the committee should consider that Bonneville is an operating agency, while FPC is a regulatory agency.

Even so, one can foresee difficulties that would arise in the Columbia River Basin from overlapping agreements, conflicts between voluntary agreements, and problems between interests operating under voluntary agreements and those operating under reasonable coordination.

Further, it seems that the Federal Power Act already contains sufficient authority for FPC to require coordination as a condition of the issuance of a license.

Indeed, the Federal Power Act, section 10(a), requires that a license shall be issued for a hydroproject only if the Commission finds that the project "will be best suited to a comprehensive plan * * *”

Certainly this implies coordination, since the term "comprehensive plan" definitely suggests that there should be a proper operating relationship of one project on a river to the other projects, no matter what the ownership of the different projects.

In fact, FPC did require Idaho Power Co. to coordinate its operations with the Northwest Power Pool in issuing a license for Brownlee, Oxbow, and little Hells Canyon Dams.

If there needs to be more specific authorization given to FPC to require coordination as a condition of a license, the Federal act might well be amended to clarify such authority. And if the term "comprehensive plan" needs further definition, Senate bill 584, introduced this year by Senator Magnuson, of Washington, more fully defines this

term.

H.R. 7201, then, has the effect of offering sizable benefits to nonFederal users for performing the type of coordination which should be a required condition of the valuable privilege they receive when granted a Federal license.

I would like to point out, too, that this bill contains a provision which might in the years ahead nullify or greatly modify the coordination sections of this measure. This provision states that coordination is not required when hydroelectric power is used "primarily for peaking service, or for producing energy other than firm energy.

If the Pacific Northwest power supply shifts to thermal power in the future, as seems likely, the thermal power will obviously be used for base loads, with hydro as the natural and valuable peaking power. Under these conditions, non-Federal owners could still obtain downstream benefit payments without having to coordinate.

CHANGE IN COMPUTING BENEFITS

Downstream benefit payments computed by FPC would be based, among other things, on

such part of the fixed annual costs of the facility furnishing the benefit, and of the annual operating and maintenance cost of such facility (including land rentals and similar charges), as the Commission may deem equitable and, where applicable, the Commission shall consider any costs incurred by the owners of the water-control facility and of downstream facilities for energy required to maintain firm energy ***

This is a highly significant change in the method of computing benefits received from upstream projects. Section 10 (f) now states that payments for upstream storage benefits shall be

such part of the annual charge for interest, maintenance, and depreciation thereon as the Commission may deem equitable.

The significance of this change in the formula for computing downstream benefits is pointed out in the minority views filed by Senators Neuberger, Jackson, and O'Mahoney, in connection with S. 1574, a Senate bill in the 84th Congress similar to certain provisions of H.R. 5309.

The report notes that the Federal Power Commission, in response to an inquiry from Senators Jackson and Magnuson, indicated that the annual fixed costs of a private hydro project total 12.19 percent of investment, while the annual fixed costs of a Federal project total 3.83 percent.

When, under the proposed formula contained in H.R. 7201, operation and maintenance and allocated administrative and general expenses are added to these annual fixed costs of Federal and licensed projects, the ration of private to Federal costs is found to be approximately 3 to 1, as against 2 to 1 under the present section 10 (f).

The effect of this disparity in costs is graphically shown in a case (1) Where a private project is benefited by upstream Federal storage, as opposed to

(2) A case where a Federal project is benefited by upstream private storage.

In the first case, the private project obtains the benefits of the upstream Federal storage at about one-third the cost such a utility would incur if it provided the storage itself.

On the other hand, a downstream Federal project would pay an upstream private project for benefits received at a rate approximately three times the cost of equivalent Federal storage.

Commenting on this situation, the report by Senators Neuberger, Jackson, and O'Mahoney observes that the following would be the result in a case where a private company has projects both above and below Federal projects, both benefiting and being benefited by them:

If the power benefits received by the two parties are equal, the Federal Government will owe the private company just three times as much money as it is owed in return.

