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In reporting to the chairman of the House and Senate committees, Maj. Gen. S. D. Sturgis, Jr., Chief of Engineers, stated in his letter of transmittal :

"In analyzing the need for Table Rock in supplying power loads, the district engineers obtained data from publications and obtained views on the power requirements and needs from the Federal Power Commission, the Southeast Power Pool, Advisory Committee on Power for the Southwest (association of rural electric co-ops), Southwestern Gas & Electric Co., and Southwestern Power Administration (Department of the Interior)."

We of the rural electrics are extremely disappointed that the $1 million of 1954 funds that have already been appropriated have not been released up until this time by the Senate and House Appropriations Committees. We feel that the Corps of Engineers has obtained its information from the most reliable and well informed sources available in the area, and we are certain that the study was undertaken by competent personnel. It seems to us that the question raised by the committees in connection with the need for Table Rock project have been fully and adequately answered by the report, and we urge the subcommittee to recommend the release of the entire amount of the carryover funds ($2,349,546) at the very earliest opportunity.

Much of the general area within transmission distance of Table Rock Dam is and has long been a power desert. This power is desperately needed by the farmers for rural electrification and by others. The rural electrics have invested over $75 million in generation and transmission facilities to furnish themselves with firm thermal energy and to integrate their system with the Federal hydrosystem. In addition, the 43 co-ops that will be served by these G-T systems have an additional investment of over $60 million in electric distribution facilities.

There are also many distribution cooperatives in the area which purchase power directly from SPA. Their loads are growing rapidly. The load, for instance, of the Canadian Valley Electric Co-Op of Seminole, Okla., has grown from 1,700 kilowatts to 3,868 kilowatts in 2 years—128 percent-SPA has informed this co-op that the Government has no more power for delivery to the co-op. The loads of other cooperatives in the SPA area are increasing at a corresponding rate.

In addition to the recessica which appears to be underway in the Nation generally, the Southwest has been going through what appears to be the worst drought in its history. In Missouri, the Farmers' Home Administration has loaned $1,748,000 in the form of disaster and special livestock loans, since July last year through January 29, 1954.

In Arkansas during the same period disaster and special livestock loans bare mounted to $1,443,000. These figures are only one evidence of the extent to which the area is suffering from subnormal rainfall and the general decline in farm income. Any increase in economic activity in the region would be helpful.

In terms of general employment, the situation is no more encouraging. In Arkansas for the week ending January 30, 1954, there were 22,652 persons draw. ing unemployment compensation. These people constituted 9.3 percent of the total of all insured workers in Arkansas whereas for the Nation as a whole the percentage of unemployed insured workers was 5.9 percent-markedly less. A year ago, for a comparable week, that ending January 31, 1953, there were only 13,798 insured unemployed in Arkansas, 5.7 percent of the total of such insured workers, whereas the United States average at that time was 3.2 percent of the total.

In terms of the recommendations we are making for speeding up the construc tion of this major project, it is also important to note that the number of unemployed construction workers in Arkansas fell from 20,500 in December 1932 to 14,900 in December 1953.

In Missouri the situation is somewhat better. In the week ending January 30. 1945, there were 40,667 insured unemployed drawing compensation in Missouri This was 4.6 percent of the insured workers in Missouri contrasted with the 5.6 percent for the Nation as a whole. A year earlier, January 31, 1953, there were only 21,950 insured unemployed in Missouri. This was 2.6 percent of the total insured contrasted with 3.2 percent of the United States average. The situation in Missouri has deteriorated in the past 12-month period. In Missoun the number of employed construction workers has declined from 57,700 in De cember 1952 to 55,300 in December 1953.

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All of these data indicate that a good shot in the arm in the form of a big project like Table Rock would be very helpful to the region and to the rest of the country. Projects under construction for which new money is asked

The following 15 multiple-purpose projects for which we ask appropriations fall in this category. Most of them are in the most expensive stages of construction. We realize that both the Congress and the administration desire to save money wherever possible. We hope that these projects may be continued, however.

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It is our understanding that initial availability of generation from the Dalles Dam on the Washington-Oregon border will be delayed for a year unless the budget request for this project is increased. I believe that an additional $11 million has been estimated as the amount needed as a minimum to keep the Dalles on schedule. You may recall that funds for this project were cut 45 percent in the fiscal year 1954 budget and it is due only to the most fortunate set of circumstances that the project is not already way behind. We also are told that the latter units for the Chief Joseph Dam in the Northwest will also be delayed a year unless the fiscal year 1954 budget estimate for the project is raised.

Estimates indicate, according to figures furnished us, that rather than saving money for the Government, the cutbacks at Chief Joseph and the Dalles will cost about $28.4 million including losses from power sales revenue and costs of contract slowdowns.

