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grated public utility systems which, having regard for the nature and character of the locality served, can best promote and harmonize the interests of the public, the investor, and the consumer." Section 30 does not touch upon the subject of what nonutility businesses are "reasonably incidental, or economically necessary or appropriate to the operations of an integrated public utility system," or the subject of what combinations of integrated systems may be retained under common holding company control pursuant to the provisions of Clauses (A), (B), and (C) of Section 11 (b) (1).29 If there is any community of subject matter in the two sections, such community is clearly confined to the subject of "integrated public utility systems"; but this is the only one of the "general terms" referred to that has a statutory definition. Thus Section 30 could not have been intended to serve the function suggested by the respondents, as it does not contemplate studies related to the terms which (according to the respondents) are undefined, while it provides for studies which in part touch upon a term which is defined.

In this connection the respondents suggest that the definition of "integrated public utility system" in the House amendment did not contain sufficiently precise standards and that it was one of the matters to which Joseph P. Kennedy, former chairman of this Commission, objected in his letter to Senator Wheeler, read to the Senate July 9, 1935.30 That letter, however, shows beyond question that what was objected to in the House amendment was not the definition of this term, but the generality of the provision for retention of more than one integrated system by a holding company if the Commission found that that could be done "consistently with the public interest." The Committee of Conference met this objection by laying down what it considered "definite and concrete circumstances under which exception should be made to the form of one integrated system," for the guidance of both the Commission and the companies concerned, embodied in Clauses (A), (B), and (C) of Section 11 (b) (1). These "definite and concrete circumstances" are stated in terms comparable with those used in the definition set out in Section 2 (a) (29).

31

One of the principal reasons for committing the administration of a statute to an agency such as this Commission is to have the agency serve as a means (in the words of former Chief Justice Hughes) of "applying broad legislative principles that are essential

9 Since Section 30 was drafted long before Clauses (A), (B), and (C) were conceived, it is evident that there was never any intent to make Section 30 touch upon the subject matter of those clauses. Prior to the House amendment there was no provision for any holding company continuing in control of more than one integrated system, and even that was permitted only as an exception to the program of emancipating operating utilitles from all holding company control.

so 79 Cong. Rec. 10838.

31 Conference Report (supra) at p. 70.

to the protection of the community, and of every useful activity affected, to the intricate situations created by expanding enterprise." 32 In the normal statutory pattern, legislative principles are applied by the agency through the media of rules, regulations, or orders, and that is the pattern of the Holding Company Act.33 There is nothing whatever in the Act to indicate that any of its terms, whether specially defined or not, should be interpreted or applied by us in the course of ex parte studies by means of "recommendations" of an informal character.

So in proceedings under Section 11 (b) (1) the definition of "integrated public utility system" set forth in Section 2 (a) (29) is specifically applied by this Commission after a formal hearing, in which all pertinent facts must be examined and weighed, and in which the companies involved have the right to present evidence and argument. In the same way specific application of the other general terms in 11 (b) (1) must be given by us, after hearing evidence on the precise factual situations at hand and the respondents' contentions as to their significance under the law.

In arguing that administrative interpretations of these general terms must be formulated on the basis of general and ex parte studies, the respondents are indeed taking an anomalous position. Where there is to be specific administrative application of legislative principles, what better forum could be provided for such purpose than the hearings required by Section 11 (b) (1) itself? In such hearings, as distinguished from ex parte studies, the rights of the respondents are safeguarded by Constitutional requirements concerning administrative hearings, and by the right to obtain judicial review of any findings and order we may enter at the conclusion thereof. Certainly there could be no judicial review of any conclusions we might reach in an ex parte study under Section 30; but Congress clearly intended that there should be such review of our orders under Section 11 (b), for it expressly provided therefor in the last sentence of that section rather than leave any doubts as to the applicability of the general provisions for review contained in Section 24.

It could not have been the intention of Congress that we must finish or even make substantial progress with our comprehensive utility studies and recommendations before making any determination as to the meaning of the term "integrated public utility system." In passing on applications for approval of acquisitions under Section 10, we are required to determine, among other things, whether a proposed

Some Aspects of Development of American Law (1916), 39 Rep. N. Y. State Bar AL 266, 269-270.

See, for example, the definitions of "electric utility company," "gas utility compar "holding company," "subsidiary company," and "affiliate," in Section 2 (a) of the aS Status in the border zones is determined by order after hearing under these deficios

acquisition of utility assets or securities "will serve the public interest by tending towards the economical and efficient development of an integrated public utility system" (Section 10 (c) (2)). And Section 11 (e), requiring our application of the same statutory term, contemplates the filing of voluntary plans "at any time after January 1, 1936." If the respondents' contention were sound with respect to proceedings under Section 11 (b), we should be equally obliged to complete elaborate utility studies of an industry-wide character before granting any application under Section 10 or approving any plan under Section 11 (e); but of course, respondents have never urged us to carry the logic of their argument as far as that. In fact, Commonwealth itself is among those who have filed applications for our approval of acquisitions and requested us to make the finding required by Section 10 (c) (2), without mentioning the utility studies as a possible condition precedent. See, e. g., Consumers Power Company, The Commonwealth & Southern Corporation, 4 S. E. C. 228 (1938); Pennsylvania Power Company, The Commonwealth & Southern Corporation, 4 S. E. C. 217 (1938).

