Gentlemen, this chart is designed to show the effect on the storage project of the things I just mentioned. The left-hand scale is a scale showing hundreds of millions of dollars. The graphs are drawn to this scale. The first graph represents an all-Federal system. It shows that with project power delivered at 6 mills per kilowatt-hour that there will be produced the required irrigation assistance of over $1 billion in the 100 years of the storage project. As I said this graph represents an all-Federal system.

The next graph shows a combination system, consisting of a Bureau investment of $41 million and a utility investment of $105 million. We increased the original utility investment in order to provide transmission capacity sufficient to take power into Arizona. We believed preference laws would require this to be done. Therefore there is a total investment in a combination system-making its capability comparable to the all-Federal system.

This graph shows that if power is delivered at the same 6 mills per kilowatt-hour, utility wheeling reduces required irrigation assistance the same required irrigation assistance as is shown on the first graph-by $637 million, and water projects are more than sliced in half.

How can we restore required irrigation assistance to what the allFederal system will provide, that is $1 billion? Well, you can do it by increasing the rate and the consumers costs as shown on the right-hand graph. That is adding the extra utility wheeling costs on top of required irrigation assistance. What does it do? It requires that power consumers costs will be increased by 1.3 mills per kilowatt-hour for over 100 years, totaling $637 million over their costs under an allFederal system.

We can conclude from this chart if utility wheeling charges are set at levels commensurate with the utilities' full costs of providing such service, their proposal will, in effect, be saving the Federal Government a $90 million investment at the expense of power consumers who will pay $637 million more for storage project power.

Even if utility wheeling charges are cut in half power consumers will pay some $119 million more for their power than they would from an all-Federal system.

The committees of Congress have said it was not their intention that consumer power rates should be so adversely affected.

Mr. Corbell's statement further says of the utilities' proposal, "in addition, the Government would be denied revenues from diversity wheeling essentially equal to the investment the utilities offer to save the Government," an investment they hope to make to reap the benefits from the Government's billion-dollar project.

Gentlemen, we believe a decision during this session of Congress is essential, since any further delay will not provide sufficient time for planning and construction. We therefore respectfully urge this committee to

1. Take action to secure the appropriation of $5 million in fiscal year 1961 to start construction of the Flaming Gorge to Oak Creek and Glen Canyon-Farmington-Curecantic lines, which all agree should be constructed by the Bureau of Reclamation.

2. Instruct the Secretary of the Interior and the Bureau of Reclamation to:

(a) Proceed in fiscal year 1961 with plans, right-of-way acquisition, surveys, and designs for the lines to Phoenix, to Farmington-Albuquerque, and to Provo-Vernal, all from Glen Canyon, and from Flaming Gorge to Sinclair, Wyo.

(b) Program and budget future line construction in an orderly manner and as required to insure that facilities will be in service in time to deliver power to the market when powerplants are complete.

(c) Make early determination of the marketing area and the price of power-and announce same.

Gentlemen, thank you very much for this opportunity to present our thinking to you.

Mr. CANNON. Thank you.

That is one of the most illuminating charts I think I have ever seen. I wonder if you could supply the committee with a photographic negative of it so that we could include it in the hearings? Mr. ALEXANDER. I will, sir.

(The chart referred to follows:)

EFFECT ON STORAGE PROJECT

COMBINATION UTILITY AND FEDERAL SYSTEM

100 YEARS

18

16

CONSUMERS

PRODUCES

FOR 100 YEARS

REQUIRED

IRRIGATION

IRRIGATION

6

ASSISTANCE

ASSISTANCE

4

2

OVER
$1 Billion

RESTORED

BUT!

COMBINATION

SYSTEM at 6 Mills/KWH

Mr. CANNON. I think the committee and the Congress will benefit from it. Thank you.

Mr. RHODES. May I ask permission that the statements of Mr. Van Wagener and Mr. Corbell be printed in the record?

Mr. CANNON. They will be printed in the record at this point. (The statements referred to appear on pp. 959-963.)

Mr. RHODES. I thank the committee and members for giving us this opportunity to present this matter, Mr. Chairman. That is all we have, sir.

Mr. CANNON. Thank you, Mr. Rhodes.

We much appreciate your cooperation.

At this point I will include the statement of Congressman Udall of Arizona.

(The statement follows:)

STATEMENT OF REPRESENTATIVE STEWART L. UDALL

Mr. Chairman, I appreciate the privilege extended to me to file this statement. Representatives of the preference users of the Upper Basin of the Colorado River and of my own State of Arizona are unitedly supporting a proposal for construction of the basic transmission lines by the Bureau of Reclamation. It is essential that a start be made this year on the first portion of this system in order to be able to market power which will become available in 1964. These lines are noncontroversial. Both preference users and the private utilities agree that these are lines which must be constructed by the Bureau.

