The next witness is Mr. Gordon Margeson of the Northeast Electric Cooperative Association, Bath, N. Y.

STATEMENT OF GORDON M. MARGESON, PRESIDENT, NORTHEAST COOPERATIVE ASSOCIATION, BATH, N. Y.

Mr. MARGESON. My name is Gordon Margeson. I am manager of the Steuben Rural Electrical Cooperative at Bath, N. Y., which serves 1,400 farm members with electricity. I am also secretary of the New York State Rural Electric Cooperative Association, and president of the Northeast Electric Cooperative Association. The Northeast Electric Cooperative Association is composed of 14 cooperatives in the States of Maine, New Hampshire, Vermont, and New York. The cooperatives in the Northeast Association serve over 28,000 members, and I speak here primarily in the interest of the Northeast Electric Cooperative Association.

Even though our cooperative areas were not directly affected by the recent floods, we are vitally concerned. These Northeastern States make up the watershed which swells the creeks and rivers, and if left unchecked can cause floods such as those recently experienced.

We are very much concerned with some of the recommendations contained in the recent Hoover Commission report.

It is my understanding that this subcommittee is interested in finding out what effect the Hoover Commission Report on Water Resources and Power would have on this section of the country if its recommendations were adopted.

I should like first to comment on recommendation No. 1, which is on page 36 of the report. I am in full accord with points A and B of this recommendation and believe they should be strengthened.

However, the principles and ideas that seem to be set forth in items A and B are already curtailed by point C, which reads:

That the Federal Government shall assume responsibility when participation or initiative is necessary to further or safeguard the national interest or to accomplish broad national objectives, where projects, because of size or complexity or potential multiple purposes or benefits, are beyond the means or the needs of local or private enterprise. Under other circumstances the responsibility for development should be discharged by State or local governments, or by local organizations, or by private enterprise.

Right in my own State of New York we have an example of what happens when a project is turned over to a State for development. We have long been concerned about the high wholesale power costs that our cooperatives in New York and New England pay, and also the high retail rates throughout the region as compared with other parts of the Nation. For many years we had hopes that the St. Lawrence seaway project would become the nucleus for a public yardstick which would bring in the element of competition necessary to bring the electric rates down. However, the New York State Power Authority is not taking advantage of this opportunity in the marketing of St. Lawrence power. They have never announced an overall marketing plan or policy.

Mr. JONES. Has that been a subject of discussion between the Association of Cooperatives and the New York Power Authority? Mr. MARGESON. Yes, sir; it has.

70818-56-pt. 3- -12

Mr. JONES. What has been the response of the New York Power Authority to your request to acquire a certain portion or block of the power?

Mr. MARGESON. They have seemed to be in disagreement in the power authority themselves. They have never come up with a power marketing policy or plan.

Mr. JONES. How much power would be generated by the New York Power Authority on the rapids section of the St. Lawrence?

Mr. MARGESON. I do not have that figure.

Mr. JONES. Is it not approximately 900,000 kilowatts installed capacity?

Mr. MARGESON. I believe so, on the New York side.

Mr. JONES. With a rated capacity of 900,000 kilovolts?
Mr. MARGESON. That is right.

Mr. JONES. Do you know what portion of that power has been contracted for up to the present time?

Mr. MARGESON. Roughly 45 percent, I believe.

Mr. JONES. Who engaged in contracts with the New York Power Authority to purchase the power that they already have under contract?

Mr. MARGESON. The largest chunk of it has gone to the Aluminum Company of America.

Mr. JONES. In its operations at Massena, N. Y.?

Mr. MARGESON. That is right.

Mr. JONES. Is that the same plant that the Federal Government has been paying approximately $4,500,000 to for a differential between the average cost of electricity and that charged by the private utilities in that area?

Mr. MARGESON. Yes, sir. It has.

Mr. JONES. Will it replace that amount of power that is costing the Federal Government $4,500,000 at the Massena plant?

Mr. MARGESON. Yes, sir. It will.

Mr. JONES. So we will have a reduction of $4,500,000 to the Federal taxpayers by the production of power by the New York Power Authority; is that right?

Mr. MARGESON. That is right.

