in rainfall, that perhaps the release upstream and the storage upstream may diminish the ability to store downstream, or considerably diminish it.

If that is a Federal project downstream, and the Government had not licensed the upstream project where it can pick up first and store, the downstream project might have stored capacity.

How do we deal with the benefit there? Is there a secondary benefit in a period of scarce storage?

Mr. GATCHELL. Under the bill they would treat of that by balancing the benefits to be obtained and where we had a situation-and I do not know of any factual situation which comes to what you are suggesting

Mr. Moss. What are the factual situations?

Mr. GATCHELL. I can take one in California where the Southern California Edison Co. and the Pacific Gas & Electric Co., do have large storage reservoirs that benefit downstream plants. The Big Creek developments are one. That is Huntington Lake and Florence Lake, and they are large storage reservoirs, and they take that water through, I think, some 2,800 feet of head, continuous power development.

One of the plants is owned by Pacific Gas & Electric Co., and the others are owned by Southern California Edison.

In that case, they store the water at the time when it is high runoff, and the snows melt, and they release it during the low-water periods which are very extensive in that part of California. By releasing it during low natural flows, they enable the Pacific Gas & Electric plant to get energy that it could not possibly get any other way.

Now, if that lowest plant was owned by the United States, this bill says that the United States would pay for a proportionate part of the cost of these storage reservoirs that are maintained upstream.

Mr. Moss. I understand that. But I am asking now where a Federal project is the downstream project, and the Federal Government has licensed upstream projects, and we come to a very dry year, one such as we are experiencing at the moment, where the downstream dam does not begin to fill, even enough to meet the irrigation commitments.

Now, if the upstream projects were not filling their dams, perhaps the downstream ones might have been. If there are benefits as a result of the upstream releases under those conditions, or if it utilizes the stream releases, does it have to pay a secondary benefit?

Mr. GATCHELL. I would think under the bill, and I don't know of a factual situation that could come up like you are mentioning, if it should I would think that the bill looks to whether they have entered into an agreement. If they have entered into an agreement for firm capacity to be furnished by water to the U.S. plant downstream, then that agreement binds. If they have not entered into a voluntary agreement, and there are secondary energy benefits conferred upon the Federal project, this bill would call upon the Federal Government to make a contribution.

But I want to call your attention to two things.

First, in the Western States there is a matter of water rights, and there is nothing in the Federal Power Act that interferes with water rights lawfully acquired. Those vested rights must be protected. Secondly, they do not construct a large storage reservior unless they are sure of having the water rights to fill the reservoir, so that

factually I don't see how the situation which you suggest where the upstream developer could store water to which the lower storage reservoir was lawfully entitled-I don't see that.

Mr. Moss. You say they do not build them until they have the rights. I point out that in my area we are still battling about rights that are involved in a project which was completed 15 years ago.

Mr. GATCHELL. I know, but they thought that they had the rights. Mr. Moss. We do everything we can to get them in operation, and we might be arguing about rights for the next 50 years, and I think that that is clearly within the realm of possibility.

Mr. GATCHELL. But they thought they had the rights.

Mr. Moss. I never thought that they did.

Those are all of the questions I have.

Mr. YOUNGER. I have a question or two, Mr. Chairman.
The CHAIRMAN. Mr. Younger.

Mr. YOUNGER. If I understood you correctly, the reason back of this legislation is to equalize the cost of energy to various consumers. Mr. GATCHELL. That is all.

Mr. YOUNGER. If that is true, then why wouldn't it be perfectly all right to have an agreement between two Government-owned projects, one upstream and one downstream, because each project might be furnishing energy to entirely different localities? If your question of equalization of the cost applies to private and public dams, then the same equalization argument certainly would apply to the cost of power generated by two public projects.

Mr. GATCHELL. That would sound all right, Congressman, if you were talking about dissimilar rates. But I do not know of any area where the United States could market on a system basis that you are speaking of, at unequal rates. They have to charge uniformly.

The Bonneville rate applies all over the area where the Bonneville Power Administration serves. That is a uniform rate. It would be merely a bookkeeping transaction to credit Grand Coulee with something that benefits the Bonneville powerplant.

Mr. YOUNGER. Are the Grand Coulee rates exactly the same as the Bonneville rates?