I wish to state that I fully support the cooperative plan which has been worked out between the preference users of the upper basin and my own State, which should be designated a market area for Glen Canyon Dam power.

Arizona, in which this dam is being constructed, is in an explosive growth stage and is in continual need for additional power. On the other hand, there is not an adequate market in the upper basin States for all the power which will be developed after 1964.

The present allocation of Colorado River power does not meet the needs of the preference users in my State, and we will be in a position to use surplus Glen Canyon power until the market is fully developed in the upper basin States.

Arizona has already had wide and favorable experience with a Federal transmission system to market power from the dams on the lower Colorado River. This system-operated by the Arizona Power Authority, a State marketing agency-has been a "middle way," benefiting both private and public utility systems.

At the proper time, lines built by the Bureau from the Colorado River storage project must be linked with those which now bring power into the central and southern part of Arizona from the Parker-Davis project in order to firm-up and increase the supply of power available to Arizona communities. Actual engineering should be started without delay on lines to be constructed beyond those requested as a starter for this basic system during the next fiscal year.

I urge that the committee, in examining the merits of this proposal, note the power-use potential in Arizona and the need to insure the earliest start on repayment of the cost of this vast project. I hope the committee will see fit to make adequate appropriations this year so that construction work can be commended.

STATEMENT OF VICTOR I. CORBELL, FISCAL YEAR 1961 APPROPRIATIONS—

COLORADO RIVER STORAGE PROJECT

Mr. Chairman and members of the committee, my name is Victor I. Corbell. I very much appreciate the opportunity to appear before you today as president of the Salt River Valley Water Users' Association and the Salt River Project Agricultural, Improvement, and Power District. These two organizations are generally referred to as the Salt River Project, which was begun over 50 years ago as the first multipurpose water and power development constructed under the Reclamation Act of 1902. The water users now operate and maintain our project under contract with the Bureau of Reclamation, to serve water to 250,000 acres and power to over 300,000 people in central Arizona.

We, as preference power users of the Colorado River Basin, are greatly interested in the early construction of an adequate and economic transmission system from Colorado River storage project powerplants into Arizona and into the other four States within the storage project area. The basic, guiding principles for providing this transmission system-principles with which we thoroughly agree-have been clearly stated by the Congress, and carried forward in the actions of the Secretary of the Interior and the Bureau of Reclamation.

Committee report, House Document No. 1087, 84th Congress, expresses these principles:

**Therefore, the Committee expects the proposal by the private power companies for cooperation in the development to be carefully considered by the Department of the Interior and the electric power and energy of the Project

to be marketed, so far as possible, through the facilities of the eletcric utilities operating in the area, provided, of course, that the Power Preference Laws are complied with and Project repayment and consumer power rates are not adversely affected." [Emphasis added.]

These principles were enunciated by the Congress to promote the economic well-being and growth of the intermountain project area, without adverse effect on other portions of the United States. And they are principles which properly accord to those who are repaying over 90 percent of the cost of the gigantic stor age project through the purchase of power, the consideration due them for undertaking such a responsibility for so long a time. The construction proposed by the utilities on October 1, 1959 does not meet these requirements of Congress.

MARKETING STORAGE PROJECT POWER

Storage project power in excess of the initial needs of preference consumers in Colorado, New Mexico, Utah and Wyoming can be absorbed immediately, at firm prices, by Arizona preference customers, who are willing to release power to the upper basin in the future under an agreed to formula. The Salt River project has joined other preference consumers in the five-State area to form the Colorado River Basin Consumers Power, Inc., which has advised the Secretary of its agreement to such a marketing arrangement.

The utilities have not proposed, nor indicated an interest in building, a transmission system which will provide for delivery of power to preference customers in any such manner.

STORAGE PROJECT REPAYMENT

Preference consumers have joined together to seek, under existing law, all project power at firm rates as soon as it is available. The utilities operating in the area have joined in an offer to absorb project power but they have not said they are willing to pay firm prices. The preferénce consumers' offer, with adequate Bureau transmission capacity to deliver, could thus enhance project development and payout. If the alternative is sales to the utilities, at steam replacement costs, of all energy not used by preference consumers in the upper basin, the project could lose as much as $50 million in potential revenue.

Also, with Bureau construction, an amount equal to the amortization component of transmission system cost can be applied to water development after the original cost of the system has been recovered, without change in consumer power rates, to yield over the full construction and repayment period as much as $204 million.

