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Governor Julius L. Meier's Administration

Governor's Miscellaneous Messages, 1931

Source: STATE OF OREGON GOVERNORS' MESSAGES TO LEGISLATURE

January 22, 1931

To the Honorable Speaker and Members of the House of Representatives.

Gentlemen:

In my message read to you at the opening of the present Legislative Session, I discussed the problem of public utility regulation in this state, advocated the abolition of the Public Service Commission and the substitution of a department or Commissioner of Public Utilities to consist of a single member who should be vested with the powers now exercised by the Public Service Commission, and additionally be charged with the specific duty of representing the public in all controversies affecting rates, valuations and service.

I also recommend the enactment of legislation that would extend the principle of home-rule, with adequate safeguards, to the cities and towns of this state, circumscribe and limit the right of one public utility corporation to contract with another where certain conditions existed and repeal the certificate of convenience and necessity law.

A bill has now been introduced by Representative Arthur W. Lawrence designed to carry these purposes into effect.

This bill proposes to abolish the Public Service Commission and to create the office of Public Utility Commissioner to take over its duties and powers with the additional specific function of appearing for and representing the patrons and users of any product or service of any public utility in all controversies affecting rates, valuations and service, and of exercising all of the power and jurisdiction of the office to protect them and the public generally form unreasonable charges, exactions and practices.

This bill also vests in the cities and towns of this state the power, to be exercised at their option, of contracting for or prescribing the service, facilities and products to be furnished by public utilities and the rates, charges and tolls that may be collected therefore. Adequate safeguards are thrown around the exercise of this power. Until it is exercised, the power of regulation remains vested in the Commissioner of Public Utilities.

Holding corporations, subsidiary corporations and various other corporate devices have been used in the past, and probably will continue to be used in the future, to confuse financial operations of public utilities and add to the difficulties of effective public utility regulation.

The proposed legislation will, in my opinion, go far towards solving these difficulties.

It provides that before any public utility doing business in this state shall enter into a contract with another corporation with reference to a number of enumerated matters, where the public utility owns a majority of the voting stock of the other contracting party, or a majority of the voting stock of the public utility is owned by the other contracting party, or a majority of the voting stock of both contracting parties is owned by a third corporation, or if any officer, or director of any of these corporations has any pecuniary interest in the contract, it must be first submitted to and approved by the Commissioner of Public Utilities before it may be lawfully entered into.

If, upon investigation, he shall find that the contract is not fair and reasonable and is contrary to the public interest, the contract may not be lawfully entered into unless such determination is vacated and set aside upon appeal to the courts.

Another very important provision is that the Public Utility Commissioner and his accountants shall have free access to all books, documents and records of both contracting parties which he may deem material to his investigation, and the failure or refusal of either of the parties to the proposed contract to give such access shall be prima facie evidence that such contract is unfair, unreasonable and contrary to public interest.

This will provide an effective means of getting into the books and records of holding and subsidiary corporations, dealing with a public utility doing business in this state, which contain the data from which it may be ascertained whether contracts or arrangements proposed to be entered into are unfair or unreasonable, or require the public utility to pay to some corporation out of its earning exorbitant sums for rentals, financing, engineering, advice, etc.

Provision is made for the repeal fo the so-called Certificate of Convenience and Necessity Act, under which the Public Service Commission may not bar all competition in the public utility field.

In its operation the law has merely promoted and protected monopoly and denied to cities and towns the right to say whether competing public utilities might operate within their limits.

Under the provisions of the proposed legislation I believe that more effective control and regulation of public utilities can be secured, many unsatisfactory conditions as to rates and service corrected, and the public interest promoted and its enactment is therefore recommended.

Respectfully yours,

Signed: Julius L. Meier,

Governor

January 22, 1931

To the Honorable President and Members of the State Senate,

Gentlemen:

In my inaugural message to the legislature, I pointed out the need for a sound constructive policy for the control, conservation and development of the water power resources of this state. It was a major issue in the late campaign, and, as I interpret the results of the general election, the people of the state have expressed themselves emphatically in favor of such policy.