Mr. GATCHELL. Yes, sir.

Mr. YOUNGER. And on any project, in any river where you have two public projects, their rates must be the same.

Mr. GATCHELL. Two Federal projects, I would think they would have to operate that way.

Mr. YOUNGER. I notice there is a provision that forces an equalization.

Mr. GATCHELL. Well, section 5 of the Flood Control Act of 1944 is the one under which the Secretary of the Interior markets energy from certain flood control projects. Energy from reclamation projects is marketed under a separate authorization. I do not know that I could answer your question, that there is a statute which requires an equalization of the rates.

I would think that that is a matter of just plain economics. They have to sell this energy and once you put it into a system, you can't tract through and say that this kilowatt that goes through here is blue and this one is red and green, and pick them out at the end. The energy gets into the Federal system and the various plant outputs are

commingled, and there is no way under the sun to separate them out. Just as a matter of plain economics I do not think that they could have different rates by one Federal marketing agency in a single region. I wouldn't think that would be possible.

Mr. YOUNGER. That is all.

The CHAIRMAN. The practice is where they have that situation, that it is all integrated into one system?

Mr. GATCHELL. That is what I am suggesting, that it has to be that

way.

The CHAIRMAN. Mr. Gatchell, thank you very much for your appearance.

Mr. AVERY. Mr. Chairman, I wanted to ask a question.

The CHAIRMAN. Mr. Avery.

Mr. AVERY. In various subsections of the bill, Mr. Gatchell, you refer to benefits accruing to downstream facilities. Actually, there are no benefits except water itself, is that not correct? Or are there any other benefits that you are referring to?

Mr. GATCHELL. The benefits which I am referring to are the benefits of developing power from water, and nothing else.

Mr. AVERY. It is just so many cubic second feet of water, and that is actually all that is involved?

Mr. GATCHELL. Yes.

Mr. AVERY. When you are describing benefits.

Mr. GATCHELL. With this exception, Mr. Avery, and that is by the electric interconnection, they can exchange electric power at a time when they are not talking about water, and they get the water later, and will get the water down when they can get the water benefit later.

Mr. AVERY. Let us get to Mr. Gary's bill, 5309. In (i) and (ii) you are not getting the interchange of power there yet, are you? You are talking about benefits and it would have to be water benefits, which mean so many second feet of water.

Mr. GATCHELL. Yes, sir.

Mr. AVERY. Now, as a matter of curiosity on my part, in each of the sections you have "whether upstream or downstream."

How could you reverse that and have an upstream benefit occurring to a downstream location?

Mr. GATCHELL. Where there is an upstream reservoir where they have a nice head, and where they can use that power as particularly valuable for peaking purposes, to supply the dependable load at the time of daily or weekly maximum demand upon the system.

That means that the water comes out from the upper plant in surges or in fluctuations, and there is a reregulating reservoir owned by another company downstream which smoothes out those fluctuations and provides better navigation down below, or something like that. By reason of permitting this upstream irregularity, the upstream developer may receive very considerable benefits from the reregulation that is provided to the downstream plant. The water being smoothed out downstream may be a very desirable benefit for the upstream. developer. That is why it is upstream or downstream.

Mr. AVERY. AS I understand your explanation, the benefit would strictly mean in the potential of furnishing supplemental power during a peak load that might occur on the demand of the upstream site.

Mr. GATCHELL. Under the illustration I gave, it would permit the upstream developer to operate on a peak load, and thereby fluctuate the water in a manner that he could not do if he had to release it more uniformly.

The Army engineers require certain uniform releases for navigation, in some streams, and you can't carry on your navigation without having a certain flow in the river at all times.

Mr. AVERY. And sanitation also, in certain instances.

Mr. GATCHELL. Sanitation and municipal water supply and other things of that sort.

If your upstream plant is operating just 4 hours a day, that means that there is a big surge of water coming down for 4 hours, and the rest of the time it is shut down. The lower reservoir smoothes that out and operates for a longer period of time, 20 or 24 hours a day, so that the discharge is more uniform below it.

