30 to 35 more years. * * * The respondent's markets are rapidly expanding and embrace the large metropolitan area of Detroit, which alone takes 40 percent of the entire output under a long-term contract."5 The United States Supreme Court, in upholding the Commission's rate of return in this case, quoted the statement.

The order of November 30, 1946, it seems to me, is fundamentally defective to the extent that it fails to make a definitive finding as to Panhandle Eastern's rights in the markets served by Michigan Consolidated. Such a finding would appear a prerequisite to the granting of a certificate to Michigan-Wisconsin because without it there could be no determination as to the sufficiency of the market to enable the applicant to operate on an economically sound basis. The record contains testimony by applicant's witnesses to the effect that, without the Michigan Consolidated's Detroit market, their project could not be supported. The serious difficulty in the position of the majority is clearly revealed in its supplementary order of December 30, 1946, and the ensuing hearing of January 15-17, 1947. The order showed the majority attempting to obtain more evidence on which to make the finding which was necessary to support its order of November 30, 1946. The hearing brought out no more substantial evidence than a copy of a proposed contract which Michigan Consolidated had offered Panhandle Eastern for limited supplies of gas after the expiration of the present contract in 1951 and an attempt to bring pressure on the latter company to accept this contract as a measure of its rights.7

The majority would seem to have left the Commission open to the allegation that the determination of the rights, attaching to a series of certificates which it has issued, can be based on past deliveries under an old contract, coupled with what a party interested in promoting a competing pipe line is ready to contract to purchase at the expiration of that contract, rather than on the actual grant of certificates and the company's obligations thereunder. The attorney for the Kansas Corporation Commission pointed out that this was tantamount to abdication of the Commission's duty under the Act, a delegation to the parties themselves of the duty of determining the ultimate issue before the Commission as to the rights and duties of Panhandle Eastern.

There should be no confusion between the rights and obligations established by a private contract and those deriving from a government-issued certificate of public convenience and necessity. Certainly those deriving from government cannot be made subordinate. An agency exercising the authority of the government cannot turn over its responsibility for such basic policy matters to determination through contracts between private parties, else the public interest might suffer. It is certainly not in the public interest to permit a holding company, controlling gas distributing subsidiaries, to use its control of the contracting power of such subsidiaries to create a seeming justification for government authorization of a pipe line designed to invade the markets theretofore served by an existing system under Commission certificates.

Some idea of the confusion which may result from the majority's approach to determining the rights of Panhandle Eastern may be drawn from supply and requirements figures which are of record in this proceeding. These figures will also serve to answer three important questions: (1) How well has Panhandle Eastern taken care of the Detroit-Ann Arbor markets? (2) How well is the company prepared to take care of the future growth of these markets and of those of Michigan Consolidated in Western Michigan? and (3) What is the nature of the additional load which Michigan Consolidated proposes to take on in order to justify granting a certificate to Michigan-Wisconsin after according a continuing load of 32,000,000 Mcf a year to Panhandle Eastern?

These significant figures, together with conclusions which may be drawn from them, may be summarized as follows:

(1) In 1946 Panhandle Eastern was obligated to supply the Detroit and Ann Arbor market areas of Michigan Consolidated with a total of 127,000 Mcf. of gas per day, representing 33 percent of its total capacity of 383,000 Mcf. The existing pipe line company has further proposed to supply Michigan-Consolidated with a total 154,500 Mcf a day on completion of its "Group B" facilities, again representing 33 percent of its then capacity of 473,000 Mcf. per day. Assuming the same percentage of total capacity available to supply the Michigan Consolidated markets when the "Group C" and "Group D" facilities are completed, Panhandle Eastern may be reckoned as planning to provide this market with 5 Detreit v. Panhandle Eastern Pipe Line Co. 3 FPC 273, 286.

6 324 U. S. 635, 650.

7 See record pages 16990-16993.

gas at the daily rate of 239,000 Mcf. representing 33 percent of its then capacity of 725,000 Mcf. This may be taken as the measure of Panhandle Eastern's plans for this market if permitted to supply its growth.

(2) The delivery of 127,000 Mcf per day throughout the year, with use of storage fields to take care of swings in the load, would provide an annual total of 46,400,000 Mcf, or more than the estimate of 44,818,000 Mcf for the firm requirements of the Detroit and Ann Arbor markets in 1952. Furthermore, it would provide sufficient gas to take care of the total firm requirements of the entire Michigan Consolidated system, including the Western Districts, through 1948 and, if we assume 2,300,000 Mcf still available from local Michigan fields, through 1949. With proper cooperation on a sound storage program, such as the Michigan Gas Storage Company arrangement which Panhandle Eastern has worked out with Consumers Power Company, the firm requirements of the Michigan Consolidated market thus would be adequately safeguarded pending completion of new facilities already authorized. And it may be noted that the requirement figures include approximately 10,000,000 Mcf a year of industrial load.