On the other hand, if in any case the payments owed between the parties cancel each other out, it will be because the private company is receiving in downstream benefits three times as much hydropower as it is providing in downstream benefits at the Federal project.

Applying the terms of H.R. 7201 to the Pacific Northwest, we find that there would be seriously adverse results not only for that region, but from the standpoint of national policy.

In that area, the Federal Government has already invested millions of dollars in projects on the main stem of the Columbia River. However, certain key upstream storage reservoirs remain to be built. If H.R. 7201 were adopted by the Congress and private power companies were licensed to build some of the major upstream projects, the result would be that the Federal Government would be paying a private company in annual charges three times as much, to provide storage capacity, as it would cost the Federal Government to provide equivalent storage capacity itself.

The result of such a procedure obviously would be higher cost power at the Federal downstream dams.

But beyond this consequence, it would seem clearly bad policy for the American people to compensate a private company thus generously for the development of resources which the public owns in the first instance.

Moreover, should the Federal downstream dams be forced to bear the higher costs of privately built upstream storage, there is a serious question as to whether or not the feasibility of present or projected downstream projects would be impaired.

To base the charges on the cost of construction, financing, and operation means not only that the Federal Government would be saddled with the higher costs for money and profits of the private power company, but would have to pay a share of the construction and operating costs even if these costs should be unduly high because of inefficiencies in construction and/or operation.

POWER COMPANY BENEFITS

A key fact, so far as the Columbia River Basin is concerned, is that virtually all of the downstream dams in existence or under construction are owned either by the Federal Government or by local public agencies. This clearly indicates that any privately owned dams upstream would exact sizable payments from public agenices under the terms of this bill.

An example is Idaho Power Co.'s Oxbow and Brownlee Dams on the Snake River.

There are eight Federal dams either completed, under construction, or authorized on the Snake and Columbia Rivers below the two Idaho Power Co. dams.

During the long congressional battle over the authorization of a Federal high Hells Canyon Dam, it was pointed out that a high Federal dam would provide sizable amounts of firm power at downstream Federal dams. If the Federal dam had been constructed, the Federal Government would have received the benefits not only at the Hells Canyon site, but at downstream Federal dams, too.

Idaho Power Co. insisted, however, that it could build the smaller dams at no cost to the taxpayers, and the FPC license for the power company dams requires-article 39—that the company—

Shall operate the project and its system in coordination with the Northwest Power Pool ***

If H.R. 7201 were passed, the Federal Government would be required to pay sizable subsidies to Idaho Power Co. for headwater benefits, even though Idaho Power does not need these subsidies, and presumably did not anticipate them at the time it was pressing its case so vigorously for a license.

The bills under consideration would require the Government to pay the Idaho Power Co. to do what it already is required to do, and the payments would be for benefits at eight large Federal downstream dams.

The Pacific Northwest Power Co. would reap even larger payments if it were licensed to build their proposed High Mountain Sheep Dam on the Snake River, below the Idaho Power Co. dams. The proposed High Mountain Sheep Dam also would be above the eight Federal

dams and would have more storage than the Idaho Power Co. small dams.

SUMMARY

1. The net effect of H.R. 7201 would be unnecessarily to increase the cost of federally generated power.

2. Coordination of operation of hydroelectric facilities is implied in the present Federal Power Act and can be required as a condition of FPC licenses.

If it is necessary to clarify this requirement in order to bring the benefits of coordination to power users, this should be done through enactment of legislation such as S. 584, to redefine "comprehensive development" rather than through the backdoor approach of repealing section 10(f).

3. Since the most likely use of hydroelectric power in the future is for peaking purposes, over the long term the non-Federal interests would not be required to coordinate their operations of hydroelectric facilities in order to obtain the payments provided for in this bill and, therefore, in the long run, this bill would accomplish relatively little in the way of coordination, but result, over a 50-year period, in very substantial Federal subsidies to non-Federal interests.

