# Appendix — Securities & Exchange Commission v. New England Electric System > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386411_0257%3A01 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1966 - **Citation:** 384 U.S. 176 ## Text INDEX VouumE | Relevant Docket Entries Below Notice and Order for Hearing . Joint Answer of All Respondents* Schedule A—Correction of Notice and Order |. Respondents’ Motion to Dismiss Findings and Opinion | Order Dismissing Pesevsiting 1 in Respect of Certain Issues Order Reconvetiiie Nesting Notice of Appearance and Answer of The Common- wealth of Massachusetts, Department of Public Utilities . Stenographic Pranetrgt of Seovis Testimony of: William Webster, Direct . Robert S. Quig, - eos... Harold L. Dalbeck, . _.. Direet Leigh FitzGerald, . Direct .... R. F. Krause, Direct Harry Hanson,...__.. Direct . Cross Elmer H. Lother, _ Direct C. W. Pearson . cn Robert Ross Cahal, Jr., nT oe Thomas J. Johnson, Jr., . Direct ... Cross. . Robert S. Quig (Recalled), | Direct . 56 94 136 . 274 .. 304 .. 333 . 381 .. 392 .. 457 .. 497 .. 921 .. 907 .. 363 . 576 *References to “Respondents” are to the Petitioners herein who were Respondents before the Commission. Index Page Francis X. Lang, Direct . .. 580 Cross. 594 James F. Simes, Direct 600 VouumeE IIL C. W. Pearson (Recalled), ... Direct ... 657 Robert S. Quig (Recalled), aera ee 667 Cross... 725 Harold L. Dalbeck (Recalled), Direct. ........ 730 Cross . 741 Harry Hanson (Recalled), Direct .. 445 Cross..... 750 William Webster (Recalled), Direct . 152 Cross. . .. toe Harry Hanson (Recalled), Direct ay Cross 777 (,. W. Pearson (Reealled), Direct 778 Cross... 813 Thomas Johnson (Recalled), © Cross _. 838 Samuel Gishman (Recalled), Direct... . 872 Cross _ 873 Thomas Johnson (Resumed), Cross. _. 874 Redirect . 930 Robert Cahal (Recalled), Cross .. 930 Samuel Gishman (Resumed) Direct... 940 Robert Ross Cahal, Jr. (Resumed), . t . Cross... _. 946 James F. Simes (Recalled), Cross. 961 Direct __. 976 Cross (cont.).... 979 Robert S. Quig (Recalled), Cross . oe Harry Hanson (Recalled), . Cross. 1144 Robert F. Krause (Resumed), Cross... _. 1164 Harold L. Dalbeck (Recalled), Cross. ........ 1195 Samuel Gishman .. _ Cross (cont.) .. 1238 Index iii Page Findings and Opinion of the Commission... 1254 Application of Respondents for stay pending judicial wey ......... PPE, on 1283 Order Granting Stay __ Sark isdy ain arte oar ae 1284 Proceedings in Court of Appeals: Petition to Review and Set Aside. —™ 1286 Stipulation as to Record to be Printed —_ ... 1294 Votume III , Respondents’ Exhibit: No. 3 . . AP Pee ee . 1297 _ So Seeing tCmeyertner i eta 1299 a ae OLE TEE LUE eT Uae V2 8 1301 ae SOR settee ears teeth 1303 ek cda ies tyne eto ee 1305 oat, a A EE a Iya 1307 EE ice oa rk in eas oa ee 1308 No. 56 . iid eae meat ne eee 1309 No. 57 ei ay Teta on he FS Aceate et 1310 No. 59 . Shales e S Sie onion eee 1311 FL, SRA eure ps eS 1313 No. 62 . . ak ae ‘in 9 5 Piee ya No. 63 erigicianies i595 ct 320 ois No. 64 .. MURS re, . 1317 BR. SE AR eee he ee te 1318 DRM icine t jee a 1337 soni, ORR RATER eS 1338 con, ee ee eek 1339 RE 86.22. ce ay scale ae oe eee ee 1340 MM. cay. ey 2 ae 1341 RO Lice SA pee ae 1342 PS es ee hPa is See Ae eee ee 1343 iv Index 92A 94 . 104 . 104A . 105 . 106 . 107 . 108 . 109 . 1 .. . 111 . 112 . 113 . 113A . 114 . 116 No. No. No. 117 118 | 119 Division Exhibit: 3. 2 3A 3B . 1345 1347 . 1349 1350 _ 1351 1352 1353 1355 _ 1365 1367 1369 1371 _ 1372 1373 1377 _ 1379 _ 1893 1395 1397 1397 _ 1405 1408 1411 1423 1426 1431 1432 1436 1437 1438 1439 1443 _ 1444 _ 1445 ADDITION TO VOLUME III Proceedings in the United States Court of Appeals for the nea st icmudtinaniitanded ede eo letens aes Original Print 1455 1455 1476 1477 1479 1455 1455 1471 1472 1472 Table of Contents Vv Page Page No. 3C . ies eS re ne 1446 No. 3D a has: Weve Farha @ ale cleat: eernoeees .. 1447 No. 4A eee Th ee Pe ee .... 1449 teh ore OO RT 5. = 1450 No. 4C ee rerae. Pees i Pata oan oe No. 4D Yer eee EMOTO Ie .. 1452 No. 5 ery ee Oe ¢2 es as Votume IV Respondents’ Exhibit 58A—First Volume of Ebasco Report VoLtumME V Respondents’ Exhibit 58B—Second Volume of Ebasco Re- port Votume VI Respondents’ Exhibit 91—Third (Supplemental) Volume of Ebaseo Report RELEVANT DOCKET EN"RIES BELOW 1. Notice and order of the Commision dated August 5, 1957 for hearing pursuant to ection 11(b)(1) of the Public Utility Holding Compaty Act of 1935. 2. Joint Answer of all Respondeits filed September 30, 1957.* Respondents’ Motion to Dismis, filed January 2, 1958. 4. Findings and Opinion and Orter of the Commission dated February 20, 1958 disnissing proceedings in respect of certain issues. 5. Order of the Commission date; February 8, 1960 re- convening hearing. 6. Notice of Appearance and Antywer of The Common- wealth of Massachusetts, Department of Public Util- ities. 7. Findings and Opinion and Orter of the Commission dated March 19, 1964. 8. Application of Respondents for stay of order pending judicial review. 9. Order of Commission dated Jane 25, 1964 granting stay. a * References to “Respondents” are to he Petitioners herein who vere Respondents before the Commission. 2 Unirep States oF AMERICA BEFORE THE Securities AND EXCHANGE ComMISssION August 5, 1957 In the Matter of New Encuanp Exvecrric SysteM AND Irs Sussrprary COMPANIES RESPONDENTS File No. 59-102 (Public Utility Holding Company Act of 1939) NOTICE OF AND ORDER FOR HEARING PURSUANT TO SECTION 11(b)(1) OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 The Commission having been advised by its Division of Corporate Regulation (** Division’’) that the Division, pur- suant to Sections 11(a), 18(a) and 18(b) of the Public Utility Holding Company Act of 1935 (‘‘Act’’), has exam- ined the corporate structure of New England Electric System, the corporate structure of its subsidiary companies, the relationships among the companies in the holding com- pany system, the character of the interests thereof and the properties owned or controlled thereby; and it appear- ing to the Division from such examination that: I 1. New England Electric System (““‘NEES’’), a volun- tary association created in 1926 in Massachusetts by Agree- ment‘and Declaration of Trust, is solely a holding company and is registered as such under Section 5 of the Act. It maintains its principal offices in the city of Boston, Massa- chusetts. 3 2. As of December 31, 1956, NEES had 32 subsidiaries, of which 16 were engaged exclusively in the electric busi- ness, one was engaged in the electric and gas business, one was in the process of constructing a nuclear power plant, eight were engaged exclusively in the gas business, one owns land, four were inactive and one was engaged in the business of rendering services for system companies. Taken together these subsidiaries conduct their businesses in the States of Connecticut, Massachusetts, New Hampshire, Rhode Island and Vermont, comprising an area of about 4,500 square miles and having a total population in excess of 2,200,000 persons. 3. (a) The names of the subsidiary companies em- braced in the holding company system of NEES as of De- cember 31, 1956, their relationships being indicated by indentation, the states of organization and operation, the nature of their business and the percentage of voting securities owned by system companies are shown in the following table: sexy) 29) d11}99/] sexy 9119399] Auedulod 291A1ag 3119997 Auedwiod Surpjoy *911999/] sed ‘d11}09/] aatqoVU] aatpoRUy sexy 911999 [ I} 9/7] ser) 91.4999] 311999" 911999] 9119997] satyiedoig SulumMO ser) aatqovuy d1199]' 914999] Auedwio,y Sutployy ssauisng fo anjon SESET - SE “ssey “ssey "Sse, “ssey “Sst “ssey IA/H'N “sseyl TY “ssey] ‘uuo0d “SSI “SSRI "SSRI “ssvyl ‘HN “SSRI “SSRI *SSBIA “SSB “ssey] suoyniad() uoiunziuvsic—Qn fo a4n1§ fo aynig “ssey “ssvy “ssey “sey 1 1 “ss “ssey “sey Tu Tu Ta “ssey ‘uu0d "SSB "ssey “ssey "SSeyAl ‘HIN ‘ssey "Sse “sseyl IA /H'N “ssty ‘ssel “ssey 00°00T 00°00T TL°66 042u0/) Suro, fo % Aueduios sex) poom.ion ' Auedwuiog sexy a20yg YON tre a hh aS _ Aueduroy d11}9a[qY WLYSylag W1syWON Bag) ta weg Auedwiod 34 3r] sex) uojdurey}0N + kavdui0s Suynysry W1ydepq UoydwieyJON Aueduiog a1Atag Jamog pue[suq MN Auedwiod d41da[q Wwoyy s9yUe A oo fueduiog samog puelsuy MeN Auedwo, o11399]q Yesueses1eN ey, suvdwor Bunysry W4yda[q VYoesuesessenN 9], ~~ fuedwiod yasuvseieN oy Auedwiog sexy Aae a 2S4 Auedwog samog INSAJ, PUL uones0d10) WSry] 79a" [oT PUL, Beat Aueduioy sex) a0uaime’y snipe Auedwiod d14139a/q VuaMe'T, ot een Kupduiog da] [[T4r9aey , LOR es Kugduod WIT ag ayuvsH conn Kirpduog syapq Ajunod xessy Aueduiog juouidojaaag Jeary ynoyo9UU0+ ooo Kugduiog sexy syasnyoessey] [8413095 cian uonesodsoy d113;09/q-O1pAH{ S|] SMO] F ctiienvpeasseaeee eee ueduioy 2199/7] O10G9V Paap Aueduio) WSr] wWayaq Aunqseuy , aia? wayshg 311399)"q pueljsuy aN ‘(O8PET “ON asvajay yy Aueduwiosy SuIploH]) LS6I “¢@ Avy uo uoIsstuWOD sty} Aq pansst Japso ue 0} juensand Auedwog s14399/"q Ajunod xassq out Sur3sau JO Ssadoid ur aie saruedwios esau, aaneuy sa cu QOD eee tere eeeeeesaseseesneeneeenes Auedwiog qea moyjax I11}09/q "SSB “SSA so , . SABRI ite clder stags: bah cee ‘OD M4IDa[y AWuNOD 41938991044 SERRE) icf “ssey “sseyAl OL'66 ~~ £ueduiod Jamog pue WSrT yynouwsa jy sey “Sse ‘Sse QOOOT et eteseseeneenenntteen Kuedwog sey yasnyse 4 a9] ‘Sse ‘SseIA] SLOG tr eteeteeneeenne Kuedwioy 21309; uequngng W799] "SSB “sseyy 9966 >" Auedwio) o14y902/'q 2 JaMog alYysysag usJayjnog 314}99]"4 “Sse “Sse OOOOT retentions Auedwo5 Wydayq Aouingd sexy “uu0”d “uu0d 00°00T SSUPESD OF eUSERPOne ees VET iop ibs bheebeedbeun Auedwios sexy yonbag UL ssauisng SuonD4s9dQ) §uonwzunSi¢C) j042u0;) fo aanjon fo ang fo amg Suyoy, fo % The above tabulation of subsidiaries does not inelude Lynn Gas and Electrie Company (‘‘Lynn’’), a Massachu- setts corporation which is engaged in the electric and gas business in that State. NEES has, subsequent to Decem- ber 31, 1956, acquired approximately 94% of the voting securities of Lynn pursuant to an order of this Commission issued April 22, 1957 (Holding Company Act Release No. 13456). (b) As indicated above, New England Power Com- pany (‘‘Nepco’’) is an electric utility company and also a holding company by virtue of its ownership of 30% of the voting securities of Yankee Atomic Electrie Company (‘‘Yankee’’), which was organized in 1954 for the purpose of constructing and operating an atomic nuclear power plant of approximately 134,000 Kw capacity. The plant is to be located in western Massachusetts, is scheduled for completion in 1960 and the output of the plant will be sold to 12 New England utility companies which are stock- holders of Yankee, Nepco’s acquisition of shares of Yan- kee’s stock was effected pursuant to an order of this Com- mission dated December 18, 1956 (Holding Company Act Release No. 13339). Concurrently therewith Nepco’s ap- plication for an exemption as a holding company was granted but Nepco as a subsidiary of NEES and Yankee as a subsidiary of Nepeo remain subject to various provi- sions of the Act as subsidiaries of a registered holding company. 4. (a) The consolidated gross operating revenues of the NEES system for the twelve months ended December 31, 1956 (excluding Lynn) amounted to $142,385,041, in- cluding $125,294,786 from the sale of electric energy, and $16,521,875 from the sale of gas. Other revenues, consisting principally of rentals, aggregated $568,380, (b) As at December 31, 1956, the system’s property account, excluding the properties of Lynn, was as follows: | ] | j ' | ) ' _ ( Property, plant and equipment including intangibles: (a) Electric plant $475,914,408 Gas plant 44,320,843 Construction work in progress 52,411,921 Other 1,195,096 Total $573,842,268 Less reserves for depreciation 102,296,664 Net property, plant and equipment, including intangibles $471,545,604 (a) $457,788,400 of the gross property account is stated at original cost. I] Do. (a) The electric utility operations in the NEES system (including those of Lynn and reflecting the Essex merger) are conducted by 14 electric utility subsidiaries, two of which are also engaged in gas utility operations. These subsidiaries render retail electric service in 198 municipalities of which 146 are in Massachusetts, 27 in Rhode Island, 21 in New Hampshire and 4 in Connecticut. The total area served is in excess of 4500 square miles and the total population is about 2,350,000 persons. In addition, some of the subsidiary companies sell electric energy at wholesale for resale to various non-affiliated utilities and municipalities. Many of these municipalities purchase their entire electric energy requirements, and utilities serving a large portion of Vermont purchase substantial portions of their requirements from system companies. (b) The electric energy requirements of the system companies (excluding Lynn) for 1956 were supplied largely by 12 steam-electrie and 22 hydro-electric generating sta- tions owned and operated by system companies, 76% being 8 generated by system companies and 24% being purchased at a cost of $14,057,032. The principal source of purchased power from non-affiliated companies is Boston Edison Com- pany which during 1956 delivered 746.5 million Kwh at an aggregate cost of $9,059,297. Of the total energy generated by the system companies, about 98% was produced by Nepeo, The Narragansett Electric Company and Worcester County Electrie Company. 