(3) If it is argued that in the 1946-1947 winter season Panhandle Eastern at times was unable to deliver to Detroit the full 125,000 Mcf. maximum contract demand, it is answered that to date Michigan Consolidated has never made any effort, either through storage or attachment of interruptible industrial customers, to utilize all of the gas offered annually by Panhandle Eastern under its contract. As compared with possible annual deliveries to Detroit totalling 45,625,000 Mcf, it took only 26,315,000 in 1942; 31,278,000 in 1943; 31,520,000 in 1944; 32,089,000 in 1945; and 38,500,000 Mcf in 1946. Furthermore, the record shows that during the 1946-1947 winter season Panhandle Eastern has delivered to the Ann Arbor market more than twice the 2,000 Mef per day required by its contract. (4) The delivery of 154,500 Mef to Michigan Consolidated daily throughout the year upon completion of Panhandle Eastern's "Group B" facilities about January 1, 1949, with proper use of storage fields, would provide an annual total of 56,400,000 Mcf, or sufficient to take care of all the estimated Michigan Consolidated firm requirements, including the Western Districts, until completion of the proposed "Group C" and "Group D" facilities. The estimated firm requirements of these markets, including from 11,000,000 to 12,000,000 Mcf of industrial load, will be 54,700,000 Mcf. in 1951, and 57,300,000 Mcf. in 1952.

(5) The delivery of 239,000 Mcf per day to Michigan Consolidated on completion of the "Group C" and "Group D" facilities, with proper use of storage fields, would provide an annual total of 87,200,000 Mcf. This would be sufficient to take care of the entire 1952 firm requirements of the system, including the Western Districts, and, in addition, to provide for 30,000,000 Mcf of interruptible industrial sales in addition to the 11,692,000 Mcf of industrial sales included in the firm requirements. Actually, this means provision for a total use of gas in the areas served by the Michigan Consolidated Company, including interruptible industrial sales, in excess of the original Michigan-Wisconsin estimates of such requirements prior to the sudden jump in the estimate of industrial load when the company decided to recognize Panhandle Eastern as entitled to supply 32,000,000 Mcf a year after expiration of its present contract on December 31, 1951.

(6) In the face of these Panhandle Eastern plans to provide for the reasonable growth of the requirements of areas served by Michigan Consolidated up to a total of 87,200,000 Mcf a year, the latter company has offered Panhandle Eastern, as already noted, a 15-year contract for 32,000,000 Mcf a year after the end of the present contract in 1951. This is 6,000,000 Mcf less than Panhandle Eastern delivered to this company in 1946 and 13,000,000 less than the maximum amount Panhandle Eastern is obligated to deliver and Michigan Consolidated indicated it will take in the final years before that contract expires. It is 24,000,000 Mcf per year less than the amount of gas earmarked for Michigan Consolidated's markets on completion of additional Panhandle Eastern facilities recently authorized by the Commission.

(7) The Michigan-Wisconsin estimates of the requirements of the Detroit market in 1952, submitted in support of its application, show an increase over the actual requirements of 1945 by approximately 55,000,000 Mcf, of which approximately 44,000,000 Mcf represents additional industrial load. For the entire market of Michigan Consolidated the total increase of approximately 62.000.000 Mef includes an increase of about 46,000,000 Mcf in industrial load. In other words, in the brief span of seven years, the markets' industrial load is to be increased from 11,000,000 Mcf to 57,000,000 Mef or more than five times that of 1945 to justify the building of the new line.

The figures summarized above are among those which the majority must consider in arriving at a conclusion as to the measure of Panhandle Eastern's rights in the existing market and its expansion. To me they convey a clear indication of the ability and willingness of the company to serve adequately the needs of the market, including the reasonable expansion of its requirements. But, quite aside from the question of rights, these figures appear to me to raise another question, both as to the soundness of the majority decision to authorize a certificate for the Michigan-Wisconsin line, and as to the dependence which can be placed on the applicant's presentation of its entire case. I refer particularly to the treatment of industrial load.

Michigan-Wisconsin initially advanced, as a main argument why the public interest would be peculiarly served by its proposal, the fact that its use of storage fields would make possible high-load factors operation of its main pipe line without the necessity of large industrial sales representing heavy competition with other fuels. So long as their case rested on the assumption that they would be permitted to take the Detroit and Ann Arbor markets completely away from Panhandle Eastern after 1951, they used estimates of interruptible sales almost entirely to provide a market for their gas in the Detroit District from 1948, when they expected to complete their initial project, to the end of Panhandle Eastern's present contract.

