(b) That projects have their own steam standby and reserve facilities where necessary for independent operation on an economical and efficient basis;

(c) That facilities be designed and installed to provide the type of power and service required by public agencies and cooperatives;

(d) That transmission outlets to existing and potential wholesale markets be adequate to deliver power to every preferred customer within the region; (e) That such outlets be owned and controlled by the Federal Government unless privately owned facilities were made available upon terms which assured full accomplishment of the "basic objects";

(f) That active assistance, from the very beginning of the planning and authorization of a project, be given to the organization of public agencies and cooperatives for the distribution of power in each project area. The directive specifically stated that the objectives were not attained by merely waiting for a preferred customer to come forward and offer to purchase the power.

It provided (a) that public agencies and cooperatives be encouraged to build diversified loads and markets and neither the operations nor the markets of these agencies or of the Government facilities be restricted by contracts or operating agreements which might serve to limit the widespread use of the power from the Federal project; and (b) that no contracts be made that operated to foreclose public agencies and cooperatives from obtaining power from the Government project. Contracts with these organizations were to recognize their preferential character and assure them full opportunity to secure the benefits of Federal power. Contracts with privately owned companies were to be limited in time and contain provisions for the cancellation or modification by the Government as necessary to insure preference to public agencies and cooperatives. When the preference policy was first adopted there was very little difference between the tax burdens of privately owned and publicly owned utilities, and it made relatively much less difference if taxes were not considered as an element of cost in fixing rates.

Today, however, the cost of public power can be 35 percent to 40 percent lower than the cost of privately sold power if corporation taxes and taxes on the income from securities necessary to finance these projects are not taken into account. So we have an entirely different tax situation than when the preference policy was initiated and its impact on power costs and rates cannot be ignored.

Starting in 1946 when all of the principal Federal projects were in operation, the preference customers took 38.3 percent of the power available to non-Federal users. This ratio steadily increased until in 1953 it was 52.2 percent. Meanwhile the privately owned utilities in 1946 received 33.3 percent of all the salable power from these projects and in 1953, 18.5 percent, or only about one-half the relative amount received in the earlier year. The Federal industrial customers, mostly electro-metallurgical and electro-chemical, received relatively the same amount in each year (28.4 percent as against 29.3 percent).

The trend toward increasing the supply to preference users has been accelerated in recent years. No firm power whatsoever will be available to privately owned utilities supplied by the Bonneville Administration in the Pacific Northwest after 1960 unless Congress authorizes additional projects, whereas in 1953 privately owned utilities received 33.3 percent of all power generated. Until recently, the Central Valley project sold 95 percent of its output to California private utilities, but from now on practically all salable firm power will be delivered to preference customers, leaving the California investor-financed utilities with only the secondary power which such preference customers do not elect to take.

The preference policy in effect makes any consumer of a nonpublicly owned utility a "second-class citizen" so far as Federal power is concerned. The company from which he buys power is denied Federal power. His neighbor across

the road or in the next town served by a cooperative or a municipality gets power for less than true cost and he, in his electric rate, pays local, State, and Federal taxes in a greater amount because his neighbor pays nothing toward these ends. A dramatic illustration of all this occurs in the Pacific Northwest. In 1953 power users in the State of Washington, in which there are numerous preference customers, received almost 85 percent of the Federal power produced by the Columbia River projects and power users in the State of Oregon, where private power enterprise in electric distribution is more prevalent, received less than 15 percent.

Investor-financed power companies by their tax payments are forced to subsidize competing public power. Approximately 80 percent of our people obtain their power from the investor-financed companies, and they in large measure subsidize the 20 percent who are served by public power.

Thus did our Government openly and brazenly reject any pretense of conforming to our traditional system of private enterprise in the field of electric power generation and distribution; instead, it charted a bold and ruthless course which could lead only to complete socialization of this basic industry.

The construction of Federal power projects as a yardstick to control the rates charged by investor-owned utilities is clearly a phony. By virtue of the various subsidies, particularly the failure to include taxes, and because of low interest rates, the yardstick proposed by public power has the equivalent of something in the neighborhood of 24 to 27 inches instead of 36.

