Mr. STEVENS. Actually, Mr. Avery, there is a considerable amount of coordination going on now. It is strictly voluntary, however. An example is this chart here. If Montana elects to release its storage in July instead of in September when everybody can use it, it has to have some way of carrying that load in July and August and until the 15th of September. So the downstream utilities have to send some secondary energy over to serve that load while Montana holds this storage. Now, this is the electrical integration. Power flows back and forth. The Bonneville Power Administration has in the last few years been sending energy over to hold this storage so that the downstream beneficiaries can get 4.7 kilowatt-hours for every one that is sent over. Bonneville has not elected to do this, however, with regard to Long Lake, Coeur d'Alene, or Priest Lake storage. They have elected to do it in the case of Flathead Lake. Also, this is an annual voluntary arrangement. It can be discontinued by either party at any time, and also, their is some question as to the legality of the Federal Government transmitting that energy for this particular purpose. Mr. AVERY. Mr. Stevens, this question should probably have been directed to another witness, but some statement was made this morning about an income to the Federal Government for Federal license fees by non-Federal users. Are those fees a considerable amount of money? Mr. STEVENS. Federal license fees? Mr. AVERY. That is what I understood a witness to say this morning. Mr. STEVENS. License fees themselves would not come within the purview of this legislation. Mr. AVERY. I understand that, but some reference was made of it. Mr. STEVENS. There might be this situation: As things are now constituted, the upstream Federal reservoir collects for downstream benefits at all non-Federal plants. And the upstream non-Federal reservoir collects from the non-Federal downstream plants, but they cannot collect from the downstream Federal plants. It is a sort of one-way street proposition. This bill would result in all utilities being created equal in that respect. The Federal Government would pay for the benefits it gets the same as the non-Federal utilities pay now. Mr. AVERY. Thank you, Mr. Stevens. The CHAIRMAN. Thank you very much, Mr. Stevens. (The following material was later received from Mr. Stevens:) Hon. OREN E. HARRIS, SEATTLE, WASHINGTON., July 30, 1959. Chairman, Committee on Interstate and Foreign Commerce, MY DEAR MR. CHAIRMAN: During the hearings of July 27 on H.R. 7201, 7494, and other bills, a question was raised as to the time when the hydroelectric facilities of the Columbia River Basin would no longer be used for the production of firm energy. An additional question was raised concerning the relative magnitude of payments which would be made under H.R. 7201 for headwater benefits by the Federal Government and to the Federal Government. I hope that the following information will be of use to the committee and to interested persons, and I respectfully request its inclusion in the printed record of the hearings. 1. The U.S. Corps of Engineers recently completed its Columbia Basin Review Report (308). This report shows that about two-thirds of all Columbia Basin storage will be used for firm energy production in the year 1985 and that there will still be storage releases in the year 2010. 2. Recently prepared figures show that storage benefits to the non-Federal plants from Federal storage are twice as much as the benefits to Federal plants from non-Federal storage. The Federal Government will pay for headwater benefits on the basis of 350,000 kilowatts of firm energy which it receives from non-Federal storage releases and will receive payment on the basis of 708,000 kilowatts of firm energy which the other utilities receive from Federal storage releases. In this situation, the Federal Government stands to take in much more money than it is spending for storage benefits. Thank you very much. Hon. OREN E. HARRIS, JACK D. STEVENS. SEATTLE, WASH., July 30, 1959. Chairman, Committee on Interstate and Foreign Commerce, MY DEAR MR. CHAIRMAN: Following the hearings of July 27, 1959, on H.R. 7201, 7494, and other bills, it was announced from the chair that the record would remain open for 5 days to receive additional information. I have therefore taken the liberty of enclosing the following information with the request that it be included in the printed record of the hearings following my statement or at some other place which the committee deems appropriate. I enclose a copy of a resolution of the commissioners of Public Utility District No. 1 of Pend Oreille County, Wash., in support of H.R. 7201. I have also received their approval of the remarks which I made before the committee. This approval, together with the approval of other utilities heretofore secured, means that every non-Federal utility that owns and operates a generating hydroelectric plant on the Columbia River or its major tributaries supports the remarks I made in favor of H.R. 7201 and H.R. 7494. These utilities are as follows: Pend Oreille County Public Utility District. Grant County Public Utility District. Chelan County Public Utility District. Idaho Power Co. Montana Power Co. Washington