COMMENTS ON SUMMARY STATEMENT, TABLE No. 2 I. ACCOUNTS AUDITED AND CASES SETTLED At page 19 of the Twelfth Annual Report appears a table showing accounts audited and cases settled as of June 30, 1932, the total amount at that time being $38,504,366.89. During the succeeding year other settlements were reached aggregating $2,138,786.89 and bringing the total to $40,643,153.78. Further details are shown below: Investments in projects definitely established Settlements reached as of June 30, 1932. $38, 504, 366. 89 Settlements reached during the year to June 30, 1933: 970. Glacier Silver Lead Mining Co-‒‒‒‒‒ $40, 421. 73 1101. Prince William Sound Water-Power II. ACCOUNTS AUDITED IN WHOLE OR IN PART BUT INVESTMENT NOT FINALLY DETERMINED This group of cases may be subdivided into (a) Hearings held and opinions and orders issued-14 projects, claimed cost (b) Hearings held, opinions and orders to be issued-7 projects, claimed cost---- $47, 431, 326. 41 33, 097, 682. 39 (c) Accounts audited, reports thereon prepared, cases awaiting hearing or other action-20 projects, claimed cost '- 177, 102, 930. 51 (d) Field audits completed, reports thereon in course of preparation-9 projects, claimed cost---- Total, group II, table no. 2- 132, 182, 796. 04 389, 814, 735. 35 1 This subgroup includes 12 projects for which applications for licenses or amendments thereof were pending. The following table shows further details with respect to subgroup II (a): In two of the cases shown in the foregoing table, namely, projects nos. 82 and 637, the Commission has, after hearings, issued findings and orders fixing a definite amount as being the actual legitimate investment in each project. In the 12 remaining cases certain items and amounts have been approved as representing actual legitimate investment, others have been definitely and finally rejected, and certain other items claimed by licensees as cost of or investment in their projects have been reserved for further investigation and consideration. The items so reserved include fees and charges of affiliated management and construction companies and, in the case of certain projects, claims for intangible values. There follows a list of the projects in group II (b) as to which hearings have been held for the purpose of determining the actual legitimate investment therein, but opinions and orders have not been issued: Hearings held, opinions and orders to be issued 108. Northern States Power Co.‒‒‒‒ 184. Pacific Gas & Electric Co- 271. Arkansas Power & Light Co. (Remmel Dam unit) _ 346. Minnesota Power & Light Co--‒‒‒ 469. Minnesota Power & Light Co.. 432. Carolina Power & Light Co-- 472. Utah Power & Light Co-----. Investment as claimed by licensee $1, 118, 819. 54 8, 009, 543. 58 2,085, 712. 80 3,451, 175. 25 1, 410, 541.29 13, 764, 856. 51 3,257, 033. 42 33, 097, 682. 39 Investigations are now actively progressing in preparation for the determination of the investment in some of the largest and most important projects, among which are the Niagara Falls project, the Conowingo and Safe Harbor projects on the Susquehanna River in Maryland and Pennsylvania, the Big Creek development in California, the Bagnell project on the Osage River in Missouri, the Dreher Shoals project on the Saluda River in South Carolina. Determinations in all or a large part of these cases are expected to be made within the next year. No change occurred in the personnel or in the number of employees in the accounting division during the year. SECURITIES DIVISION On November 12, 1932, the Commission adopted regulation 21, security issue approval, ordering all licensees under the Federal Water Power Act and their customers not to issue any securities without first obtaining authorization from this Commission or submitting satisfactory evidence of approval from the respective State commissions or agencies having such jurisdiction, in accordance with section 4 (h) and sections 19 and 20 of the Federal Water Power Act. At the time of the adoption of regulation 21 there were 26 States which had not given any commission or other agency jurisdiction over the security issues of licensees and their customer companies in their respective States. Since the adoption of regulation 21, Oregon, Pennsylvania, and Washington have conferred such jurisdiction upon their respective commissions or agencies. During the fiscal year ending June 30, 1932, the Commission received and disposed of six security applications: Puget Sound Power & Light Co.-$7,500,000 first and refunding mortgage 6 percent gold bonds, series E, due October 1, 1930, were authorized to be pledged as security for bank loans but not in excess of $175 face value of bonds for each $100 principal amount of the loan. Puget Sound Power & Light Co.-$3,000,000 5-year 7 percent secured con vertible gold notes, due October 1, 1937, were authorized but not to be sold without approval of sale by the Commission. Portland General Electric Co.-$7,500,000 1-year 6 percent bank loan, due January 1, 1934, with a discount or commission of not more than 6 percent authorized to provide funds to meet the maturity of the company's $7,500,000 4 percent gold notes, due January 1, 1933. Pennsylvania Water & Power Co.-Authorized issuance of up to 21,493 shares of $5 cumulative preferred stock (no par value) to be offered to common stockholders at $97.50 per share; with authority to offer the unsubscribed portion to the public at $97.50 per share, with provision for a commission of not exceeding $2.25 per share and a fiscal agent fee of one half of 1 percent gross subscription proceeds. Northwestern Electric Co.