Public power advocates allege that this short-change yardstick has forced down power rates in the areas adjoining that supplied by TVA. They will not admit that the national rate trend has been downward for over 35 years, and that rates in adjoining areas reflect not so much an impact of the TVA subsidized rates as they do the improved regulatory techniques, the successful administration of regulations instituted by the States and the Federal Government over both operations and investments, and, most importantly, technological improvements stimulated in part by the desire to expand consumption and in part by the competition of other sources of energy: coal, oil, and gas.

There are other effects of the Federal public power program which I could discuss in detail as, for example, that the only areas in the United States which face a current or prospective power shortage are the two now served predominantly by public power, the Tennessee and Columbia River Basins. This is a result to be expected when expansion of capacity is wholly dependent upon legislative action whose motivation is more political than economic.

The drive for public power has developed a dubious ethical standard in the Federal agencies to the extent that they have frequently described projects as measures for flood control, reclamation development, or navigation improvement when the real purpose is to produce electric power. The proposed Bridge Canyon project in Arizona and the Hells Canyon project in Idaho could be related to reclamation only because, as a bookkeeping procedure, some of the receipts from power could be shown to subsidize nearby reclamation improvement. The Chief Joseph Dam on the Columbia River, a power project exclusively, was authorized as a river and harbor improvement project.

It would be logical to assume that the Federal Government, having built its hydroelectric powerplants as incidental to the main objectives of improving navigation, preventing floods, or irrigating land, would have contracted to sell power only up to the capacity of the hydroelectric plants and on the basis that there would be variations in the output resulting from fluctuations in streamflow, This, however, has not happened. The TVA, for instance, under its "sole supplier" clause requires all of its regular utility customers to take their entire supply from its facilities. This policy, in effect, creates an obligation on TVA to build all the generating facilities ever needed in an 80,000-square mile area which it now supplies. The result is that TVA has built large steam plants and extensive transmission systems and its distributors have no generating facilities of their own.

This practice is justified on the alleged grounds of protecting the Federal investment. But in fact it is not concerned with existing investment; it relates to future supply. Much the same undertaking of a permanent utility obligation has occurred in the Pacific Northwest under the Department of the Interior's administrative assumptions.

The REA's which the public power proponents charge would be "strangled to death" without an assured supply of power from Federal agencies, in 1953 actually took over half of their energy from investor-financed projects. Incidentally, the REA's paid about 20 percent less for the energy they obtained from investor-financed utilities than they did for the energy received from nonFederal public sources.

Just as with many other functions which the Federal Government has undertaken, the more the Government does, the less the people will do for themselves. The danger was well summarized a short while ago by an editorial writer who said, "Gulliver awake would have had little trouble with the Lilliputian threads. But in the end enough of them cost Gulliver asleep his freedom."

It is just as true today as it was a century and a half ago, that the condition under which God has given liberty to men is eternal vigilance. Whether the demagogues advocating public power are or are not socialists is not important. What is important is that the price we pay for public power must be measured by the advance of socialism in our midst and our concurrent loss of liberty.

This situation which I have discussed and all the examples I have cited have been, so far as I know, within the law. There is nothing illegal involved. Obviously, however, every fact points to a serious moral deterioration. There are many who believe the welfare state is a symbol of Christian morality and righteousness. They believe that public power at reduced prices is a blessing conferred upon us by benevolent government. They overlook the fact that every benefit, if it can be so called, resulting from such action, is accomplished only by depriving nonbeneficiaries of their rightful property.

The fact that the end product might be a better material state for some few individuals can never justify the immoral means by which it is attained. The perversion of the law to legalize the acts does not make them morally sound. There is no right way to do a wrong thing.

Frequently during recent years there have come to light examples of low ethical standards of some public servants. This is symptomatic of the disease which, if not corrected, could destroy our way of life.

It is inevitable that areas served by public power will suffer all of the disadvantages of unregulated monopoly. We need only cite the Tennessee Valley, where power rates and contractual requirements are arbitrarily imposed on helpless consumers by an Authority from whose decisions there is no recourse short of congressional action.

What happens when Government enters the power field would happen in any other industry which the Federal Government decides to enter. The case made by public power proponents for cheap power could be made in exactly the same way for any other industrial product-for cheap steel, or cheap automobiles, or even cheap food.

I suppose you are wondering what the foregoing adds up to, in terms of personal action. I believe the answer is that each one of us who believes in the fundamental freedoms guaranteed to the individual by our Declaration of Independence and our Constitution in a government of narrowly restricted powers should lose no opportunity to make his views known in the hope that, if enough of us take such action, these vital matters will be brought to the attention of the thinking public. Above all, I believe we should take a firm and uncompromising stand in support of our views.

