in and forcing these private power people to operate their dams in any other way than was for the best interests of their stockholders.

But this way, we have encouraged them, by the payment for the benefit they confer, to enter into a voluntary agreement for such coordinated operation. And the Government only pays for the benfit it receives as a result of that, and it pays at a rate to be established by the Federal Power Commission. And the end result is a half a million or a million more kilowatts, without the cost of building an additional dam.

Mr. Moss. That did not answer my question at all. My question was why you have to have the authority, as a mandatory thing, as a compulsory thing.

Mr. METCALF. My answer was that I do not believe that you can compel these people to operate their private facilities in any way differently than the way which would give the most benefit to their own private stockholders. You cannot keep the Montana Power Co. from releasing water in July if it is necessary to provide power for its system.

Mr. Moss. Neither could you under this agreement.

Mr. METCALF. That is right. But you give them an encouragement. And you say, "If you need power in July for your system, we will provide you power from some place downstream. And you can use that in your system during the months of July and August, and then you repay us and provide us with a benefit when you start releasing water in September or October."

Mr. AVERY. Will the gentleman yield?

Does it not resolve itself down to this: You cannot compel the Montana Power Co. to do something that was not in their original license?

Mr. METCALF. That is exactly the point. I feel that the Federal Power Commission in the future should require the license that they have on the Brownlee proposition. But you cannot compel Montana Power. We have a preliminary license up on the headwaters for 10 REA's to build a dam at Long Meadows in accordance with the Corps of Engineers' comprehensive system on the Columbia. Now, there is a public agency, with preference. And they, too, would get benefits if they entered into the agreement for the coordinated operation.

There are public utility districts in Washington and Oregon that I hope will come in and testify at the next meeting of this committee on this bill. And they, too, would receive benefits. Municipalities that own dams and generating facilities, public power installations, receive no benefits from the Federal Government for their headwaters. Under this bill they would come in. So this is not private power against public power. It is primarily concerned with a coordinated operation to use to the optimum capacity the facilities and resources of the river.

Mr. Moss. You would not have me believe that Montana Power would give up the opportunity for a greater utilization of its system, the production of more power-after all, it is interested in the totaĺ sales in the course of a year-unless this bill is passed, which makes it mandatory rather than a matter of agreement on the part of the Federal Power Commission. If you authorize a voluntary agreement, the great benefit you use in illustrating your remarks may truly be

realized. Then is not the institution of voluntary agreement also necessary?

Mr. METCALF. Not always is it to the local benefit of the Montana Power Co. or the Washington Water Power Co. or the Idaho Power Co. or any of those other local private utilities that are operating in the Columbia Basin. Not always is it to their local benefit to operate on this coordinated system.

Mr. Moss. You cannot force them to do it under this bill. All you can do is to force the Federal Government.

Mr. METCALF. That is right. But we can say to them, "We can pay you for the extra benefit you confer on the Federal Government if you will come into a coordinated arrangement, and if you don't come in, then we will not excuse you from the provisions of section 10(f) of the act, which requires you to pay for the headwater benefits that the Hungry Horse Dam, for instance, confers, under the present Federal Power Act.”

We say to them that, "The execution and approval of this voluntary agreement will excuse you from the provisions of 10(f) of the act." Mr. Moss. That is an administrative matter, whether or not they excuse them.

Mr. METCALF. No; it is not. If they enter into this agreement, and it is approved by the Federal Power Commission, then they are excused from the present section of the law that requires them to pay the Federal Government for headwater benefits. If they promise to operate a coordinated operation on the river

Mr. Moss. This is in the area of voluntary arrangements, that you are talking about. This is entirely within the area of a voluntary agreement.

Mr. METCALF. That is right.

Mr. Moss. So it does not go to the question I asked, as to why you have to have the compulsory feature in this enforcing Federal payment.

Mr. METCALF. Mr. Avery said there is no way for us to change the terms of the license that we granted these private power companies when they first

Mr. Moss. This does not change the terms of the licensee.

Mr. AVERY. If the gentleman will yield, certainly I am no expert, but I believe there is a step on farther down the stream that is involved here. It is because the public power installation down the stream will not voluntarily agree to pay to Montana Power.

Mr. Moss. Oh, this may be two public power setups, one the irrigation district and the other a Federal.

Mr. AVERY. They are both Federal agencies.

Mr. Moss. Everyone is presently required, excepting the Federal Government, and here you are placing on the Federal Government the mandatory requirement that they pay for the upstream benefits?

Mr. METCALF. Everybody is required to pay the Federal Government for headwater benefits, but nobody else is permitted to collect any benefits for the contribution that their dam, whether it is public or REA or private, makes to Federal Government dams downstream. And this would permit a payment both ways for an agreement for coordinated operation and encourage coordinated operation.