In my message I also recommended the enactment of legislation and outlined my views as to its general character.

There has now been introduced in the Senate by Senator Sam H. Brown, Chairman of the Committee on Railroads and Utilities, a bill which embodies these views with regard to development by private persons and corporations, which , if enacted, would in my judgment go far to establish a sound, progressive and constructive policy under which the development of the water power resources of this state in the production of electrical energy by private capital may be carried on with safety to the investor and to the great benefit of the public.

The proposed legislation does not relate to or affect municipalities beyond insuring preference to the applications for the use of water, and providing that the Hydro-electric Commission created by the act may exercise such powers as may be conferred upon it by legislation that may be enacted providing for the creation of the people’s utility districts under the constitutional amendment adopted by the people at the last general election. For reasons which later in the message are pointed out, it may be well for you to seriously consider the need of additional legislation providing for some uniform system of control and regulation of municipal hydro-electric plants.

The bill is designed to retain in the State of Oregon for all time title to all waters used by private persons and concerns in the production of electricity, and provides a system by which they may, under sound and proper business safeguards, develop and utilize these water power resources until such time as projects constructed under the provision of the act may be taken over by the state or municipalities.

A short and simple method is provided by which the state or municipality may take over at any time any project constructed under the act.

Careful provision is made for the accurate ascertainments of the actual net investments in any project constructed.

The proposed law contemplates and looks forwards to the time when out of earnings the capital invested in any project constructed under the act shall be amortized and repaid, and the project become the property of the state, free form all outstanding rights and obligations.

There is no constitutional provision which authorizes the state to construct, acquire or operate a hydro-electric project. Consequently the proposed law does not deal with or authorized power development by the state. Should the state desire to go into power development, it will be necessary to amend the state constitution.

The bill creates a hydro-electric commission, to be composed of the Engineer and two other members, to be appointed by the Executive.

The Engineer should be a member because of his profession and his scientific knowledge, familiarity with water power data, and his official relation to the appropriation of waters for other purposes, such as irrigation, domestic and municipal. His service as a member of the commission would place at its disposal all of the data which the State Engineer now has with regard to the water power resources of the state, thus avoiding duplication of the work already done, and would insure harmonious co-operation between the commission and the other officers and boards which have to do with the appropriation of water.

It is proposed that the other two members of the commission serve without compensation, as it is not deemed necessary or expedient at this time to provide for salaried commissioners.

Men of high character, ability, possessing sound business judgment and experience, have manifested of late years a sympathetic interest in the necessity for and the problem of, conserving the water power resources of this state, and providing for some program that will lay a sure and broad foundation for the further growth and prosperity of our state, accelerated by cheap power.

The time may come, as the program develops, when salaried commissioners may be needed, but for the time being I am sure that men of the type needed to start the program on a sound, progressive and constructive basis can be found, who, through a sense of patriotic duty to the stat, will serve without compensation.

The proposed legislation deals only with the appropriation and use of water for power purposes. For the present I do not think it is necessary to make any change in the law with regard to the appropriation and use of water for irrigation, domestic and municipal purposes.

The proposed hydro-electric commission can work in close co-operation with the State Engineer, functioning in other capacities, and the Reclamation Commission.

Experience may later demonstrate the wisdom of putting all matters relating to the appropriation and use of water for any and every purpose under the jurisdiction of a single commission, but for the present I deem it wise to direct legislation towards a definite and constructive power program, and leave the consolidation of jurisdiction and powers to be determined in the light of acquired experience.

