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use would mean the utilization of over 3 million acre-feet of water, that there would still be a power head when you started out with only 1.6 million? How can you reconcile that situation?
Mr. Krezdorn. I have taken into consideration this particular time the total storage. I can see your problem there. In figuring the total drawdown for 2 years, with no inflow, I have considered the total in that particular example.
Mr. Kilgore. As a matter of fact, if there is no inflow for a period of 1 year and the average annual use is taken, you will be out of U.S. water in Diablo or Amistad.
Mr. Krezdorn. Out of U.S. water; yes, sir.
Mr. Kilgore. And that is all we can use, is U.S. water?
Mr. Krezdorn. One year would do that.
Mr. Kilgore. Does that affect your computations?
Mr. Krezdorn. No, sir. I think I am still on the conservative side. I am convinced of it.
Mr. Kilgore. That would be more than 100 percent error in water availability but it would still leave your figures valid?
Mr. Krezdorn. On different assumptions; yes, sir. I think I have a safety factor not of two, but of four or five in this thing.
Mr. Selden. Mr. Fisher, have you any questions?
Mr. Fisher. No, sir; no questions.
Mr. Selden. Mr. Fascell
Mr. Fascell. Is this example an exaggerated example or is it a condition likely to occur at any time?
Mr. Krezdorn. Which example, sir, is this?
Mr. Fascell. About drawing down the water and not having any come in for 2 years and you would be out of water and out of power and out of everything. I am not sure I understood all of that.
Mr. Krezdorn. This is a rather farfetched example. This might happen
Mr. Fascell. In other words, you were using an exaggerated example?
Mr. Krezdorn. Yes, sir.
Mr. Fascell. What is the likelihood of occurrence according to actual statistics?
Mr. Krezdorn. I think this occurred once in the history of the streamflow
Mr. Fascell. In other words, there was no flow downstream at that point for 2 years?
Mr. Krezdorn. No, sir. I think 1 year was the maximum of it; there was some streamflow, but not appreciably. I think you will find that the IBWC report indicates there is 1 year in the chart where there is no streamflow recognizable from the chart.
Mr. Fascell. Now, is there one other assumption in your statement and that is that in the determination of the value of the power to be sold, the power and the energy, that the customer would come to the site to get it?
Mr. Krezdorn. Right now I would say that this would possibly reduce the
Mr. Fascell. That is what your figures are Dased on, is it not?
Mr. Krezdorn. Well, they are based on a very, very pessimistic view that the power would be delivered to the customer, and a very optimis
tic view that he would have to come and get it, as far as the demand is concerned. As far as the firm power is concerned, it is a very pessimistic view.
The fuel costs now are running around 2 mills and here we are purchasing energy at 1.47 mills.
In fuel costs to generate a comparable amount of electrical energy through the utilization of natural gas which we use in that part of the country, it would cost approximately 2 mills for the gas alone.
Mr. Fascell. That is a very fine statement. The only trouble is, I didn't understand any of it. How about translating that into the English language for ine. What I am trying to find out is, are your figures—if I am using the wrong words, you reframe it so I will know what I am talking about—are your figures based on the sale of this power at the site of the generation of the power?
Mr. Krezdorn. Yes, sir. I think in my report this is brought out.
Mr. Selden. Are there any further questions?
Thank you, Mr. Krezdorn. I am certain that your study and analysis will be very carefully considered by the subcommittee.
Mr. Krezdorn. Thank you, sir.
It has been a real pleasure. I enjoyed the opportunity.
Mr. Selden. We have two additional REA witnesses, but since we are running into the noon hour, we are going to recess until 2 o'clock. At that time we will hear from Mr. Clyde Ellis and Mr. James Cobb.
The committee is recessed until 2 o'clock.
(Whereupon, at 12:05 p.m. the committee was recessed, to reconvene at 2 p.m.)
The Subcommittee on Inter-American Affairs reconvened at 2 p.m. in room 1310, House Office Building, 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 from the State of Texas.
