by the conference committee, $1,140,000 is for the purpose of implementing "interim" contracts between the Southwestern Power Administration and certain generating and transmitting cooperatives in the area. Its expenditure is limited to March 1, 1955, unless permanent contracts have been completed by that time. The committee urgently insists that permanent contracts be completed between the Southwestern Power Administration, the rural electric generating and transmitting cooperatives, and private electrical utilities in the area at the earliest possible date, so that this appropriation for "interim" contracts will be sufficient to carry through the period of both contract negotiations and construction of necessary physical connections. The committee further recognizes that certain lawsuits are now pending in regard to the right of the Federal Government to purchase electric power and energy from steam plants built by generating and transmitting cooperatives with funds borrowed from the Rural Electrification Administration for resale by it to others, and the right of the Federal Government to lease, in their entirety, certain transmission systems constructed with Rural Electrification funds, and ultimately to purchase same. Therefore, the action of the conference committee, in making the above recommendations, is not intended to prejudge the validity of said contracts between Southwestern Power Administration and the various rural-electric cooperatives, nor deemed to be congressional interpretation of applicable law. OBLIGATION STATEMENT Chairman HAYDEN. All of the $1,140,000 provided for the implementing of the "interim" contracts was obligated prior to the termination date of March 1, 1955. A statement of these obligations will be included in the record. (The statement referred to follows:) Obligations for the purchase of power and wheeling and service charges for fiscal year 1955 through Feb. 28, 1955 *Separate contracts efctive Nov. 1, 1934. Purchase of * Funds available for implementing interen contracts with cooperatives, $1,140,000; for wheeling charges or service to Southwestern Power Ad astralson vasŁO DOCS, SEDRAAL TOTAL, SLSA, AM COMMUNICATION Chairman HAYDEN. The Department of the Interior did not seek a supplemental estimate for funds to continue these interim contracts. Representatives of the cooperatives and their representatives in the Congress brought the matter to the attention of the Appropriations Committees. On January 7, I received a letter signed by Senators Kerr, Monroney, Hennings, and Symington, in which they called to my attention this situation. This letter will be included in the record. (The letter referred to follows:) UNITED STATES SENATE, Hon. CARL HAYDEN, Chairman, Senate Appropriations Committee, United States Senate. DEAR SENATOR HAYDEN: You will recall that the Interior Department Appropriations Act, 1955, contained an item under title I as follows: "OPERATION AND MAINTENANCE, SOUTHWESTERN POWER ADMINISTRATION "For necessary expenses of operation and maintenance of power transmission facilities and of marketing electric power and energy pursuant to the provisions of section 5 of the Flood Control Act of 1944 (16 U. S. C. 825s), as applied to the southwestern power area, $1,765,000, and in addition $775,000 shall be transferred to this appropriation from the appropriation 'Construction, Southwestern Power Administration.'" You will also remember that the conference report (H. Rept. 1926) contains the following language: "OPERATION AND MAINTENANCE, SOUTHWESTERN POWER ADMINISTRATION "Amendment No. 2: Appropriates $1,765,000 instead of $625,000 as proposed by the House and $2,337,000 as proposed by the Senate. Of the amount recommended by the conference committee, $1,140,000 is for the purpose of implementing interim contracts between the Southwestern Power Administration and certain generating and transmitting cooperatives in the area. Its expenditure is limited to March 1, 1955, unless permanent contracts have been completed by that time. The committee urgently insists that permanent contracts be completed between the Southwestern Power Administration, the rural electric generating and transmitting cooperatives, and private electrical utilities in the area at the earliest possible date, so that this appropriation for interim contracts will be sufficient to carry through the period of both contract negotiations and construction of necessary physical connections. "The committee further recognizes that certain lawsuits are now pending in regard to the right of the Federal Government to purchase electric power and energy from steamplants built by generating and transmitting cooperatives with funds borrowed from the Rural Electrification Administration for resale by it to others, and the right of the Federal Government to lease, in their entirety, certain transmission systems constructed with Rural Electrification funds, and ultimately to purchase same. Therefore, the action of the conference committee, in making the above recommendations, is not intended to prejudge the validity of said contracts between Southwestern Power Administration and the various rural-electric cooperatives, nor deemed to be congressional interpretation of applicable law." Your attention is called specifically to the cutoff date of March 1, 1955, when the expenditure of any portion of the $1,140,000 is prohibited. The following facts should be called to your attention: (1) The contract negotiations between the utility companies and the generating and transmission cooperatives have been in process, but have not resulted in the entering into contracts. Negotiations are proceeding but it is unlikely that they will terminate in contractual arrangements for some time. (2) Because of unprecedented and protracted drought, the hydroelectric plants in the area have not generated adequate power for SPA to fulfill its requirements to preference