6. The nature and locale of the electric operations of the subsidiaries in the NEES system are as follows: (a) Nepeo is an exempt holding company and an elee- trie utility company engaged in the generation, purchase, transmission and sale of electric energy in wholesale quan- tities to associate and other electric utility companies doing a retail distribution business and to large industrial cus- tomers. Nepco operates in the States of Massachusetts, New Hampshire and Vermont but has no residential or commercial customers. During 1956 Nepco generated 2,299,222,565 Kwh of which about 53.6% was produced by steam-electric stations and 46.4% by hydro-electric stations. It purchased 1,751,867,850 Kwh of which about 48.6% was obtained from associates and 51.4% from non-affiliates, principally from Boston Edison Company and Niagara Mohawk Power Corporation. Nepco’s gross plant at De- cember 31, 1956 amounted to $190,818,000 and its gross operating revenues from the sale of electric energy, for the 12 months ended December 31, 1956, amounted to $49,762,800 of which $36,172,800 was derived from sales to affiliates, $7,190,000 from sales to non-system utilities and $6,400,000 from direct sales to large industrial users. (b) Narragansett Electric Company (‘‘Narragan- sett’?) owns and operates facilities for the generation, trarsmission, distribution and sale of electric energy and the production, transmission and distribution of gas. Its business is conducted in the larger part of Rhode Island OO OD OES 9 where, in 1956, electric service was provided to 196,300 customers in 27 cities and towns, including Providence, within an area of about 870 square miles having an aggre- gate population of about 544,000 persons, Its electric en- ergy requirements are supplied almost entirely by its own generating facilities and electric energy is sold for resale to three associate companies in the NEES system and to three non-affiliated utility companies. During 1956 Narra- gansett generated 1,881,215,278 Kwh and sold 686,887,630 to associate companies in the NEES system and 69,223,675 to non-affiliated companies. At December 31, 1956 Narra- gansett’s gross electric utility plant amounted to $138,- 653,556 and for the calendar year ended that date its gross operating revenues from electric sales amounted to $34,- 633,174. (c) Worcester County Electric Company (‘*Worces- ter’’) owns and operates facilities for the generation, transmission and distribution of electric energy to about 200,000 customers in 77 cities and towns located in central Massachusetts, covering an area of about 1900 square miles and having a population of about 544,000 persons. During 1956 Worcester generated about 22% of its electric energy requirements and purchased about 77% from Nepco and a minor amount from another associate (Lowell) and non- affiliates. Its gross operating revenues in the 12 months ending December 31, 1956 amounted to $31,441,512 and at that date the company had gross electric utility plant of $78,285,869. (d) Suburban Electric Company (‘‘Suburban’’) owns and operates facilities for the distribution of electric en- ergy to about 79,300 customers in six suburban cities and towns north of Boston within an area of 29 square miles with an aggregate population of about 257,000 persons, In 1956 Suburban purchased substantially all of its electric requirements from Nepeo and sold comparatively minor 10 amounts of electricity to Boston Edison Company, a non- affiliate. For the twelve months ended December 31, 1956 Suburban had gross operating revenues of $10,661,493 and at that date its gross electric utility plant amounted to $21,387,610, (e) Essex County Electrie Company (‘‘Essex’’) will be the survivor by merger of five electric utility companies. Taken together these five companies, in 1956, owned and operated facilities for the generation, transmission, dis- tribution and sale of electric energy. In 1956 they provided electric service to 161,600 customers in 26 cities and towns in northeastern Massachusetts, within an area of 460 square miles, having an aggregate population of about 464,000 persons. The five constituent companies have their own generating plants and, during 1956, produced 75,473,813 Kwh. With the excention of Amesbury, the entire net out- put of electric energy of these companies was sold to Nepeo and substantially all their individual requirements were purchased from Nepco. The energy generated by Ames- bury is used in its own operating area and additional requirements are purchased from one of the constituent companies (Haverhill). Amesbury also has an agreement with Nepco for standby and emergency service over a tie line with a non-affiliated company, i.e., Public Service Com- pany of New Hampshire. During 1956 the five companies had combined gross operating revenues of $27,400,000, Their combined gross fixed property, at December 31, 1956, amounted to $60,198,060, (f) Attleboro Electric Company (‘‘Attleboro’’) owns and operates facilities for the distribution of electric energy 1 Essex County Electric Company, Amesbury Electric Light Com- pany, Haverhill Electric Company, Lawrence Electric Company and The Lowell Electric Light Corporation. Upon consummation of the merger, it is expected that Essex will change its name to Merrimack- Essex Electric Company. 11 in Attleboro, Massachusetts and Vicinity. During 1956 the company purchased approximately 97% of its energy re- quirements from Nepeo, less than 3% from Narragansett, and a minor amount from non-affiliates. During the calen- dar year 1956, Attleboro served an average of 14,689 customers with electricity and derived gross operating revenues of $2,552,416 from such service, The company’s gross electric utility plant at December 31, 1956 amounted to $4,792,263, (¢) Granite State Electric Company (**Granite’’) owns and operates facilities for the production, transmis- sion and distribution of electric energy in western New Hampshire. During 1956, it produced approximately 13.1% of its energy requirements, and purchased 20.2% of its energy from Lawrence and 66.7% from Nepeo. Granite served an average of 12,062 customers during the year, Its gross operating revenues for the twelve months ended December 31, 1956 amounted to $1,611,834 and gross electrie utility plant at that date totaled $4,459,996. (h) Lynn Gas and Electric Company is a gas and electrie utility providing services in the northeastern por- tion of Massachusetts. It also sells electric and gas appli- ances. In 1956 electrie service at retail was provided to about 47,000 customers in four communities. Lynn also supplies at wholesale about 99% of the electricity require- ments of the town of Marblehead. During 1956 Lynn generated approximately 86% of its electric energy require- ments, the balance being purchased from Nepco. The area served with electricity lies between the areas served by two associate electric utility companies in the NEES sys- tem. The electric property of Lynn at December 31, 1956 amounted to $19,303,619 and its total electric operating revenues for the twelve months ended December 31, 1956 amounted to $6,309,564. (i) The Mystie Power Company (‘Mystic Power’’) 12 owns and operates facilities for the transmission and dis- tribution of electric energy to about 7,200 customers in Stonington and Groton, Connecticut. The company pur- chases all of its energy requirements from Narragansett. Gross electric utility plant at December 31, 1956 amounted to $1,889,296 and gross operating revenues for the twelve months then ended aggregated $1,057,059. (j) Northampton Electric Lighting Company (‘‘North- ampton’’) owns and operates facilities for the transmission and distribution of electric energy in Northampton, Massa- chusetts and vicinity. The company purchases substantially all of its energy requirements from Nepeo. During the calendar year 1956, the company provided electric service to an average of 9,283 customers and derived gross operat- ing revenues of $1,520,944. As at December 31, 1956, North- ampton’s gross electric utility plant amounted to $2,312,741, (k) Northern Berkshire Electric Company (‘‘ Northern Berkshire’’) owns and operates facilities for the trans- mission and distribution of electric energy in Adams and North Adams, Massachusetts and vicinity. During 1956 the company purchased over 99% of its energy require- ments from Nepco, served an average of 16,126 customers and derived gross operating revenues of $2,602,381. As at December 31, 1956, the company’s gross electric utility plant amounted to $4,427,617. (1) Quiney Electric Company (‘‘Quiney’’) owns and operated facilities for the distribution of electric energy in Quincey, Massachusetts. During 1956, the company pur- chased its entire energy requirements from Boston Edison Company, a non-affiliate and, in turn, provided Weymouth Light and Power Company, an associate, with substantially all of its energy requirements. During 1956 Quincy served an average of 28,317 customers and derived gross operating revenues of $5,737,262. As at December 31, 1956, Quincy’s gross electric utility plant amounted to $6,374,791. * ve es wears is “3 7 b Le = wot" - 13 (m) Southern Berkshire Power & Electrie Company (‘Southern Berkshire’’) owns and operates facilities for the production, transmission and distribution of electric energy in southwestern Massachusetts. During the year 1956, the company served an average of 7,775 customers and derived $1,184,461 in gross operating revenues. The company produced less than 10% of its energy require- ments and purchased substantially all of the balance from Nepeo. As at December 31, 1956, Southern Berkshire had gross electric utility plant amounting to $3,386,490. (n) Weymouth Light and Power Company (‘‘Wey- mouth’’) owns ‘and operates facilities for the production, transmission and distribution of electric energy in Hing- ham, Randolph and Weymouth, Massachusetts. The com- pany purchases substantially all of its energy requirements from Quiney. During the calendar year 1956, the company served an average of 19,988 customers, and derived gross operating revenues of $3,158,735. Its gross electric utility plant at December 31, 1956 amounted to $6,565,775, III 7. (a) The gas business of the NEES system is con- ducted by eight gas utility subsidiaries and two combination gas and electric utility subsidiaries (Lynn and Narragan- sett). As of December 31, 1956 the gas plant of these ten subsidiaries amounted to $52,462,139 and the consolidated gross operating revenues from the sale of gas, for the twelve months period ending December 31, 1956, amounted to $19,667,944. In general, the gas operations of these sub- sidiaries are carried on in parts of the same, or adjacent territory to that of the retail electric operations in the NEES system. In 1956 gas service was provided in 52 municipalities, of which 48 were in Massachusetts, 3 in Rhode Island, and 1 in Connecticut. The total area served with gas is in excess of 700 square miles having a total 14 population of about 1,070,000 persons. During 1956 an average of about 240,000 customers were served over ap- prox.mately 2,300 miles of gas mains. (b) Natural gas is distributed by the gas subsidiaries (including Lynn) with manufactured gas used for peak shaving and standby purposes. The natural gas is pur- chased from two non-affiliated natural gas pipe line com- panies, i.e., Tennessee Gas Transmission Company (‘‘Ten- nessee’’) and Algonquin Gas Transmission Company (‘‘Algonquin’’). Orders of the Federal Power Commission authorize daily deliveries of natural gas up to 75,695 Mef by Tennessee and up to 4,450 Mef by Algonquin. The manufactured gas facilities of the subsidiaries of NEES, available for peak shaving and standby purposes have a total rated capacity of 50,800 Mcf per day. Storage holder capacity totaled 23,977 Mef. (c) During 1952 NEES established an independent gas division to provide the Massachusetts gas subsidiaries with separate management and sales personnel. Earnings of these properties in 1956 contributed $1,614,516 to consoli- dated net income as compared with $255,504 in 1951. Sales of appliances also increased with total appliance sales by this division, in 1956, aggregating $2,167,000 including about 6,000 heating installations. This division also has installed more than 10,700 automatic water heaters under a rental program started in January 1955. 8. A summary description of the electric business of the two combination gas and electric utility companies, i.e., Narragansett and Lynn has been set forth in subparagraphs (b) afd (h) of paragraph 6 above. The gas business of these two subsidiaries and the other eight gas utility com- panies are briefly described as follows: (a) Lynn owns and operates facilities for the pro- duction, transmission and distribution of gas. It purchases natural gas from Tennessee and distributes such gas at 15 retail to about 40,000 custome:s in communities supplied by Lynn with electric service jn northeastern Massachu- setts and, in addition, in Lynnield, Marblehead and small areas of Peabody and Revere. Gas appliances are also sold by Lynn. Lynn’s gas propertie; consist of a manufactured gas plant and two storage lolders to supplement the natural gas supply and 357 miles of gas mains. At De- cember 31, 1956 its gas properies amounted to $8,141,296 and gross operating revenues for the twelve months ended December 31, 1956 from the séle of gas amounted to $3,- 159,628. (b) Narragansett owns and operates facilities for the production, transmission and distribution of gas in Warren, Bristol and Westerly, Rhode (sland to about 6,700 cus- tomers. It purchases more then 99% of its gas require- ments from Algonquin. In addition to the gas sold to gen- eral customers, Narragansett has a contractual arrange- ment to supply standby service to its associate gas utility The Pequot Gas Company. At December 31, 1956 Narra- gansett’s gas properties amounted to $1,975,989 and its gross operating revenues derived from the sale of gas during the calendar year 1956 amounted to $446,553. (ec) Central Massachusetts Gas Company (‘Central Massachusetts’’) owns and overates facilities for the transmission and distribution of natural gas to about 9,500 customers in 10 communities anc surrounding area in south central Massachusetts. The conpany purchases all of its gas requirements from Tennessee. As at December 31, 1956 its gross gas utility plaat amounted to $2,104,640 and gross operating revenues for the twelve months then ended aggregated $794,961. (d) Lawrence Gas Company (‘‘Lawrence’’) owns and operates facilities for the preduction, transmission and distribution of gas in Lawrence, Massachusetts and three nearby communities in the nortieastern part of the State. 