34

If study of the situation in advance of hearings was required of us, clearly our examination of the respondents' particular holding company system under Section 11 (a) met that requirement and was more to the point than would be our studies, under Section 30, of the "sizes, types, and locations" of public utility companies generally. The respondents cannot claim that they lack definite notice of the issues to be tried in this proceeding. Although we thought our original notice sufficiently specific, we amplified it, at the respondents' request, by furnishing a statement of our tentative views on the issues involved.35

As we have seen, the scope and purpose of Section 30 differ radically from those of the present Section 11. Section 30 does not deal with holding companies, but with operating utilities, their sizes, territories, and operations. The abandonment of the earlier legislative program

4 Section 11 (a) of the final enactment reads as follows:

It shall be the duty of the Commission to examine the corporate structure of every registered holding company and subsidiary company thereof, the relationships among the companies in the holding company system of every such company and the character of the interests thereof and the properties owned or controlled thereby to determine the extent to which the corporate structure of such holding company system and the companies therein may be simplified, unnecessary complexities therein eliminated, voting power fairly and equitably distributed among the holders of securities thereof, and the properties and business thereof confined to those necessary or appropriate to the operations of an integrated public utility system.

35 Holding Company Act Release No. 2626, March 12, 1941. Cf. The Commonwealth a Southern Corporation, et al., 7 S. E. C. 369 (1940). See also Report of the Public Utilities Division on The Commonwealth & Southern Corporation and its Subsidiary Companies, March 10, 1941.

for merging or consolidating related operating companies among themselves and with their holding companies emphasizes the irrelevancy of our formulating ideals as to the size, character, and operations of operating companies in relation to the program finally adopted. Our recommendations as to such an ideal would be of little if any assistance in reaching a determination under the present Section 11 (b) (1). Our task under this section is to receive evidence on the properties of the respondents as they exist and the operations thereof, and on that basis to determine what steps they must take in order to limit the operations of the holding company system to those meeting the minimum standards of Section 11 (b) (1)—not to evolve ideal companies meeting the standards of Section 30.

Moreover, even under the earlier bills it does not appear to have been the intention of Congress that completion of the utility studies and recommendations should, as a matter of law, be prerequisite to the conduct of proceedings under Section 11. The former Section 11 provided a 5-year period for rearrangements and simplification, at the end of which period each registered holding company was to be made to cease to be a holding company. Recommendations based on the utility studies were to be made public "from time to time"-not necessarily within the 5-year period, but without limit. The very nature of the task assigned by the first part of Section 30 indicates that it is a continuing duty, as it calls for no final determinations and no ultimate recommendations. Technological changes in the industry at any time in the future might well serve as a basis for further and different recommendations.

Since the task is one which can never be deemed completely fulfilled, completion cannot be a necessary prerequisite to action under any part of the Act. It follows that neither can a partial fulfillment of the task, for there is no way for the respondents or for us to determine at what precise point a partial fulfillment would satisfy such condition precedent under the respondents' interpretation of Section 30. Their argument gives no meaning or effect to the words "from time to time" in that section, or to the contrast between that direction and the mandate of Section 11 (b) to take action "as soon as practicable after January 1, 1938." In further contrast to the direction to pub lish recommendations "from time to time," the second part of Sen 30 itself directed us to make the investment trust study and rely m thereon to Congress "on or before January 4, 1937." If the deci Congress was to set out clearly the relative degrees of urgency w it attached to these three mandates, we do not see how a more ex means of doing so could have been chosen.

Congress, of course, must have had some reason for placing Sum

30 in the final enactment after the original relationship of that section to the integration program had been eliminated. The principal reasons are not difficult to find. As to the second part of Section 30, calling for the investment trust study, the Investment Company Act of 1940 and the Investment Advisers Act of 1940 furnish the answer. As to the utility studies and recommendations, there was always a reason unconnected with the integration program which was sufficient in and of itself: it was, as Congressman Rayburn announced at an early stage in the history of the Act, that such studies and recommendations should serve "as a basis for future action by operating companies in organizing themselves so as to best serve the public.' The juxtaposition of the two parts of Section 30 would also indicate that the utility studies, like the investment trust study, were intended to provide a basis for possible future legislation-in this instance legislation affecting operating utility companies; and other sections of the Act, recognizing the need of state commissions for federal assistance in obtaining information as a basis for regulatory action,37 suggest that the utility studies and recommendations under Section 30 might also serve to fill such need.

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We conclude, therefore, that fulfillment of the requirements of Section 30 is not a legal prerequisite to the institution of a proceeding under Section 11 (b) (1) with respect to a particular holding company system.

2. AS A MATTER OF PRACTICAL ADMINISTRATION

What we have already said with regard to the functions of Sections 30 and 11 (b) (1), respectively, demonstrates how slight the possible relationship would be between utility studies and recommendations with respect to the entire industry on the one hand, and Section 11 proceedings with respect to specific systems on the other. What we have said is not, however, to be taken as an expression of unwillingness on our part to cooperate to the fullest possible extent with these or any other respondents in Section 11 (b) (1) proceedings in any endeavor, voluntary or otherwise, to rearrange their properties and simplify their structures so as to comply with Section 11 (b). Each system presents its own peculiar problems, not only within itself, but also in relation to surrounding territories and neighboring utilities. As the respondents point out, not all of these problems fall squarely within. the scope of Section 11 (b), but as they are well aware, such advice and assistance as we can render are at all times available to them.

We have already indicated that the foregoing opinion as to the legal aspect of the question is not to imply that we have done nothing in

20 See footnote 11 and text, supra.

Compare Sections 13 (b), (d) and (g), and 18 (a) and (b). See also Sections 1 (a) (5) and 1 (b) (2) and (3).

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