Orleans and Louisiana; that only a very small amount of gas was supplied to Louisiana from the lines of New Orleans and in that case New Orleans was acting merely as a conduit for the supplier of the gas; that there were separate property bases; that the two properties were subject to different regulation, Louisiana being subject to the Louisiana Public Service Commission, and New Orleans being subject to the City of New Orleans; that there was no common operation or common planning with respect to the separate properties, and that in the final analysis the alleged integration existed only by reason of the facts that the common stocks of both companies were owned by Middle South; that both companies purchased their gas primarily from United Gas Pipe Line Company; and that there was a geographic homogeneity in the area served. It is our conclusion that respondent has failed to establish that separation of the Louisiana gas properties would result in the loss of substantial economies (contemplated by Clause (A) of Section 11 (b) (1)), such as to justify the retention of an additional system, and we further conclude that the gas properties cannot be retained together with the electric properties of Louisiana. Our order to be entered herein will, therefore, direct Louisiana and Middle South to divest themselves of their interests in the Louisiana gas properties. NEW ORLEANS As previously indicated, New Orleans conducts electric, gas and transportation operations in the City of New Orleans. For the twelve months ended December 31, 1952, its operating revenues aggregated $39,185,905, divided as follows: electricity-$22,122,180; gas-$8,108,960; transportation $8,954,765. In the same period, the consolidated operating revenues of the Middle South system were $116,055,327. Electric operations of New Orleans for this period accounted for approximately 19% of the consolidated operating revenues while the gas operating revenues were aproximately 7%, and the transportation operating revenues were approximately 7.7% of the consolidated revenues. New Orleans' operations of the electric, gas, and transportation services are conducted pursuant to indeterminate permits granted by ordinances of the Commission Council of the City of New Orleans, supplementary to an ordinance adopted in 1922 commonly known as the "Settlement Ordinance". That Ordinance provides, among other things, for the establishment and continuing determination of the Company's rate base, the rate of return on the rate base, and the rates and fares to produce such return. It also provides that the City have a perpetual option to purchase parts or all of the property, at the rate base values. The Settlement Ordinance, as supplemented, limits dividends that may be paid on the common stock of New Orleans to an amount not to exceed $2.25 per share per annum, and provides for an allowable rate of return on the rate base of 72% per annum. The record indicates that at no time has the Company earned a return as high as 72% and that as a matter of practice the amount which they may earn is limited to the $2.25 per share which the Company is allowed to pay out as dividends plus a small additional amount. The Commission Council of the City of New Orleans exercises complete regulatory jurisdiction over the Company with respect to rates, accounting, property acquisitions, and issuance of securities. The record contains an affidavit of the Commissioner of Public Utilities of the City of New Orleans which sets forth a statement of policy of the City concurred in by the Mayor of New Orleans and all the members of the Commission Council of the City. That statement of policy sets forth that the unified operation of electric, gas and transportation operations by New Orleans is the result of careful planning on the part of the City and is designed "to foster and safeguard the benefits which this City acquired for itself in connection with the 1922 reorganization." 18 That statement of policy also sets forth that the City "has certain well defined legal rights to have the operations continue as they have" and that "For both legal and practical reasons therefor, the City will firmly enforce its rights and protect the benefits which it enjoys under the present local franchise situation." The Commissioner of Public Utilities of the City of New Orleans testified that not only the regulatory officials but also the public of the City recognized that the transportation operations of New Orleans were subsidized by the other properties. He stated that he had seen to it that there was publicity to acquaint the citizens of New Orleans with the fact of subsidization so that they would know that the 7¢ transportation fare in the City of New Orleans was possible only in this way and that the electric and gas consumers were paying for it. In view of the expressed policy of the City with respect to its strong desire for continued unified operations and in view of the New Orleans franchise situation, we do not propose at this time to take any action with respect to the gas and transportation properties of New Orleans under the standards of Section 11 (b) (1) of the Act. We have already found that the electric operations constitute part of the integrated system of Middle South. 18 The present New Orleans Company emerged from a reorganization of separate companies conducting utility operations in the City of New Orleans. OTHER PROPERTIES Arkansas owns certain steam properties, and Louisiana and Mississippi own certain water properties. These properties have an aggregate carrying value of less than $500,000. It is clear that these other properties cannot constitute additional businesses under the standards of the Act and no effort has been made to justify their retention. In fact, the record indicates that efforts are being made to dispose of them. ACTION TO BE TAKEN We have heretofore concluded that the electric system of Middle South constitutes a unified and integrated utility system and that it constitutes the principal system of Middle South. We have also indicated that the gas properties of Louisiana, the steam business of Arkansas and the water properties of Louisiana and Mississippi cannot be retained under the standards of Section 11 (b) (1). An appropriate order will issue in accordance with this Opinion and releasing jurisdiction heretofore reserved in the Electric proceedings. By the Commission (Commissioners McEntire, Rowen, and Adams), Chairman Cook not participating. |