customers. Purchase of power by SPA from the generating and transmission cooperatives, therefore, has been at a monthly rate in excess of that contemplated when the appropriation was made. The enclosed table shows that SPA, by the end of February, will have exhausted its funds from the operation and maintenance appropriation for purchase of power from the generating and transmission cooperatives. (3) The drought in the Southwest has not been broken. We hope it will end momentarily. The facts are SPA needs to buy power and is without funds to do so. (4) The generating and transmission cooperatives have capacity to supply SPA with additional power to meet the above requirements. (5) In order for the generating and transmission cooperatives to operate at a higher efficiency, they should sell power to the SPA. (6) SPA deposits the receipts of its power sales in the Treasury so that the Government is not losing money on any transaction with the generating and transmission cooperatives. (7) The more revenue the generating and transmission cooperatives receive from sales of power, the more rapidly they can reduce their indebtedness to the Government. Therefore, we seek your assistance in securing an extension of the cutoff date to June 30, 1955, and a supplemental appropriation of $780,000 to be used by SPA to purchase power and wheeling from the generating and transmission cooperatives during the last 4 months of this final year. It should be pointed out that, in case the contracts between the private utilities and the generating and transmission cooperatives should be completed, it would require many months to make necessary interconnections to implement them. Should the water situation improve, any remaining portion of the appropriation could be returned to the Treasury. Sincerely yours, THOS. C. HENNINGS. HOUSE REPORT Chairman HAYDEN. As this bill comes to us from the House, it includes an additional $400,000 for the continuation of these "interim contracts" through fiscal year 1955, the current year. The action of the House committee is explained on page 27 of the report on the bill now before this committee. This statement will be included in the record. (The statement referred to follows:) SOUTHWESTERN POWER ADMINISTRATION Operation and maintenance, Sunthucestern Power Administration.—An appropriation of $400,000 is recommended for the purpose of continuing in effect interim" contracts, covering the purchase and wheeling of electrical energy, between the Southwestern Power Administration and certain generating and transmitting cooperatives in the Southwest arest In the appropriation bill for the fiscal year 103 the Congress granted funds to the Southwestern Power Administration to flames "interina" contracts with The Central Missouri, Northwest Missouri and Western Oklahoma Rural Electrification Generation and Transmission Cooperatives for a period of S months contemplating that during such period it might be possible to consummate permanent arran zemerts between the Southwestern Power Administration, these cocperatives and various eripan es in the area which we'd provide for permanent distribution of electrical energy among the various public and private operating units in such te ms as to assure equitable considerati a for all corcerned. This is the third occasion on which the Congress has extended the time during which the Southwestern Power Administration may continue to purchase power from the generating and transmitting cooperatives under the "interim" contract arrangements, pending completion of the previously mentioned permanent contracts. More than ample time has been allowed for completion of these negotiations. The committee expects that by the end of this fiscal year the parties involved will have arrived at satisfactory contracts for an equitable distribution of power in the area in accord with law at rates which will assure widespread rural use of electrical energy and assure financial stability for the generating and transmission organizations operating in the Southwestern Power Administration area. QUESTION BEFORE COMMITTEE Chairman HAYDEN. I want to make it clear that the question before the committee at this time is: How much money is needed to continue the "interim contracts" through the current fiscal year until June 30? I urge that all remarks and statements be confined to this one question. HISTORY OF PROBLEM For those desiring a history of this problem, I am including in the record a statement prepared by the Rural Electrification Administration; and I understand that Secretary Aandahl is in agreement with the statement. (The statement referred to follows:) A REVIEW OF POWER PROBLEMS OF REA-FINANCED FEDERATED COOPERATIVES IN SOUTH WESTERN POWER ADMINISTRATION AREA 1. Background of problems In 1949 and 1950, REA made loans, in the approximate aggregate amount of $75 million to federated cooperatives in Missouri and Oklahoma for the construction of electric generating and transmission facilities. The federated cooperatives entered into contracts with the Southwestern Power Administration of the Department of the Interior for the sale and exchange of power and energy and the leasing of transmission facilities to SPA with an option to SPA for the purchase of the leased facilities. The performance of these contracts was dependent upon a so-called continuing fund which, as a result of congressional action for fiscal 1952, was made subject to annual congressional authorizations as to the amounts to be made available to SPA for purchase of power and energy and payment of rentals under the contracts above referred to. In the Interior Department appropriation for fiscal 1954, there was a congressional directive that no part of that year's continuing-fund authorization was to be used "for the purpose of implementing existing contracts with REA cooperatives which provide for the lease-purchase of transmission or generating