for insertion in the record of this hearing the backup data for the power values used by the Commission's staff in its analysis of the power aspects of the Diablo project.

The total annual value of hydroelectric power supply is considered to be made up of two components: (1) a "capacity value" which corresponds to the fixed elements of the cost of power supply from alternative new steam-electric plants, which in the case of Diablo would be the most likely alternative supply; and (2) an “energy value" which corresponds to the variable elements of the cost of power supply, mostly fuel, from such alternative plants. These capacity and energy components of power value are expressed in terms of dollars per kilowatt per year of dependable capacity and mills per kilowatt-hour of average annual energy, respectively.

In the case of the Diablo project, as well as for most other hydroelectric projects, the estimated "at site" cost of producing electric power at modern steamelectric plants was developed as a first step. This basic cost was then increased by transmission costs and losses to arrive at the cost of steam-electric power at the market, this cost representing the value of the power at market. This value at market was then reduced by the hydroelectric transmission costs and losses to obtain the value of hydroelectric power at the site of the Diablo project.

The detailed computation of the power values used by the staff in its analysis of the Diablo project are given below.

Fixed charges (13.03 percent of investment: includes 6.25 percent for cost of money, 0.85 percent for depreciation, 0.35 percent for interim replacements, 0.25 percent for insurance, and 5.33 percent for Federal, State, and local taxes).

$13.68

Fixed operating costs (includes costs of fuel, operation and maintenance, and administrative and general).

2.53

Total__.

16. 21

Annual cost of transmitting steam-electric capacity to market__. Annual cost of steam-electric capacity at market, or value of Diablo capacity at market_

2.62

18. 83

Allowance for losses in transmitting steam-electric power to market_
Incremental cost of steam-electric energy at market.

.05

At-site value of Diablo energy

Allowance for losses in transmitting Diablo power to market and adjustment for lower plant factor of Diablo as compared with steam-electric plant---

2.05

.33

1.72

Use

Sincerely yours,

1.70

JEROME K. KUYKENDALL, Chairman.

Mr. FASCELL. Everybody agrees you can sell all the power you want out of this project; is that right?

Mr. MASON. You want the data we used to support our conclusions as to the cost ratio of 1 to 1, anything that relates to our conclusion? Mr. WEAVER. The Congressman asked how we arrived at that $15.50 and the 1.7 mills.

Mr. FASCELL. When I get the two together, I hope I can evaluate the cost ratio or you will hear from us. I am doing it piecemeal and not all at once.

Mr. MASON. We would like to give it to you all at once. We will supply that.

Mr. FASCELL. Those are all the questions I have, Mr. Chairman.
Mr. SELDEN. Are there any other questions?

If not, I want to thank you, Mr. Weaver, Mr. Mason, and Mr. Crum for your statements and your answers to our questions.

We have with us today also Mr. N. B. Bennett, Jr., Assistant Commissioner of the Bureau of Reclamation of the Department of the Interior.

Mr. Bennett.

STATEMENT OF NEWCOMB B. BENNETT, JR., ASSISTANT COMMISSIONER, BUREAU OF RECLAMATION, DEPARTMENT OF THE INTERIOR

Mr. BENNETT. I do not have a prepared statement, Mr. Chairman, nor has the Interior Department had time to prepare a formal report on the bill.

Mr. SELDEN. I would like to ask you, then, to describe for the subcommittee the Department's interest and responsibilities in the construction and the operation of the proposed dam and also what part the Department has played in the development of the plans for this dam.

Mr. BENNETT. I will be happy to do that, Mr. Chairman. The Department's interest is severalfold. We have cooperated with the International Boundary and Water Commission, U.S. Section, on the construction of Falcon Dam. We have rendered engineering consulting services to them on their preliminary designs for the present dam. We have underway work in the lower valley below Falcon on four different projects which require investments of money by the United States.

So we are interested, of course, in seeing that the investment we are making there is protected.

