Thus, in the American pattern of economic development, the Federal Government has, historically, in all of its resource development programs, and especially with respect to electric power development, adopted a policy of utilizing its proprietary business activities to achieve the leavening effect of competition in an otherwise monopolistic controlled market without endangering existing investor-owned business enterprise. This is not an easy task because there are powerful forces, perhaps more evident today than ever before, which would remove the Government from all proprietary activities that in any way threaten complete monopoly control of the electric industry. We feel that the Federal power program has successfully provided a badly needed competitive factor in the electric industry. For instance, the Federal Government is generating only about 11.3 percent of our country's total power production, and it is not distributing that power but is selling it to local public agencies, private power companies, industries, electric cooperatives and to Federal agencies, such as air bases, etc. Actually the Federal Government itself is the biggest purchaser of electric power in the world. The Federal power program has developed over a 50-year period, and, as with any successful enterprise, the successful basic policy concepts and administrative practices required to effectuate them have become clearly established. It is these successful policy concepts and operating practices which are under attack by those who seek to destroy the Federal power program-and with it the rural electrification program in many areas. (About one-third of the consumer-owned rural electric systems obtain their power supply from the Federal dams.) What are these principles which have become axiomatic to the success of our Federal power program? (1) The Federal Government must maintain a rate of construction of feasible multiple-purpose river basin development projects adequate to insure that the total installed capacity of Federal electric plants remains an appreciable portion of the Nation's total installed capacity. The electric utility industry is one of the fastest growing in the Nation, and unless the Federal power generation also expands, it will soon cease to be of significance in view of the rapidly rising quantities of privately controlled capacity. (2) Power and energy from the Federal wholesale power system must be marketed in accordance with long-established preference principles of Federal power legislation. Preference simply means that the local people through their nonprofit municipal, power district and rural electric distribution systems are afforded a continuing first opportunity to purchase power produced at Federal projects. This principle of power marketing is in conformity with 100 years of resource development precedent. It is a policy parallel to that which governed the homesteading of western lands by individual homesteaders rather than by sale or virtual gifts to large corporate groups for profit purposes. It is the only effective policy which allows the small nonprofit distributors of electricity-and through them the individual ctiizens--to participate in the Federal program. And it is this participation of the small nonprofit groups which provides the competitive factor at the retail level. 6 Nearly every piece of major Federal power legislation enacted within the past 50 years has expressly provided for marketing first to consumer-owned electric systems and then to private utility companies. The commercial companies have complained bitterly of this provision of the law. Yet even under it operation they purchase approximately 20 percent of all energy generated at Federal dams whereas the rural electric systems purchase only 6 percent. Without preference, the rural electric systems would be able to purchase practically no Federal power because their financial resources and physical size prohibit construction by them of major transformation and transmission facilities in competition with commercial utility companies. (3) The Federal Government must construct and operate the high voltage transmission facilities necessary to integrate individual hydroelectric projects and to deliver appreciable portions of their output to the load centers of preference customers. Construction of Federal transmission facilities is necessary to secure adequate revenue from the sales of power to repay the cost of the projects and to assure that equitable quantities of energy can be sold by the Government to the so-called preference customers. In the absence of Federal transmission, the Government is faced with the problem of marketing power from isolated hy First public bodies, later broadened to include co-ops. droelectric plants, the output of which only the local commercial utility company is in a position to take. And the total output of firm power would be less. The company would thus enjoy the position of a monopoly purchaser and use its bargaining advantage to drive down the Federal revenue, simultaneously obtaining extremely low-cost power for itself and denying any benefits of the project to the preference customers entitled to them under law. (4) The Federal Government must in most instances, purchase or generate some thermal energy to supplement the hydroelectric capacity of the Federal system so