Mr. Moss. It goes beyond that. In the case I put to Mr. Gatchell, out in my part of the country, it would require the payment. It would be mandatory, not a matter of agreement, not a matter of being negotiated. It would be mandatory. I say that you can get at what you want by authorizing the Federal agencies to enter into agreements of this type to pay in order to encourage.

Mr. METCALF. As I understood the case you presented to Mr. Gatchell, the Federal Government would have to pay for benefits it received, and only for benefits, for additional benefits it received, as a result of the release of this water in accordance with a plan and a program already on file with the Federal Power Commission and in accordance with rates that were determined by the Commission. And if no benefits were received, or it was under an extraordinary situation, there would be no payment.

Mr. Moss. That is not the understanding I had.

Mr. METCALF. That is my understanding, and that is the intent of the bill, that there would have to be a program on file or a coordinated operation on file with the Federal Power Commission. And I ask leave to file a section-by-section analysis of my bill that explains that. The CHAIRMAN. You may file it for the record. (The analysis referred to is as follows :)

SECTION-BY-SECTION ANALYSIS OF H.R. 7201

The bill is in two sections. The first section constitutes a number of changes in the Federal Power Act. For clarity they will be discussed by Power Act section designations.

SECTION 1 OF THE BILL

Section 31(a): Authorizes voluntary agreements between various owners of water-control facilities and hydroelectric facilities when there is a benefit that is, or may be, gained by operating such various facilities in a coordinated manner. The Federal Government as well as any other owners of such facilities are authorized to negotiate such operating agreements. All such agreements are subject to approval by the Federal Power Commission.

The subsection authorizes such agreements to regulate reservoir releases and transfer, exchange, or sell energy among the parties for the benefit of each party. The execution and approval of such agreements would excuse the parties from any other obligation to pay for headwater benefits as required by later sections of the bill. Such agreements are purely voluntary and no one can be bound unless they agree to the terms of the contract. Such an agreement would not excuse the obligation to make any payment called for under the present section 10 (f) of the Federal Power Act up to the effective date of the bill.

(b) This subsection establishes the procedure to be followed only in the event that voluntary agreements as authorized by subsection (a) cannot be negotiated. Federal and non-Federal projects are subject to its terms.

An owner or operator of a water-control facility (typically, a reservoir) may declare his intention to operate his reservoir in such a manner as to provide the optimum amount of firm energy for the group composed of himself and all downstream hydroelectric facilities. The procedure for declaring such intention is set out later in the bill and such reservoir owner is required to file a plan for such method of operation. If the operating plan is found to be reasonable, then each downstream beneficiary becomes obligated to pay his equitable portion for the benefits conferred by such reservoir. If such reservoir owner does not submit a reasonable operating plan or does not submit any plan at all to operate for the mutual benefit of the whole group, then such reservoir owner is not entitled to any payment at all for headwater benefits.

Once a plan for coordinated operation is found to be reasonable the Commission will determine a reasonable and equitable annual charge which will be paid to the reservoir owner and will also apportion such charge among all beneficiaries in proportion to the additional amount of firm energy that each beneficiary can produce as a result of the coordinated operation. The amount

of such annual charge to be paid by a particular beneficiary is further limited to the value of the benefits realized by such facility. Thus the total amount to be paid to any reservoir owner is limited to an equitable portion of the fixed costs and operation costs of the reservoir, and the amount that will be paid by a particular beneficiary is limited by the value of the benefits he receives. All determinations to be made by the Commission will be made after notice and opportunity for hearing.

The subsection sets forth, without limitation, some of the costs an equitable portion of which will be included in computing the annual charge to be paid to reservoir owners. The costs are the fixed annual costs of the rservoir, the annual operating and maintenance cost of the reservoir (including land rentals and similar charges) and costs incurred by reservoir owners and downstream owners for energy which they require to maintain the firm energy level allowed by the coordination plan.

A proviso in the subsection establishes rules for the payment of headwater benefits in the event that hydroelectric facilities in a particular river basin are used primary for peaking service or secondary energy rather than for the production of firm energy. Under such conditions, coordinated operation will not be a condition precedent to payment for headwater benefits; on the contrary, an equitable charge will be assessed, based on whatever benefits are conferred.

If the physical circumstances in an area indicate that the hydroelectic facilities are used primarily for a purpose other than the production of firm energy, then the reservoir owner is entitled to equitable payments for headwater benefits without the necessity of coordinating his operation with those below him. The subsection defines "firm energy" as that term is used in the bill. The subsection provides that payments required by the bill may, by agreement of the affected owners, be paid in power, or energy.