16 The company serves approximately 33,000 customers. Dur- ing the year 1956, Lawrence produced less than 1% of its gas requirements and purchased the remainder from Ten- nessee. The company’s plant account totalled $5,238,030 at December 31, 1956 and operating revenues aggregated $2,480,960 for the twelve months ended that date. (e) Mystic Valley Gas Company (‘‘Mystie Valley’’) owns and operates facilities for the production, transmis- sion and distribution of gas to 16 communities in eastern Massachusetts, including Arlington, Everett, Malden and Medford. During the twelve months ended December 31, 1956, the company served approximately 98,000 customers and derived $8,136,035 in gross operating revenues from such operations. Mystic Valley produced less than 1% of its gas requirements, purchased a minor amount of gas from a nearby non-affiliate, and obtained the balance of its requirements from Tennessee, The company’s property account amounted to $21,967,385 at December 31, 1956. (f) Northampton Gas Light Company (‘‘Northamp- ton’’) owns and operates facilities for the production, transmission and distribution of gas to approximately 8,000 customers in Northampton and Easthampton, Massachu- setts. Gross operating revenues during the year 1956 amounted to $675,322. Northampton produced less than 1% of its gas requirements and purchased the balance from Tennessee. The company’s plant account amounted to $1,749,615 at December 31, 1956. (g) North Shore Gas Company (‘‘North Shore’’) owns and operates facilities for the production, transmis- sion and distribution of gas to approximately 33,000 cus- tomers in six communities located in northeastern Massa- chusetts, including Beverly, Gloucester and Salem. The company produces less than 1% of its gas requirements and purchases the remainder from Tennessee. Gross operating revenues for the twelve months ended December 31, 1956 17 aggregated $2,900,012 and gas utility plant at that date totalled $9,023,246. (h) Norwood Gas Company (‘‘Norwood’’) owns and operates facilities for the distribution of natural gas to about 4,200 customers in Norwood, Massachusetts. The company purchases its entire supply of natural gas from Algonquin. Its gross operating revenues for the twelve months ended December 31, 1956 amounted to $381,993 and gas utility plant at that date aggregated $953,213. (i) The Pequot Gas Company (‘‘Pequot’’) owns and operates facilities for the transmission and distribution of gas to approximately 1,200 customers in Stonington, Con- necticut. Pequot purchased its entire supply of natural gas from Algonquin during the calendar year 1956 and paid Narragansett a charge for the transportation of gas and a _demand charge for manufactured gas, although no manu- factured gas was received into the system during the year. The company’s gross operating revenues for the twelve months ended December 31, 1956 aggregated $101,860 and its total utility plant at that date amounted to $204,383. (j) Wachusett Gas Company (‘‘Wachusett’’) owns and operates facilities for the production, transmission and distribution of gas in north central Massachusetts. During 1956, the company produced less than 1% of its gas requirements and purchased the balance from Ten- nessee. Gas was sold to approximately 8,100 customers from which the company derived revenues of $682,105. Wachusett’s total utility plant account at December 31, 1956 amounted to $1,551,146. IV 9. The Division avers that the foregoing allegations, and the facts otherwise disclosed in the course of. its examination of the NEES system, indicate or tend to in- dicate that: 18 (a) The holding company system of NEES is not con- fined in its operations to those of a single integrated public- utility system, and to such other businesses as are reason- ably incidental, or economically necessary or appropriate to the operations of such integrated public-utility system; (b) The various gas utility assets and the electric utility assets owned or controlled, directly or indirectly, by NEES and other respondents cannot continue to be controlled by NEES under the standards of Section 11(b) (1), particularly clauses (A), (B) and (C) thereof; and (c) The various businesses of some of the subsidiaries of NEES, other than the business of a public-utility com- pany as such, may not be retainable as reasonably in- cidental or economically necessary or appropriate to the operations of either the electric or gas public-utility sys- tems. V It appearing to the Commission, on the basis of the above allegations of the Division of Corporate Regulation, that a proceeding should be instituted under Section 11(b) (1) of the Act with respect to the New England Electric Sys- tem holding company system: Ir Is Orperep that proceedings be and the same hereby are instituted under Section 11(b)(1) of the Act with re- spect to the New England Electric System and each of its subsidiary companies hereinbefore named, all of which are made respondents herein. Ir Is FurtHer Orperep, pursuant to the applicable pro- visions of the Act, that a hearing be held at the offices of the Securities and Exchange Commission, 425 Second Street, N. W., Washington 25, D. C. on November 12, 1957, at 10:30 A. M. On such day the hearing room clerk in Room 193 will advise as to the room where such hearing will be held. At such time respondents and any other 19 interested persons will be heard with respect to the matters and questions hereinafter set forth. Ir Is FurrHer Orperep that such respondents shall file with the Secretary of the Commission on or before Sep- tember 30, 1957, their joint or several answers in the form prescribed by Rule U-25 under the Act admitting, denying, or otherwise explaining their respective positions as to each of the allegations of Parts I, I, III and IV hereof, The answer should state which of the properties and facili- ties of the New England Electric System holding company system constitutes the retainable ‘single integrated public utility system’’. Any such answer may include a statement of the claim of the respondents, or any of them, as to ( a) the action, if any, which is necessary and should be required to be taken by any of the respondents (including the di- vestment of control, securities or other assets), to limit the operations of the system to a single integrated public- utility system; (b) the extent to which the system should be permitted to continue to control, in addition to its claimed ‘‘single integrated public utility system’’, one or more additional integrated public-utility systems as may meet the requirements of Clauses (A), (B) and (C) of Section 11(b)(1) of the Act; and (c) the extent to which any of said respondents should be permitted to own, operate or control any business (other than the business of a publiec- utility company as such) as reasonably incidental or eco- nomically necessary or appropriate to the operations of such integrated public-utility system or systems. Any such answer may, if such respondents so desire, state that they propose and are prepared to take such action as will cause them to comply with Section 11(b)(1) within the meaning of the Act, together with a description of such action and the time within which they propose to take action. The Division of Corporate Regulation having advised the Commission that, upon the basis of its preliminary 20 examination of the New England Electrie System holding company system, the following matters and questions are presented for consideration, without prejudice to its speci- fying additional matters and questions upon further exam- ination: (a) Whether the electric utility assets of the New England Electric System holding company system consti- tute a single integrated electric utility system or more than one such system; (b): Whether the gas utility companies of the New England Electric System holding company system consti- tute a single integrated gas utility system or more than one such system; (c) The nature, extent and location of the ‘‘single integrated public-utility system’’ of the New England Electric System holding company system; (d) Whether, in addition to the New England Electric System holding company system’s ‘‘single integrated pub- lic-utility system’’, any of its additional electric or gas utility systems may be retained under common control under the provisions of Section 11(b)(1) of the Act, speci- fically Clauses (A), (B) and (C) thereof; (e) Whether any of the non-utility businesses con- ducted by the New England Electric System holding com- pany system are reasonably incidental, or economically necessary or appropriate to the operations of the inte- grated public-utility system or systems retainable under common control; (f) What action is necessary to be taken by the New England Electric System holding company system to limit the operations of the system to those of a single integrated public-utility system, together with such additional utility cystems, and such other businesses, if any, as are retainable under the standards of Section 11(b)(1) of the Act; 21 Ir Is FurrHer Orverep that at the aforesaid hearing, attention be given to the foregoing matters and questions. Ir Is Furruer Orpverep that William W. Swift or any other hearing officer or hearing officers of the Commission designated by it for that purpose shall preside at the hear- ing in such matter. The hearing officer so designated to preside at any such hearing is hereby authorized to exercise all powers granted to the Commission under Section 18(¢) of the Act and to a hearing officer under the Commission’s Rules of Practice. Ir Is FurrHer Orperep that jurisdiction be, and hereby is, reserved to separate, either in whole or in part, or for disposition in whole or in part, any of the issues or ques- tions which may arise in these proceedings, or to consolidate these proceedings, or any portion thereof, with any pro- ceedings which may be instituted subsequently under other provisions of said Act with respect to New England Electric System and its subsidiaries, and to take such other action as May appear conducive to an orderly, prompt and eco- nomic disposition of the matters involved. Ir Is Furruer Orverep that any person desiring to be heard in connection with these proceedings or proposing to intervene herein shall file with the Seeretary of the Com- mission, not later than five days prior to the date herein- before fixed as the date for said hearing, his request or application therefore, as prescribed by Rule XVII of the Rules of Practice of the Commission. Such request shall set forth the nature of the applicant’s interest in the pro- ceedings, his reasons for requesting to be heard or to inter- vene, which of the allegations and issues, as hereinbefore set forth, applicant proposes to controvert, together with a statement of any additional issues which the applicant proposes to raise with respect to the proceedings herein instituted. Ir Is Furruer Oxperep that the Seeretary of the Com- 22 mission shall serve notice of the hearing aforesaid by mail- ing a copy of this Notice of and Order for Hearing by registered mail not less than 30 days prior to the date fixed therefor to each of the respondent companies, the Federal Power Commission; the Connecticut Public Utili- ties Commission; the Department of Public Utilities of Massachusetts; the Public Utilities Commission of New Hampshire; the Public Utility Administrator; Department of Business Regulation of the State of Rhode Island; and the Public Service Commission of Vermont; and that notice of said hearing is hereby given to the aforesaid and to all states, municipalities, and political subdivisions of states within which are located any of the physical assets of the respondent companies, to all state commissions, state security commissions, and all agencies, authorities or in- strumentalities of any state, municipality, or other political subdivision having jurisdiction over any of the respondent companies or any of the business affairs or operations of any of them, and to all other interested persons, such notice to be given by a general release of the Commission, distributed to the press and mailed to the mailing list for releases issued under the Act; and by publication of this Notice and Order in the Federal Register not later than 30 days prior to the date hereinbefore fixed as the date of hearing. By the Commission. (s) Orva, L. DuBots Secretary JOINT ANSWER OF ALL RESPONDENTS Pursuant to Part V of the Commission’s Notice of and Order for Hearing dated August 5, 1957 in the above en- titled proceedings, the Respondents file this joint Answer. The abbreviations contained in said Notice and Order are adopted in this Answer. 23 I In certain comparatively minor respects the allegations in Parts I, II and III of said Notice and Order are not accurate, Attached as a part of this Answer is a schedule marked ‘‘A’’ correcting such inaccuracies. As so corrected the Respondents admit said allegations. II. The Respondents deny the allegations of Part IV of said Notice and Order, III. Further answering, the Respondents aver that: 1. The properties and facilities of such of the Respond- ents as are electric utility companies (including the electric assets of such of them as are also gas utility companies), together with Nepco’s interest in Yankee Aton ic Electric Company, constitute a single integrated public-atility sys- tem retainable under the Act, and the properties, facilities and businesses of New England Power Service Company either are integral parts of said system or are retainable, and the Respondents should be permitted to own and Operate them, as reasonably incidental or economically necessary or appropriate to the operations of said system; and Respondents request that an interim order of the Commission be entered to such effect as soon as may be feasible. 2. In the event that any of the properties and facilities referred to in paragraph 1 above are not retainable as part of a single integrated public-utility system they are retainable, and the Respondents should be permitted to continue to control them, as one or more additional inte- grated public-utility systems which meet the requirements of clauses (A), (B) and (C) of Section 11(b)(1) of the Act. 3. The properties and facilities of such of the Respond- 24 ents as are gas utility companies (including the gas assets of such of them as are also electric utility companies) are either retainable as parts of the single integrated public- utility system referred to in paragraph 1 above, or are retainable, and the Respondents should be permitted to continue to control them, as one or more additional inte- grated public utility systems which meet the requirements of clauses (A), (B) and (C) of Section 11(b)(1) of the Act. 4. To the extent that the Respondents or any of them are engaged in any business other than the business of a public-utility company as such, such business is reasonably incidental or economically necessary or appropriate to the operations of the retainable integrated public-utility sys- tem or systems, and the Respondents should be permitted to continue to own, operate and control it as such. New ENGLAND ELECTRIC SysTEM . By (s) Irwin L. Moore, Pres. ATTLEBORO ELECTRIC COMPANY By (s) Harry Hanson, Treas. CENTRAL MASSACHUSETTS GAS COMPANY By (s) Apert E. Westwoopo, Treas. Connecticut River DEVELOP- MENT COMPANY By (s) Grorce R. ALLEN, Pres. GRANITE STATE ELECTRIC COMPANY By (s) Josern X. Corsett, Secretary LAWRENCE Gas COMPANY By (s) Harry Hanson, Treas. Lynn Gas AND ELECTRIC CoMPANY By (s) H. E. Aver, Vice-Pres. MERRIMACK-EssEX ELECTRIC COMPANY By (s) Harry Hanson, Treas. Tue Mystic Power COMPANY By (s) Ratren E. Nock, Vice-Pres. Mystic VALLEY GAs COMPANY By (s) Harry Hanson, Treas. THE NARRAGANSETT COMPANY By (s) T. Dexter CLARKE Counsel THE NARRAGANSETT ELECTRIC LIGHTING COMPANY By (s) T. Dexter CLARKE Counsel THE NARRAGANSETT ELECTRIC COMPANY By (s) Raupn E. Nock, Vice-Pres. New ENGLAND POWER COMPANY By (s) Irwin L. Moore, Pres. YANKEE ATOMIC ELECTRIC COMPANY By (s) WILLIAM WEBSTER, Pres. New ENGLAND Power SERVICE COMPANY By (s) Roperr F. Krausr, Pres. NORTHAMPTON ELECTRIC LIGHTING COMPANY By (s) ALBERT E. Westwoop, Treas. NORTHAMPTON Gas LIGHT COMPANY By (s) ALBERT E, Westwoop, Treas. NORTHERN BERKSHIRE ELectric Company By (s) ALBerr E. Westwoop, Treas. NortH SHoreE Gas Company By (s) Harry Hanson, Treas, Norwoop Gas Company By (s) ALBer’ E. Westwoon, Treas. THE Prquor Gas Company By (s) Raupn E. Nock, Vice Pres. Quincy Evecrric Company By (s) Harry Hanson, Treas. SOUTHERN BERKSHIRE POWER & ELectric Company By (s) ALBERT E. WEstwoop, Treas. SUBURBAN ELrectrric CoMpANY By (s) Harry Hanson, Treas. Wacuusetr Gas Company By (s) Atsert E, Westwoon, Treas. WeyMouTtH LiGut AND Power COMPANY By (s) ALsert E, Westwoon, Treas. Worcester County Evecrric Co, By (s) Harry Hanson, Treas. YreLttow Cap Company By (s) T. Dexter CLarkr, Counsel 2% —_—___ Scuepute A CORRECTION OF NOTICE AND ORDER (References are to paragraphs of Notice and Order) I, Paragraph 3(a): The footnote in the bottom of the table should be changed to read as follows: ‘These companies were merged into Merrimack-Essex Electrie Company, a company formerly named Essex County Electrie Company, pursuant to an order issued by this Commission on May 23, 1957 (Holding Company Act Release No. 13480). As of August 31, 1957, 80.59% of that company’s voting securities were owned by NEES.”’ Paragraph 3(b): At the end of line 9 add ‘‘an order of this Commission dated November 25, 1955 (Holding Com- pany Act Release No, 13048) and’’, At the beginning of the last sentence for ‘“‘Concurrently therewith,’’ substitute “Concurrently with the November 25, 1955 order,’’, 26 IL. Paragraph 6(b): In the second from the last sentence the figure ‘‘1,881,215,278’’ should read ‘‘1,886,292,578’’. Paragraph 6(c): At the end of the first sentence the figure **544,000’’ should read ‘‘602,600’’. Paragraph 6(e): At the beginning of the ninth line the figure ‘75,473,813’ should read ‘‘75,938,565’’. In the last line after th ord ‘‘property’’ the words ‘‘in service’’ should be adaca. Paragraph 6(i): At the end of the first sentence after ‘*Connecticut’’ there should be added ‘‘and vicinity’’, Paragraph 6(n): At the end of the first sentence after ‘*Massachusetts’’ there should be added ‘‘and vicinity’’, With respect to paragraphs 6(a), 6(b), 6(c), 6(d), 6(f), 6(g), 6(i), 6(j), 6(k), 6(1), 6(m) and 6(n), the gross plant figures set forth in the Notice and Order are exclusive of Other Physical Property. II. Paragraph 7(a): In the second sentence, the figure *¢$52,462,139’’ should read ‘‘$52,928,165’’. Paragraph 8(a): In the last line, the figure ‘‘$3,159,628”’ should read ‘‘$3,146,069’’. Paragraph 8(b): In the second sentence for the words ‘more than 99%’’, substitute ‘‘all’’. MOTION TO DISMISS The respondents by their attorneys move to dismiss so much of the instant proceeding as relates to any of their electric properties or operations on the ground that the record in these proceedings clearly establishes that all such properties and operations constitute a single integrated LEME LE LY OT ETL TID MT RPL I IG OE EOE NT TER ae Dee Sree 27 pubiic-utility system as defined in the Public Utility Hold- ing Company Act of 1935. (s) Joun R. Quaries (s) James VorENBERG Rorrs, Gray, Best, Cootipce & Ruce Attorneys for the Respondents December 31, 1957 FINDINGS AND OPINION InreGRaTIoN or Hotpina Company System Definition of Integrated Electrie Utility System Where electric utility assets operated by a registered holding company system are either physically inter- connected or capable of physical interconnection so that, under normal conditions, they may be economi- cally operated as a single interconnected and coordi- nated system and where, in other respects, such assets satisfy the definition of an integrated public-utility system contained in Section 2(a)(29)(A) of the Pub- lie Utility Holding Company Act of 1935, held, such electric utility assets constitute a single integrated public utility system. APPEARANCES: Joun R. Quaries and James VorEnBeERG, for New England Electric System and its subsidiary compa- nies, Respondents. Rosert C. Barnarp, for Abacus Fund. Wituiam R. Nowy, for the Division of Corporate Regulation. This proceeding concerns the determination of the extent to which the electric, gas, and other business operations of the holding company system of New England Electric Sys- tem (‘‘NEES’’), a registered holding company, satisfy the standards of Section 11(b)(1) of the Public Utility Holding Ps ~ . ahs y'2 Se lL i ha Por NEO OES Bee 28 Company Act of 1935 (‘‘Act’’). After appropriate notice,! a public hearing was held. By agreement of counsel, the hearing was initially devoted exclusively to the issue as to whether or not the electrie operations of the NEES system constitute those of a ‘‘single integrated public-utility sys- tem’’ as permitted by Section 11(b) (1). Following the completion of the testimony in respect of that issue, NEES filed a formal motion and supporting memorandum seeking dismissal of so much of the proceed- ing as relates to the system’s electric operations on the ground that the record establishes that all such properties and operations constitute a single integrated public-utility system. Although there is no opposition to NEES’ motion, we have examined the rather extensive record developed as to this issue. On the basis of the following findings and conclusions, we have determined to grant the motion. Pertinent Sratutory Provisions Section 11(b) of the Act provides in pertinent part: ‘‘Tt shall be the duty of the Commission, as soon as practicable after January 1, 1938: ‘*(1) To require by order, after notice and opportunity for hearing, that each registered hold- ing company, and each subsidiary company there- of, shall take such action as the Commission shall find necessary to limit the operations of the holding-company system of which such company is a part to a single integrated public utility system...’’ An ‘‘integrated public-utility system’’ is defined in Sec- tion 2(a)(29) to mean 1 New England Electric System, et al., Holding Company Act Release No. 13525 (August 5, 1957). 29 ‘*(A) As applied to electric utility companies, a system consisting of one or more units of generating plants and/or transmission lines and/or distribution facilities, whose utility assets, whether owned by one or more electric utility companies, are physically inter- connected or capable of physical interconnection and which under normal conditions may be economically operated as a single interconnected and coordinated system confined in its operations to a single area or region, in one or more States, not so large as to impair (considering the state of the art and the area or region affected) the advantages of localized manage- ment, efficient operation, and the effec lation.’’ tiveness of regu- Tue NEES Hoxpine Company Sysrem NEES is a voluntary association created in 1926 in Massachusetts by Agreement and Declaration of Trust and is solely a holding company registered as such under Sec- tion 5 of the Act. It maintains its principal offices in the City of Boston, Massachusetts. It has 28 subsidiary com- panies, of which 12 are engaged exclusively in the electric business, 8 exclusively in the gas business, 2 in a combined electric and gas business, and 4 are inactive. The names of the electric utility the States in which the business are as follows: subsidiaries of NEES, y operate and the nature of their Attleboro Electric Company Mass. Granite State Electric Company N.H. Lynn Gas and Electric Company Mass. Electric TD Electric GTD Electric GTD, Gas PTD Merrimack-Essex Electric Company Mass. Electric GTD Mystic Power Company, The Conn. Electric TD Narragansett Electric Company, The R.I. Electric GTD, Gas PTD RRO oe Silt 30 New England Power Company . Os Vt., N.H. Electric GT Northampton Electric Lighting Company Mass. Electric TD Northern Berkshire Electric Company Mass. Electric TD Quincy Electric Company ; isis: SES Electric TD Southern Berkshire Power & Electric Company Mass. Electric TD Suburban Electric Company _ Mass. Electric TD Weymouth Light and Power Company Mass. Electric TD Worcester County Electric Company Mass. Electric GTD G—Generation T—Transmission D—Distribution P—Production In addition, Yankee Atomic Electric Company (‘* Yan- kee’’), 30% of the common stock of which is held by New England Power Company (‘‘NEPCO’’), was organized in 1954 for the purpose of constructing and operating an atomic nuclear power plant of approximately 134,000 Kw capacity in Western Massachusetts. The plant is scheduled for completion in 1960 and its output is to be sold to 12 New England utility companies. The acquisition by NEPCO of its interest in Yankee was effected pursuant to an order of this Commission in connection with which we found that the acquisition would, inter alia, tend towards the development of the integrated public utility system of NEES. Another subsidiary of NEES, New England Power Service Company (‘‘NEPSCO’’), is a service company which provides technical services to the system’s public- utility companies. The electric utility subsidiaries of NEES conduct a retail electric business in substantial portions of Rhode Island and Massachusetts and in relatively small areas of Connecticut and New Hampshire. Altogether, these com- panies provide retail electric service to 810,000 customers in an area of about 4,500 square miles with a total popula- tion of about 2,300,000. In addition, they sell electricity 2 Yankee Atomic Electric Company et al., 36 S.E.C. 552, 564-66 (1955). 31 for resale to various non-affiliated utilities and municipali- ties in Vermont, New Hampshire, Massachusetts and in a small area in Rhode Island. At December 31, 1956, the total electric plant investment of NEES’ electric utility subsidiaries was $547,637,969. The Kwh sales of such subsidiaries for the year 1956 were 5,434,013,000 and their electric operating revenues were $131,615,000. The system peak load in 1956 was almost 1,200,000 Kw. Attached hereto as Appendix A is a map of the NEES electric system. Description or ELECTRIC OPERATIONS oF THE NEES System For the year 1956, 76% of the electric energy require- ments of the above electric utility companies ( excluding Lynn Gas and Electric Company)* was generated by sys- tem companies and the balance was purchased from non- affiliates. The system owns and operates 12 steam-electric and 22 hydro-electric generating stations. The important hydro-electric stations are located on the upper Connecticut River in New Hampshire, and on the Deerfield River in northwestern Massachusetts and adjoining area in southern Vermont. The system’s hydro-electric generating stations have a capability of 593,000 Kw and are linked to its extensive transmission system by high voltage lines almost all of which are owned by NEPCO. Also connected to this transmission system are the fuel-burning generating sta- 3 Pursuant to an exchange offer authorized by us, NEES acquired 93.76% of the common stock of Lynn Gas and Electric Company in 1957. In permitting the exchange to be made we found that the acquisition of the common stock of Lynn Gas and Electric Company would tend toward the economical and efficient development of the 32 tions having an aggregate capability of 767,930 Kw, the more important plants being located at Providence, Rhode Island, and in Worcester and Salem, Massachusetts. The system’s transmission facilities are also connected with those of several non-affiliates, the principal one being Bos- ton Edison Company which serves the Boston metropolitan area and with which the system has power interchange arrangements. In general, the stexm stations in the NEES system carry the system’s base load; water is stored in reservoirs during low load periods so as to have the hydro-electric capacity available to meet peak loads. Purchased power is also used to satisfy load requirements when economical. The system’s. electric utility assets comprising generating stations, trans- mission lines and distribution facilities are physically inter- connected with each other over system owned and operated facilities except as discussed below. The service area of Northampton Electric Lighting Com- pany (‘‘Northampton’’), which operates in the west central portion of Massachusetts, is separated from the service area of its closest associate company, Worcester County Electric Company, by the service area of Western Massa- chusetts Electric Company (‘‘Western Massachusetts’’), a non-affiliate. At the nearest points, the service areas of the two associate companies are 5 miles apart. The peak load of Northampton in 1956 was some 14,000 Kw. The service area of Southern Berkshire Power & Electric Com- pany (‘Southern Berkshire’’), which operates in south- western Massachusetts, is also separated from the service area of its closest associate company, Northern Berkshire Electric Company, by the service area of Western Massa- chusetts. At the nearest points, the service areas of the two associate companies are about 7 miles apart. The peak loal of Southern Berkshire in 1956 was some 8,500 Kw. Under an agreement between NEPCO and Western LI EAE RAL NIE LOL SLI EET LE TN TI 33 Massachusetts the latter takes from NEPCO such elec- tricity as may be required to service the energy require- ments of Northampton and Southern Berkshire and in turn delivers to Northampton and Southern Berkshire their energy requirements at the points of interconnection be- tween them and Western Massachusetts,* The deliveries of energy from NEPCO to Western Massachusetts and from the latter to Northampton and Southern Berkshire are made as nearly as possible on a simultaneous basis. The payment for the energy is made directly by Northampton and Southern Berkshire to NEPCO in the same manner and at the same rate as other system companies make payments to NEPCO for purchased energy. The service areas of Quincy Electric Company (‘‘Quin- ey’’) and of Weymouth Light and Power Company (‘‘Wey- mouth’’), which companies operate in the east central portion of Massachusetts, adjoin each other, and the facili- ties of these two companies are interconnected. Quincy’s service area is approximately 8 miles from the nearest points of the service areas of two other associate compa- nies, Worcester County Electric Company and Lynn Gas and Electric Company. The properties of Quincy are adja- eent to the City of Boston and the properties of both Quincy and Weymouth lie at the southeasterly portion of a high voltage transmission loop cireling metropolitan Boston. A number of subsidiaries of NEES, along with Boston Edison Company, feed power into this loop. Approximately two-thirds of the loop is owned by NEPCO and one-third by Boston Edison Company. The power requirements of Quincy and Weymouth are supplied by Boston Edison Company pursuant to a contract which is terminable by either party on one year’s notice, The peak load for the Quincy-Weymouth area for 1956 was 68,850 Kw. *A minor portion of Southern Berkshire’s power requirements is furnished by t wo small hydro-electric stations owned and operated by it. a cai sities a _ . , 34 The Tiverton distribution area of the Narragansett Electric Company (‘‘Narragansett’’) is located in the southeastern portion of Rhode Island and its