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INTERSTATE HEARINGS. The Commission was represented by its rate expert and examiner in the Western Grain Rates case and also the Western Coal case, 80 I. C. C. 362, as well as in the Southern Oregon and Northern California Class Rates case, 74, I. C. C. 207.

In 58 I. C. C. 220, the Interstate Commerce Commission authorized increases in the rates of the Pullman Company for accommodation on sleeping and parlor cars 20 per cent. Subsequently the Order of United Commercial Travelers of America made complaint, in Docket 11567, to the Interstate Commerce Commission, alleging that not only the 20 per cent increase in Pullman fares but the surcharge of 50 per cent of the Pullman accommodation fare should not be made. Hearings were held and the case submitted. Later on, in Docket 14785, the Interstate Commerce Commission, on its own motion, started an investigation “In the matter of charges assessed passengers traveling in sleeping and parlor cars."

This investigation goes not only into the matter of sleeping car fares and charges, but also into the matter of the surcharge accruing to the rail lines.

At the request of the California Commission, the Interstate Commerce Commission set a hearing for San Francisco on July 10, at which appeared representatives of this Commission, who presented evidence concerning the situation in California which we claimed to be representative of the entire western situation.

It was shown that immediately after the surcharge was placed on Pullman fares August 26, 1920, the travel in Pullman cars, as well as in the parlor cars of the individual carriers, decreased. It was also shown that the amount paid by the Pullman Company to the rail carriers decreased. This case is still pending.

EXPRESS RATES. The express companies, during federal control, operated under government guaranty against loss, but were guaranteed no profits.

Transportation Act 1920 provides that if the American Railway Express Company within thirty days after March 1, 1920, make application to the Interstate Commerce Commission the latter was empowered to authorize a perpetuity of the consolidated company. This was done.

Transportation Act 1920 also turned back to private owners the management of the express company, with the guaranty period running until September 1, 1920, the same transition period as was made for the railroads. The government had suffered a deficit in the operation of the express to the extent of close to $100,000,000.

The express company, in March, 1920, made application to the Interstate Commerce Commission to increase its rates sufficient to offset the deficit and render a fair return.

The express company is a peculiar agency, depending, as it does, upon the rail carriers for the service it performs, and pays to the rail carriers a rental under contract, known as "Express Privilege.'

The Interstate Commerce Commission, recognizing the emergency, granted the express company an increase in rates sufficient to render a reasonable return, and in the meantime the express company made application to the various states petitioning for authority to increase

intrastate rates to harmonize with the interstate rates. The California Commission, after thorough investigation, discovered that the western part of the country was bearing more than its share of the burden of expense and when the express company came to the Railroad Commission requesting an increase in rates the California Commission required it to make an affirmative showing for the necessity of such increase, and upon the express company's failure to do so the California Commission denied an increase in state rates, whereupon the express company took the matter to the Interstate Commerce Commission alleging that the failure of the California Commission to increase state rates to harmonize with interstate rates created an interference with interstate commerce and was in violation of section 13 of subsection 4 of the Interstate Commerce Act. The case was heard on March 25, 1920, before an examiner of the Interstate Commerce Commission in San Francisco.

In April, 1922, the Interstate Commerce Commission requested that California, with other states, who had acted similarly, should come to Washington and make oral argument and such other representation in the pending case as might seem necessary. This was done on May 3 and 4, 1922. California was represented by Mr. Hugh Gordon, attorney for the Railroad Commission, who argued that the various horizontal increases in the express rates had entirely destroyed the formula and suggested that the Interstate Commerce Commission start an investigation upon its own motion into the rates, rules and regulations of the express companies throughout the United States. In July, 1922, the Commission announced the commencement of such a proceeding under I. C. C. Docket 13930.

As stated in a preceding paragraph, the Transportation Act provided for a cooperative plan between state and interstate regulatory bodies; a committee of Interstate Commerce Commissioners and state commissioners, members of the National Association of Railway and Utilities Commissioners, was appointed and a plan of cooperation inaugurated.

At the convention of the national association, in Detroit, on November 14, 1922, Chairman McChord of the Interstate Commerce Commission made the keynote speech and suggested that the Express Rates case then pending before the Interstate Commerce Commission was the most apt case with which to try out the newly formed cooperative plan and suggested that a committee of state commissioners be appointed, one commissioner representing each of the five express rate zones, and this committee to select an examiner from one of the state railroad commissions to sit with the Interstate Commerce Examiner in hearing the case, and the committee to finally sit in conference with the interstate commissioners in reaching a conclusion in the proceeding. The states' committee was appointed with the following members: Hon. W. C. Bliss of the Rhode Island Public Utilities Commission; Hon. Frank W. Shealy of the South Carolina Railroad Commission; Hon. H. G. Taylor, chairman Nebraska State Railway Commission; Hon. Amos A. Beits, Arizona Corporation Commission; Hon. E. V. Kuykendall, Director Department of Public Works, Olympia, Wash., and this committee selected Examiner J. C. Harraman of the California Railroad

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and Seal in hearing the case and making a report which, after submitting to the committee, would be finally submitted to the Interstate Commerce Commission en banc.