:

(c) This subsection sets forth the procedure for establishing a coordination plan under subsection (b) if negotiations for a voluntary agreement under subsection (a) have failed. In order to qualify himself for any payment under subsection (b) a reservoir owner or operator must file a commitment to operate his storage facility on a coordinated basis with all facilities downstream from him. The commitment must be filed with the Commission in advance of the commencement of the river basin storage control period and it must commit the reservoir owner to so operate for a period of not less than 5 years. Anyone affected by the coordination commitment may object to such a commitment within 30 days after it is filed. Affected parties will be entitled to argue, among other things, that the area does not lend itself to coordination for firm power production and is thus within the first proviso of subsection (b) or that the coordination plan to which the reservoir owner seeks to commit himself, is unreasonable in one or more particulars.

If the Commission does not disapprove the proposed coordination within 6 months of the fixing of the commitment the reservoir owner will have satisfied the requirement for assurance to downstream owners as set forth in subsection (b). The reservoir owner will thus have qualified himself to receive payments for headwater benefits and will have obligated himself to operate on a coordinated basis in order to produce the optimum amount of firm energy that can be produced by the group composed of the reservoir owner and all downstream

owners.

(d) This subsection is composed of two separate matters, each described in a sentence. The first sentence relates to a situation where the owner of a facility is a party to, and bound by, a coordination plan under subsection (c). If such a facility is operated in a manner which results in a detriment to any other facility within the coordination plan, then the Commission shall allow to the injured owner an equitable offset against the charges assessed to him under subsection (b) and the Commission shall include such offset in computing the annual charge to be paid to the reservoir owner and apportioned among downstream parties.

The second sentence of the subsection relates to a water-control facility which is not part of a coordination agreement or plan under subsection (a) or (b). If such an owner operates his facility so as unlawfully to interfere with the natural flow of the river or to interfere with storage releases which have been released from upstream in accordance with a coordination agreement or plan and if such interference results in a detriment to a downstream facility, the Commission, after notice and opportunity for hearing, will fix a reasonable

and equitable charge to be paid to the injured party by the owner creating the injury. This portion of subsection (d) allows the Commission to determine and assess damages caused by interference with coordinated operation or with natural stream flow.

(e) This subsection provides that charges which are established by the Commission may be readjusted by the Commission on its own motion or the motion of any interested party at any time that changed conditions so warrant. Notice and opportunity for hearing are required for any such readjustment.

(f): Subsection (f) provides that sums collected by the United States under this bill will be revenues of the facility providing the benefit and be disposed of in accordance with all applicable provisions of law.

(g): This subsection states that all affected parties shall pay their reasonable share of the Commission's costs in making its determinations and that a reasonable portion of such costs will be allocated to the United States if it be an affected party although no cash need be paid by agencies of the United States. (h): Subsection (h) provides that appropriations or other funds which are available for the operation of any affected Federal facility shall be available to pay such costs or charges as may be assessed against the United States.

(i): This subsection states that no party will be required to pay annual charges under section 31 of the bill for benefits received prior to the effective date of the section. Also no one would be required to pay such charges under section 31 for benefits received more than 5 years prior to the date on which the Commission gives notice to a party under subsections (b) or (d). Thus the provisions of section 31 do not operate retroactively. On the other hand, the Commission and reservoir owners are encouraged to proceed as fast as possible in making the necessary determinations under the bill because assessments will be limited to the period of not more than 5 years prior to the time that the Commission institutes its proceeding.

This subsection also provides that a party is excused from paying annual charges to any non-Federal interest if they are already required to pay similar charges under State law. This provision is intended to prevent double assessment against owners, particularly in Wisconsin, who are already subjected to charges for improvements maintained by the State.

SECTION 2

Section 2 of the bill repeals subsection (f) of section 10 of the Federal Power Act and includes a general repealer of other acts or parts of acts which may be in conflict with the bill. However, the section also provides that nothing in the bill shall excuse or otherwise affect any obligation which may have accrued under section 10 (f) or in any other manner prior to the effective date of the new law. The effective date is established on the first day of July following the date of enactment. Any obligation which, as of the effective date of the new law, has been assessed or is awaiting computation and assessment under prior law remains collectible.

Mr. Moss. The Commission is in a position to direct rather than to have it as a matter of agreement under the provisions of Mr. Gary's bill.

Mr. METCALF. I am talking about the bill of the gentleman from Montana.

The CHAIRMAN. Any further questions?

Mr. METCALF. I would like to also file a resolution by the County Commissioners Association of the State of Montana in support of this legislation.

The CHAIRMAN. Let it be filed for the record without objection. (The resolution referred to is as follows:)

RESOLUTION

Whereas S. 1782 by Senator Murray and H.R. 7201 by Congressman Metcalf are bills pending in the 86th Congress providing for the comprehensive operation of hydroelectric power resources of the United States; and