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SMALLER QUESTIONNAIRE VOLUNTARY

Mr. Swidler. We have a smaller questionnaire, yes, sir; and we made it voluntary because a lot of these small producers just do not have records from which they could fill out even a small questionnaire. We would like to have the information, but to compel it, even in the case of an abbreviated questionnaire, would be burdensome to them and probably not fruitful to us. So that we just said, please, will you fill it out if you cano And a requirement is imposed only upon the fellows who have the information available and the means and facilities with which to fill it out. Senator ALLOTT. Will you yield? Senator Mon RoREY. Yes. Senator ALLOTT. Well, you require in this questionnaire that they o back and dig out all their records and detailed information for fantastic breakdowns in here—I say fantastic breakdown—of information for a period of 8 years.

Correl, ATION OF INFORMATION by CoMPUTER

Now, I do not see how you could possibly correlate this information in one area with less than several years' work. In other words, somebody has dreamed up this nightmare here, and it is a nightmare, and the information that is contained in this report of one company alone could not be correlated in a shorter period than less than several years, let alone a dozen companies in the same area.

Mr. Swidler. Senator, what makes an area rate proceeding possible is availability of computer services. You old never handle this mass of information and attempt to fix rates for a whole area with any grasp of the facts of the individual companies in the industry unless you had computer services. And this item, which I hope you will not treat lightly, of $300,000 for additional services, includes computer services.

IMPACT OF COMPUTERS ON EMPLOYMENT

Senator MAGNUsoN. The trouble—every agency has been in here with computers. They are going to solve all their problems with computers, but there never is any decrease in employment. We have some that have been here that we have given them $3 or $4 million for computers and they are hiring more people to run the computers than they had without them—more expensive people. I hope this o thing—it never ends around here.

ey always have money for computers and we find out there is no

decrease in employment.

We had a request here the other day for some $110,000 to improve the memory of a computer. And these computers, I guess, cost a great deal of money. I do not know.

I am not passing on this one, but the American businessman today is just harassed and harassed with these things. We had the Federal Trade Commission in here the other day. They have one, I think you outdo them. Theirs weighs only 6 pounds, the one they have. Yours is 10. And a fellow cannot turn around but he has to answer a questionnaire. I do not know how some of these people can do business sometimes. But I am not passing on this one. You have a little dif

ferent problem, I understand, with rates. But it seems to me that the Government is just continually loading upon the American businessman a constant workload on these questionnaires or things that they send out. There must be a simpler way. I don't know. There has to be a simpler way. Maybe when the memory of the computer gets improved, we might find a simpler way, I don't know.

DETERMINATION OF FAIR AND JUST RATE

Senator MONRONEY. Maybe we can push a button and come up with a definition, after 10 years, of what à just and reasonable rate is so the businessman would know what he is being asked to do. I don't think he would mind a bit submitting a thing that would take him a year to prepare if he felt that a just and reasonable rate would be determined. He could say now we know. The Commission has ruled, the courts have passed on it. But I don't think they figure that this adds up to a thing or that additional information that they furnish is not going to be filed away the same as the stuff they furnished for the last 10 years.

I have sat through these hearings for years in the Commerce Committee and on appropriations and I have never seen any dearth of knowledge or accumulation of all the statistics regarding gas production that the various chairmen and expert witnesses were called upon to furnish.

Mr. SwIDLER. When these rates are determined, Senator Monroney, they will undoubtedly be the subject of judicial appeals. It is not only a matter of our own solidity in determining just and reasonable rates and being able to defend the rates we arrive at but also in having to face that judicial review.

In appraising our request you need to remember, that the job of fixing gas rates in the field has not been mastered and that this job was not done before. This is not more money to do the same job, it is to do a job that needs to be done and has not yet been done.