Thus, their initial figures show them building up this interim interruptible industrial load in the Detroit District from 2,538,300 Mcf in 1945 to 9,000,000 Mcf in 1946 and 11,400,000 Mcf in 1947, then jumping abruptly to a fixed total of 27,000,000 Mcf for each of the years 1948 to 1951, inclusive. Thereafter, according to their initial estimates, this load would drop to zero in 1952, although the evidence shows that 13,000,000 Mcf would be available for sale on an interruptible basis. But, in October 1946, in order to justify a certificate for the new line after allotting 32,000,000 Mcf per year of the market to Panhandle Eastern, MichiganWisconsin jumped the 1952 estimate of such interruptible load to 45,000,000 Mcf, but stated that there would be a firm market for this gas.

Insofar, therefore, as the economic soundness of the proposed MichiganWisconsin pipe line depends upon its participation in markets now supplied by Panhandle Eastern, its justification rests upon a proposed tremendous increase in industrial sales already referred to. It will mean, according to the applicant's estimates for 1952, that 53,000,000 Mcf, or more than 60 percent of the 87,000,000 Mcf of Southwestern gas consumed in the Detroit market, will be sold to industry, nor does this figure include sales to industry for space heating. It will mean that approximately 57,000,000 Mcf, or 55 percent of the 102,000,000 Mcf sold by Michigan Consolidated in that year, including the Ann Arbor and Western Districts, will be sold for industrial uses. These figures compare with 1945 when less than 30 percent of the gas sold by Michigan Consolidated in either its Detroit, or its entire market, went for such industrial purposes.

Now I am not taking a position against industrial use of natural gas, or against providing for the orderly expansion of such use. But, passing over Panhandle Eastern's right to the first opportunity to provide for the growth of this market, I do not believe it in the public interest to authorize a new line, into the established market of an existing company, when the evidence shows clearly that its justification rests not on orderly growth of the general market, but on intensive efforts to expand industrial use through conversion of large industrial plants, including boiler installations, to natural gas.

To the extent that this is true, it means that the Commission is here authorizing new pipe line capacity to provide gas primarily for expansion of industrial use 1,200 miles from the source of supply, rather than for expansion of general service with expansion of industrial use only incidental thereto. I am convinced that if such a step is to be considered sufficient time should be taken for a full exploration of its consequences.

Because of my fundamental objection to the majority decisions of November 30 and December 30, 1946, as affecting the rights of Panhandle Eastern to supply gas, it is not necessary to discuss other defects in the case presented by MichiganWisconsin in support of its application. But one aspect of the case should be noted because of its bearing upon the main issue. The record is so unsatisfactory as to reserves, storage possibilities, deliverability, prospective rates, etc., that it cannot be deemed to support the conclusion that Michigan-Wisconsin can deliver gas to the Detroit area at a sufficiently lower cost than Panhandle Eastern gas to warrant consideration of such alternative source of supply. In fact, when consideration is given to the testimony of Panhandle Eastern that the over-all project cost per million cubic feet of capacity would successively decline as each

step in the expansion program is completed and to the fact that Panhandle Eastern's rates are subject to this Commission's jurisdiction, it appears that the cost of gas to consumers in the area may well prove to be somewhat higher on account of the authorization of the new line.

The Michigan-Wisconsin case has focused considerable attention on the proposed use of certain Michigan gas fields for storage as an element in the economy of the project. Initially this was offered as an alternative to large interruptible industrial sales as a means of assuring high pipe line load factor. But, as the more recent proposal involves large sales to industrial customers, this aspect of the case is no longer significant. Suffice it to say that the Commission has already authorized a certificate to Michigan Gas Storage Company under which Panhandle Eastern summer gas may be stored in depleted gas fields relatively near to those proposed to be used by Michigan-Wisconsin. Sound policy might well dictate the integrated use of all such potential storage fields to meet the growing Michigan market.

Reviewing the entire matter it seems to me that the majority, as a result of pressure for an early decision, have failed to give proper meaning to the word "rights" as applied to Panhandle Eastern's interest in the Detroit area markets. In the regulation of public utilities, rights should signify that assurance on which the owners may depend as a basis for undertaking to live up to their responsibility for an essential public service. They are, in essence, a reciprocal of responsibility. The word "right" is used in the same sense in the phrase "right to a fair return on investment." That means no absolute or abstract right but the assurance of such return as may be necessary to assure continuously the supply of capital required for the rendering of a public service in terms of the public interest.

