STATEMENT OF HON. JOHN N. NASSIKAS, CHAIRMAN, FEDERAL POWER COMMISSION

Mr. NASSIKAS. Thank you, Mr. Chairman. I'll present my views on the bills under consideration and I will paraphrase my statement. You will forgive me for the voice I have today. It is just that I have a little cold.

I testified on Senate Joint Resolution 253 in hearings this past Wednesday. This bill would create a National Commission on Regulatory Reform for the purpose of evaluating the impact on the economy of the independent regulatory agencies. S. 4145 is the administration's proposal to achieve the same objectives. It was submitted to the Congress by the President following his joint address to the Congress on October 8.

As I indicated in the Senate Commerce Committee hearings, I support the creation of a National Commission. I believe such a commission can assist our efforts to resolve the Nation's severe economic difficulties. It is my view, however, that the National Commission should complete its work expeditiously, preferably as close as possible to the 1 year timeframe specified in S. 4145. Also, the creation of a National Commission on Regulatory Reform should not be used as a justification for further delay in the formulation of a national energy policy, or for that matter, for taking action on other important business.

And I might add parenthetically here, that while I oppose S. 770, the Consumers Information and Counsel Act, I do not think that action on that bill should be delayed pending some further study by the Regulatory Reform Commission. I think it ought to be voted up or down as fast as possible. Specifically, as I say in my statement, I am concerned that the opponents of the administration's proposed deregulation of new natural gas supplies could use the National Commission's investigation as an excuse for further delay of the proposal.

The President made it clear in the same message in which he proposed the National Commission that deregulation is his number one legislative priority in the energy sector. He did not intend his proposal for a National Commission, I am sure, to conflict in any way with congressional action on his substantive energy proposals.

It is also my view that the National Commission should take full advantage of the reorganizational studies, and I am sure they will, that have preceded it such as the recent work of the Ash Council as well as earlier studies going back to the Hoover studies. Needless delay should not be tolerated in reassembling data and information where these earlier studies are relevant.

Regarding membership, I certainly agree that it should be drawn. from the executive and legislative branches of Government as well as the private sector. I personally favor including representation from the independent regulatory agencies as provided in Senate Joint Resolution 253. I recognize that some may say that this would create some kind of a conflict in examining the structure and operations of an agency by the one who serves on it. I think we might equally say that an objective, fair-minded regulator might lean over backward to criticize his own agency for that very reason.

In any event, I think that the experience of the regulatory agencies should not be discounted, and I support the policy of Senate Joint Resolution 253 of including regulators.

The Chairman of the National Commission will have an important responsibility, of course, as most Chairman do, to shape and direct much of the Commission's work and will have the bulk of important administrative responsibility, including the selection of the staff personnel that will have the all important daily responsibilities of the work of the Commission.

For these reasons I believe the President should designate a chairman with the advice and consent of the Senate rather than the Commission electing its own Chairman as provided in Senate Joint Resolution 253. At the same time, the Vice Chairman could be chosen by the members of the National Commission, as set forth in the bill.

This is essentially the procedure followed at the FPC. Under section 1 of the Federal Power Act, it is provided that:

The Commission shall annually elect a vice chairman to act in the case of the absence or disability of the chairman or in case of a vacancy in the office of chairman.

As for the scope of the National Commission's proposed investigation, I believe the principal concerns of the Commission should be, one, an evaluation of the purposes for which the regulatory agencies were established and their relevancy today. As you know, the Federal Power Act has been both broadened and strenthened by various court. interpretations. The Federal Power Act goes back to the 1920's. There were some very major changes in the 1930's when the Holding Company Act was enacted, but I think that all of the statutes which established the regulatory agencies should be carefully examined to see whether they are in fact relevant today, with, of course, provisions as may be necessary.

Second, the National Commission should study the effectiveness o the regulatory agencies in discharging the duties they have been assigned; third, the economic costs and impact of regulation, fourth, the need for regulation in the future; and five, the structural and procedural needs of the regulatory process now and in the future, including the qualifications, tenure and number of regulators needed to serve the public interest and the industries or economic activities which should be regulated.

