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Mr. REAVLEY. Leasing the falling water is still selling the waterpower potential, and by our engineering and—because of some of these questions--we believe that the Federal Government is going to make more money in the long run than it could make by leasing the falling water. It will pay for more of the dam.
Mr. FISHER. Yes. That is all.
Mr. SELDEN. Are there any further questions? Thank you very much, Mr. Reavley.
We have two additional witnesses today; we have Mr. J. L. Bates, president of the Central Power & Light Co., and he is accompanied by A. P. Jones, planning engineer for the Central Power & Light Co.
If you two gentlemen will come up, we will be happy to hear from both of you.
Mr. KILGORE. I do not believe these gentlemen have been here. These are two very fine Texans and I think one of the prior witnesses said earlier the Central Power & Light is a good citizen.
Mr. SELDEN. We are glad to have both of you gentlemen here.
STATEMENT OF J. L. BATES, PRESIDENT, CENTRAL POWER & LIGHT
co., CORPUS CHRISTI, TEX.
Mr. BATES. Gentlemen, my name is J. L. Bates. I reside at Corpus Christi, Tex. I am the president of Central Power & Light Co., which is a private corporation incorporated under the laws of the State of Texas.
In my opinion the proposed Amistad Dam on the Rio Grande is needed badly for flood control and conservation of water for irrigation and municipal use. I ask, therefore, to be recorded as being for the enactment of H.R. 8080 and to be allowed to make this statement concerning, primarily, the development of hydroelectric power in connection with this project.
Central Power & Light Co. is engaged in the business of generating, transmitting, distributing, and supplying electric power and energy in an area of about 43,700 square miles in 42 counties in the southern portion of Texas. It furnishes electric service in 213 cities and communities and in addition, to about 27,800 rural customers. It supplies the power requirements at 91 different points of delivery for 13 rural electric cooperatives. It owns and operates about 3,286 miles of high-voltage transmission line which forms a network and interconnects with the system of Houston Lighting & Power Co., with the system of the Lower Colorado River Authority which is a State agency, and with the city of San Antonio public utility system. It has interconnections also with the system of the West Texas Utilities Co. to the north and east of Amistad Dam site. Its high-voltage transmission system serves the area around the proposed development and it has high-voltage lines in this vicinity.
This company has steam electric generating plants with total capability of about 876,000 kilowatts and hydroelectric plants with a total capability of about 10,000 kilowatts. These figures include a steamplant and two hydroelectric plants and dams which would be flooded and rendered and inoperative by the proposed Amistad
The International Boundary and Water Commission, in connection with its studies, asked this company for an evaluation of power from a proposed dam at the Amistad site to be constructed substantially according to plans as described in Senate Document No. 65 entitled “Rio Grande International Storage Dams Project: Proposed Amistad Dam and Reservoir," which plans were based on the historical 50-year record of flow in the Rio Grande. Using further information supplied by the International Boundary and Water Commission as to proposed operating plans, power generation figures and estimated cost of a generating plant adequate to accommodate water releases to obtain the most benefit from power generation, this company arrived at a value for falling water averaging $337,000 per year. This amount is based on the estimated cost of providing from a steamplant an equivalent amount of power and energy having similar characteristics as to reliability and firm supply.
Under the treaty of February 3, 1944, Mexico and this country share equally in the power generation. The Amistad Dam would be built primarily for irrigation and flood prevention and use of falling water for power generation would have to be incidental and secondary to retaining and releasing the water for flood prevention and for irrigation. For that reason and because of variation in the amount of water in the river, any power and energy will not be firm power.
"Firm power” is power that may be relied upon as being available at any and all times. “Dump power” is power that would have to be taken when generated. Generation at Amistad could not be entirely scheduled to meet the requirements of the power user but would occur only when there is need to release water for a priority purpose. “Dump power" is of relatively small value, being as shown by representatives of the Federal Power Commission, about equivalent to the fuel cost for steamplant generation.