facilities are not directly connected with those of Narragansett’s trans- mission system. Tiverton’s power requirements (with a peak demand in 1956 of some 4,000 Kw) are supplied by a non-affiliate, Fall River Electric Light Company, whose facilities are, in turn, connected with those of the NEES system. In the event Fall River’s capacity to supply the Tiverton load is impaired, the NEES system is in a position to make up any deficiency in the supply. CapaBILITy or INTERCONNECTION AND CoorRDINATED OPERATION Although the facilities of the four companies described above and the Tiverton area of Narragansett are not at present directly connected with the high voltage trans- mission system of NEES, engineering studies and testi- mony regarding the feasibility and costs of making such direct interconnections were submitted by NEES. To make such interconnections would require the construction of 16 miles of 69 Kv transmission line for Northampton, 13 miles of 115 Kv and 6 miles of 23 Kv transmission lines for Southern Berkshire, 35 miles of 115 Kv and 6 miles of 23 Kv transmission lines for Quiney-Weymouth and 8 miles of 23 Kv transmission line for the Tiverton area. While the existing arrangements are merely those which, at present, make the best economic sense, the necessary interconnections would be constructed forthwith if the present arrangements with the non-affiliate companies were terminated. The record indicates that the system’s electric business is conducted on a unified basis. Construction of new gener- ation, transmission and other facilities is planned with a view to the requirements of the system as a whole as well 35 as of the constituent company or companies which may be particularly affected. Daily coordination of the power supply for the system is controlled by a central system dispatcher, located at Millbury, Massachusetts, who sche- dules and controls, principally through automatic elec- tronic equipment, the use of the important generating units in the system. He also arranges the daily purchases and sales with neighboring companies. The supplying of power for the Southern Berkshire and Northampton areas, which are not directly connected with the system’s high voltage transmission lines, is in im- portant respects coordinated with that of the system as a whole since the necessity of satisfying their daily require- ments is the responsibility of the NEES system dispatcher. As to the Quiney-Weymouth aréas, the automatie controls in the NEES system instantly detect any power deficit arising in the transmission loop surrounding the Boston area, including the power requirements of the Quiney- Weymouth areas, and under normal conditions the NEES system is in a position to rectify automatically from its generating facilities the power deficit. Similarly, in the event the supply to the Tiverton area should be impaired, the NEES system is in a position to supply the load automatically. Accordingly, we find that the electric utility assets in the NEES system are physically interconnected or capable of physical interconnection and may be economically oper- ated as a coordinated system.® Orner Statutory Stanparps The electric operations of the NEES system are con- ducted in a comparatively small and compact area in five 5 Cf. The North American Co., 11 S.E.C. 194, 241-243 (1942); Cities Service Power & Light Co., 14 S.E.C. 28, 52-55 (1943); Federal Light & Traction Co., 15 S.E.C. 675, 679-681 (1944). 36 contiguous States in New England. The distance between the most northerly point and the most southerly point in the system is approximately 200 miles; and the distance between the most westerly point and the most easterly point is approximately 150 miles. Although the record indicates that most of the principal executive and technical personnel who formulate system policy and planning and control the affairs of the system have their offices at the central headquarters in Boston, it is noted that, by reason of the comparatively compact area served, the central organization has ready access to almost any part of the system and can maintain daily contact with local needs and conditions. In this connection, the local companies employ experienced local managers to deal with local problems of operation, such as day-by-day customer relationships, supervision of local employees and public relations. The manager is a member of the local company’s Board of Directors and in most instances other local residents are also members of the Board. The electric distribution properties of the NEES system are subject to the regulatory jurisdiction of the State commissions in the four States in which the system renders retail service, namely the Connecticut Public Utilities Com- mission, the Department of Public Utilities of Massachu- setts, the Public Utilities Commission of New Hampshire, and the Public Utility Administrator, Department of Busi- ness Regulation of the State of Rhode Island. Each of these commissions has extensive regulatory jurisdiction over the operations of the respective companies located in their respective States. The retention under common control of the various electric properties does not appear to impair the effectiveness of State regulation. 37 ConcLusIons Upon consideration of the entire record, we are of the opinion that the electric utility assets owned and operated by subsidiaries in the NEES holding company system are either physically interconnected or are capable of physical interconnection so that, under normal conditions, they may be economically operated as a single interconnected and coordinated system and in other respects meet the definition of an integrated public utility system as applied to electric utility companies set forth in Section 2(a)(29)(A) of the Act. We shall, therefore, dismiss the proceeding insofar as it relates to the issue of whether the electric utility assets of the NEES holding company system constitute a single integrated public utility system, and shall reconvene the hearing at an appropriate time for the taking of evidence with respect to the other issues in the proceeding. An appropriate order will issue. By the Commission (Chairman Gapssy and Commissioners Orrick, Patterson, Hastines and Sarcenrt). (s) Orvat L. DuBots [skaL] Secretary 35 = 13688 — Appendiy ——— ] ELECTRIC MON TREC UE Fuel-Electric Plant a ee. PROPERTIES AND SERVICE AREAS VT. a OF SUBSIDIARIES OF } ¢ NEW ENGLAND ELECTRIC SYSTEK \ +4 - LEGEND -- : ae ) 5 a ydro-Electric Plant \iydro and Fuel Electric Plant ee Principal Transmission Lines ———— Transmission Lines of Others scssesesecceeees — Indicated Direct Interconnections with System Geo ee a co “a } : i Service Areas - Retail } _ \ ME. S hes SCALE OF MILES = S=_ wo % 2 bod — : = bs z SOUTHERN: ae BERR Se TE 2 MASS. Er - amt) onu DECEMBER 2), | SER INET ET CS a ee - wi hate Soa Nh 39 ORDER DISMISSING PROCEEDING IN RESPECT OF CERTAIN ISSUES The Commission having, on August 5, 1957, issued its Notice of and Order for Hearing pursuant to Section 11(b)(1) of the Publie Utility Holding Company Act of 1935 (*‘Act’’) in respect of New England Electrie System and its Subsidiary Companies, Respondents (Holding Com- pany Act Release No. 13525), to determine what action, if any, Shall be required to be taken to limit the operations of the system to a single integrated public utility system and to such additional systems and other businesses as are retainable under the provisions of Section 11(b)(1) of the Act; and A public hearing having been held after appropriate notice, at which evidence was adduced solely with respect to the issue of whether the electric utility assets of New England Electric System and its subsidiaries constitute a single integrated public utility system; and New England Electrie System having filed a motion and supporting memorandum requesting dismissal of the pro- ceeding insofar as it relates to said issue; and The Commission having considered the record on said issue; and having this day issued its Findings and Opinion herein, on the basis of such Findings and Opinion: Ir Is Orverep that the proceeding heretofore instituted by the Commission’s Notice of and Order for hearing of August 5, 1957, issued pursuant to Section 11(b)(1) of the Act, in respect of New England Electrie System and its Subsidiary Companies, Respondents, be, and hereby is, dismissed insofar as such proceeding relates to the issue of whether the electric utility assets embraced in the hold- ing company system of New England Electrie System con- stitute a single integrated public utility system. Ir Is FurtHer Orperep that, in all other respects, said proceeding is continued in full foree and effect. A further — ETL Trad SS SMM Ne Sapna mar em bet tg 40 hearing will be held herein upon the remaining issues at such time and place as may be ordered by the Commission or fixed by the hearing examiner heretofore designated. By the Commission. (s) Orvat L. DuBois [SEAL | OrvaL L. DuBois Secretary ORDER RECONVENING HEARING The Commission having, on August 5, 1957, issued its Notice of and Order for Hearing pursuant to Section 11(b)(1) of the Public Utility Holding Company Act of 1935 (**Act’’), in respect of New England Electric System (‘“*NEES’’) and its Subsidiary Companies (Holding Com- pany Act Release No. 13525), for the determination of what action, if any, should be required to be taken to limit the operations of the system to a single integrated public- utility system and to such additional systems and other businesses as are retainable under the standards of See- tion 11(b)(1) of the Act; and A public hearing having been held after appropriate notice, at which evidence was adduced solely with respect to the issue of whether the electric utility assets of NEES and its Subsidiaries constitute a single integrated public- utility system; and The Commission having, on February 20, 1958, issued its Findings and Opinion (Holding Company Act Release No. 13688) concluding, among other things, that the elee- tric utility assets owned and operated by the Subsidiaries in the NEES system met the definition of an integrated public-utility system as applied to electric utility compa- nies set forth in Section 2(a)(29)(A) of the Act; and having issued its Order wherein it dismissed the proceeding insofar as it related to the issue of whether the electric utility assets embraced in the holding company system of i a EL a i ea ld a ila i a C2 COVED ALI DAR SOP AE EL IE 41 NEES constitute a single integrated public-utility system, but in all other respects continued the proceeding in full force and effect upon the remaining issues concerning which a further hearing would be held at such time and place as might be subsequently ordered by the Commission or fixed by the hearing examiner; and It appearing to the Commission that it is appropriate and in the public interest and the interest of investors and consumers that the hearing be reconvened: Ir Is THerEerorr Orperep that the hearing in the above entitled proceeding be reconvened on May 18, 1960 at 10:00 o’clock in the forenoon of that day, at the Head- quarters Office of the Securities and Exchange Commission, 425 Second Street, N.W., Washington 25, D.C. By the Commission. (s) Orvau L. DuBois Secretary NOTICE OF APPEARANCE AND ANSWER I. The Department of Public Utilities of The Common- wealth of Massachusetts hereby enters its appearance in this proceeding, and files this written notice of appearance pursuant to Rule XVII (a) of the Rules of Practice of the Commission. Il. The position of the Department of Public Utilities of The Commonwealth of Massachusetts with respect to the matters set forth by the Securities and Exchange Commis- sion in its Notice of and Order for Hearing dated August 5, 1957 is that the economies of joint operation of gas and A EEG ION NT DIG: PY EA TIE NER ae EA ee 42 electric properties by the New England Electric System holding company system are substantial, that a separation of such joint operation would be adverse to the interests of the residents of this Commonwealth and may necessitate increased gas rates as a result of the apparent substantial additional expenses flowing from the separation of such joint operation and that, under the provisions of Section 11(b)(1) of the Public Utility Holding Company Act of 1935, specifically Clauses (A), (B) and (C) thereof, the gas utility companies of the New England Electric System holding company system may be retained under common control with the system’s integrated electric-utility system. THe CoMMONWEALTH OF MASSACHUSETTS DeparRTMENT OF Pusuic UTILITIES By: (s) Francis X. Lane Chairman Dated: May 9, 1960 hsp all alle pia ok EI ofan a SE at a nila ed Rech tote lel fanned a ates TG ae de nie ee Oe EIR *p2ae 43 STENOGRAPHIC TRANSCRIPT OF HEARING * * - [593 ] BerorEe THE SECURITIES AND ExcHANGE CoMMISSION In the Matter of : New Encianp Evectric System AND Its Sussipiary CoMPaANtIEs File No. 59-102 (Public Utility Holding Company Act of 1935) Room 292 Securities and Exchange Commission 425 2nd Street Washington, D.C. Wednesday, May 18, 1960 The above-entitled matter came on for further hearing, pursuant to recess, at 10:00 o’clock a.m. Before: James G. Ewer, Hearing Examiner Appearances: Joun R. Quarces and James Vorenserc, Esqs., 50 Federal Street, Boston Massachusetts, RicHarp B. Dunn, Esq. 441 Stuart Street, Boston, Mass., and Wiiuiam D, Anprews, Esq., 50 Federal Street, Boston, Mass., for and on behalf of the Respon- dents Troy T. Murray, Esq., Department of Public Utili- ties, Room 167, State House, Boston, Mass., for and on behalf of the Department of Public Utili- ties Wim R. Now.iy, Esq., Counsel, Division of Corporate Regulation, Securities and Exchange Commission EIRP SE RT ETS OL St LOTTI CRETE 44 [594] PROCEEDINGS Hearing Examiner Ewell: The record will show that the hearing is reconvened in the matter of New England Electric System and its subsidiary companies, under the Commission’s file No. 59-102, pursuant to the Commission’s order of February 8, 1960, which stated, among other things, that the proceeding involving the question of the retention of the electric utilities has already been disposed of by the Commission by its order of February 20, 1959, and that the hearing should be reconvened for the purpose of disposing of the remaining issues in the proceeding under Section 11(b) 1 of the Publie Utility Holding Com- pany Act of 1935. The Commission’s order set the matter down for this morning, May 18th, at 10:00 o’clock, and we are now ready to proceed with the taking of testimony in pursuance of that order. First, I would like to call attention, though, to the fact that I have received a notice of appearance on behalf of the Commonwealth of Massachusetts, Department of Public Utilities, by Francis K. Lang, Chairman. This notice of appearance is rather brief, and I think it might be appropriate to read it into the record. First, I will ask if there is anyone here present repre- senting the Department of Public Utilities. [595] Mr. Murray: I am here representing the Massa- chusetts Department of Public Utilities. My name is Troy T. Murray, Member of the Massachusetts Bar. Hearing Examiner Ewell: Under our rules any state or political sub-division thereof may become a party upon filing of a notice and application for that purpose. Is there any objection? I think the motion will be granted, and as indicated, I think I will read this paragraph into the record. PUES ISRAEL LAI MIE LIN ORME, GEILE OE EEE REINER SI PEED SLE ONE TONE PED 45 The second paragraph states: ‘‘The position of the Department of Public Utilities of the Commonwealth of Massachusetts with respect to the matter set forth by the Securities and Exchange Commission in its notice and order for hearing dated August 5, 1957 is that the economies of joint opera- tion of gas and electric properties by the New England Electric System holding company system are sub- stantial, that a separation of such joint operation would be adverse to the interests of the residents of this Commonwealth and may necessitate increased gas rates as a result of the apparent substantial additional expenses flowing from the separation of such joint operation, and that under the provisions of Section 11 (b) 1 of the Holding Company Act of 1935, speci- fically clauses (a) (b) and (c) thereof, the gas utilities of the New England Electric System holding company system may be retained under common [596] control with the system’s integrated electric utility system.’’ This letter is signed by the Commonwealth of Massa- chusetts, Department of Public Utilities, as I indicated before. The motion to intervene in the proceeding is granted, and I will ask if there is anyone else who wishes to enter an appearance in this matter. Mr. Quarles: Mr. Hearing Officer, on behalf of the re- spondents, the appearances of Mr. Vorenberg and myself were entered in the earlier sessions. I would like also to have noted of record the appearance of Mr. Richard B. Dunn, attorney of Boston, and Mr. William Andrews, also an attorney of Boston, as counsel for the respondents. Hearing Examiner Ewell: All right. Of course, Mr. Nowlin appears for the Division. Mr. Nowlin: Mr. Examiner, before we proceed with the testimony, I would like to state for the record the Com- ees a en , FE ee PR LS SIE ET PTE LG I IR RE NPY See ee Cee 46 mission’s order reconvening the hearing in this matter was printed and published in the Federal Register February 16, 1960, in Volume 25, Number 382 at Page 1387. Hearing Examiner Ewell: I want to ask again if there is anyone else who wishes to enter an appearance in this matter or be heard in connection with this proceeding. The record will show no response. So, I assume that we are ready to go forward now [597] with the taking of testimony, if there are no other appear- ances. Mr. Quarles: As a preliminary to tat, I would like to tie this hearing in with the preceding one, if I may. As you may recall, in my opening statement at the com- mencement of these proceedings in November of 1957, I pointed out that there were certain differences between the issues concerning the retainability by NEES of its electric utility assets and its gas utility assets, respectively; that with respect to the former, the facts were relatively simple and easy to establish, whereas the latter would require a different and more comprehensive kind of treatment; and that for practical reasons, including particularly those re- lating to financing, it seemed desirable to separate the two and deal first with the electric assets. This proposal was adopted and in due course, after hear- ings, as you have mentioned, the Commission issued its findings and opinion determining that the electric assets of the System constitute a single integrated public utility system and are retainable as such. This is the principal utility system of NEES. [598] We come now to a consideration of the gas utility assets. As indicated at a previous hearing, in view of the position taken by the Commission in other cases, we do not press the contention that these assets may be retained as a part of our single utility system but will direct our attention to demonstrating that they are retainable as an EAE ALRITE IL ELIE LORY STINE LEA LE OST LOE ELLE OI LINE TOMES EN LIS SALES I 47 additional integrated system, or alternatively as more than one such additional system, by reason of complying in every respect with the so-called ABC tests of Section 11 (b)(1). A determination that they are so retainable will not be inconsistent with any previous decision of the Com- mission or the courts with which we are familiar. In fact, we are satisfied that such a decision is required by the express language of the statute as applied to the facts of this case. Recognizing that it is the policy of the Commission to order segregation of electric and gas utility systems in the absence of a clear showing to the contrary, and that if we are to retain both we must prove our case by positive evi- dence, we may possibly have gone further than necessary to make sure of our facts, checking and rechecking our conclusions, and procuring expert professional advice of the highest standing on all questions of opinion or judg- ment involved in our determinations. If this should appear to be so, Mr. Hearing Officer, we ask your indulgence, and [599] assure you that we will present our evidence as expeditiously as the gravity of this case permits. To fully appreciate the facts with respect to the gas properties in the NEES system as they are today, it is necessary to consider them in their historical context. The reorganization of the NEES system to comply with Section 11(b)(2) of the Public Utility Holding Company Act was consummated in 1947. During the next few years the electric utility business in New England experienced an unprecedented growth, but the manufactured gas business failed to keep pace, and by about 1950-1951 had reached a very low ebb. The coming of natural gas was imminent and full of promise, but the cost of conversion to it would be sub- stantial. There was some uncertainty as to the retain- ability by the NEES System under Section 11(b)(1) of the 48 Act of its gas business as it was then constituted. NEES. was experiencing difficulty in the equity financing of its business. In view of this total situation the NEES manage- ment decided to explore the possibility of disposing of its gas holdings, hoping that the prospect of natural gas would enable it to get a satisfactory price. It invited bids and in the fall of 1951 entered into an agreement of sale of sub- stantially all its gas properties, conditional only on the purchasers’ being «ble to arrange the necessary [600] senior financing. In February of 1952, NEES was notified that the finane- ing efforts had failed and that the contract was terminated. By that time natural gas in the area had become a reality and it was essential to go forward without delay. In view of all the circumstances, after careful considera- tion NEES then decided to suspend all efforts to sell its principal gas properties and set about developing the full potential of its natural gas business. This has involved substantial changes in management and personnel, corpor- ate structure, and property holdings, all of which will be explained in some detail by our witnesses. Briefly summarized, a separate and independent gas divi- sion was established and given full authority to operate the gas properties independently of and in competition with the electric properties and to promote aggressively the development and extension of the gas service; the corpor- ate organization has been substantially rearranged by suc- cessive mergers, consolidations, transfers and the like to effect complete separation of the gas properties from the electric properties and to provide a simplified and practical corporate structure appropriate to the needs of the gas utility business; and by eliminating fringe properties, the gas system has been reduced to a small compact group of companies, all situated in the State of [601] Massachusetts and all but one served by the same pipeline. ES REO EEE R LIAL A ELR OE TET ET ALE Oa EMR RG CI LED NOSE ODO, LEE NEI, LLM FENG OBER 49 In brief, we will show that the effect of this program has been to bring the gas properties of the System, while under common ownership and operation, within the definition of a single integrated gas utility system, and in any event, whether technically one or more such systems, clearly within the requirements of the Act for common control and operation; and at the same time to develop an oper- ating organization and program for the electric and gas properties under common ownership which is functionally an efficient and integrated system, even if technically under the Act it is necessary to regard the total enterprise as consisting of a principal clectrie system and one or more secondary gas systems. We also expect to show that both the electric companies and the gas companies and their customers benefit by the combination; that separation would inevitably result in substantial losses of economies to both, especially the gas companies and their customers ; and that, in view of the critical competitive situation of the gas utility industry in New England by reason of distance from the gas fields and absence of natural storage facilities, the loss of economies that would result from such a separa- tion would seriously threaten the future of these gas com- panies, ~ Looking now at the specific provisions of the Statute, it appears that there is only one substantive [602] issue remaining in this case. The electric properties have been cleared, and I assume there is no question about the service company. This leaves merely the question of compliance of the gas properties with the provisions of Clauses (A), AB) and (C) of Section 11(b) (1) of the Act. Since all of the properties are in a single state, the re- quirement of Clause (B) is met. In view of the small size of the total system and parti- cularly of the gas system, it does not seem that any serious question could be raised under Clause (C); and if there is AN RESAEO TRAE IR WOE ase GN as 50 any theoretical doubt, it appears to be resolved by the facts of actual experience, the details with respect to which will be presented in the course of this hearing. Finally, we have the question under Clause (A) whether the several gas companies could be operated independently without the loss of substantial economies now available to them; and it is to this that we have principally addressed our attention. Even though by virtue of their present common owner- ship and joint operation the several gas companies may be regarded as a single integrated utility system, it appears that, in segregation studies and in applying the ABC tests, they must be examined individually and on the assumption that if separated from the NEES system each of them would be operated independently. If they were to be [603] disposed of, it would be in whatever manner proved fea- sible at the time, and there is no basis for assuming that they would be kept together under new ownership. We have accordingly made our studies of them separately. But, by way of exploring all possible alternatives, although we may not have the right to assume the possibility of joint operation after severance, we have also examined the extent to which the economies lost in separation could be salvaged and retained if in any way a plan could be found to operate all of the gas properties as a single independent system. Briefly stated, the position of the respondents in this pro- ceeding is as follows: One, the corporate structure and administrative organi- zation of NEES as developed under the Holding Company Act and now in effect are appropriate to the situation of the System and provide the framework for efficient opera- tion of all its utility properties and for good service to the public. This has been amply demonstrated in actual prac- tice. DRYER I LENT EE PLE AT MERE SORE PS NE EAE SET OI ORNS Nee TET GAG PIL TORT ah ol Two, the present clean-cut separation of gas and electric management in independent departments facilitates aggres- sive promotion and development of each without prejudice or favor to either. In view of all the circumstances, the record of the gas companies in the NEES Gas Division compares favorably with the other gas companies through- out New England. [604] Three, the unique competitive handicap of the gas industry in New England by reason of being further from the source of supply of natural gas and having no natural storage facilities for peak shaving and therefore having higher costs for gas than any other area in the United States, while the prices of competing fuels are as low here as anywhere in the country, necessitates availing of every possible advantage and makes the loss of any economy critically serious. Four, separation of the gas companies from the NEES system would inevitably result in substantial losses of economies which they now enjoy and without which their future would be less secure, even if a way could be found to keep them together and operate them jointly as a single gas utility system. Five, separation would also result in substantial losses to the related electric companies, which is particularly significant in this case as such losses would ultimately fall principally on the same customers as the gas company losses since, in large measure, the gas and electric cus- tomers are the same individuals. Six, having gas and electric properties under common ownership and control is not in any way contrary to the public policy of Massachusetts and does not in any way interfere with but actually facilitates regulation by state [605] authority. Seven, continued ownership and control of its present gas properties by NEES is entirely consistent with the — 52 broad purpose and policy as well as the specific provisions of the Holding Company Act. Eight, in sum, this case is unique and differs in substan- tial ways from any that has previously come before the Commission, and on the facts, as they will be brought out in the evidence, the Holding Company Act requires a finding that the gas companies now in the NEES system may be retained by it. Although the relevant facts appear to be quite simple, determining with the maximum degree of certainty and accuracy the amount of the loss of economies that would result from separation has required long and tedious work and the application, at various points, of experience and mature judgment. This work has been done by NEES personnel with the aid of its regular professional advisors and by Ebasco Services Incorporated, an independent engi- neering and consulting organization. The two