The value of the upstream plant as a peaking plant is an easily recognized economic value, because it is something that the company would otherwise have to pay for or provide capacity elsewhere for. Because they are able to operate in that peaking manner by reason of this reregulation below, we thought they should help out in paying for the reservoir that is provided downstream to permit their reregulation.

Mr. AVERY. Touching back on the subject that Mr. Moss was discussing with you, I want to make sure that I understand it. I believe that you referred to a normal operation, I believe those were Mr. Moss's words, and if that was the capacity in which the upper location was operating, I understood you to say there would be no charge for the water, that is a benefit charge to the lower location; is that right? Mr. GATCHELL. That is where I have my difficulty. There would be no, what we call firm power commitment. There would be a secondary energy charge if that lower plant used this water which was released normally upstream.

Mr. AVERY. Just to go back one step, in these agreements is there a discharge of so many cubic second feet set out as a normal discharge upon which a fluctuation will be based?

Mr. GATCHELL. The agreements for firm energy, where the downstream developer is able to count on being able to produce so many kilowatts, has to be an agreement that he will receive so many cubic second feet of water within certain periods. That is where there would be an agreement that would give this downstream developer a firm capacity that he would not otherwise have.

Under the normal operations that Mr. Moss was speaking about, there is no agreement, but the upstream developer just operates normally, and water happens to come down so that the lower power developer is using water that is stored and has been stored so that he would not have had it otherwise. He gets that stored water at a time when the normal flow or when the natural flow would be lower.

Mr. AVERY. That I understand. But somewhere along the line, we have to establish what would have been going down without the upper reservoir.

Mr. GATCHELL. I beg your pardon?

Mr. AVERY. I suppose you would call that normal flow, instead of normal use.

Mr. GATCHELL. You are absolutely right.

I have overlooked one thing. We are talking about stored water, the stored water is released upstream in the regular normal operations of the upstream plant. And they do not vary one whit from the way they want to do, because they are certain they can absorb that output at the time they produce it. But that water nevertheless has been stored at times of high natural runoff, and it is released at times when the natural runoff would be less than the release. And it is because at the time it reaches the downstream plant, and the normal flow would have been less, the downstream plant is able to develop secondary energy which it could not otherwise develop.

Mr. AVERY. I think it is all coming into focus now, except to firm up a little bit that normal flow: When is that established? What determines the normal flow?

Mr. GATCHELL. That is easily ascertained by the rainfall. They make very exact measurements on these reservoirs as to the inflow by reason of the rainfall, and then the discharge out of the reservoir. Mr. AVERY. In addition to the normal flow? That is the area we are talking about.

Mr. GATCHELL. That is the area you are talking about, yes, sir: and not only that area. If it is natural flow, then nobody ought to pay for it, or nobody would.

Mr. Moss. I have been trying to think of a case that might give me a better understanding of the proposal. You are familiar with our Shasta Reservoir, a typical multiple-purpose operation. I think it is presently proposed to construct upstream an additional storage project. Now, supposing that it is operating in one of these very dry years and it is necessary to look above Shasta for certain releases which will conduce to navigation, irrigation, and salinity control in the Sacramento Delta. Release has to be made, then, in order to meet those requirements.

Mr. GATCHELL. From upstream?

Mr. Moss. From an upstream source, yes. Now, being somewhat prudent, the people of Shasta decide to put the water through the powerplant before it goes on downstream to meet these requirements on the project. Do they pay a secondary power benefit as a result of their prudence?

Mr. GATCHELL. Yes, sir. If they get energy out of this water which has been stored for irrigation upstream, and is released for irrigation upstream-if Shasta gets energy that it could not otherwise getI see no reason why Shasta should not pay a proportionate part for the construction of those upstream storage reservoirs.

Mr. Moss. This would be true whether or not there is an agreement? Mr. GATCHELL. The secondary energy, yes, sir. It would be true whether or not there is agreement.

Mr. Moss. Then this is what occurs: That regardless of the purpose of the release, if it is beyond the normal flow, it must be paid for?

Mr. GATCHELL. That is in essence the principle, yes, sir. And it is the principle because, Mr. Moss, your upstream reservoir costs money. Mr. Moss. I am familiar with the fact that it costs money. I am also familiar with the fact that in the multiple-purpose operation downstream much of the power revenue is committeed to subsidizing the water for irrigation which is used by my people.