Conversely, without change in consumer power rates, the utilities' proposed combination system would reduce project repayment ability by $204 million.

CONSUMER POWER COSTS

Preference consumers need a greatly expanded supply of dependable low-cost electricity, not only for irrigation pumping but also for municipal purposes-in order to maintain reasonable power rates and to produce revenues from electric sales to meet rising costs of rapidly expanding irrigation, domestic and industrial water uses, and other municipal services.

Our own Salt River project is a good example of this reclamation principle at work. Irrigation and domestic water charges have remained at reasonable levels in this area only by reason of increasing electric revenues contributed by the project's power operations-the true fruition of the multipurpose reclamation concept.

Salt River is proof that such projects do enhance the economy. The original Federal investment of some $10 million has been fully repaid. In addition, in the 25-year period 1934-59, residents of Maricopa County (80 percent of whom reside on Salt River project lands) have paid to the Federal Government taxes exceeding $1 billion, possible only because of the local economy created and maintained by the Salt River project.

We do not need nor want a transmission system which has for its purpose only the extension of the Federal Government in the power business. We do want the system which will make all storage project power available to preference customers at the lowest possible cost. The utilities have offered to provide a major part of the storage project transmission, but they have not come forth with wheeling charges they might apply. If they make these charges in accord

ance with usual ratemaking procedure, consumers power costs would be adversely affected-increased as much as $433 million over the Bureau costs for such service.

This is not all-if the utility combination system is built, the repayment ability of the project is dangerously reduced, as we noted earlier, by some $204 million. To keep the project whole, then, could necessitate an increase in power rates, over Bureau charges, of 433 plus 204 equaling $637 million, almost 1.3 mills/kilowatt-hours on all firm energy for 100 years. We understand this approach has actually been suggested by one of the utilities concerned.

The utilities will not be customers for storage project power. Thus they have no reason to build a transmission system to wheel power to preference customers, except to exercise control over the entire transmission network and to extract a profit from preference consumers for the benefit of nonresident shareholders. Preference consumers are repaying some 90 percent of the whole cost of the storage project as first proposed by the Bureau-why should they be asked to pay needless additional charges?

There are further considerations. It is of vital importance that the Bureau's 1,200,000-kilowatt storage project system and its 1,700,000-kilowatt HooverParker-Davis system be electrically interconnected by a Bureau-controlled backbone transmission system. This backbone is essential to preserve the best combination of water levels to minimize power deficiencies to all concerned. Such an interconnection to be constructed, operated and maintained by the Secretary of the Interior, was ordered and authorized by Public Law 485, 84th Congress, 2d session. That interconnection can be enlarged to provide capacity for marketing storage project power in the Phoenix area of Arizona.

Finally, there will be increasing permanent use for these transmission lines in capacity interchange between Arizona and the systems to the north. An increasing percentage of Arizona's generating capacity is becoming idle in the winter, while a greater summertime surplus is growing in the other States. The ultimate power users, both preference and utility customers, would materially benefit by interchanging this diversity, especially at Bureau wheeling rates, and the added revenue could accelerate project payout. Preference customer diversity interchange alone will provide revenues to the Bureau of from $60 million to $100 million. These revenues will be denied the Federal Government if the utility system is built.

SUMMARY

The Salt River project and other Arizona preference users have a major interest in securing power from the storage project, and a vital stake in obtaining that power at the lowest possible cost. The Congress has directed that, in marketing this power, preference laws must be complied with, and project repayment and consumer power rates be not adversely affected.

Bureau of Reclamation rates for an all-Federal system will be set at a level sufficient to payout power features and other obligations of power revenues within specified times-in fact, power revenues will pay 91 percent of the total cost of this tremendous water and power project. The utilities offer will

(a) Decrease power revenues and adversely affect project repayment ability up to:

(1) $50 million-uti'ity power purchases at less than firm rates, and (2) $204 million-Bureau payment of wheeling charges over what it can afford.

(b) Increase consumers' power costs over Bureau charges by $433 million. (c) Decrease the Government's investment by some $90 million.

The project cannot stand decreased revenues so the utilities have spoken of an alternative:

(a) Adding the $204 million project repayment deficit under its plan to consumer power costs, and

(b) Increasing consumer power costs over Bureau charges by $433 plus 204 million, or $637 million. Because preference customers buy all the power. they pay all of the increased costs-1.3 mills per kilowatt-hour added to all firm energy for 100 years.

And in addition, the Government would be denied revenues from diversity wheeling essentially equal to the investment the utilities offer to save the Government-an investment to reap the benefits from the Government's $1 billion 'project.