groups have worked in collaboration in some areas and along parallel lines in other areas, each exercising independent judgment on all matters of opinion or judgment. Senior members of the NEES organization and of Ebasco, as well as staff and operating personnel who did the field work and assembled the [606] statistics, are here for direct testimony and cross examination. In the interest of presenting the subject matter in logical sequence and producing as clear a record as possible, we would like the privilege, as in previous hearings, of having certain witnesses testify in installments as different aspects of the ease are developed, instead of being required to complete their testimony and be cross examined before being excused from the stand; and of course we will be happy to have counsel for the staff defer cross examination until all of our evidence is in and the staff has had an opportunity to examine the transcript. | Also, following the previous practice, if agreeable to Mr. DRE GPL LEA EER LALO NET ETO TEBE CINE HE LS o3 Nowlin, I suggest that we wait until the evidence is in before we discuss post-hearing procedures, such as staff participation in the preparation of the decision, the need for any specific findings or a recommended decision by the hearing officer, the thirty-day waiting period, briefing, oral argument, ete., and that in the meantime all rights in these respects be reserved. I think it is implicit in what I have already said that the respondents are taking this case seriously and regard it as different from any case previously before the Commission. With respect to one or more of these procedural matters, therefore, when the time comes, we [607] may well ask for a different precedure from that followed in the electric case. We plan to present our case in the following order. Mr. William Webster, President of NEES and NEPSCO will present a brief and general picture of the NEES System as it exists today, with emphasis on the gas side, Mr. Robert S. Quig, Coordinator of the Management Consulting Division of Ebasco Services, Incorporated, will outline the assignment given to Ebasco and the manner in which it was carried out by Ebaseo personnel under his supervision, and will present the report submitted by Ebasco. Mr. Harold Dalbeck, head of the Gas Division of NEES and President of the several gas companies, will describe the gas division, its history, organization, management, properties and operation, and will describe the effect of severance on the gas companies. Mr. Leigh FitzGerald, a Vice President of New England Power Service Company, will similarly describe that por- tion of the NEES electric utility system which is directly related to the gas system by reason of serving common customers, using common facilities or personnel, or other- Wise concerned with the gas business at the operating level, te 2 Hs wire LRAT ROC PIN COE OSLER ROR: Ss ee eee Bite, ARE erect Se ae ah eR” LEE SIS pao 54 and will describe the effect on the electric eempanies of the gas companies’ being removed from the [608] System. Mr. Robert F. Krause, a Vice President of NEES and NEPSCO, will describe changes in the System since the hearing in 1957, and will explain the relationships between the gas and electric divisions at the executive level and the manner in which each operates independently of and in competition with the other. He will also supplement his testimony given in 1957 on the Service Company, with emphasis on the effect which gas severance would have. Mr. Harry Hanson, Vice President and Treasurer of NEES and NEPSCO and Treasurer of most of the oper- ating companies, will describe the Treasury Department under his Supervision and the manner in which it functions with respect to both the electric and the gas companies. His testimony will be supplemented by Mr. Elmer Lother, Vice President and Comptroller of NEPSCO. They will, among other things, present financial statements and exhibits and will describe the effects which severance of the gas com- panies would have in the treasury and accounting end. We will then call several members of the Ebasco organiza- tion who participated in making the study and preparing the report and ask them to explain how the work was done, what standards and tests were applied, how firm the con- clusions are and in general the soundness and reliability of the conclusions reached in the report. [609] Members of the Ebasco group and Mr. Dalbeck will then be asked to analyze the extent to which the losses on segregation would result from separating the gas opera- tions from the electric operations and the NEES system, and the extent to which they would result from separating the gas companies from each other, in other words, to what extent these losses could be avoided by keeping all of the gas companies together and operating them under common ownership and control. By) Finally, Mr. Webster will be recalled and questioned concerning his expert opinion on the conclusions expressed by other witnesses, on the application of the ABC tests to the facts of this case, on the materiality of the risks to the gas companies in segregation and on the net effect of this segregation. Hearing Examiner Ewell: Mr. Quarles, in regard to your statement that you intend to present some of the testi- mony of certain witnesses, perhaps in segments, as need might arise, I assume, though, that it will be all concluded, each witness’s testimony will be concluded in your direct case. Mr. Quarles: Yes, in the direct case, before we suggest an adjournment for the study of the record. That is correct. Our thought is merely that it would be a more readable record and a clearer record if we deal first with [610] the study on the assumption of separate operation of the in- dividual gas companies and then deal with it on the other assumption of a possible way of continuing operation of the gas companies as an independent system. Hearing Examiner Ewell: All right. Are you ready to go ahead? Mr, Quarles: I would like first to call Mr. Webster. Mr. Nowlin: If you don’t mind, just a minute. I assume the answer is pretty obvious, that in the event it should be determined that the gas properties are not retainable, to- gether with electric properties, that the management of NEES would select the electric properties in lieu of the gas properties. Mr. Quarles: That selection has been made. I think it was in the record before, in my opening statement. I did express the idea that the electric system is the principal system. Mr. Nowlin: Thank you, sir. Mr. Quarles: Now, may I recall Mr. Webster who has SEF 56 already been sworn and testified in the earlier phase of the case. Hearing Examiner Ewell: All right. [611] Whereupon, WILLIAM WEBSTER having been previously sworn, resumed the stand and testified further as follows: Direct Examination By Mr. Quarles: Q. Mr. Webster, when you testified in November 1907 in the earlier hearings with respect to these proceedings, I believe you said that you were Executive Vice President and a Director of NEES, President and a Director of Narragansett Electric Company, President and a Director of Yankee Atomic Electric Company and a director of New England Power Company. Since that time have there been any changes in your positions with the NEES holding company system? A. Yes. Effective February 25, 1959, I resigned as Executive Vice President of NEES and was elected President. On December 22, 1959, I resigned as President of Narragansett Electric Company but remained on the board of that company. Effective January 4, 1960, I was elected President and a Director of New England Power Service Company. In addition to these positions I have continued as President and a Director of Yankee and as a Director of New England Power Company. Q. In previous hearings in this case, respondent’s exhibit No. 2 listed the subsidiaries of NEES and showed [612] the percentage of NEES ownership of each subsidiary. Have there been significant changes since that time? A. Yes, there have been. Q. I show you a tabulation entitled ‘‘Subsidiaries of New England Electric System at April 1, 1960’? and ask you to 57 describe it. A. This lists the subsidiaries of NEES and shows the percentage of the common stock of each owned directly by NEES as of the date indicated. NEES has the controlling interest, in most cases one hundred percent of twenty-three subsidiaries. Fourteen of these subsidiaries are engaged solely in the electric business, eight solely in the gas business and one is a service company. As noted at the bottom of this table, New England Power Company, one of the NEES electric subsidiaries, owns thirty percent of the common stock of Yankee Atomic Electric Company. Q. Was this table prepared under your supervision? A. Yes, it was. Q. And does it accurately set forth the information it purports toshow? A. It does. Mr. Quarles: I will offer that as Respondent’s Exhibit No. 50. That is the next number. Mr. Nowlin: No objection. Hearing Examiner Ewell: Respondent’s Exhibit No. 50 [613] will be received. (Respondent’s Exhibit No. 50 marked for identifica- tion and received in evidence.) By Mr. Quarles: Q. Please describe briefly the significant changes which have taken place in these corporate relationships since Exhibit No. 2 was submitted in the previous hearings in this case. A. In the first place, as a result of hearings before this Commission, a plan for the exchange of NEES shares for the publicly hold minority interests in common shares in the straight electric subsidiaries of NEES was approved. The Findings and Opinion and Order were dated May 14,-1959. This was enforced by an order of the United States District Court in June 1959 and was consummated in July 1959. This involved Merrimack-Essex, Southern Berkshire, Suburban Electric, Weymouth and Worcester County and the common stock of these electric companies 58 is now owned one hundred percent by NEES. The then Lynn Gas and Electric Company was not involved in the minority interest proceeding as it was at that time a recent acquisition and was a combination company. Early in 1959, the Pequot Gas Company, located in the southeast corner of Connecticut was sold and at the same [614] time Narragansett Electric Company sold its gas properties located in Westerly, Rhode Island. Later in December 1959, Narragansett disposed of its remaining gas properties in Warren and Bristol, Rhode Island and thus became a straight electric company. On February 5, 1960, pursuant to approval by this Com- mission and by the Massachusetts Department of Public Utilities, the electric and gas properties of Lynn Gas and Electric Company were separated. Lynn Gas and Electrie Company changed its name to Lynn Electric Company and continues to own and operate the electric properties and Lynn Gas Company, a new company, owns and operates the gas properties. The four inactive subsidiaries which were referred to in the previous hearings, Connecticut River Development Company, the Narragansett Company, The Narragansett Electrie Lighting Company and Yellow Cab Company, have all been dissolved. Q. The properties, service areas and operations of the electric subsidiaries of the NEES were described in this proceeding in 1957. Have there been any significant changes since that time? A. Not in substance. The service areas of the electric companies are substantially the same but the vital statistics of plant investment, number of cus- tomers [615] and revenues have increased as the demand for electric service has continued its upward trend. The next important System developments in the electric end of our business will be an additional strong transmission 59 tie to the west which will further connect the Niagara Mo- hawk Power Corporation with our system, and a new steam generating station at Brayton Point on Mount Hope Bay near Fall River, Massachusetts. The 230,000 volt transmission line to Niagara Mohawk will enable us to buy 230,000 kilowatts of power from Niagara in 1962 and lesser amounts for the next two years. This arrangement will allow us to build in one single operation the 450,000 kilo- watt plant at Brayton Point in two units to come on the line in 1963 and 1964, These generating units can be then immediately fully loaded with the help of some temporary one-unit sales to other New England utilities. The atomic electric generating plant of Yankee Atomic Electric Com- pany is rapidly nearing completion. It is expected to go critical later this year and to be operating on a regular schedule sometime in 1961. From the standpoint of electric operations as well as gas we have made rapid strides in streamlining our manage- ment and operating procedures. It has been and continues to be our objective to manage our electric system as if it were a single company, with lines of authority and respon- sibility so far as possible running along functional [616] lines, consistent with state laws and corporate boundaries and requirements. This has been an evolutionary process which, while not yet wholly complete, has continued to move ahead in recent years through the elimination of some corporate entities and the grouping of remaining ones on a regional basis. The recent authorization dated December 30, 1959, by this Commission with respect to the organiza- tion and conduct of business of New England Power Service Company is expected to enable us to achieve greater efficiencies and to further improve our functional organization. Q. I next show you a map entitled ‘“New England Elee- trie System—Gas Companies’’ and ask you to state what it Pe Od RS EAE ACN ER IETS TITS 60 shows. A. This map shows the location and service areas of the eight gas companies of the NEES system and also shows the two natural gas pipelines which serve New England. These eight System gas companies are ail located in Massachusetts and, with the exception of the Norwood Gas Company, all purchase natural gas from the Tennessee Gas Transmission Company. Norwood purchases natural gas from Algonquin Gas Transmission Company. @. Was this map prepared under your supervision?! A. Yes, it was. Q. And does it accurately set forth the information it purports to show? [617] A. It does. Mr. Quarles: I will offer it as Respondent’s Exhibit No. 51. Mr. Nowlin: No objection. Hearing Examiner Ewell: It will be received. (Respondent’s Exhibit No. 51 marked for identifiea- tion and received in evidence. ) By Mr. Quarles: (. Referring to this map, will you indicate the genera! location of each System gas company and state the number of customers served by each? 67 are now generally confined to the eastern half of one state, top corporate officers are generally common to all, and one system divisional organization serves all ‘he gas com- panies. There are joint operations with the electric busi- ness Where combination produces economies, and gas opera- tions are separate from electric operations