of the year. In the last 4 months of the year, including August, wherein lies our peak load period, the generation at Falcon is reduced to practically nothing.

We are guaranteed availability of the plant to use to generate power for only 20 hours per week. The energy you are talking about, that Mr. Bates was referring to, comes under the classification of dump energy. At times, that plant runs full blast, 24 hours a day, 2 or 3 months at a time, in the spring.

This power is what we call dump power. We are forced to shut down other plants, even forced to deliver it to the north end of the system, to the Lower Colorado River Authority, at dump rates.

That is what Mr. Bates means, the correlation of the two, you see. Mr. FASCELL. I think I get your picture. I see it as you have painted it very well.

If it is that bad, why do you want to make the tremendous investment and outgo at Amistad and agree to pay for the falling water? It doesn't look like a good business proposition to me.

Mr. BATES. It is not good business, altogether. If it works out as our engineers and the report indicate it will, it will be a break-even basis by the time we pay taxes, if we can get this power-you notice I said to be released at times most beneficial. That means during the times of our peak load, when we can use it.

Mr. JONES. If I may supplement that, I think this may be what you are seeking, sir.

Mr. FASCELL. I am not seeking anything except information.

Mr. JONES. Falcon Dam below Amistad will to an extent help roll over those shortage periods and permit us to release some water at times to be caught in Falcon Lake, which will help considerably, together with the fact that there is a possibility the operation of the two plants together may

Mr. FASCELL. That is all fine, but it won't help you a bit if you don't renew your contract with Falcon.

Mr. JONES. The Power Commission has to design the rate at Falcon, every 5 years. We don't know what they will come up with in December 1961. We have no way of knowing at this time. Until we know, we can't say whether we are interested on an economic basis in Falcon power or not.

Mr. FASCELL. Is Falcon power now delivered to you at dump rates? Mr. JONES. The dump power is, yes. But we also pay for peaking capacity.

Mr. FASCELL. You have a two-rate contract, then, dump rates and peak rates?

Mr. JONES. Yes, sir.

Mr. FASCELL. What is the percentage, 60–40, 70–30 ?

Mr. JONES. 70 percent is dump power.

Mr. FASCELL. And 30 is peak? Yet, according to Mr. Bates under this short experimental contract you have had more water available during this short term operation than you had anticipated.

Mr. JONES. Yes, sir. The dump power is the excess.

Mr. FASCELL. Notwithstanding the fact 70 percent of this is delivered to you at dump power rates, you are still telling us it is not an economical operation for you, and therefore not for the Government either. Because the only way the Government can get back its money

would be to raise its rates. And I assume you fellows are going to sit tight when negotiation time rolls around, you are not going to be anxious to sign a contract if the rates go up, or if they redistribute your power load, notwithstanding the fact you have had more water during that 5-year period than you anticipated.

Mr. BATES. Of course, there is one factor in there, that you must consider, we have built into that plant-there are two transmission lines we have built in, that we would have to jerk out, at quite an economic loss.

We don't know what they will come up with. That will be relayed to us through the Bureau of Reclamation, after being approved by the Federal Power Commission. What the rate will be, we don't know.

Mr. JONES. Mr. Congressman, one more point, about this dump power. Because a system takes dump power doesn't mean it is economical or any great advantage to do so. As I said

Mr. FASCELL. Not unless you can use it.

Mr. JONES. That is correct.

And continuously for 24 hours a day, we can't use it. When a great bulk of power is dumped into our system 24 hours a day, we are forced to shut down more economical plants, where we may have more advantageous fuel rates or something of that nature, forced to shut down these plants, and transmit this hydropower, out to the north, and sell it at a loss.

Mr. FASCELL. You are telling me, in effect, you are really not interested in this power at Falcon-I am saying this because it might be an analogy of what might happen-for two reasons:

1. Under present rates you are not doing too well as far as you are concerned, and if the rates go up, you don't want any. And if you have more water than you anticipated and if there is a possibility it would continue even under the present setup, you wouldn't even want that.

Mr. BATES. I want to correct part of that impression.