In addition to that, we are the marketing agents for the power now generated at Falcon Dam. We have that responsibility by act of Congress passed in 1954.

We have not participated in the overall planning of this project. We have, as I indicated, participated in giving our engineering advice and consultation on the design problems of the dam.

We did write the letter of January 29, 1959, which is published on page 141, I believe, of the Senate document, which sets forth the views of the Interior Department on the plan proposed in that document.

1 See app. II, p. 263.

The views expressed in that letter by Assistant Secretary Aandahl have not been changed. We are of the same opinion as expressed therein. We do feel this is a good project and one which should be undertaken.

Mr. SELDEN. Yesterday we received testimony which indicated that the Falcon Dam was not amortizing through the sale of power the cost of its power facilities. Could you explain to the subcommittee what significance this has, in relation to the 1954 law, which you state in your letter of the 29th of January to the Assistant Secretary of State, provides this energy must be marketed to cover the cost of producing and amortizing allocated capital cost?

Mr. BENNETT. Yes, sir, the act of June 18, 1954, requires that the rates for the sale of power at Falcon be set so as to accomplish amortization of the power costs.

As of today we have been unable to establish what those allocations are. We cannot arrive at a final allocation until the costs of the total projects on the river are known. This would include the present dam under consideration, so we have established an interim rate schedule at Falcon which has been approved by the Federal Power Commission. That rate schedule calls for sale of power in general terms at $15 per kilowatt-year and 1.75 mills per kilowatt-hour and for 1 mill per kilowatt-hour for all hours beyond 400.

The revenues which we have secured today under that rate schedule gross total $1,216,982. That includes the annual operation, maintenance, replacement, and incidental expenses due to marketing. Excluding these items we have deposited in the miscellaneous receipts of the Treasury $563,733 above the operating costs.

Mr. SELDEN. Which does not amortize the cost of the power facilities?

Mr. BENNETT. Whether it does or does not, I don't think we can tell today. It simply indicates in the terms of the annual operating costs we are operating in the black. There was 1 year

Mr. SELDEN. Why is it you can't determine the cost of the power facilities at the Falcon Dam?

Mr. BENNETT. The position has been taken by the State Department that until the costs of the structures required by the treaty are all known you cannot tell what the costs of allocated power will finally be. Mr. SELDEN. What position has the Department of Interior taken on it?

Mr. BENNETT. We have to take the position that the cost items are those referred to as by the State Department; when we have those costs, allocations can be made.

Mr. SELDEN. Have you made no determination on the basis of that one dam itself as to whether or not the power facilities are being amortized by the sale of power from the dam?

Mr. BENNETT. No, sir, that has not been made.

Mr. SELDEN. Did I understand you to say that a determination cannot and will not be made until all the other structures required by the treaty are installed?

Mr. BENNETT. That is the policy being followed.

Mr. SELDEN. Could such a determination be made?

Mr. BENNETT. Theoretically it could be.

Mr. SELDEN. Would the Department of the Interior have the operating responsibility for the powerplant at the Amistad Dam if the Federal Government constructs the power facility there?

Mr. BENNETT. There is no present legal authority for that. I would have to assume if there is a federally constructed powerplant, it would be operated in connection with the powerplant at Falcon to produce system power and the Interior Department in that case should be responsible for marketing the power from the two structures. Mr. SELDEN. Mr. Fisher, do you have any questions?

Mr. FISHER. No.

Mr. SELDEN. Mr. Kilgore?

Mr. KILGORE. Mr. Bennett, would you be in a position to indicate by-I suppose this would be by projecting the figures on power returned that have actually been experienced at Falcon and projecting that over the expected 50-year life, what cost would be amortized by the return that you have now experienced?

Mr. BENNETT. That could be done in a very rough fashion. We have now 5 years of operating experience with a net return of $563,733. That is approximately $112,000 a year; 112,000 times 50 years would give you a rough figure.