where separa- tion makes for the furtherance of business. Q. When were the first serious discussions indicating that natural gas might be brought into the New England area? A. In 1948. Q. Was that a significant event in the history of gas business in New England? A. Indeed it was. Just prior to the introduction of natural gas into New England, the gas industry generally was in dire straits. The rapid in- flation which followed [627] World War II had skyrocketed labor and fuel costs so that the costs of producing manu- factured gas reached extremely high levels. Most gas properties in the area were earning little or nothing and some were operating ‘‘in the red’’, Rate increased pro- vided temporary relief but with each increase, it was gener- lly true that the gas business was slowly but surely prie- ng itself out of the competitive market with other fuels, System gas operations were no exception to this discourag- ng picture of the New England gas industry in the late orties, Q. How were the NEES gas companies operated prior 01948? A. We operated them substantially in the form i Which they had been acquired in the early 1930’s. The irge number of companies which comprised the NEES ystem in the 1930’s was a result of the historical develop- lent of the electric and gas industry in the New England rea on a town-by-town basis and we were faced with many roblems resulting not only from a large number of cor- orations but also from the several holding companies in le System. Pere ats MOE UT EERIE, IMR : ] °, é oa * & ¥ £ a Sgt. + MOTIONS ARIS Sesh 68 Until the simplification of the holding company system was effected in June of 1947, System officials were con- cerned not only with the protracted proceedings relating thereto but also with the long Service Company proceed- ings in the early 1940’s. During the same period there were [628] protracted proceedings before the Federal Power Commission in connection with the licensing of hydro electric developments which demanded the attention of several of our top officials. In 1947, the corporate simplification proceedings under the Holding Company Act were completed, and System off- cials were able to concentrate on operations of the System. By 1948, we were already experiencing a post-war growth in our electric business far in excess of what had been anticipated during the early 1940's. At the same time, we had come to realize that the manufactured gas business had a rather dim future and offered little prospect for a fair return on the NEES investment therein. Q. What happened in the period 1948 to 1951? their affiliation with the NEES system? sults of so much of their work in which I did not directly participate so that I feel confident in standing 106 behind the report and stating our conclusions based on the work it embodies. Furthermore, as I have earlier stated, [680] we have reviewed this project with senior officers and others in our organization to further test and sub. stantiate our conclusions. On this basis I have no hesitation in stating that the pro- jections set forth in this report represent the firm and con- sidered judgment of myself and the individuals who parti- cipated in its preparation. In addition, Ebasco as a firm supports the judgments of its people who were engaged in this study. Mr. Quarles: Mr, Hearing Officer, I propose, in due course, to offer this report as an exhibit. I would like, if I may, to have it marked for identification at this time as Respondent’s Exhibit No. 58. Hearing Examiner Ewell: I note it is in two volumes, Do you want to ma:k them A and B? Mr. Quarles: It might be convenient. The two volumes are numbered consecutively, the pages of volume two con- tinuing the numbering from volume one, but perhaps it would be convenient to have them separately labelled, Mr. Nowlin: Will this be 58-A and 58-B? Mr. Quarles: Yes. Mr. Examiner, with reference to the marking of this exhibit, since it is considered one total work, even though we label it as A and B, I would hope that we ean refer to it simply as Exhibit 58. [681] Hearing Examiner Ewell: I think so. (Respondent’s Exhibit 58-A and 58-B marked for identification. ) By Mr. Quarles: Q. Very generally, what conclusions were arrived at by Ebasco? A. It is Ebasco’s considered judgment that the severance of the gas properties would result in a serious and substantial loss of economies to the affiliated companies 107 of the NEES system. At would be especially harmful to the individual gas companies, but it would also have an impact on the remaining electric companies. Q. Mr. Quig, the conclusions based on the study re- flected in this report are of considerable significance in this case. Since it appears that the section on each gas company and on the five ‘‘companion’’ electric companies are organized on a similar basis, I would like you to take us on a ‘‘guided tour’’ through one section of this report dealing with a gas company and one with an electric com- pany, so that we will have a general familiarity with the report. Since we propose to call other members of the Ebasco team and to recall you later, I will not ask you at this time to go into detail. Which gas company would be useful to review for this purpose? A. The North Shore Gas Com- pany which is covered on [682] pages 501 to 539 in Volume lof the Report would be a good sample. Q. Mr. Quig, do you consider North Shore to be a fairly representative NEES gas company, organized and operated in general like the other gas companies of the New Eng- land Electric System? agement. They also will Service Company safety grou constant search for new idea reflect favorably on our whole won many safety awards ovthe -past few years, both national and statewide, and ” management and our employees are indeed gratef °F the assistance of the Safety Department in the atfPe™* of our safety record. . beled ‘‘corporate’’ under Q. Moving over to the boy ’ — . . ounsel, what sort of serv- the vice president and gener: ‘ , . iat represent? A. We call ices to the gas companies doe” | : Company Corporate De- upon the lawyers in the Ser partment, who have been a by the ee directors as counsel for the eral companies, in almost every phase of our operation: They advise us on day-to-d with our problems with eust¢ pal and state authorities. T new legislation and rulings keep us advised of changes t egal matters in connection ‘s, employees, and munici- are continually studying regulatory authorities to ymay affect our daily work. Se x i Se edo, eet They prepare all legal filings with local, state and federal podies and represent our companies in all cases before these bodies. They advise us and prepare special contracts when required, and there is no legal problem that arises in our companies that is not discussed with some one of them. Q. What services are performed under the heading of Publications? A. The monthly magazine ‘‘Contact”’ is dis- tributed to all our employees, and this is a product of the Service [799] Company. The NEES Daily News Digest is a summary of any news affecting public utilities, appear- ing in daily papers through our territory and New York. Items of interest appearing in this digest are available to us as they appeared in the papers, since the Publications Department maintains a complete file of clippings. Q. Does this department also assist you in public rela- tions? A. Very definitely. However, when a problem of this nature arises, we usually confer with the NEES Vice Presi- dent in charge of publie relations, and he will assign someone in this department to work with us. Q. Are all of these services essential? A. Very definitely. Q. In your opinion, are the billings from the Service Company a fair measure of the value of the services ren- dered to the gas companies? A. No, sir. First of all, the billings are at cost and therefore do not reflect the charges we would have to pay for such services if we had to go outside for them. Secondly, the billings in no way reflect the value to the gas companies of having a reservoir of specialists on hand for instant service at cost or for brief questions and answers which if put to outsiders not familiar with our gas operations would involve time to research and increase [800] billings. Q. Were it not for the Service Company, would you have been able to operate your gas companies with the executives and employees you now have? A. Definitely not. By being able to draw on the Service Company we have been able y oe = sre FS eS STAR oe RET EE EEL ETRE: PWN PRETO SIRT ON EISELE IAL II YEE NEARER IBN AR SSE LEN AEE MES ALE NE aS aR RATIOS 188 to keep our executives and employees to a number far below what we would need if the Service Company was not available to us. Q. Could any of these services be performed by either the Gas Division or the gas companies? A. It would not be possible for us to perform these services without substan- tially increasing our present personnel, Even then, there are many services performed by the Service Company that could not be afforded either by a gas group organiza. tion or by independent gas companies. This is so because the gas companies enjoy the benefit of being a part of the large NEES organization which, although predominantly electric, does give to the gas companies many benefits not possible in a smaller operation. Q. Are the executive and administrative services of NEES System top management personnel requested of the Service Company and billed to the gas companies? A. Yes. At the beginning of this year we requested the Service Company to provide for us the services of top system ex- ecutives, as permitted by the Order of this [801] Com- mission, dated December 30, 1959. Mr. Quarles: Mr. Hearing Officer, this brings us to the end of one phase of my examination of this witness, and since it is now four minutes of five, it might be appropriate to adjourn until tomorrow morning. Hearing Examiner Ewell: All right. Is 10:00 o'clock tomorrow morning satisfactory to everybody? If so, we will resume at 10:00 o’clock tomorrow morning. (Whereupon, at 4:56 o’clock p.m., the hearing was adjourned to Thursday, May 19, 1960, at 10:00 o'clock a.m.) rey ; SiR A hats Mt BNE AAS Re PRESLEY 2 BAEC B CANOE EL 189 [803] PROCEEDINGS Hearing Examiner Ewell: We will resume. Whereupon, Haroup L. DaLBecK resumed the stand and testified further as follows: Direct Examination (Resumed ) By Mr. Quarles: (). Now turning from the Service Company back to the local organizations, Mr. Dalbeck, can you summarize the relationship between gas and electric companies locally in areas Where NEES las both kinds of operations? A. The Treasury functions are the most important instance of combined operation. Treasury represents the one area where gas and electric companies have common officers. Functionally, accounting personnel are all part of a single organization performing functions for both gas and elec- trie companies. The closest combination of activities is in the customer accounting field. The same meter readers read both gas and electric meters at a location on one stop. The remainder of the customer accounting operation from the processing of the meter books right through to the preparation and mail- ing of the customers’ bills is handled on a combined basis thus saving time and increasing the efficiency of the entire operation. General accounting [804] functions are also com- bined. People who work on gas company general books usually are different from those who work on those of electric companies, but most accessory functions from office messengers to overall supervision of Treasury depart- ments are combined. The same is true in the plant account- ing and payroll areas. Office maintenance personnel such as janitors, also work on a combined basis and are usually members of Treasury departments. SRR EERE ORIEN NESS LER CRRA EE TE ee ae ea pets 190 (). Are there other treasury functions besides account. ing performed locally? A. Yes. In smaller companies, where the amount of stockroom space required is not large, stores functions are combined between affiliate gas and electric companies. Ledger clerks and stockroom personne] work for both companies. In larger companies, however, available stores buildings generally are not large enough for combined stockroom operations and separate gas and electric stores departments are established. Also, customer relations and eashiering ‘personnel work on a combined basis. Customers enter our stores and pay both gas and electric bills to the same person. If they have questions concerning their bills or service they talk to customer rela- tions clerks who answer questions concerning both gas and electricity. (). What functions other than Treasury are performed on a combined basis? [805] A. Some Utilization Depart- ment operations are combined. It would be uneconomic to train the large numbers of servicemen we have to service both gas and electric appliances, but there are several utilization department jobs which are done more efficiently and economically on a combined basis. Joint service cen- ters where request for service calls are received, records kept, and service orders dispatched exist in several of our companies. Radio dispatehing equipment is used by both companies and operated by personnel working jointly for both in some of our companies. Gas and electric service calls received outside of normal working hours are handled on a combined basis by either electric substation or gas personnel, in addition to their other duties. Q. Are there more areas of combined operations! A. There are many. Practically all community and public relations efforts are combined in communities where affiliate gas and electric companies have franchises. Gas and elee- iA ED PA) AS LS SARASOTA CRE 191 tric company managers are continually conferring with each other and taking joint action in this field. Also, labor and personnel problems are combined. The same unions represent both gas and electric employees. Local grievances which affect both companies in an area are often discussed by both managers and settled between them. There is a wide variety of contacts which do not show on our organization chart but are governed by practical day-to-day judgment as to [806] how gas and electric com- pany personnel can draw on one another for help and assistance. Q. Mr. Dalbeck, so far, in my questions and in your answers, we have approached the NEES gas business pretty much from an organizational point of view. We have both referred from time to time to the system organization chart and you have described the organization of the Gas Division and of individual gas companies. You indicated that this sort of approach fails to reflect the many direct contacts across organizational] lines which characterize operation of the gas business. [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386411_0257%3A01. Public record. Not legal advice.