NEED FOR SIMPLIFIED SYSTEM

Senator MAGNUSON. You say it has not been mastered, but it seems to me somebody ought to come up with something more simplified so you can master it. We are getting bogged down here with countless papers, questionnaires, indexed and staffed, and warehouses full of them. It seems to get worse. It is like a spider web sitting on top of you fellows in the Commission. I think a lot of it is the fault of the staff. Maybe we ought to send a bunch of Parkinson's books down there to them. We ought to appropriate $100 to buy some copies of Parkinson's law and send it down there. Maybe they could go home and read it and come up with something simple.

Something simple is awfully hard to get over around this place here. If it comes too simple, then they are against it because they have to compute it and study it and have a questionnaire on it.

Mr. SWIDLER. Well, sir, this is simple in a way. We will have a limited number of proceedings. I don't know how many we will wind up with, maybe 6, 8, or 10 proceedings that will fix the natural gas rates at the producer level in the whole country. Now, this is instead of thousands of individual proceedings, instead of each little pro

ducer having to show his own costs. You have made it possible in this way for hundreds or thousands of them to combine and put in their case through a joint agency, such as TIPRO, for example, which represents all the little producers in Texas. The concept of one proceeding which embraces in one case I think 400 and in another case 600—this is a simplication. Certainly, it makes these few proceedings large and individually expensive, but a few of these proceedings are intended to cover an awfully large field and to determine at the well the price that 34 million consumers are paying for natural gas.

APPLYING OF FAIR AND JUST RATES

Senator ALLOTT. You keep talking about consumers. There are other people involved in this thing, Mr. Swidler. You and I talked about this in your first appearance before this committee. The sole aim of the Federal Power Commission is just not as a consumer agency. This is the thing that the Senator from Oklahoma is talking about, what is fair and just. Now, you have this, you call it the cost of service basis that you are trying to get to. You are going to end up with a great big broad brush here in a given area and you have to do one of two things: You either have to end up with your rates down to the place where the lowest cost producer perhaps gets a break, or you have to put it up so high where the highest cost producer is going to get hurt and not get his, and in this instance, then the low-cost producer, if I understand the terms, gets the windfall. I think that the Senator from Oklahoma has a point, What is fair and just? If you put it out on an area rate basis, it sure is not going to be fair and just to these people. Now, I am completely aware of the consumer interest, but you also cannot deprive a man of his property and of the property value. That is what this area rate thing is going to do in many instances.

Mr. SWIDLER. I do not like to talk about the details, because the case is now before us. We are working and as I understand it, under a congressional mandate, to try to find an answer to this problem, to find one that is just and reasonable and as fair as we can make it for everybody concerned.

Senator MAGNUSON. The area rate approach was an attempt to try to simplify something, but in order to do it it seems to me you are complicating it even more. I don't know.

DIFFICULTY IN DEVOLVING SIMPLIFIED PROCEDURE Mr. SWIDLER. You cannot make a proceeding involving several hundred cases and all nature of companies in the country as simple as a negligence case.

With that many parties, that much money involved, that great production, there are many facets to it. In these hearings we are dealing with virtually the whole petroleum industry. The gas comes up associated with the oil. If the gas came up separately, if you could account for it separately, if you did not have problems of allocation involved, it would be a much simpler proceeding. But you have to make these allocations, you have to take account of everything that comes out of the well in order to know what the costs of the gas are. So this is a very complex thing inherently. To say a questionnaire weighs so many pounds, does not answer the question. The

question is, What facts do you need in order to determine just and reasonable rates in a whole area for all the producers in it! You are talking now about rates for the fifth largest industry in the United States.

Senator SALTONSTALL. How many people, Mr. Swidler-
Senator Monroney, may I ask a question?
Senator MONRONEY. Yes.

PERSONNEL NEEDED TO PROCESS REPORTS

Senator SALTONSTALL. How many people does it take, on the other side of the coin, to study and understand these great big reports that these companies fill in ?

Mr. SWIDLER. Many people. This is why we are asking for additional staff. It takes several hundred people to master the problem of regulating producer rates.

Senator SALTONSTALL. And then it is summed up to the Commission?

Mr. SWIDLER. Yes, sir. Then it comes up to the Commission. Ultimately, we will have to decide the policy and of course we direct the staff.