Water Power Co. Portland General Electric Co. Pacific Power & Light Co. I also enclose a copy of a document entitled "Comments by H. A. Sewell, Consulting Engineer, on Research Memorandum-Gus Norwood, Headwater Benefits Legislation, S. 1782." Mr. Sewell, who is consulting engineer for Public Utility District No. 1 of Pend Oreille County, has authorized me to submit this memorandum and request its inclusion in the record of the hearings for the consideration of the committee and interested persons in connection with the research memorandum which was submitted for the record by Mr. Norwood. Thank you very much. Sincerely yours, JACK D. STEVENS A RESOLUTION APPROVING CHANGES IN THE FEDERAL POWER ACT TO PERMIT VOLUNTARY COORDINATION OF HYDROELECTRIC POWER SYSTEMS IN THE UNITED STATES ON A BASIS OF SHARING OF BENEFITS WITH THE APPROVAL OF THE FEDERAL POWER COMMISSION Whereas it is economically advantageous and desirable in the public interests that the release of storage waters in reservoirs of lakes and rivers with dams and powerplants producing hydroelectric power in the United States be coordinated to produce the largest amounts of power possible; and Whereas the large amounts of floodwaters in the rivers of the Pacific Northwest make it especially desirable that storage waters there be released with proper coordination so that they may carry substantial amounts of additional load carrying capability on the hydroelectric power systems in the Pacific Northwest; and Whereas the benefits of fully coordinated operation cannot be realized under existing provisions and interpretations of Federal laws; and Whereas when the Federal Power Act, including section 10 (f) thereof, was enacted nearly 40 years ago, the problems of coordinated operation and electric grid transmission systems were unknown and the benefits possible therefrom under the conditions of the complex power development of multiple ownerships on a river system, such as the Columbia, where unheard of and unimagined; and Whereas Public Utility District No. 1 of Pend Oreille County, Wash., owns and operates the Box Canyon hydroelectric project on the Pend Oreille River in Pend Oreille County, Wash., one of the tributaries of the Columbia River and is subject to the release of large amounts of storage water from the reservoir of Lake Pend Oreille and other reservoirs upstream in the Clarksfork River above Lake Pend Oreille, and because of the lack of proper coordination by both Federal and non-Federal projects in the release of said storage waters the district has not been able and cannot secure the full benefits from upstream storage releases as was intended and which it would receive under fully coordinated operation; and Whereas the district has secured the shoreland and flowage rights for a hydroelectric project in the Zee Canyon area of the Pend Oreille River and has a hearing and application for license to construct a dam and powerplant at Zee Canyon, and if the license is granted and the project is built, the district will have additional need for coordination of the upriver storage in the reservoir of the Pend Oreille and Clarksfork River; and Whereas the district owns the Sullivan Lake storage reservoir located on a small stream tributary to the Pend Oreille River and has been licensed by the Federal Power Commission to operate the same as a storage reservoir to provide water for downstream Federal and non-Federal projects on the Pend Oreille and Columbia Rivers and cannot secure the full benefits from said storage except by proper coordination agreement; and Whereas maximum coordinated operation cannot be obtained without a new statute to be substituted for section (f) of the Federal Power Act which will permit voluntary coordination and recognize the sharing of benefits therefrom between and among the various Federal and non-Federal projects or owners of hydroelectric powerplants and storage reservoirs in the rivers and lakes of the Pacific Northwest: Now, therefore, be it Resolved by the Commissioners of Public Utility District No. 1 of Pend Oreille County, Wash., That the Commission hereby approves in purpose and principle S. 1782 and H.R. 7201 to provide for voluntary agreements between and among the Federal and non-Federal hydroelectric power systems of the Pacific Northwest to coordinate their storage releases and power operations so they may be able to share the greatest power benefits to be derived therefrom, said coordination agreements to be subject to approval by the Federal Power Commission. Dated this 28th day of July 1959. Attest: F. W. SCHWAB, President. F. R. JORDAN, Secretary. COMMENTS BY H. A. SEWELL, CONSULTING ENGINEER, ON RESEARCH MEMORANDUM— GUS NORWOOD, HEADWATER BENEFITS LEGISLATION, S. 1782 (Numbers refer to the numbers in Mr. Norwood's memorandum.) (4) The Federal Water Power Act, as Senator Dill may recall, was enacted to encourage the development of waterpower and lay out a set of rules creating a Federal Power Commission so that individual acts of Congress would not have to be introduced for each separate development on navigable streams or on Government lands. This act has served its purpose marvelously but after 39 years of operation and the rapid development of hydroelectric power made possible