So, in dealing with the main issue in the case we are passing not so much upon the right of monopoly as opposed to competition as upon the question of mutual dependability as between a public service corporation and the community. Actually, the idea that the granting of a certificate in the instant case will engender competition for supply of gas to the Detroit market area is pretty much an illusion. For the distributing company which contracts for the gas and the parvenu pipe line company will be jointly owned. What little competition might result would be limited to a competitive drive to expand the industrial market for gas, an outcome which may prove definitely questionable in terms of the public interest.

Viewed realistically, interest pipe line companies serving entire communities, including large city areas, involve fixed investments which are too large to permit a simple application of the competitive principle. Such investments would become practically valueless for service elsewhere if a pipe line company should lose an existing market. An interpretation of Section 7 (g) as designed to foster even "regulated competition" (to me a paradox), when an existing company is rendering adequate service at reasonable rates subject to regulation, would increase the risks of the business to the point of economic unsoundness. Thus in this industry the situation differs materially from that of motor carriers, having little, if any, fixed immovable investment which cannot be diverted to other routes and communities.

No one is contending that a certificate of public convenience and necessity sets up an irresponsible and permanent monopoly, but rather that it permits a continuity of service to a growing market so long as the corporation lives up to its responsibilities as a public utility.

For the reasons set forth herein, I am convinced that the record before us does not warrant a decision to permit a new pipe line to enter the Michigan Consolidated Detroit and Ann Arbor market areas now served by the Panhandle Eastern Pipe Line Company, and therefore that the application of the MichiganWisconsin Pipe Line Company should be denied.

February 7, 1947

Date of Issuance: February 7, 1947.

LELAND OLDS, Commissioner.

Mr. CROSSER. Mr. Chairman, I wonder if we could not adjourn now? It is late, and we have people in our offices waiting for us.

Mr. HALE. Mr. Martel, of the American Federation of Labor, is here wishing to be heard. As long as he is here I think we ought to extend to him the courtesy of being heard.

STATEMENT OF FRANK X. MARTEL, PRESIDENT, DETROIT AND WAYNE COUNTY FEDERATION OF LABOR, DETROIT, MICH.

Mr. MARTEL. I am Frank X. Martel, president of the Detroit and Wayne County Federation of Labor.

Mr. SADOWSKI. And one of the greatest labor leaders in the United States of America.

Mr. MARTEL. Thank you, Congressman. I have been kidded by experts.

Gentlemen, in accepting your invitation to appear before this committee to discuss the question of natural-gas shortage in the city of Detroit, please be advised that it is our studied opinion that the present emergency in Detroit is but part of a general picture in which two large public utilities, contesting for a very lucrative market, have brought on a situation in which the peoples of the Detroit industrial area have become not only the temporary victims but are confronted with a permanent hardship and it is apparent that no permanent relief from this situation can come unless the Congress of the United States takes a hand in this situation and by law compels those utilities corporations involved to give first consideration to the people who desire to use gas for space heating, commercial, and industrial purposes. Detroit, the fourth largest city in America and the industrial capital of this great Nation, is serviced by the Michigan Consolidated Gas Co. on a day-to-day agreement and without franchise. The Michigan Consolidated Gas Co. purchases natural gas from the Panhandle Pipeline Co. who supply gas largely from the State of Texas.

The contract between the Michigan Consolidated and the Panhandle Co. is for a stipulated amount of gas less than that needed by the present users in the city of Detroit under normal conditions, let alone during the winter months when the need for gas for space heating creates a tremendous boost in the demand.

The Michigan Consolidated Gas Co., through one of its affiliates, has made application to the Federal Power Commission for permission to build an additional pipe line for the purpose of supplying gas to the Detroit industrial market free of any need for calling on the services of the Panhandle Pipeline Co.

This application has been favorably acted upon by the Federal Power Commission. This permit, however, is now being attacked in the Federal courts by the Panhandle Pipeline Co. and this is delaying construction.

It is very definitely established that the Panhandle Pipeline has been refusing to grant additional gas to the consumers of Detroit to be distributed through the Michigan Consolidated Gas Co. and have been using this monopolistic control of available natural-gas pipe-line facilities as a club over the Michigan Consolidated Gas Co. to force it first, to abandon its projected pipe line and secondly, to compel the entering of a new contract for the purchase of natural gas transported by the Panhandle Pipeline Co. I said at the inception of this statement that this temporary shortage in Detroit is but one phase of the gas situation the people of Detroit are confronted with.

While it is true that the officials of the city of Detroit, through the office of the corporation counsel, have won an advantage on price for the present consumers of gas through forcing recognition of the principle that such moneys paid to the Panhandle Pipeline Co. by the