that the maximum amounts of firm power can be made available for the benefit of preference customers in the area. Most hydroelectric generating stations are characteristically peaking plants. That is, their output is best used to meet the peak load of interconnected area networks. The Government can usually obtain the most lucrative revenue to repay the cost of a project by using the output of its projects as peaking capacity. However, the rural electric systems and other preference customers cannot use undiluted peaking capacity to meet their around-the-clock loads. They must have continuous energy. Federal power marketing agencies, therefore, have from the beginning faced the problem of having for sale power most valuable for its peaking characteristics while being under a legal mandate to sell to preference customers. Until very recently, most of the Federal power agencies have traded their peaking capacity to local commercial_utility companies in exchange for steam energy supplied by these companies. By intermingling mutually complementary hydro and steam energy, the Government agencies have been able to make large blocks of firm around-the-clock power available to preference customers. The general rule is that it is economical for the Government to purchase firming energy up to a point where the cost of its hydro capacity plus the cost of purchased firming energy is equal to the rate charged the preference customers for around-the-clock service. These then are the policies which have previously operated to promote a successful Federal power program: An adequate construction program to maintain total Federal capacity as an appreciable portion of total national capacity; a marketing preference to nonprofit distributor groups; construction by the Federal Government of transmission facilities to integrate Federal generating stations and deliver appreciable portions of their output to preference customers, and purchase of maximum economical amounts of firming energy. I have tried to show how, since the advent of the present administration, each of these principles of Federal power marketing has been appreciably modified by administrative action of the agencies of the executive branch responsible for Federal power activities. The investor-owned companies are demanding absolute monopoly. They are afraid of a little element of competition from low Federal wholesale power rates. They are afraid of a yardstick which will make available to the people and the Congress the basic facts concerning the costs and operating practices of utility system operation. The adminstration recommends no new starts so that the competitive effect of Federal power will soon be lost. The power companies desire to control at the bus bar the entire output of such Federal projects as exist or are under construction. The administration recommends bus bar sales to the power companies. The utility companies desire to stop the REA- G. and T. program and wreck the G. and T. cooperatives in existence, contrary to the will of Congress as expressed in many laws. The administration refuses to honor contracts for power exchange with the G. and T. cooperatives and pressures them to integrate with utility companies and destroy their integrity. The utility companies would deny the benefits of Federal power to preference customers. The administration refuses to request appropriations for the construction of transmission facilities to deliver these benefits to the preference customers. It seems to us that the revised power policy of the present administration indicates an attempt to undermine 50 years of an established successful resource development program and to divert the benefits of the existing program to investor-owned groups and to remold and modify the program as it emerges in the future to place it under the complete control of the same groups. Mr. Chairman, the question is what forces and factors have brought about these basic changes in Federal power policy; the changes that have converted an established policy of encouraging partnership between the Federal Government and its citizens, as represented by nonprofit groups, into a policy favoring exploitation of our natural resources, for profit purposes, by specialized interests. The new policy is one which will deny to the citizens the benefits of water resource development. We can only conclude that these policies espoused by the present administration are the result of the tremendous campaign of propaganda being waged with ratepayers' money by the major electric utility companies, both individually and through their well-financed national organizations. For instance, it is our best information that the National Association of Electric Companies distributed among its membership last winter a proposed bill specifically designed to completely codify our Federal power policy in accordance with the thinking of the privately owned utility industry groups. The proposed bill would: (1) Declare that it is the primary responsibility of local enterprise to supply electric power and energy needs. and that the United States, before constructing any facility for the generation of power and energy, must first allow local enterprise to build the project, or in the alternative, allow local groups to lease and operate the power facilities; (2) provide that contracts with local