by this act, most of the cheap power sites which "will stand on their own feet" have been developed and the act should now be revised to encourage the development of those projects which are of great public benefit, because they increase the power at downstream Government dams, and yet do not produce enough power at site to make them feasible without some "sharing of the costs" by the benefited downstream projects. In the Northwest most of these downstream projects happen to be federally owned and so section 10 (f) should be amended to cover this new situation. (5) In regard to existing projects such as the Montana Power Co., these projects have "stood on their own feet" but now they are being asked to coordinate their development for greater downstream use. This coordination may result in less power production at site and they certainly should be compensated. We believe that in the case of these established projects definite provision should be made that all excess of payments received over costs incurred because of coordination agreements should be definitely earmarked for reduction of rates to the consumers. (6) We believe that the purposes of the Federal Power Act go further than the view of Mr. Buchanan. The water resources are owned by all the people, and especially all those people living in the watershed and any benefits received from coordination should be given to the people in the area rather than being restricted to the customers of the federally owned projects. (13) It is true that the rivers belong to all of the people and especially the people in the watershed but S. 1782 is designed to make this concept possible by enabling all of the people consuming power in the area to share in the benefits to be made possible by coordinated operation. (14) The concept of Mr. Norwood is very fallacious because the upstream utility was granted the use of a water privilege for the benefit of the people of the area which it serves. It should be operated for the benefit of these people and if its operation is modified for the benefit of people being served by another downstream utility, the downstream people, whether served by a Federal or nonFederal project, should compensate the upstream people for their proper share of the benefits created by the upstream utility. This is not "paying rent on your own property" but is rather a sharing of the benefits received from that property by all of the people of the area. (15) The Washington Public Utility District Association has consistently opposed the enactment of legislation such as S. 1782. In fact, at the hearing on July 16, 1959, Mr. Norwood presented a brief by Mr. Ken Billington. However, we believe that this brief is actuated by those public utility district's who are purchasing from the Federal Bonneville Power Administration and so hope to obtain the benefits of cheap power regardless of the equity of dividing these benefits with the other power consumers of the area. We believe it is high time that the Public Utility District Association recognize the rights of their members who have had the foresight to pioneer their own self-sufficient power supplies rather than "hanging on to the coattails of the Federal Government." The Public Utility District of Pend Oreille County pioneered this concept and Senator Dill was instrumental in getting the courts to legalize the construction of Box Canyon Dam. The decision in the Schwab case made possible the construction of the other public utility district dams in the State of Washington. It is these producing public utility districts which recognize the necessity of full coordination and are supporting legislation such as S. 1782. ((17) The statement of Kinsey Robinson in regard to the amendment of Government policy before authorizing the construction of upstream storage is fundamentally sound. We have heard Senator Dill state that if such legislation had been in effect, the construction of high Hells Canyon Dam could have been ordered by the Federal Power Commission but it certainly was not feasible to construct the high Hells Canyon Dam under the existing Federal Power Act. The untold benefits to the downstream power users of this high dam have been lost unless they can be made up by other projects, and these projects in turn will require legislation similar to S. 1782 unless they are to be constructed by the Federal Government. The present Federal Power Act tends to concentrate all of such storage construction in the hands of the Federal Government. (18) Public Utility District No. 1 of Pend Oreille County now holds license No. 2225 for Sullivan Lake power project, which is a storage project, and under which it hopes to be able to negotiate agreements with the Federal Government and others who can use this storage water downstream. However, the license requires that within 6 years a feasibility report be prepared as to the feasibility of generation at site. Manifestly, no generation can be determined until there is a pattern for contracting with downstream beneficiaries so that they may absorb part of the costs. In this case, larger waterways and larger waterwheels and generators will be required in order to release the water for maximum downstream coordination. Manifestly, the downstream