endeavoring to obtain uniform rates to the widest extent feasible. In determining areas where uniform rates should prevail, consideration is given to the relative cost of rendering service, the location of gas fields, natural boundaries, and the general characteristics of the region. In other words, our purpose is to encourage the establishment of uniform rates in regions where substantially the same operating and natural conditions prevail, starting with the premise that the widest areas practicable in terms of average costs and physical characteristics of service, should be designated.

In accordance with these principles, for the purpose of allocating the over-all rate reduction, the territory of the company was divided into 7 rate areas, as follows:

San Antonio Area.-Generally west of Edna, Texas, and southward from Austin; it includes both Austin and San Antonio.

Wichita Falls Area-From Wichita Falls, Texas, northwest to the Amarillo gas field. This area is not connected with the main United system.

Central Area.-Generally from Fort Worth, Texas, east to the Mississippi River and from the northern boundary of Louisiana to the Gulf, with two exceptions, namely Houston and vicinity and Beaumont and vicinity.

Houston Area.-Houston, Texas, and environs.

Beaumont Area.-Beaumont, Texas, and environs.

Jackson Area. From the Mississippi River east to Pensacola, Florida, but not including the New Orleans area. The Jackson area includes Jackson, Mississippi; Mobile, Alabama; and Pensacola, Florida.

New Orleans Area.-City of New Orleans and environs.

The following tabulation shows the rates per M. c. f. in each area prior to and after the rate reduction:

It will be noted that the new rate for Houston, Beaumont, and New Orleans is 15 cents, which is considerably lower than the rates for the other areas. This lower rate is due solely to the very close proximity of each of these areas to the sources of natural gas.

The instant reduction to the New Orleans area for domestic and commercial gas amounts to $66,049. This is in addition to an annual

reduction to this same class of sales for resale in the New Orleans area that was made in 1942 (retroactive to August 1941) of $162,094.* Thus, the total annual reduction to this area since this case started amounts to $228,143. Furthermore, the contract between United and New Orleans Public Service, Inc., which will be superseded by the new rates, provided for a nominal domestic gate rate of 30 cents per M. c. f. The contract provided for a credit, against this rate, of 3.65 cents per M. c. f. for each billion cubic feet of gas sold by United to the New Orleans company for use in its power plant. The maximum credit allowed was 14.6 cents per M. c. f., making possible a minimum domestic gate rate of 15.4 cents per M. c. f., dependent upon the continued use of a certain minimum amount of gas in the New Orleans Public Service, Inc., power plant. Almost 100-percent increase in the price of gas was possible under the terms of this contract. The new rate rectifies this situation. The 15-cent rate will be independent of the powerplant usage.

A very substantial part of the gas consumed in the City of New Orleans is transported by Interstate Natural Gas Company, Inc., for United and in addition United purchases gas from Interstate. Any reduction in the charges of Interstate will result in a further reduction in the New Orleans gate rate. Proceedings involving Interstate's rates were instituted some time ago; hearings have been held and briefs filed therein (docket No. G-149). This matter is under active consideration by the Commission and an early decision will be rendered. (See infra, p. 416.)

BENEFITS TO RETAIL CONSUMERS

The Commission is not unmindful of the fact that the ultimate purpose of its rate regulatory activities under the Natural Gas Act is the assurance of reasonable rates for ultimate consumers. This purpose has been recognized by the Courts, particularly the United States Circuit Court of Appeals for the Seventh Circuit in connection with the Commission's order involving the rates of the Natural Gas Pipeline Company of America and Texoma Natural Gas Company. The Commission anticipates that the rate reductions will be passed. on to ultimate consumers by the distributors.

It is sometimes mistakenly assumed that the Federal Power Commission has jurisdiction over retail rates to the ultimate consumer, but this is not so. Its jurisdiction is over certain sales for resale

A portion of this reduction was absorbed by Interstate Natural Gas Company, Inc., by a simultaneous reduction in charges to United.

5 Natural Gas Pipeline Company et al. v. Federal Power Commission, 131 F. (2d) 137. See also, Mississippi River Fuel Corp. v. Federal Power Commission, 121 F. (2d) 159, 164 (C. C. A. 8th).

only. The city gate rate, although important, is not the only factor in the retail rate. In certain cases the controlling factor is the distribution company's spread between the city gate and the retail rate, which is subject to state or local authority.

Exhibit A to the attached order lists all the distributors which purchase gas from United and its affiliate, Houston Gulf Gas Company. A summary of the total amount of the reduction applicable to each distributor is shown on p. 410 in the exhibit. On the remaining pages of the exhibit there is listed each community served by distributors and the amount of reduction applicable to such community. This information is attached to the order for the purpose of advising each distributor and each community of the estimated reduction applicable to it, thereby enabling prompt consideration of an appropriate reduction in the retail rate in each case.