Hearings were held at Washington, D. C.; Atlanta, Ga.; Dallas, Texas; Phoenix, Ariz.; San Francisco, Cal.; Tacoma, Wash.; Helena, Mont.; Denver, Colo.; Omaha, Neb., and Chicago, Ill. Over 5000 pages of transcript of evidence was taken, several hundred exhibits filed and a horde of witnesses examined. After the case was submitted in Washington, on April 24, 1923, the examiners started their report. The Interstate Commission sent its examiners to San Francisco and with Examiner Harraman, of the California Commission, made their report and called a conference with the states commissioners at San Francisco on August 27. The states commissioners have tentatively approved the report of the examiners, which will be submitted to the Interstate Commission some time in October, 1923.

The California Commission is largely responsible for the opening of this case and in defense of its reasonable express rates the probability is that the decision of the Interstate Commerce Commission will be out before this report is in print.

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ENGINEERING DEPARTMENT. The volume of work handled by the Engineering Department during the last fiscal year has been as great as that during any preceding year in the Commission's history.

During the first half of the fiscal year the department was fully manned and was able to carry on the work expeditiously. During the second half of the fiscal year a number of important resignations occurred in the Engineering Department, including the chief engineer and, in view of the very material reduction in the appropriation of the Commission for the coming fiscal year, it was impossible to take on additional expert engineers to maintain the full force. As a result, at the close of the year, the department was experiencing difficulty in preventing delay in the handling of proceedings.

No change has occurred in the general methods applied to the work of the department in making valuations and service investigations, the determination of rates, or the handling of informal complaints. The former plan of handling much of the work by informal conference has been continued. This method has made possible the handling expeditiously of a great deal more work than could be done by formal hearings.

Some changes in the organization of the Engineering Department have been made during the fiscal year as a result of the changes in staff and reduction in force. The four main divisions are continued and, in addition, there is maintained in the department a general staff of men specializing on matters of valuation and operations, who handle work as assigned in connection with proceedings involving the various divisions. The organization has been more closely knit together so that, in so far as practicable, men may be shifted from one division's work to another as is needed. Even with the curtailment of staff being made effective, the Engineering Department maintains representatives in the Los Angeles office of the Commission to handle formal and informal complaints originating there. This arrangement has proved very satisfactory and is making available to the public greater service.

OUTSTANDING ACTIVITIES. The department's work in general is discussed in greater detail under the headings pertaining to the several divisions and attention will here be called only to the more important matters in which the Engineering Department has been actively engaged.

GAS AND ELECTRIC RATES. During the year the electric rate proceedings involving the Pacific Gas and Electric Company and Great Western Power Company have been decided and new rates fixed for these two utilities, serving approximately one-half of the State of California. In addition hearings have been held in connection with the redetermination of electric rates of the Southern California Edison Company, Western States Gas and Electric Company, Coast Counties Gas and Electric Company, and Midland Counties Public Service Corporation. With the completion of

these proceedings the Commission will have reconsidered the electric rates of practically all utilities serving in California since the high prices of 1919 and 1920. Gas rate proceedings have been limited to certain natural gas companies by reason of the fact that the automatic rate adjustment, effective heretofore, has made it unnecessary to give consideration in formal hearings to changes in rate for manufactured gas resulting from the reduction in the price of oil.

In connection with the supervision of electric utilities the Commission has, through its valuation engineers, cooperated with the Federal Power Commission in the consideration of the granting of permits and licenses for construction and in the determination of values of projects heretofore constructed and now under construction.

WATER UTILITIES. Work in connection with water utilities has not been so extensive as in previous years, owing in part to the fact that many of the utilities have previously appeared before the Commission and had rates adjusted and also to better conditions of water supply than heretofore existed. Considerable work has been done in connection with the inspection of dams constructed by public utilities. This work has increased owing to the greater activity in hydro-electric power development. During the year, however, thirty-seven appraisals were made involving water companies totaling in excess of $6,000,000.

TELEPHONE SERVICE PROBLEMS. The most difficult problem which is being handled by the telephone division of the Engineering Department is in connection with the telephone service conditions in southern California, and the work tending toward improving telephone service in general throughout the state. The unprecedented growth of California during the past two or three years has resulted in part in complaints of being unable to obtain telephone service and in the quality of service rendered. Every possible effort, with the limited staff available, is being exerted to bring about an improved telephone service condition.

GRADE CROSSING ELIMINATION. The transportation division has been active in a number of rate and service proceedings involving state regulation. A very material increase in applications for approval of grade crossings and for consideration of the cases of elimination of grade crossings have been received. This has apparently been due to the very great increase in productive activities and the intent on the part of the larger steam railroads to carry on extensive railroad programs.

The problem of grade crossing elimination is becoming more serious each year as the state develops and the population increases. It is unfortunate that the Commission finds itself, on account of financial curtailment, unable to continue the active work of a comprehensive determination of grade crossing eliminations.

SOUTHERN PACIFIC CENTRAL PACIFIC UNMERGER. As discussed more in detail under the subdivision dealing with the transportation division, the Commission, through its engineering and other departments, took an active part in the consideration before the

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