I am sure you will find among the Hoover Commission recommendations some with which you are not in agreement and which you would not wish to support. This is inevitable. The Hoover Commission was a bipartisan organization, designed to represent both political parties. I believe it is fair to state that, in many instances, the Commission's recommendations represent compromises between sound economic judgments and political expediencies. When such compromises are made, the end result is usually not entirely satisfactory to either party. Some of the Commission recommendations with respect to the work of our task force are such that I cannot support them. On the other hand, I am sure that the total of the Hoover Commission recommendations, if made effective, would constitute a great advantage to the Nation.

It is my firm intention to do all in my power to mobilize effective public support for those recommendations of the Hoover Commission with which I agree. If this were done by all citizens, the result would be reflected in remedial action by the Congress. I, therefore, urge you to consider the recommendations carefully and to support those which the dictates of your conscience indicate are acceptable to you.

Several months ago there was a Meet the Press television program featuring an interview between members of the press and two prominent figures of the investor-owned power industry who were then much in the public eye. In the course of the interview a member of the press panel posed this question: "What do you think of public power?" And the answer came back something like this: "Public power is all right. There is a place for public power and a place for private power. I have no quarrel with public power. I get along fine with public power."

I was shocked by this statement. Why should anyone in the investor-owned power business be so magnanimous toward public power? Certainly it could not be because public power proponents had been correspondingly kind and

gentle in their judgments, statements, and actions involving private power. Could it be that the speaker was motivated by a policy of appeasement? If so, events since that television love feast could hardly be interpreted as justifying the kindliness with which this "champion of free enterprise" handled the public-power question.

If you should ask me, "What do you think of public power in the light of your task force studies?" I would answer as follows:

I believe that all public power which is subsidized by tax funds, whether on the Federal, State, or local level, is economically and morally wrong. However, where a local community, or even a State, desires to indulge in such socialistic adventures, I am not unduly alarmed by such action. For States and other local governmental entities cannot print money; and they are subject to close and constant scrutiny by the electorate with respect to their policies and procedures. Furthermore, they are in competition with other States and other communities. If their socialistic exactions become too onerous, many citizens will move out taking their wealth with them. But the Federal Government is in competition with no one. It is an all-powerful monopoly with unlimited taxing power, plus the power to devalue the currency by issuing printing-press money. And no one can escape its exactions.

Specifically with respect to Federal power, I believe it promotes the growth of the social cancer of avarice in our body politic, that it is a fraud and a delusion, fraught with danger to our whole system of private enterprise It is not in any sense of the word low-cost power. It is low priced, not low cost. The general taxpayer makes up the difference.

Federal power sets an evil pattern for all other segments of the economy to indulge in self-seeking competition for Government handouts. You never get something for nothing. These handouts are bought with votes; and when votes are thus prostituted, freedom is endangered.

I do not agree with our friend on the television program that public power is all right. On the contrary, I believe it is all wrong. I do not believe that there is a place for public power and a place for private power. Once public power has been firmly entrenched in its place, the neighboring private power is doomed to ultimate extinction. There will be no place left for it. We cannot get along with public power if we want to live as a free people. For if we are enticed into a greedy scramble for public bounty, we will ultimately become a nation of panhandlers and moochers-from each other.

Perhaps you will conclude from the foregoing that I do not believe in public power. If so, you are absolutely correct.

(Excerpt from Task Force hearing at Portland, Oreg., June 29, 1954.)

Admiral Ben Moreell (retired), chairman of the board of Jones & Laughlin Steel Co. and former Chief of the Navy's Bureau of Yards and Docks, is head of the Commission's task force appointed to study Federal activities in the field of water and power resources.

On November 10, 1952, in an address entitled "To Communism-Via Majority Vote" at the annual meeting of the American Petroleum Institute, Mr. Moreell declared:

"The first plank is ownership of land. Now, it is true that our Government has always owned land. But early American policy was to get this land into the hands of private owners as quickly as possible. Sometimes it was sold at very low prices. Sometimes it was given away. But always the idea was to get it into the hands of private owners, whether it be a railroad, a college, an individual homesteader, or others.