I would gather from the information_contained in Senate Document No. 65 that the gross revenue would be increased some $3,000 a year if Amistad Dam is constructed. So you would have possibly as much as $115,000. Trying to go from the 5 years of experience on into the future is dangerous. Unfortunately that 5 years happened to include 1957, a very, very low water year, in which we sold only 23 million kilowatt-hours.

I would hope there wouldn't be many more like that.

Mr. KILGORE. I can assure you that the people down there hope that too.

Mr. SELDEN. On the basis of the estimate of the Department of State of the increase that you have just mentioned, would the cost of the power facilities be amortized?

Mr. BENNETT. I don't recall at the moment what the specific cost of the power facilities was, but I think it would be fair to anticipate that by extrapolating from the full year period to a 50-year period your net revenues would be on the order of $6 million.

Mr. SELDEN. Do you have any estimate of the cost of the power facilities, Colonel? Certainly you must have that figure somewhere? Colonel HEWITT. We gave you that figure yesterday for Amistad. Falcon or Amistad?

Mr. SELDEN. Falcon.

Colonel HEWITT. Yes, sir, we do. Capital costs tentatively allocated to power is $6,945,000, that is, specific costs to power.

Mr. BENNETT. What we are saying is that forecasting from 5 years of record it would appear that the revenues would be about equal to that tentative allocation.

Mr. SELDEN. So including interest, it would not amortize the cost of installations.

That is the answer I am trying to get.
Mr. BENNETT. Based on this 5 years of
Mr. SELDEN. That answers my question.

Mr. KILGORE. Mr. Bennett, because of the Bureau's interest in the area below Falcon, the Bureau is aware of some of the conditions that exist there and is aware of the litigation involving water rights. Would it be a correct and fair statement to say at this time there would be no way during the pendency of this litigation to identify the irrigation beneficiaries in the area?

Mr. BENNETT. I think that is probably a fair statement. Until such time as the court has made its finding as to what are the water rights, it would be difficult to say who would receive the specific benefit from the stored water.

Mr. SELDEN. Thank you very much, Mr. Bennett.

We are running into the lunch hour. We have an important witness this afternoon from the Bureau of the Budget, Mr. Hughes. I am going to ask him, if he will, to come back at 2:30 and we will continue the hearing at that time. Colonel Hewitt, I hope you will be here also to answer any questions that might come up.

The committee will stand in recess until 2:30.

(Whereupon, at 12:45 p.m., the subcommittee was recessed, to reconvene at 2:30 p.m., the same day.)

AFTERNOON SESSION

The subcommittee reconvened at 2:30 p.m., Hon. Armistead I. Selden, Jr., chairman of the subcommittee, presiding.

Also present were the Honorable O. C. Fisher, a Representative in Congress from the State of Texas, and Hon. Joe M. Kilgore, a Representative in Congress from the State of Texas.

Mr. SELDEN. The meeting will come to order.

Our witness this afternoon is Mr. Phillip S. Hughes, Assistant Director for Legislative Reference, Bureau of the Budget. Mr. Hughes, do you have a prepared statement?

STATEMENT OF PHILLIP S. HUGHES, ASSISTANT DIRECTOR FOR LEGISLATIVE REFERENCE, BUREAU OF THE BUDGET

Mr. HUGHES. No, sir; I do not.

Mr. SELDEN. I understand the Bureau of the Budget has several suggested amendments to the pending legislation. I am going to ask you to explain the proposed amendments and the reasons that you have suggested those amendments.

Mr. HUGHES. Mr. Chairman, our letter of September 2, 1959,1 transmitted to the committee our comments with respect to H.R. 8080, and suggested five amendments in total. These, in general terms, were amendments designed to bring this legislation into conformity with what we considered to be generally good practice in legislation of this kind.

Without further ado, perhaps I can brief somewhat from the material that we sent you, the nature of these recommendations and then if you wish you may raise such questions as may arise. The first suggestion that we made dealt with section 2.

There is a proviso in section 2 to the effect that if a power privilege is leased, a report shall be made to the Foreign Relations Committee

1See app. IV, p. 271.