Exhibit B to the attached order lists the rate schedules filed by United and gives the effective date of each.

CONCURRING OPINION

SCOTT, Commissioner, concurring in the result:

LELAND OLDS.
CLAUDE L. DRAPER.

BASIL MANLY.

CLYDE L. SEAVEY.

I concur in the conclusion of the majority that the proposed rate. reduction be made effective. I feel constrained, however, to disagree with my associates concerning the method used in disposing of these proceedings.

The investigation is terminated and reduced rates become effective without the Commission specifically determining a rate base, or finding the amount of any write-ups, the original cost of utility plant, accrued depreciation, working capital, operating expenses, annual depreciation expense, taxes, rate of return, the inadequacy of the company's depreciation reserve, and the reasonableness of charges paid by this company to an affiliate for gas purchased.

I regret that specific findings have not been made concerning these matters. I recognize, however, the desirability, during the war period, of making every reasonable effort to reduce the time involved in rate matters. In this regard the Commission has an enviable record of disposing of other rate cases in an expeditious manner. Several cases, in fact, have been settled by negotiation. I believe, however, that the public interest requires not only that rates be reduced from time to time, but also that their reasonableness be tested only after and upon the establishment of a rate base and a determination of the concomi

tant factors related thereto. If these findings are not made, complications and difficulties may arise later between the pipe line company and distributing companies which may result in misunderstanding and delay or reduce the benefit that really belongs to the consumers. It may even necessitate, at some future date, a further extensive investigation.

* *

The majority states that it is anticipated "* that the rate reductions will be passed on to ultimate consumers by the distributors." Reference to Exhibit A, attached to the order, clearly reveals that the largest distributor and largest single beneficiary from the reduced rates is the United Gas Corporation, parent of the United Gas Pipe Line Company. This distributor will receive $721,172, or 33 percent of the total reduction. Both of these companies are a part of the Electric Bond & Share system. In addition, several of the other distributing companies are a part of the same utility system. Adding the reduction to these affiliated distributors to the amount applicable to the United Gas Corporation increases the reduction to the Electric Bond & Share properties to approximately 40 percent of the total reduction provided by the new rates. This great benefit accrues to them, but we are without any commitment or assurance that it will be passed on to the ultimate consumer. If it is not passed on, a large portion of the reduction in rates will merely represent a shifting of profits between companies in the same holding company system.

The rates of the United Gas Pipe Line Company obviously are unreasonable. I do not desire to withhold from the consumers a substantial reduction in rates. For that reason I concur in the result obtained, with the hope that the consumers receive the full benefits to which they are entitled.

The views herein expressed, as to the nature of our responsibility in connection with the performance of the rate-making function, I believe to be the essence of sound regulation. If they are accepted and followed, no insurmountable obstacle to effecting rate reductions by the conference method will ensue. They should be the rock-bottom minimum requirements in carrying on our work in the rate-making field. To continue the use of such standards assures a means of protecting the public and imposes no unreasonable restraint on the utility.

In the Natural Gas Pipeline Company case, supra, United States Circuit Court of Appeals, Seventh Circuit, the court required the entire amount of the refund resulting from a rate reduction order of this Commission to be passed on to the consumer.

Order making effective reductions in rates

Louisiana Public Service Commission, Complainant v. United Gas Pipe Line Company, Defendant; United Gas Pipe Line Company; City of Jackson, Mississippi, Complainant v. United Gas Pipe Line Company, Defendant; United Gas Pipe Line Company

(G-133, G-148, G-157, G-193)

It appearing to the Commission that:

(a) Pursuant to the request of the United Gas Pipe Line Company, a prehearing conference was held in these proceedings on February 10, 11, and 12, 1943, under the provisions of Sec. 50.59A of the Provisional Rules of Practice and Regulations under the Natural Gas Act, as amended;

(b) As a result of the said conference United, on April 1, 1943, filed certain revisions in its contracts for the sale of natural gas for resale, representing an annual reduction in the sum of $2,195,287, the details of such reduction by distributors and communities being attached hereto as Exhibit A and made a part hereof;

(c) United has made application that the reduced rates contained. in the rate schedules in the attached Exhibit B be allowed to take effect on either March 20, March 26, April 1, or April 10, 1943, as provided in the respective billing periods; and it is in the public interest that such effective dates be established;

Now, therefore, in view of the foregoing, and for the reasons set forth in its opinion in this matter issued with this order and, by reference, made a part hereof;

It is ordered that:

(A) The rate schedules of United Gas Pipe Line Company, as described in the attached Exhibit B, be and they are hereby permitted to take effect on and after March 20, March 26, April 1, or April 10, 1943, as provided in the respective established billing periods;

(B) The aforesaid rate schedules shall be deemed to have been filed and published in compliance with the Natural Gas Act;

(C) The proceedings in the above-named and numbered dockets be and they are hereby terminated.