Mr. JONES. But at the same time, even though you are a preference customer, you have not been able to obtain contracts for preferencepower generated by the New York Power Authority at the rapids section of the St. Lawrence?

Mr. MARGESON. That is right. As yet we have been unable to secure any contracts.

The cooperatives in New York State made application for St. Lawrence power and this application was submitted on June 21, but as yet no action has been taken. I understand that the power authority is now proposing a limited marketing area which would exclude the New York cooperatives entirely Therefore I would say that for the public good, the Federal Government should assume more rather than less responsibility in the development of waterpower projects. Chapters 18, 19, and 20 of the report had a great deal to say about Federal competition with private enterprise. Recommendations No. 11 and No. 15 would virtually take every bit of competition out of the power industry, and I am opposed to these recommendations.

Now, I believe in private enterprise and I also believe that competition is necessary to motivate private enterprise to produce a highquality product at a reasonable price. By its very nature an electric utility is not a competitive business in the usual sense such as a grocery store or meat market, but whenever it is possible to inject even the hint of competition the results can be readily seen. In this connection I should like to relate a bit of the history of our own cooperative.

Prior to 1944, when our cooperative's first lines were built, less than 40 percent of the rural people in Steuben County had central station electric service. Pleas of the farm people to the existing utility were met with either flat refusals to extend service, or proposals of outrageously high surcharges which the farmers were unable to pay. In 1924 my father purchased a farm which had a utility transmission line running across it. For 20 years my parents did without the advantages of electric service. They pleaded with the power company to no avail, and it was not until 1944 that they received electric service, and they received it from the cooperative.

After the co-op was formed, the utility changed its tune in our area. What originally was planned to be a co-op of 5,000 members was cut to 1,400 by the spite-line activity of the utility. They forgot about their surcharges and other excuses and put forth a tremendous effort to wreck the co-op. Over 95 percent of the rural people in our area now have electric service. This is what a little competition in the utility field did in our section.

However, when our co-op was formed, people were eager to get electric service and little attention was paid to wholesale rates. We purchase our power from the same unfriendly utility that tried to ruin us. The Public Service Commission in our State does not regulate wholesale rates, therefore ours is a negotiated rate. As there are no other sources of supply in our area, we are in a very poor bargaining position. We are restricted from extending service to any of their consumers, yet that may serve our customers any time they wish. An escalator clause in the contract is based on the price of coal at their oldest and most inefficient station, where the cost of coal per ton is far above that paid at their other stations. At no time have they given us the benefit of the cheaper generation at their newer and more efficient plants.

What we need now is a little bit of competition in our power supply. Recommendations No. 11 and No. 15, if adopted, would deny and prohibit the introduction of such competition from future hydropower projects.

I understand that this committee is investigating the report to the Congress and not the task force report; however, I cannot see how they can be separated. In reading over the Commission report I find repeated reference to the task force report, which indicates that the task force report had a great deal of influence on the report to the Congress.

Now, the chairman of the task force was Adm. Ben Moreell. Investigating further I found this to be the same Mr. Moreell who delivered an address at the annual meeting of the marketing division of the American Petroleum Institute at Chicago, Ill., on November 10, 1952, entitled "To Communism-VIA Majority Vote."

Mr. JONES. Is that the same Mr. Moreell who was chairman of the task force of the Hoover Commission's study on water resources and power?

Mr. MARGESON. I understand it was.

Mr. JONES. Is he the same Mr. Moreell who is president of the Jones & Laughlin Steel Co.?

Mr. MARGESON. Yes, sir.

In this address Mr. Moreell condemned and/or linked with communism the Tennessee Valley Authority, the Bonneville power project, personal income taxes, social security, Federal Reserve System, the Federal Communications Commission-in fact, nearly everything that our Federal Government has done. At one point he said, and I quote:

Since Marx enunciated his doctrine more than 100 years ago, we Americans have adopted in vary degrees-practically his entire program.

If Mr. Moreell believes what he said in this address, and he must have believed it or he would not have said it, then to me it is inconceivable to believe that this man could make an unbiased report on Federal agencies. If this is the narrow line of thinking that the Commission wanted in its report, it should have saved its time and money in setting up the task force, and written the report from Mr. Moreell's speech of November 10, 1952.