While both Senate Joint Resolution 253 and the administration's bill, S. 4145, would provide the kind of review that is needed, there are some important provisions in the administration's proposal that are not included in Senate Joint Resolution 253. First, section 3 (a) (iv) of S. 4145 provides that the National Commission shall include in its investigation an examination of State and local government regulatory activities which interact with the Federal independent regulatory system. The importance of this interaction cannot be overemphasized, especially in the public utility sector, where State public service commissions control the bulk of electric power rates and services nationwide. State regulatory commissions regulate about 85 percent of the kilowatt hours and over 90 percent of the electric power revenues. Natural gas distributors and intrastate pipelines are also regulated by State agencies while the interstate natural gas pipeline system is under FPC jurisdiction. Then we also have an anomaly

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really, in the natural gas production sector of the industry, where two-thirds of production is dedicated to the interstate market and is subject to our regulation, while one third of production is essentially unregulated as to price in the intrastate market. It is essential, therefore, that the National Commission should evaluate these interrelations.

Also, section 4 (c) of S. 4145 provides that "if the Commission receives of any witness or any Government agency" that sounds almost rhetorical, Senator, a good selection of literary language"receives of any witness or any governmental agency materials which have been submitted on a confidential basis, and the confidentiality is protected by statute, the material shall be held in confidence by the Commission." I favor this provision. It quite properly reflects current public policy precluding the disclosure of confidential information. However, confidentiality itself and the extent it should be accorded in the regulatory sector are important policy considerations which I think the Commission should review. I also assert as a principle which I endorse and which I try to follow in our regulation, in the absence of overriding reasons compelling the protection of proprietary information, public policy should support the fullest disclosure of information secured in the course of the regulatory process.

I am also in favor of the provision in section 6 of the administration bill which would include the Congress among those agencies which would be required to furnish information to the Commission on Regulatory Reform. I do not really think that it was intended to exclude Congress but I would suggest that that be clarified. They should have access to congressional data because the Congress has conducted some invaluable studies, some of which have been published, others which may be in process of being formulated, and I think that the Commission would benefit and the public interest would benefit by having access to that kind of information.

I will conclude my discussion of S. 4145 by suggesting simply that the National Environmental Policy Act (NEPA) has been ingrained as part of our law for about 5 years now and I think a specific mission of the Commission on Regulatory Reform, at least so far as the Federal Power Commission and other energy agencies are concerned, should be to fully evaluate how effective the statute is and what are the additional net energy costs of NEPA, as well as the delays being caused by NEPA. Overall, is the statute as totally beneficial as we may have thought 5 years ago, or should there be some revision of the statute and standards set forth which do not establish quite as broad a guideline as the written act?

Now, I will keep paraphrasing here. I will cover S. 704, the Regulatory Commissions' Independence Act. S. 704, as revised, has three provisions that may be summarized as follows:

First, budget estimates and requests shall be submitted concurrently to the Congress and the OMB, and while OMB and the independent commissions may consult on budget estimates and requests, OMB cannot change such estimates or requests; such estimates and requests must be submitted to the Congress by the President in his budget in the form that they were submitted to OMB by the independent commissions.

As I say, and as qualified on page 10, I support that. I supported it before this committee. I think it is a fine idea to enable the Congress to review the budget at least on an equal basis with the OMB, and to assist the Appropriations Committees and the agencies in establishing their budgetary limitations.

Second, legislative recommendations, testimony and comments on legislation must be submitted to Congress at the same time they are submitted to OMB. I favor that, as I say, on page 10; and then third, the independent regulatory commissions are authorized to conduct all their own civil litigation.

Pages 11 and 12, in a rather lengthy statement that I will not repeat, summarize our experience with the Solicitor General, and in all fairness, it has been excellent. The Solicitor General has been most helpful to our Commission. We have cooperated with him very well, and our record of appeals is really quite remarkable. I must say, the record speaks for itself. We win most of the time. I do not think I would like to change a winning combination. At the same time, I hasten to add, if the Congress wished us to have sole control over appeals, I think we could hire just a very few more lawyers. We have nine now in our appellate section, 80 to 90 cases pending at all times in the Federal court system, and it is an appellate load that I think is probably as large, or larger, than any independent regulatory agency, and we can handle it. But I would like to leave the structure as is.