Without going further into detail, it may be briefly stated that under the proposed legislation the water power resources of the state developed by private capital would, for all time, remain the property of the state. Municipal and public development ownership would be encouraged and given preference, while on the other hand private capital invested in any project would be safeguarded and assured a fair and business-like treatment until the project in which it is invested might be taken over by the state or municipality. The state would receive reasonable compensation for the use of the waters in the generation of electricity, and thus its revenues augmented. The rates paid by the consumer would be based upon a fair return upon actual legitimate investment. The issuance of corporate stocks, bonds or other securities against any project in excess of the legitimate actual investment would be inhibited. Provision would be made for the amortization of the net investment during the life under the licensing system provided, and the speculation in an unsound promotion of water sites and water power resources would be guarded against.

Nature has endowed Oregon with an abundance of water power.

I firmly believe that the future growth and prosperity of this state are intimately bound up with the conservation and the development of our water power resources.

If we lay sound foundations now, adopt and adhere to wise and constructive policies, we will contribute immeasurably to the future growth and development of our state.

The proposed legislation in my judgment will go far toward accomplishing these purposes and its adopted is recommended.

The sentiment for public ownership of hydro-electric plants has grown rapidly during the past few years. A number of the cities and towns of this state now own and successfully operate power plants. Municipally owned power plants are very likely to grow rapidly in number during the next few years. Under the constitutional amendment adopted by the people at the last general election power district municipalities may be created, and no doubt legislation will be enacted during the present session of the legislative assembly providing for their creation.

Some proponents of municipal ownership seem to be opposed to any control and regulation by the state of the construction or operation of municipal plants , of the securities issued, the service rendered or the rates changed.

It seems to me, however, that the need for some such system of regulation will be at once apparent if we consider the situation of municipal projects in the absence of such regulation.

I am informed by the State Engineer that about 90 per cent of the available water power resources of he state are within National Reservations or the public lands belonging to the Federal Government. Most municipalities who desire to make future developments must go upon these reservations or public lands. As to all such projects whether constructed by the state, a municipality, or by private persons or corporations, the Federal Water Power Act by its terms is made applicable. Under this Federal Act the Federal Water Power Commission, among its other powers, defines what constitutes net investment, prescribes the method of keeping accounts, controls and supervises the issuance of securities for the financing of any project, regulates amortization reservations to be set up for repayment of the investment in the project, and prescribes the rates that may be charged. All these powers may be and are exercised by the Federal Water Power Commission until such time as the state within which the project is located provides a method of control and regulation by some state board or agency. In order to bring this matter clearly to your attention, I quote the following from Section 19 of the Federal Water Power Act:

“That in case of the development, transmission, or distribution, or use in public service of power by any licensee hereunder or by its customer engaged in public service, within a State which has not authorized and empowered a commission or other agency or agencies within said State to regulate and control the services to be rendered by such licensee or by its customer engaged in public service, or the rates and charges of payment therefore, or the amount or character of securities to be issued by any of said parties, it is agreed as a condition of such license that jurisdiction is hereby conferred upon the commission, upon complaint fo any person aggrieved or upon its own initiative, to exercise such regulation and control until such time as the State shall have provided a commission or other authority for such regulation and control: PROVIDED, That the jurisdiction of the commission shall cease and determine as to each specific matter of regulation and control prescribed in this section as soon as the State shall have provided a commission or other authority for the regulation and control of that specific matter.”

It therefore follows that unless and until the state provides a system for the control and regulation of the matters enumerated in the foregoing quote portion of the Federal Water Power Act the Federal Water Power Commission would exercise full control and jurisdiction with respect thereto.

It seems to me that if control and regulations concerning these matters is to be exercised with respect to municipal projects constructed, as most of them must be, on National Reservations and Federal public lands, control and regulations by the state would be so far preferable to that of the Federal Government and would not be so likely to delay and hamper development. I therefore recommend that in connection with the consideration of the legislation providing for the creation of power districts you give serious thought to the problem that I have outlined to you.

Very truly yours,

Signed: JULIUS L. MEIER,

Governor

Oregon Secretary of State • 136 State Capitol • Salem, OR 97310-0722
Phone: (503) 986-1523 • Fax: (503) 986-1616 • oregon.sos@state.or.us

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