The CHAIRMAN. Thank you very much.

And, Mr. Hooker, thank you very much for your appearance here again.

Mr. Norwood, I believe you are from out of the city.

STATEMENT OF GUS NORWOOD, NORTHWEST PUBLIC POWER ASSOCIATION, INC., VANCOUVER, WASH.

Mr. NORWOOD. Yes, sir; from the State of Washington.

The CHAIRMAN. Well, that is out, all right. How much time would you require if we were to proceed?

Mr. NORWOOD. Would a 10-minute summary help?

The CHAIRMAN. We may be broken up, but we will try to accommodate you if we possibly can.

You are Mr. Gus Norwood, Northwest Public Power Association, 1311 Columbia Street, Vancouver, Wash.

Mr. NORWOOD. Yes, sir. And, Mr. Chairman, I would like to submit for the record the statement of Mr. Ken Billington, executive secretary of the Washington Public Utility Districts' Association serving some 1 million people, or three-quarters of a million people in the State of Washington.

The CHAIRMAN. It will be received for the record.

(The statement of Mr. Billington, referred to, is as follows:)

STATEMENT IN OPPOSITION TO H.R. 5309 BY KEN BILLINGTON, EXECUTIVE SECRETARY, WASHINGTON PUBLIC UTILITY DISTRICTS' ASSOCIATION, SEATTLE, WASH. My name is Ken Billington. I am executive secretary of the Washington Public Utility Districts' Association comprising 25 county public utility districts serving more than 230,000 electric customers within the State of Washington. This association is opposed to changes in the Federal Power Act proposed by H.R. 5309 on the ground that these changes are contrary to the public interest and not in keeping with the sound administration of the use of our natural resources. This legislation would grant an unwarranted subsidy to special interest users of a public resource and would create exorbitant charges against the Federal Government.

We subscribe to the principle that the navigable water resources of this Nation are in the public domain under the control of Congress. Non-Federal water users are permitted to develop this public resource under Federal Power Commission licenses. These licenses give the right of use but not ownership. The resource itself is still owned by the people.

When a non-Federal power project operator is provided benefits by the operation of upstream Federal facilities, he is in addition to enjoying the use of the people's water resource also using a part of the upstream facility in which the people have invested. For the use of this investment the downstream, non-Federal powerplant owner should be, and under present law is, required to pay a reasonable amount. This is the reasoning which supports section 10(f) of the Federal Power Act and which has been the rule in river development for more than 30 years.

The Federal Government is not, and we feel should not be, required to pay upstream non-Federal projects for benefits to downstream Federal facilities. Our Federal Power Commission licensing procedure tells the non-Federal developer in effect, "As long as you make full use of this site as provided for in the Federal Power Act, you may have the right to this site and its water to develop to the extent of your own finances and for your own special interest." H.R. 5309 would have the FPC add, "In addition, we will pledge and loan to you the Federal Government's investment in, and earning power of, its downstream plants to make your investment a much better one for your own special interest." In short, we feel the present law is proper and that the people should not be required to pay through the Federal Government for upstream storage benefits created incidentally by non-Federal projects which are already using for their

own limited interest (whether private or public power) a resource of the people. The public does enough when it permits a non-Federal entity to develop for its own use a part of the Nation's resource and should not thereafter have to pay further for any incidental benefits which may accrue from the development.

The provision in H.R. 5309 relating to the extension of FPC licenses at the expiration of original licenses seems to bind the FPC to mandatory actions unnecessarily. In fact, the provision might promote a result contrary to that intended by its supporters by encouraging the exercise of the Federal recapture power rather than accepting one of the listed alternative possibilities.

Thirty years' experience and wise administration of our water resources under the present law would be destroyed under H.R. 5309. We urge rejection of the bill.

Mr. NORWOOD. I have a memorandum on the Senate bill, which is comparable to the Metcalf bill, Senate bill 1782, introduced by Senator Murray, which is also a legislative history of this subject, and I think this would be helpful to the committee. I have additional copies for the members of the committee, if the clerk would take these.

The CHAIRMAN. Very well.

Mr. NORWOOD. Mr. Chairman, my written statement is about 12 pages long and basically makes the point that the premise behind these bills is false.

The CHAIRMAN. Would you like your statement to be included in the record?

Mr. NORWOOD. Yes, sir.

The CHAIRMAN. Let it be included.

(Mr. Norwood's statement, referred to, is as follows:)

STATEMENT OF GUS NORWOOD, EXECUTIVE SECRETARY, NORTHWEST PUBLIC

POWER ASSOCIATION

My name is Gus Norwood. For the past 11 years I have served as executive secretary of the Northwest Public Power Association with headquarters at Vancouver, Wash.

The Northwest Public Power Association is owned and operated as a service institution by 105 consumer-owned electric systems of the States of Alaska, Idaho, Montana, Oregon, and Washington. These comprise rural electric cooperatives, electric utility districts, and city-owned electric systems serving almost 2 million people. Our systems are unique in that we do not operate for profit. Our sole purpose is to serve our people on a nonprofit basis. In legislative matters before the Congress we strive for policies in the best public interest.