With respect to S. 770, the Consumers Information and Counsel Act, I will not repeat what is in my statement. The Federal Power Commission is charged by the Congress with representing the consumer interest. Court after court has said, going back before the Hope case, that our predominant concern must be to protect the consumer interest. The theory is that the applicants, the utilities, that come before us are quite mature and sophisticated, and quite able to take care of themselves; we do get into adversary proceedings with utilities who come before us. Our staff is given rather liberal freedom to represent the interests that they believe, from the standpoint of the public interest, are not set forth in the litigation. The classic case that admonishes the FCP and other agencies is the famous Storm King case, involving a hydroelectric project, where the court said that we should not be umpires blandly calling balls and strikes, simply using the evidence that was presented before us, and then making a decision. They said that we have a public interest concern to protect, and we should present evidence on other public interest concerns through staff largely, or other experts, and then make our decision.

I was a consumer counsel at one time back in the fifties, representing the State of New Hampshire as people's counsel in all kinds of cases; I happen to think it was necessary there. Our budgetary limitations. were such that it was most difficult to, shall we say, combat increasing utility rates and that kind of thing. But we were able to manage somehow. I think it is better to give the resources to the agencies themselves than to create another consumer organization out here that will represent consumer interests before the agencies. I happen to think that we will get better results. I do not think we will get the prolonged delays that are bound to result from independent consumer representation.

And one final point. The Federal Power Commission that we know today is entirely different from that standpoint of representation before us than it was, let us say, 6 or 7 years ago. That is because the public interest firm, and the consumer movement have accelerated, and properly so, as has the environmental movement. The reason Í raise this is that these organizations do come into the Federal Power Commission and do argue. State commissions, most notably the New York commission and the California commission, are in every major case which we handle, and some minor cases also. Distributors also, as the Supreme Court said in a southern Louisiana case, affirmatively represent the consumer interests; that is, vis-a-vis producers. So that if a distributor is advocating a point of view before us, they are often advocating a different point of view than the producers. That is all I have to say there.

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At the same time, I do not fault the idea of an independent consumer counsel. I do not say that in all instances the Federal Power ComAt the same time, I do not fault the idea of an independent consumer counsel. I do not say that in all instances the Federal Power Commission has adequately represented the consumer interests. I know that is not so, because we do not have the resources, and I do not think any agency has the total capacity to represent the consumer interests to the degree that we would. But if we get the resources, I believe that my agency, and I am sure others, would represent the consumer interests very ably.

Thank you very much.

Senator METCALF. Thank you very much, Mr. Nassikas. I have long been an advocate of consumer counsel, as you well know, and I think, as you point out--and I am going to come back to this with some of the others but I think this is the time to bring this up. As you point out, especially in utility rates and regulation, we are largely in the area of State regulatory agencies, and State regulatory agencies have even less resources than the Federal Power Commission has. It has been my experience that the Commissioners almost retreat into a position of putting on black robes and donning wigs, and just sit back, as you suggested in the case you cited from New York-and call the balls and strikes. The overpowering and overwhelming influence of the utilities, with their special bar, is not offset by skilled consumer counsel.

I think that you have made-you personally have made strong advances toward the original concept that the regulatory agencies were supposed to represent the consumer, and the burden of proof is on the person coming in and advocating a change of rate increase or a power siting, or a change in regulations before the Securities and Exchange, or something with the Federal Trade Commission. But as you point out, Congress is as much at fault as anybody. We have been negligent in giving you the staff to take care of it, and the state legislatures have also been negligent. So somebody has to step in and represent the consumer with skill.

I often point out to my own experience when I was newly graduated from law school. I was an assistant attorney general assigned to represent the Montana Railroad and Public Service Commission, among other assignments-audit the auditor's office and the state school board, and so forth; and handle some of the appellate cases.