Mr. FASCELL. So I get back to my original proposition, which is, assuming that is all true-and I certainly assume it is true, you told me it is I can't visualize going up the river to put in a $10 million plant and pay $337,000 a year for the right to the falling water. You have more than you can use now.

Mr. BATES. You are speaking of dump energy. We are constantly constructing steam plants and can get all the energy we want.

Mr. FASCELL. Then I have to assume that the deal you have hoped you can make at Amistad including construction of your own plant, plus average rental for falling water of $337,000 a year, is cheaper to you than the present setup of buying 70 percent dump power and 30 percent peaking power at Falcon, and is cheaper to you than building your own steam plant. Otherwise, you won't do it.

Mr. BATES. Of course, you are correct in that, sir. But our main purpose in evaluating this power, this falling water, our main interest, is to see that they can put in conservation.

We have tremendous investments in powerplants, facilities, all up and down the river. Regardless of what has been said about us here, about us wanting to underwrite a government dam-I believe that was the expression used, I don't recall now the exact testimony-we

believe any loss at Amistad will be made up by us in the stabilized economy below the dam.

And if it takes this to do it, if it takes the falling water to assure that the conservation part is put in, we will do it.

The Federal Power Commission has said that it will not make money, won't amortize.

Mr. FASCELL. I realize that. And I would hasten to assure you as far as I am concerned, I have not

Mr. BATES. We have said we can use it in our system or in neighboring systems effectively if it is released under these conditions.

Mr. FASCELL. Yes. Which, as I understand it, is firm, 100 percent peaking power.

Mr. BATES. No.

Mr. FASCELL. What did you say? I thought that is what you said in your letter.

You tell me.

Mr. BATES. Well, we said here what we call it.

Mr. FASCELL. I mean in arriving at the evaluation of $337,000 per year for falling water. I thought that was conditioned upon 100 percent peaking power.

Mr. JONES. Insofar as possible, sir, we said.

Mr. FASCELL. I don't recall that. If you say it is in there, I will

believe you.

Mr. JONES. There will be some dump power at Amistad, but not nearly as much as there was at Falcon. In fact, Falcon's dump energy would be reduced to some extent.

Mr. FASCELL. Let me ask you: doesn't peaking power require regulated flow?

Mr. JONES. Do you mean a constant release from the dam?

Mr. BATES. Peaking power means delivered at the time you need it. Mr. FASCELL. Yes. In other words, in order-the basis of your evaluation of falling water for peaking power presumes that the water will flow to produce the power at the time of your peak. Is that correct?

Mr. BATES. That is correct, sir.

Mr. FASCELL. So it is regulated flow of water.

Mr. BATES. And if it wasn't there, or not released, we would lose on our investment and the Government would lose in annual pay

ments.

Mr. FASCELL. I understand.

And you said that is the highest and best use you could give this water at this time. But you also said in your statement, I am trying to reconcile this, and I don't see how I can right now, that Amistad Dam is built primarily for irrigation and flood prevention, and I certainly agree with that, and the use of falling water for power generation would have to be incidental and secondary to retaining and releasing of water for flood prevention areas.

For that reason, therefore, you said, because it is incidental and a secondary purpose, and because there might be variation, based on the Commission studies, in the amount of water, you can't class this as firm power, but you can class it as peaking power.

Mr. BATES. That is right.

Mr. FASCELL. Despite the fact that peaking power takes regulated flow and despite the fact it is also a secondary or incidental purpose. Mr. JONES. Peaking power, sir, is classified in two or three different categories. One is seasonal peaking power, available for three or four months out of the year, if this covers the peak load season it has value. Peaking power can also be daily peaking power.

Now, both types would be available at times from Amistad, and there would be times none would be available, merely a reserve capacity. This plant would then be put on a reserve or standby basis, with the understanding that it could be used for 2 or 3 hours if necessary in an emergency.

And it could be also used as spinning capacity. Integration into a power system involves many facets with which I am sure this committee is not familiar. Those things were considered by us.