Senator MONRONEY. Is this questionnaire going to be directed, then, at the Commission gaining information from the producers so that it can come up with a formula on what is a just and reasonable rate?

Mr. SwIDLER. Yes, sir.

Senator MONRONEY. And then if the producers supply this information, they will be told what a just and reasonable rate formula would be and that just and reasonable rate would apply not only to the consumers but also to producers, would it not?

Mr. SWIDLER. Yes, sir.

RATE SETTLEMENTS MADE ON COMPROMISE BASIS

Senator MONRONEY. Because a rate that is not just and reasonable to each is certainly not a satisfactory rate.

Now, I understand that all of the settlements that have been made were made on the basis of not any formula or not any just and reasonable rate, but on an agreed compromise, sort of like a bargaining proposition; is that correct?

Mr. SWIDLER. It is correct except that most of them have been figures which, as I recall, approach the Commission's guideline ceiling prices. The ceiling prices are the prices by and large which represent the highest levels at which any substantial sales of gas have taken place in the area. They do not represent just and reasonable rates, but they do represent what you might call something approaching the top market.

Senator MONRONEY. Are these permanent rates or are these temporary

Mr. SWIDLER. These are permanent but they are subject to change in the area rate proceedings.

Senator MONRONEY. In other words, you might settle off by settlement now a part of a large field or a large area and then come back on the overall and it would be changed; is that correct?

Mr. SWIDLER. It would be changed when the just and reasonable rates are determined.

Senator MONRONEY. These are not considered to be just and reasonable rates but they are agreed and settled rates?

Mr. SwIDLER. That is correct.

CONTEMPLATION OF JUST AND REASONABLE RATE BASIS

Senator MONRONEY. Does the FPC contemplate, as Senator Allott asked, establishing a just and reasonable rate on the cost of service basis, a utility pricing basis such as we have in electricity?

Mr. SwIDLER. That would certainly be one factor and a good bit of this questionnaire goes to cost. But that would not be the only factor and I cannot tell you now how these factors will be weighted in because we await the recommendations of our examiner and the briefs of the parties. This is the heart of the question that we must grapple with.

Senator MONRONEY. In other words, I cannot see precisely how all this data is going to be used by the Commission in its regulatory scheme. It appears the Commission is still uncertain what they are going to base their formula on and they have to go to the producers to get more information. It seems to me you can come up with the formula with all the knowledge and experience that your staff has had through more than 10 years and many of the Commissioners have, to get the formula and then ask for the information in the questionnaires for the regulatory scheme.

Mr. SWIDLER. Well, this is one way of going about it and perhaps there is a lot to be said for it, but look at the case from the other point of view for a moment.

Can you make your decision before you get the facts? Senator MONRONEY. You have had 10 years, Mr. Chairman, on this. This is not a new bunch of people; it is not a new problem. It has been in the hair of every Commissioner who has been on the board for 10 years. I guess you have had a staff of a hundred working on it.

DIFFICULTIES IN RATE REGULATION Mr. SWIDLER. You cannot charge us with the whole 10 years. I was happly at work in the Tennessee Valley when all this started and the thought that I would ever have this burden had not entered my mind until 3 years ago. But from my own point of view, to arrive at an a priori result without a record did not seem to me to make sense. It seemed to me to be far better to have the case tried, to get the facts, to have the contentions of the parties and their briefs, to have the help of the examiner, and then arrive at a conclusion, in this pace-setting proceeding. For the Commissioners to just sit down among ourselves and try to dream up a formula in an abstract, a priori way did not see to be the way to regulate the rates of this great industry.

Had we tried it, Senator Monroney, I venture to say you would have more fault to find than you have with our current proceedings. You would say, "What do you mean, just sitting around here and dreaming up a formula; is that the way to regulate a great industry ?”

I would have to say no, it isn't. I think I can defend what we are doing now, but I do not think I could defend the other way.

Senator Magnuson. That is the question of how big a record do you want.

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