Mr. Selden. The meeting will come to order, please.
Our first witness this afternoon is Mr. Clyde T. Ellis, general manager of the National Rural Electric Cooperative Association.
Mr. Ellis, you may proceed.
STATEMENT OF CLYDE T. ELLIS, GENERAL MANAGER, NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION, WASHINGTON, D.C.
Mr. Ellis. Mr. Chairman, I shall make a brief statement and then defer to our electrical engineer, whom I shall introduce at that time.
I am Clyde T. Ellis, general manager of the National Rural Electric Cooperative Association, which is the service organization of the rural electric systems of the United States, with something over 90 percent of them belonging.
Mr. Chairman, there are two points I would like to make. One is that the rural electric systems everywhere are having great difficulty planning and finding their wholesale power supply.
The other point I would like to make is that, consistent with the long-established policy of the rural electric systems, we would like to see the latent waterpower at this site in question developed.
On the first point, the electric business is by far the fastest growing major industry in America, we believe. We have made that statement many times and have not been challenged on it.
The total industry is doubling its capacity, people are doubling their use of electricity about every 10 years. That is the total industry.
The rural electric systems are doubling their use of power about every 5 to 7 years. The rural electrics are using so much power now by comparison with what they have in times past, that to even think of doubling their use in the next 5 to 7 years, to think of finding the power supply somewhere is almost incomprehensible. Where are we going to get the power? That is the question everywhere.
Most of the rural electrics do not generate their own electricity. Only about 16 percent of the power we use is generated by ourselves. Therefore we must look to others.
Now, on the question of developing the latent power of the river. In my opinion, the time has come in America when we cannot afford waste of resources. Whenever power is going to waste, where it is needed—and I know of no place now that it is not—whenever power is going to waste that could be used that is cheaper—going to waste down the rivers—where it would be cheaper than developed any other way, it ought to be developed.
Our electrical engineer, Charles A. Robinson, has been with NRECA for 10 years. You were asking for qualification this morning. He is a graduate electrical engineer, and this week has completed his work for a law degree here at George Washington University, in addition.
Charley has made most of the statements for NRECA dealing with wholesale power supply for several years, and I defer to him at this point, with your agreement.
Mr. Selden. The Chair recognizes Mr. Robinson.
STATEMENT OF CHARLES A. ROBINSON, JR., STAFF ENGINEER, NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION
Mr. Robinson. Mr. Chairman, in essence, we are asking that the second paragraph of section 2 of the bill, be deleted completely. That is the paragraph that begins at line 21, page 2, and ends at line 9, page 3. This is the contingent authority to lease the falling water from the project.
We ask that that portion of the bill be deleted because we believe it would preclude the rural electric systems in Texas from purchasing any of the power that may be developed at this project.
There is no single rural electric that can bid on all of the power at the project, and if such a co-op existed it could under REA borrow only funds to serve rural consumers, so even if we were able to bid for the lease of this falling water as lessees, it would probably not be in the public interest to do so because you would then be tying all of that power up for rural consumers, and we believe the power should be equitably divided between all the people who can use it.
We don't want all of it. We only want a reasonable portion. But we believe that part of the bill would preclude our getting any of that power.
Our position is based on the conviction that 75,000 kilowatts of firm power can be attributed to that project—75,000 kilowatts.
We base that on the FPC letter to Colonel Hewitt, which appears at page 81 of the report of the IBWC, in which the Commission staff states that a public utility company might be willing to purchase this power as firm power, although the Commission itself found—the Commission staff, I should say, found that it could not contribute any firm power capability.
We further base our contention on the existing contract for the sale of Falcon power, which is downstream from Amistad, and the hydroelectric power is of decidedly inferior quality. Yet the Central Power & Light Co. is, under its contract with the Bureau of Reclamation, paying firm power rates for a portion of the Falcon output.