"That practice is followed no longer. The policy now is for Government to take land from private owners and, in strict accord with Marxist doctrine, to use it for 'public purposes.' The public purpose may be an irrigation or floodcontrol district, a Tennessee Valley Authority, a Bonneville power project, forest land, an oil reserve, or any one of a number of others."

He also said:

"If this century-old strategy of Marx--what today we call 'creeping socialism'-sounds familiar to you in the light of current events in America, you will understand why I am disturbed."

Copies of the speech are distributed by the Foundation for Economic Education, Irvington-on-Hudson, N. Y., which announces that Admiral Moreell is a trustee of this foundation, and that "One of our In Briefs'-Survival of the Species-is also by Admiral Moreell.”

The Foundation for Economic Education in 1949 published a particularly inaccurate and misleading book, The TVA Idea, by Dean Russell, and by the end of that year had distributed 30,529 copies in "mass mailings" and 26,855 in "secondary distribution." (Hearings before the House Select Committee on Lobbying Activities, 81st Cong., pt. 8, Foundation for Economic Education, July 18, 1950, p. 46.)

Although it claimed to be an educational organization, the House Committee on Lobbying (H. Rept. 3138, 81st Cong.) pointed out that there was one difference "which seriously detracts from the educational character" of the foundation. "The true educational institution does not sponsor one point of view to the exclusion of all others. The true educational institution has no pattern to

which the teacher must make his views conform, consciously or otherwise." Charles L. Andrews, of Memphis, Tenn., operates his own business, the C. L. Andrews Cotton Co., is a director and chairman of the board of the Producers Warehouse & Compress Co., and is a director of other companies.

On being appointed to the Hoover Commission task force, he was quoted by the Associated Press in an interview as saying:

"I am a strong advocate of free enterprise and feel that the TVA has gone too far afield.

"When Congress first authorized appropriations for the TVA it was understood the new agency was to be set up for the development of flood control and fertilizer production. But it has gone into the field of power production where it competes with private enterprise which to my mind is not fair play." On a more recent occasion he was again quoted as saying:

"I have always thought the principle of TVA is wrong-it's socialistic in that it is government in business, interfering with private enterprise."

W. W. Horner, consulting engineer of Horner & Shifrin, St. Louis, Mo., was chairman of the water policy panel of the engineers joint council, which prepared a report in 1951.

Earlier he was water consultant and member of the National Water Committee of the National Resources Planning Board, 1936-42, and participated in the preparation of the Arkansas Valley report, which he called-in a paper printed in the Journal of the American Water Works Association, July 1946-the "dying effort" of the Board.

In the paper he said: "the TVA has been operated now for a number of years at the expense to the Federal taxpayers of about a billion dollars, and has greatly benefited the people of the valley. As a 'noble experiment' it may be classified as a distinct success."

He said that flood control, navigation, and hydroelectric power in the TVA project "still remained fairly well within the field of engineering economics, and arguments in its defense might have been based on annual costs and the benefits wherever they might accrue."

His description of the Tennessee Valley Authority Act, however, contained a number of major errors. "The other provisions of the bill," he said, "seem to have been based on an assumption that the Tennessee Valley had a degraded population, one incapable of looking after itself and probably incapable of improving its condition even in the light of the developments proposed."

He added that, "From this assumption apparently flowed the further provisions of the bill which gave the valley authority a paternalistic position, which permitted it to use the power to process the products of the region and to enter into various forms of industry, business, and social government."

In the American Economic Review of May 1951, Mr. Horner said, in a paper entitled "A Desirable National Water Policy," that "There is unquestionably a real need for the expansion of power production. Many feasible hydroelectric projects are of such magnitude as to probably preclude their development under private financing.”

The water policy panel of the engineers joint council, of which Mr. Horner was chairman, declared that the sale of Federal power should, in general, take place at the generating stations (bus bar), that Federal construction of transmission lines should be limited, that power should be sold only at wholesale, and that "such power should be sold without priorities or preferences in any respect to any purchasers or consumers or class thereof."

The panel particularly objected to such preference clauses as appeared in the Flood Control Act of 1944 "Preference in the sale of such power and energy shall be given to public bodies and cooperatives."

Gov. J. Bracken Lee, of Utah, in a statement introduced before the Senate Committee on Public Works on proposals for a Columbia Valley Administration,