-$148,100 first mortgage 20-year sinking fund gold bonds, due May 1, 1935, authorized in order to meet sinking-fund payment due May 1, 1933. This order was later rescinded. Northwestern Electric Co.-Authorization to issue $100,000 first mortgage 20-year sinking fund, gold bonds, due May 1, 1935, was denied because application was filed shortly before effective date of act giving Oregon commission jurisdiction over this issue, and because the public-utilities commissioner of Oregon requested the Federal Power Commission not to exercise jurisdiction in this matter. LEGAL DIVISION Presenting, as it does, the first statutory definition of the basis upon which utilities may earn a fair return, in contradistinction to the "fair-value" rule imposed by judicial decisions upon other regulatory bodies, the Federal Water Power Act prescribes a definite formula for determining the base in recapture, rate, and security regulation. In the absence of direct judicial precedent, judicial interpretation heretofore being directed to the formula of fair value, it has devolved upon the Legal Division to render advice to the Commission as to the correct principles applicable to the proper determination of the actual legitimate original cost so as to insure that such determinations shall be safely within the bounds of statutory and constitutional limitations. Other important activities of the Legal Division during the past fiscal year included formal and informal opinions for the Commission's guidance; assistance rendered the Attorney General in the presentation of cases in court, including the preparation of pleadings and briefs and oral argument; active participation in Commission hearings upon all matters arising under the act; and appearances before committees of Congress, upon request, for presentation of opinions and views with reference to pending legislation. Members of the Commission's Legal Division also represented the Commission in conferences with licensees, State officials, and other departments of the Government, including the Federal Emergency Administration of Public Works and the Departments of Interior and Agriculture. Among the important conferences have been those with the last two Departments named in an effort to find some means by which public lands of the United States, withdrawn for power purposes, might be put to other public uses prior to the time of actual power development without impairing or destroying such future power development. An important case in which the Commission's Legal Division actively participated during the past year was the Appalachian Electric Power Co. suit, commonly known as the "New River" case, which, at the time of the 1932 annual report, was pending in the United States District Court for the Western District of Virginia. This suit, brought as an action to remove a cloud from title to company's property, involved an attack upon the constitutionality of the recapture provisions of the Federal Water Power Act and upon the constitutional authority of the United States over historically navigable streams not presently used in navigation and over the headwaters of streams actually navigable. After two hearings, in which the general counsel and other members of the Legal Division assisted Hon. Huston Thompson, special assistant to the Attorney General, the district court held that the Commission had not exceeded its statutory or constitutional authority in taking action which, under the act, resulted in the establishment of Federal jurisdiction over the proposed project of the Appalachian Electric Power Co. on New River near Radford, Va. An appeal was taken by the company to the United States Circuit Court of Appeals for the Fourth Circuit where members of the Commission's staff again assisted. On October 3, 1933, the higher court upheld the Commission's contention that the district court was without jurisdiction over the defendants, and that in a proceeding to remove cloud from title the power company could not attack the constitutionality of a congressional statute, and remanded the case to the district court with direction to dismiss. A petition for rehearing filed by the company has been denied by the circuit court of appeals. Another court action of importance was filed by the Alabama Power Co. May 31, 1933, in the Supreme Court of the District of Columbia, assailing the Commission's authority under the Federal Water Power Act to determine the cost of the company's licensed project no. 82 on the Coosa River in Alabama and to require the licensee to set up its capital accounts in conformity to the Commission's determination. The company in its bill also challenges the Commission's denial of holding-company and service-company profits which a common ownership sought to write into the project cost by the device of intercorporate control, and the Commission's authority to refuse to permit the write-up of land costs through the device of the corporate fiction. The Commission's counsel, in cooperation with the United States attorney, argued the case orally and presented briefs on a motion to dismiss the bill. An early decision is anticipated. The Commission on November 12, 1932, asserted active jurisdiction over the security issues of companies subject to its authority in those States having no State regulatory agencies empowered to deal with the subject. The work of passing upon the various applications for approval of proposed issues, which were filed subsequent |