facilities." As a result of the foregoing congressional directive, the federated cooperatives invited the power companies in the area to a meeting in Springfield, Mo., on October 1, 1953, to discuss the working out of a permanent solution of their power-supply problem which would eliminate the need for resorting to Interior's continuing fund or other Federal appropriations. REA representatives attended this meeting at the request of the cooperatives. There was general agreement expressed at the meeting as to the desirability of such a permanent solution as the objective of the negotiations which would be initiated following the meeting. Since the federated cooperatives are located in different areas served by different companies, it was decided at the meeting that the negotiations would be carried on in smaller groups by the companies and cooperatives which had common service areas. Following the Springfield meeting the cooperatives and the companies in the various areas exchanged correspondence and held a number of meetings with respect to the basic principle which should govern the permanent solution. REA did not take part in these meetings although, in a general way, it was kept informed of developments. Representatives of the federated cooperatives continued negotiations both with the commercial companies and with the Interior Department in regard to interim arrangements. While these representatives of the cooperatives were in Washington during January, they requested Mr. Ancher Nelsen, as REA Administrator, to take an active part in their negotiations with the commercial utilities and formalized this request with a letter dated January 29, 1954. On February 26, 1954, at a meeting in Jefferson City, attended by Mr. Nelsen and Mr. Fred Aandahl, Assistant Secretary of Interior, the boards of directors of the Missouri federated cooperatives again requested that REA take an active part in the negotiations of the permanent solution and Mr. Nelsen agreed to make REA personnel available for this purpose. At this meeting, also, the status of the negotiations in each case was reviewed and Mr. Aandahl suggested that a meeting be arranged which would be attended also by all the commercial companies involved. Such a meeting was held by Messrs. Nelsen and Aandahl on March 15, 1954, at Kansas City. Mr. Nelsen expressed REA's concern with the problems involved and assured the cooperatives of full REA assistance in the carrying on of negotiations for the permanent solution. Plans were made at that meeting for individual area meetings of cooperatives and commercial companies in which REA representatives would render active assistance. 2. Objectives of REA's endeavors The following excerpt from Mr. Nelsen's address to the Missouri Rural Electrification Association at Jefferson City on February 26, 1954, stated the following REA objectives in the negotiations for a permanent solution: "The arrangements which have been in effect between certain of your federated cooperatives and SPA had been made dependent upon annual appropriations for the continuing fund by the Congress. They involve a lease-option provision under which title to the transmission facilities would eventually pass to the Government. The Congress, as a matter of national policy, determined that this was not a correct approach and directed that the situation be reexamined and negotiations be started toward a different type of approach-a permanent solution which would eliminate features of the previous arrangement which were deemed objectionable. "Any such long-range solution must recognize the established position of the electric cooperatives as part of the total power picture in the Southwest. The cooperatives themselves have much to gain from a solution which would end dependence on annual appropriations to SPA, eliminate the lease-option provision, and enable the cooperatives to make their power situation secure into the future by combining self-generation and negotiated arrangements of their own choice. "In other words, you have the opportunity to protect fully your sources of power. You can assure yourselves of access to both hydro and steam power over your own transmission lines. You would thus be independent of the Government and of the commercial power companies as well. "As an incidental but nonetheless important byproduct, a permanent solution on a sound basis would bring peace in an area where the power situation has long been harassed by controversy. Such a peaceful solution merits our best efforts. I do not see how anyone can oppose it unless he overlooks the basic strength of the cooperative's position or has something to gain from a continuance of controversy." 8. The means proposed to accomplish the REA objectives In general, it is thought that the integration of all the electric systems in the area, including the facilities of the federated cooperatives, the companies, and SPA, and the effective use of the Government's peaking hydroelectric power and energy will result in providing an adequate supply of low-cost power to the cooperatives and encourage widespread use of electric power and energy in the rural areas served by the cooperatives. At the present time, the negotiations contemplate, as a means of effectuating such integration, that the cooperatives will purchase peaking hydroelectric power and energy from the Interior Department, sell it to the commercial companies, together with the output of the cooperatives' thermal generating plants, and will buy back from the commercial companies the electric requirements of their member cooperatives. It is also contemplated that the federated cooperatives will make available to the companies surplus transmission capacity which might exist from time to time on the cooperatives' systems and the companies may make available to the cooperatives surplus transmission capacity on their systems for the use of the cooperatives. |