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EXHIBIT A.-Wholesale power costs of rural electric systems for year ending June 30, 1954, in order of decreasing cost (official REA figures)

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Although we are in a great coal-producing State where steam-generated power is very economical to produce, it is plainly evident that steam power is not comparable to hydro power in cost. At least, it is not evident from the rates charged to our cooperatives and to domestic and rural customers by private utilities in our State.

The Commission's recommendation that public power rates be increased through taxes and other charges to equal private power rates could only be suggested by a group totally unfamiliar with the long history of this problem or fully dedicated to profit for the few at the expense of the many.

At this time, three of our member systems are purchasing power from the North Penn Power Co. The rate includes a coal charge, and this charge is based on the price of coal at Binghamton, N. Y.-a plant of the New York State Electric & Gas Co. North Penn has imported power from New York State for many years and has always charged our cooperatives a rate based on coal costs at Binghamton, N. Y. It is our understanding that North Penn is now buying power from a plant of the Pennsylvania Electric Co. where coal cost about a half as much as at Binghamton, but our co-ops still pay for Binghamton coal. Here we have a situation where Pennsylvania farm people, and others as well, must pay excessive power rates, because it suits the utility owners best to ship coal from our State to New York, generate power there, and ship the power back to Pennsylvania. Of course, both companies are allowed to earn 6 percent on this inefficient power business.

We do not believe that the Federal power program which has done so much for so many areas of the Nation should be used as a means of justifying the costly operations of inefficient utility empires. Such recommendations cause us to doubt the worth of the entire effort of the Commission.

In 1937 the first cooperative in the State was refused wholesale power at any price, until an REA loan was obtained to build a generating plant Within hours after the loan was approved by REA, a contract was offered. For 10 years the original high rate prevailed until in 1947 the cooperatives formed the Allegheny Generation & Transmission Cooperative, which I represent. This was fought through the courts by the power companies, but the co-op's right to generate their own power was upheld. Almost before we started engineering work a rate reduction was offered. Foolishly, a number of the co-ops took the new rate,. leaving 4 co-ops to pay about 15 mills for power for another 6 years.

In 1951 the Allegheny cooperative applied to REA for a loan to serve just 3 of our systems as the first step in an integrated generating and transmission system to serve all of our 13 cooperatives. Again the power companies made an offer just low enough to stop our plans. That offer brought rates down for all of our systems and resulted in a saving to our 60,000 consumers of some $2 million in the 5-year term of the contract. However, we are still paying above the national average for power and we are at the mercy of an industry that wishes us no good.

We feel that this is inequitable in a State where cheap coal is abundant and where vast quantities of hydropower remain undeveloped. The hydropower is undeveloped because of opposition by coal interest, utilities, and railroads. While this selfish and shortsighted opposition has delayed hydro development, our coal regions have become distressed labor areas. At this time one large nuclear powerplant is being constructed in our State, another has been authorized, and vast quantities of natural gas are being piped into the State from the West. Since none of these developments threatens the high level of electric rates, as would public hydropower, there is not a word of opposition. The plight of the unemployed coal miner seems to be of no concern to a utility receiving large subsidies toward construction of a profit-making nuclear powerplant. That, they say, is progress. Evidently the economic growth of the South and West brought into being by the Federal water and power programs is not so considered.

We submit that full development of the hydropower in our great river systems and integration with our steam power is the best solution to the economic problem of our coal industry. As has been demonstrated so well in areas where Federal yardstick hydropower has been fully developed and sold at a low price, consumption has risen very rapidly, requiring high quantities of coal and other fuels for supplemental power generation. This helps not only the coal miners but the stockholders of the utlities as well. We see no justification for rapid tax amortization for steam powerplants where hydropower is not fully developed. Over $154 million in such certificates have been issued to utility companies in our State. The National Rural Electric Cooperative Association has estimated the subsidy to five private companies in our State at $195,403,066 over a 33-year period as a result of these certificates. We are informed that no part of this great subsidy need be returned to the retail customers of the companies.

We feel that the only way to properly and adequately develop the hydropower potential and to protect and develop our water resources is through Federal programs. Since 1937 we have watched a multi-State compact known as INCODEL struggle with the relatively small problem of development of the Delaware River Basin. To date we see no visible benefit to our State and no hydropower has been developed or even planned on the Delaware by INCODEL. Private utility lobbies, such as exist in our State capitals, have found it quite easy to see that such compacts develop no cheap power. The total cost to the State as a result of such obstruction is hard to determine. It can surely delay other vital needs such as flood control and water conservation with disastrous results.