enterprise to carry out the provisions of (1) above would initially run as long as 40 years, and unless the contractor were in default, would run for an additional period up to 20 years; (3) would prevent the United States from in any way acquiring or developing any facility, the primary purpose of which is to generate electric power for disposition to the public; (4) would prevent the United States from purchasing the output of any such plant, project or dam for disposition to the public, except in an emergency situation; (5) would prevent the Federal Government from constructing any transmission facilities where local enterprise was willing to furnish such facilities; (6) would eliminate from the law the preference principles of Federal power marketing; (7) would confer upon State regulatory commissions or local regulatory commissions jurisdiction for determining appropriate rates for the distribution and resale of all electric power and energy sold by the United States. If this type of legislation were enacted by the Congress, the Federal power program would be at an end. The private utility companies would be in a position to dominate the development of our waterpower resources. It would abolish every one of the concepts that history has shown as necessary to a successful Federal power program. The parallelism between legislation of this type discussed by utility companies throughout the country, the recommendations of the Hoover Commission, and the policies and attitudes of the Federal power agencies under the present administration is indeed striking. We can only conclude the administration's power policies reflect the thinking of the utility companies, and that those in the executive branch responsible for the management of our water resource development program are imbued with the idea that the future economic and social development of our Nation must be based on greater and greater profits for the investor-owned utility systems. We feel that this subcommittee has the opportunity to discover the reasons for the present administration's Federal power policy which so closely expresses the desires of the utility industry and the Hoover Commission. SECTION IV Exhibits to accompany statement of Clyde T. Ellis, executive manager, National Rural Electric Cooperative Association, before the Task Force on Water Resources and Power of the Commission on Organization of the Executive Branch of the Government, New York, N. Y., June 14, 1954 EXHIBIT 1. URGING PUBLIC HEARINGS AND FAIR TREATMENT BY THE NEW HOOVER COMMISSION Whereas there has been formed a commission commonly known as the Hoover Commission to examine the administration of the agencies of the Federal Government and to make policy recommendations concerning the functions of the Federal Government, and there has been created a task force of this Commission on water and power to examine in particular the administration and policy of the agencies of the Federal Government concerned with power such as the Rural Electrification Administration, Department of the Interior, and the Army Corps of Engineers: Now, therefore, be it Resolved, That the Commission be urged to enlarge the size of the Task Force on Water and Power so as to provide for adequate representation of public and cooperative groups which at the present time are not represented on that task force; and be it further Resolved, That it is essential in a democratic government that the people have the right to present their views before a commission with such sweeping authority. Therefore we strongly urge that the Commission permit us sufficient time to present our views before the full Commission and also the Task Force on Water and Power (1954). EXHIBIT 2. COMPARISON OF GROSS INLAND CONSUMPTION OF COMMERCIAL SOURCES OF ENERGY, UNITED STATES AND OTHER AREAS, 19501 1 Gross inland consumption is the calculated consumption of fuel and power after deduction of fuels used in overseas bunkers. Commercial sources of energy consist of anthracite and bituminous coal, pitch coal, brown coal and lignite; petroleum, shale oil and natural gasoline; natural gas; and hydro and geothermal electric power. The noncommercial sources, largely or wholly used by producers, include peat, bagasse, fuel wood, lumber-mill wastes, dung, and other wood and agricultural wastes. Production and consumption of noncommercial sources of energy are estimated to have been 592 million metric tons in 1949, 285 million metric tons in Asia alone. 2 Per Capita figures for Australia and New Zealand only. NOTE.-United States consumed 46.6 percent of total world consumption. United States per capita consumption was over 6 times the world average. Source: United Nations. EXHIBIT 3. THE THREE WORLDS OF SPACE, PEOPLE, AND INDUSTRY *SOURCE: Zimmermann, Erich W., "World Resources and Industries" P. 97 EXHIBIT 4. URGING ABOLITION OF REA ALLOCATION FORMULA Whereas the formula in the existing act governing the allocation of REA loan funds has ceased to serve either an essential or useful purpose but has become, instead, an impediment to the simple and economical administration of this program: Now, therefore, be it Resolved, That we urge the Congress to delete the allocation formula from the act and stipulate that the allocation of loan funds be left to the discretion of the Administrator of REA (1953). 70818-56-pt. 5-13 |