This 5,000-horsepower compressor engine, one of the largest on any natural gas transmission system in the United States, is being installed by Panhandle Eastern Pipe Line Co. under authorization granted by the FPC early in the 1962 fiscal year. It is part of a $68.9 million expansion program designed to bring additional natura! gas to consumers in the Midwest.

tificates issued in fiscal 1962 was approximately 1,544 million cubic feet per day, considerably less than in fiscal 1961. The net increase in capacity was somewhat lower than the cumulative increase because in some cases two or more pipelines systems were authorized to construct facilities to transport the same gas through new or additional facilities.

PIPELINE CERTIFICATES

The Commission in fiscal 1962 disposed of 317 certificate applications involving interstate pipeline companies. These included requests for authorizations for the construction, acquisition, operation, and abandonment of natural gas facilities; applications for orders under section 7(a) of the Natural Gas Act directing pipeline companies to provide service; and applications for status determinations and for export and import permits. Of the total filed during the year, 39 were 7(a) applications, compared with 74 in fiscal 1961 and 10 in fiscal 1953.

The following tables summarize all the filings, dispositions, and pending cases, as well as statistics relating only to the construction and operation of new and additional facilities.

1 Includes applications issued, dismissed, denied, withdrawn and rejected. Includes service area applications under sec. 7(f), export-import applications under sec. 3, status determinations under sec 1(b) exemption applications under sec. 1(c), and "Grandfather" applications under sec. 7(c) of the Natural Gas Act.

Pipeline rate regulation is the foremost activity of the Commission in the natural gas field from the standpoint of direct dollar benefit to the consumer. The most intensive effort to reduce the backlog and bring cases to conclusion has been given to this category during the past year. The settlement program, previously described, has been particularly effective, and the largest decrease in number of pipeline rate cases on hand in the Commission's history has been achieved. This incidentally is only the third time in a decade that a decrease has been achieved. The decrease of suspended cases was from 99 at the beginning of the year, involving $376 million in proposed annual increases, to 76 cases at year's end, involving $277 million. This was a reduction of 23 percent in case load and 26 percent in dollars.

The following table shows a summary of the workload in pipeline rate regulation:

Natural gas pipeline companies made a total of 1,168 rate filings during the fiscal year 1962, compared with 993 the preceding year. Of the 22 rate increase applications filed, which totaled $27,196,000 per year, 18, for $24,477,400 annually, were suspended and the remaining 4, totaling $2,718,600 annually (including $2,118,000 for industrial increases and $600,600 for field sales), were allowed to become effective without suspension. Two rate reductions, totaling $924,700 per year, also were filed during the fiscal year. One of the rate reductions for $501,000 was voluntary, and the other for $423,700 was made pursuant to FPC order. The annual dollar backlog of suspended increases decreased from $376.2 million at the end of the 1961 fiscal year to $277.2 million as of June 30, 1962.

The following table shows the disposition of rate increase applications filed by pipeline companies during the fiscal years 1962 and 1961 and the total amount of increases disposed of during the fiscal year.

Thirty-seven of the cases completed during the fiscal year related to cases pending before the Commission at the beginning of the year, and the other four cases completed were filed during fiscal year 1962.

Pipeline Company Rate Cases

At the core of pipeline rate regulation is the resolution of issues in formal rate cases. During the fiscal year 1962 the FPC had before it a total of 138 formal natural gas pipeline rate proceedings. Of this total, 117 were applications for rate increases suspended under section 4 of the Natural Gas Act, and 21 were cases relating to other rate matters. Ninety-nine rate-increase applications and 17 other rate matters were brought forward from the prior period, whereas 18 suspensions and 4 other rate matters were added during the year.