Both the Federal License and the New York Power Authority Act under which power is being developed on the St. Lawrence River provide for power from the project to be made available to adjoining States. Our private companies show no interest in that great source of low-cost hydropower, even though they have imported steam power from New York State at a cost of about 1 cent per kilowatt-hour for many years. We are attempting to secure some of the St. Lawrence power, but find it most difficult to deal with an agency of a neighboring State. Failure of the Federal Government to spell out our right to the power and failure to provide for transmission of the power to our State border may well deny us any benefit from that resource.

These actual situations cause us to urge rejection of the Commission's recommendations to turn the Federal power program over to the States and to private interest.

We believe in the profit system and feel that there is no greater asset to a growing and profitable economy than low-cost electric power. We have observed that the competitive factor injected into the power supply and rate situation by public power development can play a great part in a growing economy.

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Utility commission regulation did not secure electric service for our rural areas nor is regulation securing for us the low-cost power that we need. The Federal REA program helped us secure service, and we feel that a dynamic and forward-looking Federal power program can help us secure the abundant low-cost power needed for our Pennsylvania farms where a family unit lives and also produces and processes many items for the retail food market. Our ability to produce, process, and market quality farm products to serve our great potential consumer demand is our best farm program. The Allegheny Cooperative is dedicated to the task of securing cheap energy from electric power to replace high cost physical labor on our farms. We need the help of a sound Federal power program.

We must strenuously object to the recommendation that generating and transmission loans made by REA be subject to Federal Power Commission approval. We feel sure that throughout various changes in politics and policies of our Federal Government we can expect reasonable and understanding treatment at the hands of REA. We could not hope for such treatment from the Federal Power Commission, where private utility influence will always be a factor, as well demonstrated by recent decisions on Dixon-Yates and Hells Canyon affecting rural electric cooperatives in great areas of the South and West.

As good citizens we cannot subscribe to the false economy of turning our great Federal water resource and conservation program over to the State, to compacts of States or to private enterprise. It is far too vital to the future of the Nation to do so. In this matter, as in the matter of the recommendations regarding REA we feel that the task force was not qualified to do a fair and competent study. Surely the great program of REA has developed personnel qualified to lend honest and valuable assistance, but so far as we can determine, such persons were not included on the task force.

It is interesting to us to read that the task force went to the trouble and expense of studying the British Electric Authority as well as Scandivanian public power systems, to make a case for payment of Federal taxes by Federal power installations. It is even more interesting to find that no mention, whatsoever, was made by the task force of the great public power developments in Canada. Such action on the part of the task force, to us seems something less than accidental. Apparent approval of such actions by the Commission takes away much of the value of the final report.

Ours is the only organized group in our State close enough to the electric power situation to make this statement and we appreciation the opportunity to do so in the public interest.

Mr. JONES. Our next witness is Mr. Earl E. Schaffer, mayor of the city of Bethlehem.

Mr. Schaffer, do you have a prepared statement?

Mr. SCHAFFER. I have not. I have some material which I would like to leave with the committee some tabulations-but no prepared statement.

Mr. JONES. You may proceed, Mr. Mayor.

STATEMENT OF HON. EARL E. SCHAFFER, MAYOR,

BETHLEHEM, PA.

Mr. SCHAFFER. Mr. Chairman, in compliance with the letter of the subcommittee, written by Staff Director William C. Wise under date of September 12, I will submit to the committee memorandums on the matters requested in the letter of the committee and will augment that and supplement it by saying that my full concern is only with a rather small portion of the report of the task force-was it?-and that particular portion relating to flood control, with particular reference to the recently affected area of the Delaware River and its tributaries.

Mr. LIPSCOMB. Excuse me, Mr. Chairman.

Mr. Mayor, did you mean you're speaking with respect to the Hoover Commission report? I notice you have it, not the task-force report.

Mr. SCHAFFER. This is the Hoover Commission report. I'm sorry, sir.

I might say in general on that matter that I think the cities in the Delaware River Basin and in the drainage areas covered by the tributaries of the Delaware are pretty much in accord with the outline given by Mr. Francis A. Pitkin before this committee yesterday, the chairman of INCODEL, in which he outlined four needs, as I see them in the morning press, as I read them in the morning press, the first being better flood- and hurricane-forecasting facilities and services; second, more research designed to determine the probable future pattern, frequency, and intensity of hurricanes, and to devise_possible measures, if any, for their control; third, more effective floodarea zoning, to prevent residential, industrial, and summer-camp development in areas subject to flood hazards; and, fourth, development and execution of river-basin development programs for the effective control and use of water resources.