This company, in evaluating the prospective Amistad power, considered that its highest and best value would come from using it as “peaking power” and “reserve power” to the extent that this might be feasible considering the market available and the necessity of using the falling water consistently with retaining or releasing water for flood prevention or irrigation purposes; that is, the power that is available even though not continuously dependable would have a higher value if generated at times of peak load or used as reserve capacity so as to relieve the using system of providing capacity to meet such requirements, than it would have as dump power.
It must be taken into consideration that there will be unscheduled shutdowns and that a times there will be drought periods during which there will be no water or a greatly reduced amount of water for power generation. Assuming, however, cooperative releasing of water—which it is believed could be done when such water is available without jeopardy to priority uses—such power could be taken into the system of this company as to have value as peaking and reserve power. In order to realize the benefit of using the falling water to some extent for peaking power, it would be necessary to install facilities to generate about 100,000 kilowatts at average head condition—I use the term "average” because I believe previous testimony indicated a minimum of 75,000, and it could run up to as high as
140,000 to 150,000, under maximum head condition—so that the available water could be used through the peaking hours of the day rather than on a 24-hour basis.
The International Boundary and Water Commission's estimated cost of this size plant was about $15 million and this company's evaluation of the falling water is based on that estimate. Although a generating plant with smaller capacity might be installed for around $10 million as has been testified at this hearing, a plant of smaller capacity would require during irrigating seasons more nearly continuous operation and then might not be adequate to use all of the available water. This would provide substantially more dump power and less peaking power. This company made the evaluation for the Commission on the basis that the highest and best use of the power would produce the most revenue and that even though a larger capacity plant would be required, more revenue would be produced by installing such larger plant and using the falling water for peaking capacity rather than to produce and sell substantially all of the hydroelectric energy as dump energy.
This company is buying power and energy produced at Falcon Dam under a short-term contract. Here let me say that originally the electric facility was not in the original authorization for the Falcon Dam. It was the second, it came in later. This power is being treated and paid for as peaking capacity even though it is contracted on a very low 20 hours per week use factor. This arrangement was accepted on an experimental basis because of other special circumstances and so that both parties to the contract could determine the value of the Falcon power and energy on a long-term basis. More water has been available during the operation under this shortterm contract than can be anticipated on a long-range average. This company is not able to predict the value to it of the power and energy at Falcon after the expiration of the present temporary contract. Such value will depend on various considerations, including the flow into Falcon Lake, the availability of certain lakes in Mexico for storage—and may I say here that is the only off river storage available and because it is in Mexico I possibly should not have even mentioned it. But it has been useful in the past, in making peaking power available at Falcon, that is, the use of the storage lakes in Mexico and the possibility of the construction of other storage facilities that could be used to permit generation of the power and energy more timely in the light of the needs of the using system. It seems likely, based on our experience under the present short-term experimental contract, that Falcon hydropower will produce less annual revenue in the future than in the past.
The service area of Central Power & Light Co. includes substantially all of that part of Texas located along the Rio Grande below the proposed Amistad Dam site. As a result I have been familiar with the area over a number of years and, as previously stated, I believe that the proposed Amistad Dam is needed badly for flood control and conservation of water for irrigation and municipal use. I appreciate this opportunity to make this statement, concerning primarily the hydroelectric power phase of the project, and I hope that it will be helpful to the committee.
Mr. SELDEN. Thank you very much.