OUTLINE OF TESTIMONY

H.R. 5309 is an omnibus bill covering three subjects.

We have no objection to the portion of the bill which would exempt very small hydro projects of under 2,000 horse power from the obligation to obtain a license. This issue is the subject of a separate bill in the Senate. We would prefer this being enacted alone so that it cannot be used as an excuse by tagging on bad riders.

The last part of this bill, section 6, is a tremendously large subject and is also a separate matter. It requires automatic relicensing of all private utility dams unless the United States takes over the dams. This leaves the States and local governments out in the cold. We strongly oppose section 6. We think it warrants treatment as a separate bill and separate bearings.

This brings me to the first part of the bill which repeals section 10(f) and sets forth a formula for making the Federal Government pay money every year as a subsidy to certain private utilities.

In simple case form it makes the Federal Government as the owner of the downstream Bonneville Dam on the Columbia River pay an annual tribute to the Montana Power Co. which has been so fortunate as to be a temporary tenant at the Kerr damsite where the Kerr Dam controls the level of the publicly owned Flathead Lake.

The bill goes to an even greater extreme in that the Federal Government would also be required to pay a further extra charge if the Corps of Engineers obtains approval to dredge the channel between Kerr Dam and Flathead Lake and thus permitted greater drawdown of Flathead Lake.

In effect the Government, which owns Flathead Lake, would be required to pay rent to its own temporary tenant for letting that tenant use the public property. Considering the values involved, the value of Flathead Lake is at least 10 times the value of Kerr Dam.

We are opposed to the present repeal of section 10 (f) and the proposed formula of H.R. 5309, the Gary bill.

My testimony is authorized by resolution of the membership of the Northwest Public Power Association which reads as follows:

"We oppose the proposal that Federal agencies owning downstream dams pay upstream storage charges to private utilities. We urge retention of section 10 (f) of the Federal Power Act as it now stands. We urge FPC to expedite its determination of downstream benefits due in the Columbia River Basin."

Before leaving this resolution, Mr. Chairman, may I emphasize that for some 8 or 9 years we have been urging the Federal Power Commission not only to expedite the Columbia River case but also in the Missouri and Willamette River Basins. We think the Commission has been unreasonably slow. This is a case where justice delayed is injustice. Much of the present resentment about the unsatisfactory operation of section 10(f) is due to the slowness of the Commission in performing its duties.

Another observation under the heading of poor FPC administration is the use of a task force made up of downstream dam owners which serves as an advisory committee. This task force has been meeting for years and they appear to be able to agree on one thing: They want to pay as little as possible. There is an obvious lesson in the operation of this task force. You do not operate a court by setting up an advisory committee of defendants to set policies on fines. We cannot have the tenants set the rent for the use of these public waters. We take a dim view of voluntary agreements to solve these

problems.

The law places this judicial duty clearly and mandatorily upon the Commission. It is my considered view based on many years of observation in this situation that the Commission is inclined to be reluctant as an agent of the Government to collect the money which is due the Government.

Public property is involved. Money is due the United States Treasury. I have invited the attention of the Comptroller General that his Office should take steps to insure that these funds are collected.

Our member systems have an interest in this matter because the Federal power program in the Pacific Northwest is on a self-liquidating nature. Last year our systems paid about $25 million into the United States Treasury for power. This pays back the power investment plus interest and operating costs. If headwater benefits charges for Hungry Horse Dam are not collected, we pay in the long run.

Let me emphasize that this is primarily a Pacific Northwest problem because we have about a third of the nation's hydropower, developed and undeveloped. More especially our river is and increasingly will be controlled by upstream storage.

Who owns the storage dams controls the river. This means physical control but also a measure of economic control and much influence over the electric business.

While we oppose H.R. 5309 except for the 2,000 horsepower issue, we do agree that some improvements can and must be made. I can discuss this better by turning to H.R. 7494 and H.R. 7201 which are identical.

Again the Pacific Northwest is primarily concerned.

We oppose these two bills in their present form but we agree that the present situation needs remedy. We need a lot of study before we are ready for legislation.

This legislation is premature on two general grounds: First, we need to know more about where we want to go in the Columbia River Basin and how to get there. Meanwhile, we have a voluntary powerpool in the Pacific Northwest which, while far from perfect, is doing a fair job. We are in no hurry. Second, this involves Canada. We are in negotiations. These are interrelated. We expect an agreement with Canada by the end of this year. We think this bill should wait at least until the negotiations with Canada are concluded.

are done.

The drastic policy changes made by this bill will affect us for the indefinite future. We ask that this bill be held up until after the Canada negotiations Turning to the content of the two bills we find we are dealing with two subjects: coordination and downstream benefits.

The Federal Power Commission now has adequate authority to require coordination as it has in the Brownlee Dam and other licenses. We think this should be required in all licenses.

Likewise the Bonneville Power Administration now has authority and has entered into several voluntary coordination contracts as for Rock Island Dam and Box Canyon Dam. That agency does not seek new authority.