I think those of us who have been affected in this immediate area can endorse the proposals advanced by Mr. Pitkin as representing pretty much the attitude of the cities in the area.

It does seem to us that it is quite as essential to preserve those things which we have and to remove the causes of repeated damage as it is to repeatedly spend terrific sums of money to restore the facilities which have been either lost or damaged.

I am sure that the Members of Congress and of this subcommittee are aware of a report of the Army engineers of 1933, known as the 308 report, which made adverse recommendations on the Delaware River Valley projects, but was, I understand, reviewed under a congressional resolution adopted about 1936, as a result of which borings were taken on the Delaware, the entire area surveyed by Army engineers, and plans laid for correcting the flood conditions in the Delaware River Basin and on its tributaries.

There are tremendous benefits to be realized, as we see them—first of all, a use and control of the Delaware water both for the purposes of acting as a water supply and, at the same time, for flood-control purposes. We have or might have had a very serious situation in the event of national emergency. I am of the opinion, and I believe am reliably informed, that for a period of a number of hours there was no vehicular communication anywhere between the States of Pennsylvania and New Jersey, except at the Camden-Philadelphia bridge. That might have been an almost fatal situation in the event of a national emergency. I believe, too, that the action on the Delaware River Basin would serve to cut down, if not reduce entirely, the tremendous expenditures that have been made by the Army, I believe, possibly the Navy, in the removal of siltation in the Delaware River Channel. I am informed that tremendous sums have been spent there in order to keep the channel deep enough to permit the entrance of the larger vessels.

It is the feeling of the cities of our area that steps should be taken by the State of Pennsylvania, perhaps, first of all, to resolve its difficulties with the States of New York, New Jersey, and Delaware, but when those difficulties are resolved they ought to be properly implemented by legislative action of their State lawmaking bodies, and that

then they should appeal for Federal assistance in the solution of the flood problems.

I do not presume that this committee at this time is particularly interested in surveying flood damage, or as far as it affects individual communities. I realize that your problem is a great deal broader than that. We do have definite views on the matter of flood control and the situation as it exists on the Delaware and on its tributaries.. We do feel that the load cannot be borne entirely by States and/or communities, but that Federal assistance will be required, and that there is sufficient national benefit from an economic angle to justify Federal participation in a program of that kind.

Mr. JONES. Thank you very much, Mr. Mayor.

Do you have any questions, Mr. Lipscomb?

Mr. LIPSCOMB. Mr. Mayor, did you have any comments to make on the Hoover Commission recommendations contained in this report? Mr. SCHAFFER. Only insofar, Mr. Lipscomb, as I have made them in connection with that section which deals primarily with flood control, which is our main and primary interest.

Mr. LIPSCOMB. The only recommendations in the flood-control section, of course, are well, there are two, actually-one on the transfer of the construction of dams from the Department of Agriculture to the Corps of Engineers, and then, of course, the recommendation 1, which contains several parts.

Mr. SCHAFFER. Is that in this?

Mr. LIPSCOMB. Yes, sir.

Mr. SCHAFFER. On page 74 and preceding?

Mr. LIPSCOMB. Yes, sir. I think your general comments generally covered some of your feelings on this.

Mr. SCHAFFER. I think, by and large, we can accept the methods proposed, methods of flood-control organization. I don't think there is any point for dispute there at all. Ours is, of course, primarily a problem of flood control and it is not to be confused with extensive land reclamation projects or with power projects, as such, in the Delaware River.

Mr. LIPSCOMB. Mr. Chairman, could we insert into the record the letter that was sent to the mayor inviting him to testify for this meeting?

Mr. JONES. Yes, sir. Without objection a copy of the letter-not your letter, but a copy of the letter-will be made a part of the record immediately following the testimony of Mayor Schaffer.

Any further questions?

Mr. LIPSCOMB. No, sir.

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Hon. EARL E. SCHAFFER,

Mayor, City of Bethlehem, Bethlehem, Pa.

SEPTEMBER 12, 1955.

DEAR MAYOR SCHAFFER: I appreciate very much the time you spared me 2 weeks ago to enable me to explain to you the functioning of our special subcommittee and to extend to you an invitation to testify before our subcommittee at a hearing to be held at Pocono Manor in Mount Pocono, Pa., on September 21-22. The committee would greatly appreciate hearing from you on the 22d.

As I explained to you, the function of our subcommittee is to make a study of the report of the Commission on Organization of the Executive Branch of the

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