We also understand that the Gavins Point Dam on the Missouri River has now been delayed 6 months behind its completion date, and that the Cheatham lock and dam on the Cumberland River in Tennessee has also been delayed for approximately 1 year as concerns the availability of initial generation from it. The rural electrics of the Missouri Basin area are depending on Gavins Point and the 100,000 kilowatts of capacity that will be available to them from it. The Bureau of Reclamation's transmission network in North and South Dakota, with extensions into Nebraska, Wyoming, and Montana is nearly ready for operation, and in fact, some portions of it are already in operation. It is the opin. ion of many experts and it is apparently the opinion of the Department of the Interior that the rural electric cooperatives and other preference customers in the Missouri Basin will be able to fully utilize every firm kilowatt-hour of energy that comes from the Missouri Basin dams.

The Cheatham Dam on the Cumberland River in Tennessee, which will have an ultimate installed capacity of 36,000 kilowatts consisting of three 12,000kilowatt units, is small but its power is already being anticipated by the system of the Tennessee Valley Authority. TVA is facing a very serious shortage of power in its area, and it has estimated that under the most favorable circumstances, its capability will be no more than its anticipated load in 1957. The rural electric systems in the TVA area depend on the Authority for their entire requirements. There is no other source of supply for them.

We also understand that the Buford Dam on the Chattahoochie River in Georgia has been delayed 1 year. The rural electric cooperatives of the Southeast have, in general, been most unfortunate in their efforts to secure the bene

fits from the Federal hydroelectric projects that have already been put in op eration and are under construction in that area. Except in Virginia where the Virginia Electric & Power Co. is wheeling a limited amount of John H. Kerr energy to our systems in Virginia and a portion of North Carolina, and in South Carolina where we have built our own transmission system to take power from the Clark Hill Dam through the South Carolina Public Service Authority, we have been unable to obtain Federal power because of a lack of appropriations for construction of Federal transmission lines over which to deliver the power to our load centers. Moreover, except for the Virginia Electric & Power ('o.. the Southeastern Power Administration has been unsuccessful in its efforts to secure reasonable agreements by which the commercial utility companies would wheel power to us.

We are, however, hopeful that the present attempts of the Georgia Power Co. to monopolize the entire Georgia share of Clark Hill power will be stopped, and that a reasonable portion of its benefits will be passed to the cooperatives in Georgia which are entitled to them under the law. We further hope that a favorable outcome of the present badly confused Georgia situation will react to the benefit of the other areas in the Southeast, and that we will be then able to secure additional power from John H. Kerr Dam and other dams in the area.

In view of these circumstances, we ask that the subcommittee, in consideration of the great need for additional Federal hydroelectric energy in the areas where these delays have occured, to recommend sufficient funds during fiscal 1955 so that the Chief Joseph, The Dalles, Cheatham, Gavins Point, and Buford Dams may be put back on schedule. Projects ncaring completion for which carryover funds only are asked

There are nine multipurpose projects nearing completion this year for which the Corps of Engineers has requested only that they be allowed to use carryover funds:

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The rural electric systems have given up 150,000 kilowatts of Bull Shoals Dam, as I have previously mentioned, so that the aluminum plant in Arkansas could be adequately served. The aluminum plant takes substantially the entire output of Bull Shoals and the rural electric systems are at the present time getting little benefit from it. Our people in the Southwest, however, are receiving, or will receive, benefits through the Southwestern Power Administration's sys. tem from the Norfolk Dam in Arkansas and the Fort Gibson and Tenkiller Ferry Dams in Oklahoma.

The Whitney Dam in Texas is practically on the line at the present time, and the Brazos Electric Power Cooperative in Texas has executed a contract for its entire output. Such of the Whitney power as Brazos does not need will be sold to other customers in the area through the facilities of the Texas Power & Light Co. with which Brazos has also negotiated a contract.

The Wolf Creek Dam in Kentucky and the Dale Hollow Dam in Tennessee will be integrated with the TVA system with which 51 rural electric systems have requirements contracts. A portion of the Detroit Dam generation is already on the line and our people receiving service from the Bonneville Power Administration appreciate the additional energy it is making available.

As I previously mentioned, our co-ops in Virginia and a portion of North Carolina are receiving 60,000 kilowatts of John H. Kerr power through the facilities of the Virginia Electric & Power Co. We hope that eventually, additional arrangements can be worked out for wheeling to other cooperatives in North Carolina through the facilities of Carolina Power & Light Co., which company has so far refused to wheel for the account of the Government.

I think it is obvious that the rural electric systems already are receiving substantial benefits from the above projects and we urge the relatively small amount of money that has been requested as carryover funds to take them through the fiscal year 1955 be recommended by the subcommittee. Planning funds

It is our understanding that $2.5 million has been requested by the Corps of Engineers to use for planning funds during fiscal 1955. The following projects which will include power facilities are scheduled for further study under this request.