4. A Federal license granted to non-Federal interests to construct and operate a hydroelectric project on a navigable stream is a privilege, and such license is applied for and granted on the basis of conditions which are understood by all parties. An additional Federal windfall is not needed.

5. This proposed legislation would put the Federal Power Commission into the role of water master of the Columbia River, a role that is not consistent with the functions assigned to a regulatory agency.

If additional coordination of the hydroelectric facilities on the Columbia River and its tributaries is needed, responsibility for such coordination more logically should be placed in the hands of an operating agency, such as Bonneville Power Administration, which already has the responsibility for coordinating the power facilities of most of the major hydroelectric dams in the Columbia River Basin. For the foregoing reasons, we urge your subcommittee to reject these bills as not being in the public interest.

For your information, I am attaching as exhibit A a resolution on this subject adopted at the most recent annual convention of this association, May 28, 1959, in Seattle, Wash.

At the very least, we would urge this committee to suspend any action on legislation on downstream benefits at this time and arrange for thorough studies to be made to estimate the costs to the Government which would arise if the proposed legislation were enacted.

The Congress quite properly has always been opposed to blankcheck or hidden appropriations, yet if the bills presently before this committee were enacted, Congress would, in effect, be making the Federal Government liable to future costs of an unknown magnitude, inasmuch as the costs which might ultimately be incurred under this legislation are not now known.

We would, therefore, suggest that before giving further consideration to this matter, the Congress should direct one of its committees to make a comprehensive study in order to provide an estimate of the

costs to the Government and to each non-Federal utility of the payments which would be required over a 50-year period for downstream benefits under at least two alternative conditions:

1. Assuming that all further upstream storage will be built by the privately owned utilities.

2. Assuming that all further upstream storage will be built by privately owner utilities.

Mr. Chairman, I have the resolution which was adopted at our organization's most recent convention which I would like to insert in the record. I apologize for such a long statement, but I think this is a matter of very great importance and felt that the committee should have our views, in full.

The CHAIRMAN. Without objection, the resolution will be included in the record.

(The resolution referred to follows:)

EXHIBIT A. RESOLUTION ADOPTED AT THE ANNUAL CONVENTION OF THE AMERICAN PUBLIC POWER ASSOCIATION IN SEATTLE, WASH., MAY 28, 1959

RESOLUTION NO. 5-DOWNSTREAM BENEFITS

Whereas S. 1782 and H.R. 5309 would amend section 10 (f) of the Federal Power Act to require downstream Federal dams to pay charges to upstream private utility corporations for river regulation at upstream dams; and

Whereas such bills would not be in the public interest in that they would require the Federal Government to pay a rental on a public resource: Now, therefore, be it

Resolved, That the American Public Power Association opposes S. 1782 and H.R. 5309 in their present forms.

The CHAIRMAN. Does that conclude your statement?

Mr. RADIN. Yes, sir.

Mr. FLYNT. Mr. Radin, I had understood that any provisions in this proposed legislation would include as a mandatory provision thereof that these payments would be reciprocal in their nature.

In other words, if a Federal project received benefits from the storage facility of a private company and if a private company received similar or identical benefits from a Federal project, that they would cancel off each other. Am I wrong on that?

Mr. RADIN. I am not sure they would cancel off.

Mr. FLYNT. I mean if they were identical?

Mr. RADIN. Not necessarily, because of the difference costs that are incurred in the building of the respective projects.

Mr. FLYNT. I am not talking about costs; I am talking about benefits.

Mr. RADIN. The benefits would be calculated in terms of payments to be made. If the payments were to be made on the basis of the costs of the respective projects one would have to be figured on the basis of private costs and the other on the basis of public costs.

Mr. FLYNT. No, you misunderstand my question. I was asking the question:

If the benefits were identical would it be unfair to allow at least an equal recoupment on both sides?

In other words, if the Federal Government or a federally owned project receives benefits why should it not pay the same thing that it would receive if it gave those benefits?