Now, that contract is based on a situation in which, during the years when the firm power is available at the project, the firm power rate is paid. If a year goes by when there is no firm power at the project, then, of course, there is no capacity charge paid and there is no firm power considered for that year.
I am willing to concede that an occasion may arise when there is not sufficient water to make firm power available at the Diablo (or Amistad) project. This would be the worst possible way of looking at it, but that 1 or 2 years out of a long stretch of time would simply mean that for that particular year there would be no firm power. But, the project would be interconnected to an existing utility system and it would be a very simple matter to meet that demand for capacity during that short period from some other part of the system. During all of the remaining period, there would be firm power available from the project.
We further base our contention that there is firm salable power there on the very contract offer submitted by the Central Power & Light Co. This is the offer about which we have heard so much and under which the company offers to pay $337,000 per year for the output of the project. It will install the generators and purchase the falling water.
But this offer is conditioned on 100 percent availability of peaking capacity, which is the same thing as saying it is based on 100 percent availability of firm power.
Now, if the firm power is not there, presumably the offer of the company will either be nonexistent or its value will go way down.
If there is firm power in the project, which we believe there is, we calculate that the Government must realize a net revenue per year on that firm power of something like $1,337,400 per year. If you charge against that $811,000 per year—and these calculations are appended to my statement—table 1 appended to the statement—that calculates the value of the firm capacity and energy at the project per vear, vou will see that that is $1,337,400.
Table 2 is our estimate of the cost of installing the power features. It is $13,680,000. It includes the power intake, and penstocks which are going to be put into the project by the Government anway, and I might add that the $337,000 which would be paid by the company would have to include something for amortizing those penstocks.
Table 3 of our statement is our calculation of the costs of amortizing and replacing the power facilities. You see that totals out to be $811,000 per year. If you subtract that from the annual value of hydroelectric power, which is $1,337,400, you wind up with a surplus power revenue of $526,400.
Now, in every year that firm capacity and energy were sold from the project, that $526,400 would be available to defray other project costs, such as those costs allocated to water conservation, if those were made reimbursable.
This, we believe, would serve very substantially to satisfy one of the points of opposition to the bill that has been raised by the Bureau of the Budget.
The water users yesterday in this very room conceded that they did not wish to pay the costs of the project allocated to water conservation.
Under the plan in which the Federal powerplant would be installed, you would have $526,400 per year to do that job.
If you look at the company plan where you would get a maximum of $337,000 a year and if you subtract from that the $21,000 a year necessary to amortize the penstocks, which must be charged against income under any circumstance, you wind up with $316,000 per year net to the Government, which is $200,000 a year less than you would get were the Government to install and operate the power facilities and to market the power therefrom.
Now, the argument will of course be made that in those years where there is no firm power available this revenue will be less, but let me add that in that same year the revenue you would get from the power company would be less because their offer is predicated on 100-percent availability peaking capacity. When one goes down, the other goes down. You can't escape that fact.
Now, finally, Mr. Chairman, I would like to say that in seeking deletion of this portion of the bill, we are asking for no more than the Congress has seen fit to do on three prior occasions. We are asking that this so-called partnership provision of the bill be deleted.
You may recall that this partnership-type proposal was suggested with respect to the Yellowtail project in Montana, where the Mountain States Power Co. and the Pacific Power & Light Co. asked for this privilege.
It was considered in connection with the Trinity project in California last year, where the Pacific Gas & Electric Co. asked the same privilege of the Congress.
It was considered in connection with the John Day project in Oregon, where the Portland General Electric Co. of Oregon asked for the same privilege.
In each case, the Congress has rejected this contention, has rejected the partnership principle as being against the public interest for the reasons I have outlined, and has proceeded with construction of the power facilities by the Federal Government.
Thank you very much, sir.
Mr. Selden. Thank you, Mr. Robinson.
Would you like to have your complete statement included as a part of the record?
Mr. Robinson. Yes, sir.