Mr. JONES. Do you know how much money that subcommittee spent in gathering data and information to write its report? Mr. MARGESON. I understand it was considerable.

Mr. JONES. About $400,000 of the taxpayers' money.

Mr. MARGESON. I believe that a large portion of this report is opinionated and is not an impartial or unbiased study of the problems of water resources and power.

In my opinion, the report as a whole would be detrimental and would hinder the development and the use of the Nation's water resources for the public good.

I thank you gentlemen for the opportunity of being heard here today.

Mr. JONES. Now I have just one question. In recommendation No. 9 the Hoover Commission says:

That the Congress empower and direct the Federal Power Commission to fix the rates on Government power sales at such levels as will—

(a) Eliminate the inequities now imposed upon the great majority of the people;

Then it goes on to item (b) and (c). It also has a discussion on the Federal power development, chapter XVI, where it says that the 1906 reclamation law was established which set up the system of priorities for the sale of power generated at federally installed interior projects. Subsequent to that we wrote the same provision in the Federal Power Act, and also during the thirties in the Bonneville Act, the REA Act, the TVA Act, the Southwest and Southeast Power Administration Acts, in the Flood Control Act of 1944, and the Atomic Energy Act the year before last. We wrote those same provisions of law for preference customers into all those acts.

If the Hoover Commission recommendation were to be adopted, would it not wipe out all of those preferences in all of the laws that have been enacted by the Federal Government to provide for the sale and disposition of power generated at federally constructed projects?

Mr. MARGESON. It certainly would. In my opinion it would reverse the Federal power policy we have had all these years.

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

Our next witness will be Mr. Frank Sahlman of the Washington Electric Cooperative in East Montpelier, Vt. Mr. Sahlman.

STATEMENT OF FRANK SAHLMAN, MANAGER, WASHINGTON ELECTRIC COOPERATIVE IN EAST MONTPELIER, VT.

Mr. SAHLMAN. Mr. Chairman, I am sorry I do not have enough copies of my presentation here. I had a little secretarial trouble this morning.

Mr. JONES. That is nothing unusual. I have it all the time. You go ahead.

Mr. SAHLMAN. Mr. Chairman and members of the committee, my name is Frank Sahlman. I am the manager of the Washington Electric Cooperative in East Montpelier, Vt. I am also here as chairman of the power committee of the Northeastern Association of Electric Cooperatives, which association represents the 14 rural electric cooperatives in New York and New England.

It is a wonderful feeling for me to find members of our Congress taking an active part in helping the people protect their interest here in New England, and it is great to find a man like you, Congressman Jones, coming up all the way from Alabama, not to take our industry away, but to show us how we can keep our industry from moving South, where the power rates are lower and the industries and the people do not worry too much about floods.

We should also be grateful for your work on Niagara and St. Lawrence in trying to see that the people of the Northeast and not the special interests will be the beneficiaries of this power.

A few years ago over in the Sheraton Hotel here in Springfield there was a hearing on water resources in this region. About the same time, ECAP, which is the electric companies advertising program, had an ad in one of our widely distributed papers blaming the high cost of power here in New England on the cost of coal. They went so far as to compare the high cost of delivered coal to the high cost of delivering pineapple from Hawaii. Now, sorry to say, they almost had me believing that the power in New England all came from the juice in the Hawaiian pineapples. The price was so high. It is hard to keep the taste for this Hawaiian pineapple electricity, especially when we have so much water available for power transported free to us here in New England.

More recently these ECAP people have been delivering a brand of snake oil that isn't very palatable either. In these snake-oil ads they said something to this effect, that letting the Federal Government do things was bad. It seems to me that here in New England maybe we found something a heck of a lot worse and that is being indifferent about the values of flood control and power costs.

I think we can blame some or most of these troubles we have had with water around here lately on the meddling of the utility companies in the various State legislatures in New England for the past 20 years. We can blame them and their political cronies on the inefficient tangled-up interstate compacts that have been effective, yes, in keeping the power rates high, but ineffective from keeping our people