Mr. FASCELL. I wondered if you weren't overgenerous in your evaluation of the type of power in arriving at the best and highest use. I wonder if you shouldn't have maybe classified this as straight dump power.

Mr. BATES. We certainly couldn't justify any offer we have made on straight dump power.

Mr. FASCELL. In other words, it wouldn't be worth anything to you as dump power?

Mr. BATES. No, sir.

Mr. FASCELL. You wouldn't come get it under any conditions at any price?

Mr. BATES. I couldn't say we won't come get it at any price. But it would be valued perhaps about that indicated by the Federal Power Commission, to us.

Mr. FASCELL. If it were classified as dump power, you wouldn't consider building a plant at the site?

Mr. BATES. No, sir.

Mr. JONES. An assumed area peaking pattern was considered in their studies. The Boundary Commission study indicated that it could meet the condition required to generate peaking power 80 percent of the months. That means 80 percent of the months for 50 years. Maybe that is all but 2 months of the year, or maybe it is all but 4 months in 2 years, or 10 months in 5 years.

Mr. SELDEN. Mr. O'Hara ?

Mr. O'HARA. No questions.
Mr. SELDEN. Mr. Burleson ?
Mr. BURLESON. No questions.
Mr. SELDEN. Mr. Fisher?
Mr. FISHER. No questions.
Mr. SELDEN. Mr. Kilgore?

Mr. KILGORE. Let me see if I understand what you are talking about on the peaking power potential at Amistad being greater than

that at Falcon.

Do you reach that conclusion on the assumption that water can be released from the Amistad site and recaptured at Falcon for use below Falcon so that at periods of time when there would be no demand for irrigation below Falcon, water could be released from Amistad and run through the penstocks for power, recaptured at Falcon for later use, and thereby there would be no loss of water? Mr. BATES. That is right.

Mr. FASCELL. Is that going to be done at the demand of the Water Commission of Texas, release of the water at Amistad for that purpose, with their consent and approval, or is it an inherent power in this legislation for that purpose?

Mr. KILGORE. Insofar as the water destined to be used below Falcon is concerned, I would think that the matter as to whether it can be stored in Amistad and left there, or released from Amistad and captured at Falcon would be within the judgment of the Boundary Commission unless the Boundary Commission subjugated the irrigation right to the extent that their practice resulted in loss of some of that

water.

Mr. FASCELL. I follow you all right.

Mr. KILGORE. If that doesn't happen, I think the right is within the United States.

Mr. FASCELL. The Texas Water Commission can say, "We don't want you to release water out of Amistad, not right now.'

There is that possibility. I mean, it is a possibility.

Mr. KILGORE. If that is conservation water and if the State of Texas would make a valid position that the release of the water at the time when there was no demand for it for irrigation would result in loss of some of that water for irrigation purposes, I think that would be a very likely possibility.

It would have to involve, I think, a subjugation of the irrigation priority in the treaty to power or some other cause to the detriment of the irrigator

Mr. FASCELL. I am interested in this: In order to deliver peaking power you have to have a regulated flow 80 percent of the time, which means unless you have agreement in advance that this will be releasable, then I think it raises a question. That is the only point I

make.

Mr. BATES. I believe our letter to them is clear in that matter, that it had to be done under the conditions you outline, or else we couldn't use it. And it would not be paid for, there would be a penalty.

Mr. KILGORE. I think the record will reflect that something over 90 percent of the irrigated lands on the basin under consideration are below Falcon.

So, when you are releasing water for irrigation purposes at Amistad site, you would assume over 90 percent of it is subject to recapture at Falcon, therefore the release of water for peaking power purposes would be feasible; you could release it at whatever period of the day is indicated for peaking purposes, because more than 90 percent of it is going right down to be recaptured anyway.

Mr. SELDEN. If there are no further questions, Mr. Bates, we thank you for your appearance and statement. Also, we appreciate the statement and appearance of Mr. Jones.

Mr. FISHER. Mr. Chairman, I have a letter here from J. C. Epperson. May I have that inserted in the record?

Mr. SELDEN. Without objection, it will be included in the record at this time.

(The letter referred to is as follows:)