users must pay a share of the costs of these improvements or they will not be made. The same situation exists at Lake Wenatchee, Wash., and at Priest Lake, Idaho. In fact, we believe that it exists on every project involving storage from this time on. passage of legislation similar to S. 1782 is necessary for regional development regardless of whether it benefits private power companies, non-Federal public, or Federal projects. The customers of these various utilities are the real people who own the water and are entitled to the benefits. The (24) (1) In our opinion S. 1782 is not a reversal of our traditional water resources policy but rather is a bringing of them up to date just as other fundamental concepts have to be readjusted from time to time: First, from the horse and buggy to the railroad, then to the airplane, and now to the jet plane. (2) There is no subsidy involved. The downstream users of the power will receive enough benefit through coordinated operation so that their customers will receive cheaper power and at the same time will be able to pay part of these benefits for the use of upstream water. (3) As stated under paragraph (24) and other paragraphs above, the enactment of this legislation will increase the development of our river resources by non-Federal public agencies and private companies and so take some of the load of upstream storage responsibility off the Federal Government. -(25) This proposed bill is not a perpetual appropriation bill. The payments to the upstream utilities will come out of the rates paid by the downstream utilities and since the downstream utilities receive benefits greater than their pay, ments, these rates will not be increased but actually will be lowered. At the same time, the customers of the upstream facilities will be compensated by rate reductions. (28) It is true that for over 5 years a task force of FPC has been studying on the Columbia Basin under docket No. E-6384. This study has convinced every member of the task force that far greater benefits can be obtained for the downstream users by proper coordination and that part of those benefits should be passed on to the upstream users, thus benefiting the whole region. Every one of the downstream users would be willing to pay several times what it is now paying if it would receive proper releases of water from upstream. (35) Headwater benefits are only a fraction of what they would be under coordination. Studies of the task force have shown that the present headwater benefits being received and paid for can be increased many times over by proper coordination agreements. Since these payments can be increased from necessary benefits to all parties concerned, that certainly cannot be regarded as a subsidy but as a sharing of the benefits received by the downstream utility. (36) This section shows the fallaciousness of Mr. Norwood's approach. Dump power can only occasionally be marketed and then at a very low price; and then if this power can be firmed up by proper coordination, the power becomes valuable because it can be sold on contract. (37) We do not believe that any coordination forced on a utility by license requirement will produce the benefits which can be derived from a voluntary coordination arrived at mutually. The only saying is: "You can lead a horse to water but you can't make him drink." (39) Here Mr. Norwood goes all out to support the fallacious assumption made in section 37 and then proposes to require the amendment of present licenses to cover this fallacious concept. (40) The conception of section 10 (a) of the act does not go so far as to have the Federal Power Commission police the operation of the license so that he operates his project for the benefit of downstream Government dams and their customers rather than for the benefit of his own customers. (44) President Theodore Roosevelt cannot by any concept be characterized as a meddler who would go into the operations of licenses and make them operate their projects, not for the purposes of serving their own customers and paying their own financial obligations but operating for another set of customers for a downstream project. Any such reference as that given to President Roosevelt's statement is a slur on that great man's concept of Americanism. (49) Here again, as in several of the preceding and following paragraphs of Mr. Norwood's, the people constitute the Federal Government, which is their instrument and their servant. He seems to feel that the Federal Government should operate the entire system for their favored customers of the downstream Government projects. (54) Here Mr. Norwood "argues in a circle." He now says that a subsidy is proper if it is directly appropriated by Congress. We can see no difference between his alleged subsidy and the subsidy mentioned in this paragraph, except that the alleged subsidies under S. 1782 will not really be subsidies by the Federal Government but are payments by the consumers of the downstream utilities to the consumers of the upstream utilities. (57) In this section, the method of computing upstream payments proposed by the FPC is mentioned. It is true that under this system which is known as the alternate cost system, each downstream utility is made to pay its share |