Turning to the central policy issue in this bill, I would like to pose this question. Can we permit a licensee to operate on an uncoordinated basis? The answer is "No." Everyone agrees that coordination is necessary in the public interest, and we agree that such coordination must be predictable. If all licenses would have included the Brownlee Dam corrdination clause, we would have such universal coordination.

If legislation is needed, the place for tightening the law is section 10(a) which defines comprehensive plan. We have always assumed that for a plan to be comprehensive it must be premised on a plan of operation which is comprehensive. This would include both hydraulic and electrical integration. Our solution is to tighten up section 10(a) to require coordination. This is done in paragraph 62 of our research memorandum.

We do not want a public power or a private power agancy to come to some negotiating table and be allowed to haggle over the question of whether or not they will coordinate.

I would limit such negotiations to the practical meaning of coordination in terms of the annual water plan.

Turning to downstream-benefits payments I hesitate to review all the arguments which are set forth in the 10-page Senate minority report of May 7, 1956. Generally this bill is a perpetual appropriations act. The bill places a duty on the Federal Government to pay out money every year to any licensee which builds a dam to store water upstream from a Federal downstream dam.

This bill makes such a subsidy both to new dams and to existing dams like Kerr Dam. This is a windfall, a subsidy, or bonanza.

We believe in equity and fairness. We recognize the Markham Ferry case where the Government is paying some $6 million to the Grand River Dam Authority. We go along with the Oroville Dam provision in the last omnibus bill. We in the Pacific Northwest expect to ask Congress to support similar dams which can be built in the Pacific Northwest.

The Columbia River involves a wide diversity of ownership of dams. We are vitally interested in this area of legislation.

This is a very important matter. We compute that with 80 percent development and with power at 5 mills the annual value of Columbia River power is $675 million per year. I testified on this at the Upper Columbia River development hearing last year before the Senate Interior Committee.

We expect that upstream storage may affect as much as half of the Columbia River power potential.

It may well be necessary to seek Federal assistance in order to enable the various non-Federal agencies to develop many of the dams at the more than 500 power damsites in the Columbia River basin. We'll face up to these situations when the time comes.

We think Congress is looking at a liability of tens of millions of dollars per year in the Columbia River Basin alone. If subsidy is needed, we think we better start on a project-by-project basis and not on this blank check, perpetual appropriations basis. Even if the payments in our basin amount to only $20 million a year, that still amounts to $2 billion over a 100-year service life. Additional charges would be required in the many other river basins.

One of the areas of concern to those of our systems which purchase power from a Federal system is that the upstream storage charge of a private utility would involve a rate of return of over 12 percent on the portion of the dam which is allocated to downstream benefits.

Mr. NORWOOD. The premise behind these bills, for example, in the Pacific Northwest is that "we do not now have coordination." The answer is "We do." We enjoy a benefit in our power pool of some 7

million kilowatts, a benefit from coordination of at least a million kilowatts. A commonly used recent figure is 1,200,000 kilowatts of benefits from coordination. These benefits are now being achieved voluntarily. It is not necessary to make new payments to obtain the benefits which we are now achieving.

These bills rest on the assumption that the companies, because they are not tied up mandatorially, could theoretically discontinue coordination and wipe out these benefits; and under those circumstances, they would then have to be paid for again coordinating. And that is the area of misunderstanding behind these bills.

We in the Pacific Northwest have a coordinated power pool today. We do not have to pay these additional costs to get benefits which we now get.

The reason that our people do this voluntarily, in a river system of great diversity of ownership, is that the benefits are so great to each and every member utility of the Northwest power pool that they have done this voluntarily and do not need additional legislation.

There were some questions here about whether Federal agencies may participate in coordination and integration contracts. The answer generally is "Yes." The Bureau of Reclamation has such contracts in southern Idaho and in the central valley project, that I am personally familiar with. The Bonneville Power Administration has coordination contracts at the Rock Island Dam and the Box Canyon Dam in the State of Washington. These, however, do not involve cash payments. They involve the operation of exchange accounts, in which energy is exchanged back and forth, and this does not involve Federal appropriations.

A number of these bills do involve Federal payments, and thus these bills in effect are appropriation authorization bills. The Columbia River system will some day produce, assuming 80 percent development and five mill power, as much as $675 million worth of power per year. This is about one-third of the power potential of the country. I have covered this in my testimony at the Upper Columbia River hearings of the Senate last year.

In this kind of a picture, to pass legislation which would commit the Government to upstream storage charges and in a river system in which upstream dams will control and determine about half of the power benefits, the Congress is coming very close to signing a blank check.

Now, some of our own public power systems would like to build some of these upstream storage projects, and we think that these cases can be taken care of just the way the Congress has already taken care of two situations. There is the Markham Ferry project in Oklahoma, involving the Grand River Dam Authority, where Congress contributed over $6 million for the project because of the Federal flood control benefits involved. And in the omnibus bill last year, Congress authorized the Chief of Engineers to make an arrangement with respect to Califronia's Oroville Dam on the Feather River in connection with flood control benefits which come from that project.

We think such project-by-project studies would be a better way of going into this large field, and that the Congress should not commit itself on a blank-check basis in an area in which there is so little firm knowledge.

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