power delivered to load centers. This cost of 6.06 mills is the same as the Commission staff estimate of the cost of alternative steam-electric power and is considered by the staff to represent the value of the power and the direct power benefit. The Commission does not include in power benefits the latter two classes of indirect benefits named above and believes that the inclusion of such benefits is, at the least, open to question. On the basis of the firm energy value of 6.06 mills per kilowatt-hour, the Commission staff estimates the total annual power value at $38,913,000. Assuming that irrigation benefits are equal to the annual cost of $9,671,000 assigned by the report to the participating projects, the total benefits accruing to the Colorado River storage project as computed by the staff would be $48,584,000. Assuming that the total project cost is amortized in 50 years with interest at 2.5 percent and that the proposed power allocation pays interest at 2.5 percent, and using the operation, maintenance, and replacement charges given in the report, the total annual cost of the storage project would be $41,573,000. The resulting benefit-cost ratio for the project would be 1.17 to 1. If power benefits are computed on the basis of the expected selling price of 5.5 mills per kilowatt-hour for firm energy, the benefitcost ratio would be 1.08 to 1. These ratios may be compared with the value of 1.8 to 1 shown in the report. The commission staff has given considerable study to problems of the development of the Colorado River Basin over the past several years and reports, in connection with its studies, that it has received the full cooperation of your own field offices. The results of these studies. with respect to the availability of water and regulation of stream flows and with respect to generation of power at the proposed projects are in substantial agreement with the estimates of your office. The staff advises that in its opinion the units of the Colorado River storage project are generally well planned and well suited for the purposes intended. It points out certain relatively minor modifications in the plans, however, which it believes may be found desirable. Included among such modifications are possible alternative methods of developing the fall of the Gunnison River immediately downstream from the proposed Curecanti Reservoir, and possible increases in the ultimate power installation at certain of the dams. The staff observes that although the overall storage project appears to be justified, there is a wide variation in the economics of individual units, particularly with regard to the costs of power computed on the basis of the proposed cost allocations. For example, as planned the Crystal project, which is for power only and does not provide any regulatory storage, appears to be of doubtful economic feasibility. Among the more favorable units from the standpoint of economic justification are the Glen Canyon, Echo Park, and Whitewater projects which are proposed for early construction in the report. The staff is of the opinion that the Glen Canyon and Echo Park projects, particularly, are of such importance as to warrant their consideration for inclusion in any early program for the further development of the Colorado River Basin. Echo Park, possibly with an installation somewhat higher than the 200,000 kilowatts shown in the report, is considered by the staff to be strategically located to assist in serving power loads of the northerly part of the upper Colorado River Basin. At the southerly end of the upper basin, the Glen Canyon project would also have strategic value from the standpoint of assisting in serving loads to the south and, in addition, in providing desirable regulation of stream flow and in protecting projects downstream from loss of value due to siltation. The Commission staff has made independent studies of the present and future needs for power in the areas that could be served with the power produced at the Colorado River storage project powerplants. With respect particularly to 1970 loads, for which presumably the so-called initial installations would be made, the staff reports estimated loads as of that year substantially less than the estimates of your Bureau. The aggregate installation considered in your report for the year 1970 amounts to 1,364,000 kilowatts. As a result of its own estimates and studies the Commission staff finds that an aggregate installation of approximately 1 million kilowatts would be adequate for that year. The difference in the estimates results from differing determinations as to the needs for power in the fringe areas of the upper basin and differing assumptions as to the export of power to adjacent areas. It is pointed out that changes in the assumptions regarding the export of power, particularly to the southern California area, could materially alter either of the estimates of 1970 power needs. Your report does not state specifically that it is proposed to use the interest component of revenue received from the sale of storage project power in assistance to irrigation development. Analysis of the report, however, including the table on page 94 of the substantiating materials, shows that it is proposed to use the interest component for this purpose. The report shows that over a 70-year development and operating period, a total of about $675 million would be accumulated through use of the interest component. It is proposed that the funds so accumulated would be available through the recommended upper Colorado River account to assist participating and dependent irrigation projects by paying irrigation costs which are in excess of the ability of water users to repay. The Commission has consistently taken the position that the public interest would best be served if the interest component were returned to the Treasury of the United States rather than diverted for such other purposes. In this case there is an additional subsidy, amounting to $332,950,000 of the cost of the storage project allocated to irrigation, to be repaid from power revenues. The Commission understands that the program proposed in your report will necessarily be long range in character, and that modifications may be found desirable from time to time as studies continue. In this connection the Commission staff's suggestions for modifications, which would not constitute major changes in the plans, can be discussed with representatives of the Bureau as studies and detailed consideration of the Colorado River storage project continue. The Commission appreciates the opportunity of commenting upon the report of your Department. Sincerely yours, MON C. WALLGREN, Chairman. DEAR MR. WARNE: Pursuant to the policies and procedures established by the Federal Interagency River Basin Committee, we have reviewed the preliminary report furnished by your Department. entitled "Colorado River Storage Project and Participating Projects, Upper Colorado River Basin, December 1950." It is our understanding that the Public Health Service section as revised by us in January 1951 has been incorporated in a later preliminary edition of this report. The only additional comment we have is to suggest that the following paragraph covering taste and odor control be added after the final paragraph under the subheading "Stream Pollution Problems." "The possibilities for reducing the likelihood of taste and odorproducing organisms through reservoir preparation should be reviewed in the planning stage of those impoundments that will or may— serve as domestic water supplies." A copy of this letter is being furnished the secretary of the Federal Interagency River Basin Committee for his information. Sincerely yours, M. D. HOLLIS, Assistant Surgeon General, Associate Chief, Bureau of State O |