, the next witness we will hear is Mr. Obergh.

Will you give for the record your full name, and in what capacity you appear before the committee.

STATEMENT OF LOUIS I. OBERGH, WASHINGTON, D. C.

Mr. OBERGH. Mr. Chairman and gentlemen of the committee, my name is Louis I. Obergh. I am an attorney at law; Southern Building, Washington, D. C.

I am appearing here representing the Legislature of Puerto Rico. Mr. CRAWFORD. Mr. Obergh, may I interrupt you for a question? Mr. OBERGH. Yes.

Mr. CRAWFORD. Would you file with the committee, if you have not done so, your authority to represent the Legislature of Puerto Rico? Mr. ÓBERGH. Yes; I am coming to that.

Mr. CRAWFORD. Very well.

Mr. OBERGH. Under date of March 8, 1940, the Senate of Puerto Rico adopted unanimously the motion granting authority to its President, the Honorable Rafel Martines Nadal, to appoint an official representative to appear before the Congress to express the hydroelectric policy of the senate of Puerto Rico in connection with H. R. 8239 now pending before the Committee on Insular Affairs of the House of Representative.

The President of the Senate has honored the undersigned with the official representation of that body as shown by written authorization signed by him, also copy of motion adopted by the senate, certified by the Secretary of the Senate of Puerto Rico under its official seal.

Mr. Chairman, I am filing with you now the certification of the Secretary of the Senate of Puerto Rico showing the motion as passed and my appointment as the representative of the Senate of Puerto Rico.

The CHAIRMAN. Is there any objection? The Chair hears none.