Forty-one suspensions and 15 other rate matters, or a total of 56 cases, were disposed of during fiscal 1962. This left 82 cases (76 suspensions and 6 other rate matters) pending at the beginning of the fiscal year 1962. The 181 rate-increase applications filed in fiscal 1962 proposed $24,477,400 in annual increases in the companies' existing rates. As in previous years, these proposed increases were based principally on the companies' claims of higher costs for purchased gas; increases in cost of service applicable to jurisdictional customers resulting from use of cost classification and allocation methods at variance with Commission methods and practices; departures from usual methods of rate base determinations; claims of increased depreciation expenses; increased operating expenses (e.g., wages, salaries, pensions, taxes); and increased return allowance on investment.

UNIFORM NATURAL GAS ACCOUNTING REGULATION

Accounting regulation is an important tool of utility regulation. One of the important phases of the Commission's work is the examinations by its staff to assure that the amounts recorded in natural gas companies' plant accounts are on an original cost basis. Utilities are permitted to charge rates that will give them a fair return on original cost, less accrued depreciation of their property. If the plant accounts are inflated, the customers will be overcharged in the rates for service.

The Commission's staff during the year actively resumed examination of natural gas company plant accounts to bring the original cost of utility property up to date. This step was taken to minimize rate fieldwork and to expedite rate cases by establishing a sound base for ratemaking purposes. Eliminations from the property accounts of writeup of improper items have a beneficial effect for consumers by providing just and reasonable rates, and for investors through the establishment of a sound capital structure.

1 The 18 cases added during fiscal year 1962 were comprised of 6 proposed new increases, amounting to $6,574,400; 1 remand amounting to $17,903,000; and 1 case reinstated and 10 cases previously carried as other rate matters on which no dollar amounts are involved.

By the end of the 1962 fiscal year, 177 natural gas companies had filed claimed original cost studies of gas plant totaling $2,505,639,837. Excess recorded cost over claimed original cost was $252,555,686, including plant acquisition adjustments of $73,064,463 and plant adjustments of $179,491,223. The FPC staff had completed field and office examinations of 102 studies by June 30, 1962. Fifty-five will not be examined because of termination of FPC jurisdiction, leaving 20 on hand still to be examined as of June 30, 1962.

Of the 102 examined through the end of the fiscal year, 23 were made in conjunction with examination of electric plant of combination companies owning both electric and gas facilities. The applicable gas plant adjustments of the companies were included in the information set forth for electric companies. Of the remaining 79 companies, the claimed original cost was reduced from $1,645,483,271 to $1,535,628,042. At the same time plant acquisition adjustments and plant adjustments totaling $112,554,979 were correspondingly increased to $220,020,196. The Commission by June 30, 1962, had authorized and approved dispositions for these 79 companies totaling $222,324,153, comprised of plant acquisition adjustments of $52,673,227 and plant adjustments of $169,650,926. The amounts classified as plant adjustments must be written off or otherwise disposed of by natural gas companies the same as by electric utilities.

In the FPC's revised original cost program, $660,484,031 recorded in the plant accounts of six natural gas companies was examined by the staff during fiscal 1962 and a $24,355,620 adjustment was proposed. This was still pending at yearend. Field work on five others was in progress at the end of the year. Every dollar adjustment to plant in service also results in an additional adjustment for return, related depreciation charges, and Federal income taxes, all of which bring an annual reduction in the rates charged consumers of about 16 percent of the amount eliminated.

The FPC's accounting staff also reviews and investigates proposed journal entries filed by natural gas companies to record acquisitions and sales of gas plant. The entries are reviewed from the standpoint of the original cost of the property, adequacy of the accumulated provision for depreciation, excess over original cost and provisions for its disposition, and other necessary accounting. During the 1962 fiscal year, the staff reviewed 27 such journal entries, involving properties with total original cost of approximately $236 million.

At the year's end the Commission was in the process of forming a field staff unit to audit company books and records to check the compliance with the FPC's Uniform System of Accounts and with established accounting principles and practice. If the accounting system is followed and all entries are properly classified, the reporting of the utility's expenditures can be relied upon as accurate and complete.