Mr. BATEs. May I say one thing. The Central Power & Light Co.—I wrote this letter after exhaustive study by engineers, which did not anticipate that there would be hydroelectric facilities in Amistad. We did make some suggestions. I would like to say that here this afternoon, I have heard the statement that there is no utility regulation in Texas. I would like to correct that. Mr. Reavley knows about it. The municipalities do control rates. Every town in which we operate, we must have a franchise and we must obtain a rate increase, if we want a rate increase. That is not true outside of municipalities, but they do have access to courts, if we are out of line. Of course, Mr. Reavley being an attorney—I am not—he knows what that is, he is familiar with that. But do not think that the utilities—we do not want this committee to feel the Central Power & Light Co., whose name has been bandied around here liberally and freely, or any other privately operated utility in Texas—can charge any rates they desire or feel the traffic will bear. Thank you. Mr. SELDEN. Your company does purchase the power from Falcon Dam, is that correct? Mr. BATEs. Yes, sir. Mr. SELDEN. Do you estimate that the power that you are securing from Falcon Dam under the present arrangement is costing your company less than it would have cost had your company installed generating facilities, or is it costing more? Mr. BATEs. It is costing us slightly more. It is not meeting what Congress was told. The testimony, when they asked for the electric facilities, referred to I believe by Mr. Reavley, he said it would amortize the electric facilities in, I believe, 40 years and pay for 47 percent of the rest of the dam. That was when they got the money from the Federal Government. It has not done that. It will not do that. I think Congress has been quite disappointed, I know the Commissions have. But understand, we must 5. this power from the Department of the Interior. The State Department owns this facility, and it is operated by the State Department, Falcon, that is, but our purchase contract must be made with Interior, under your marketing law. Mr. SELDEN. Mr. O’Hara 2 Mr. O'HARA. Mr. Bates, I am interested in your statement. Somebody referred to the Public Utilities Commission. The witness before you stated that the enactment of this bill would be a gift of this site to your company. Naturally, I wish as much information as possible on both sides. In your statement you furnish figures on a steam plant and two hydroelectric plants of your company which would be flooded and rendered inoperative by the proposed dam. Are you to be recompensed for such loss as you might suffer there? Mr. BATEs. We would expect to be, yes, sir. It would mean removal of a lot of transmission lines, a lot of Mr. O'HARA. Do you propose in case this dam is authorized and built, to bid for this power concession or power use? Mr. BATEs. Yes, sir.
Mr. O'HARA. As I understand, there are probably no other bidders in the field, is that the fact?
Mr. BATES. No, sir, I would not say that. They are here today. Mr. O'HARA. They have said previously they cannot bid because they haven't the funds.
Mr. BATES. The facility- to answer your question the best I can, Mr. O'Hara, the best I can, you might be interested to know we operate about as many miles on this river as Mr. Hurd said he did, only we operate in the towns, largely. The town of Del Rio, which was terribly hurt, the town of Piedras Negras, the town of Laredo, all those were hurt by this flood, which incidentally has provided some of the additional water that is still behind Falcon. We operate in those towns. We have steam generation at Laredo, and at Del Rio; I believe it was testified there was none in that area, but there is.
Our interest in this matter largely is in water conservation and in flood control. That is where our interest lies. We serve the Rio Grande Valley of Texas which represents approximately 25 percent of my company's load.
Mr. O'HARA. Well, you have wide experience, you have organization, you have capital. Therefore, would there be in reality anybody bidding against you?
Mr. BATES. I could not answer that, sir.
Mr. BATES. I will say this, before this study was made, in original discussion, when they were talking about a tremendous amount of power—I do not know who Mr. Hurd referred to—but I had discussion with neighboring utilities companies when it looked as if it would have to be marketed.
I will say to you, I do not know of any company in the area who could use the amount of power that would be generated there on peak unless they have a system of around 1 million kilowatts, which is about our system. So I would say we would be the only one that could use that power.
Mr. O'HARA. I am trying to simplify the proposal in my mind, Mr. Chairman. As I get it, everybody wants this dam—that is agreed oneverybody wants it. No disagreement there at all. Every good and loyal Texan wants this dam.
Mr. BATES. And the neighboring Republic wants it.
Mr. O'HARA. You might not be able to get authorization to build this other facility with Government money; is that the situation ?
Mr. FISHER. Mr. O'Hara, the bill I introduced is in exact accordance with the official report of the International Boundary and Water Commission, that is, that it could not justify the Government in building a plant itself. As to whether that finding is true, I don't know. The bill conforms with the report, precisely.
I put in the bill, however, a preference right of the electric cooperatives to buy the falling water if they wanted to do so, ahead of any private company. They say they don't want that privilege.
There is certainly a value attached to the generating potential there, the power potential, and naturally I think it would be to the interest of the committee and the Government to make the best deal possible, whether that means selling the falling water or building a plant. The Congress has always followed that policy.