Projects for which planning funds only are requested

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The Hartwell Dam on the Georgia-South Carolina border, and the Ice Harbor Damn in Washington have both previously been in the budget for construction funds, and we are indeed sorry to see that neither of these nor any other new dams are scheduled to be started during fiscal 1955. Especially in the Pacific Northwest where a major portion of the area power supply is provided from the Federal system, the power supply problem will again become acute after 1959 when the last generator of the Dalles Dam comes on the line. We are told that the total load in the Pacific Northwest is expanding at the rate of 500,000 kilowatts per year, about the size of Bonneville Dam. While it is true that private utility companies and local public agencies are installing additional generation, the fact still remains that the major portion of the area's power supply is going to come from the Federal system, and the area is going to be short of power unless additional projects are put under construction.

We urge that the subcommittee approve the planning funds requested insofar as they are necessary to push forward with multiple-purpose power-producing projects, and we sincerely hope that it will not be too long before additional power porjects are put under construction. Reallocation of construction costs of multiple-purpose projects

The rural electric systems of the country are naturally very much concerned and interested in the cost allocation procedures applied to multiple-purpose projects from which power is marketed. The rates for power from these projects must, of course, reflect the cost of the power facilities. Unfortunately it is a most complicated process at best to arrive at a final figure which will reflect the number of dollars which are invested in the power facilities of any given dam. The separate costs of power installations such as the price paid for generators and the labor required to install them are of course self-evident, but any figure purporting to represent that portion of the joint costs of the project which reflects power investment is much more difficult to distinguish. The actual concrete in a dam and the labor required to pour it, for instance, would in a large measure be required whether the dam were used for power or not. But because it is impossible to install a powerhouse without a dam, some component of the concrete or earthwork must be charged to power. Therefore, the total portion of the cost of any project which is allocated to power represents, at best, an arbitrary assignment to power of a portion of the joint costs of construction.

As you well know, except for certain specitic projects such as Bonneville Dam and McNary lock and dam in the Northwest and perhaps a few other projects, the legislation authorizing these projects does not, we are told by the Corps of Engineers, place statutory responsibility on any particular agency of the Federal Government for determining final cost allocations for multiple-purpose projects. Therefore, except for a very few such projects, there has been no final determination of cost allocations and the rates that are being paid for the power produced from these projects are temporary in nature, and reflects allocations arrived at by the agency marketing the power from the project.

At the present time an interdepartmental committee consisting of representatives from the Corps of Engineers, and the Department of the Interior is attempting to work out a mutually acceptable plan for finalizing cost allocations on those projects which are still operating under an interim allocation plan.

For many years now our people have been purchasing power from these Federal projects at reasonable rates and at rates which will pay out the cost of the project in the required time according to the cost allocated to power by the power marketing agency involved. We hope that any final cost allocation on those projects now operating on an interim allocation basis and on new projects will not appreciably raise our rates for Federal power. If the rates are raised, it will cost our systems millions of dollars per year, and it will to a large extent vitiate the yardstick effect under which all of the preference customers have looked to Federal hydroelectric power as a standard against which to measure the rates and operating practices of commercial utility companies. In many areas of the country the rates which the commercial utility companies charge us are geared to the rates of Federal hydro projects operating in the service areas of the companies, and in areas adjacent to their service areas. Therefore, if Federal rates are raised we will not only suffer the direct damage of paying increased quantities of money to the Government for our power, but it also means that many commercial utility companies that serve us throughout the country would increase their rates.

Several weeks ago during testimony before the Anti-Monopoly Subcommittee of the Senate Committee on the Judiciary, Under Secretary of the Interior, Ralph Tudor, testified to the effect that conversations are underway between representatives of the Defense Department and the Department of the Interior looking toward an ultimate plan of basing cost allocation for multiple-purpose projects on the allocation originally proposed by the agency requesting appropriations for construction of the projects. In most instances this would mean that the Corps of Engineers cost allocations would be final.

During the same hearings it was testified by Assistant Commissioner of Reclamation, Harvey McPhail, that, in many cases, the Corps of Engineers' cost allocation formulas allotted substantially higher portions of the construction cost to power than did the Interior Department's plan under which power is being marketed from most of the projects. We feel that our systems are going to be faced with the possibility of paying more for their wholesale power not only to the Federal Government but to commercial utility companies throughout the United States if such a plan is put into effect.

We submit to the subcommittee that in view of the controversy concerning the allocation to power of joint costs of project construction, the component of cost which is allocated to power represents an arbitrary decision by whaterer agency makes the final allocation, and we urge that any rigid formula such as the separable costs-remaining benefits plan, which we understand is now used by the Corps of Engineers, cannot take into consideration the variable economic, engineering, and social factors affecting each project in different sections of the country.

We urge the subcommittee's consideration of the likelihood that the rates of the rural electrics throughout the country may be raised, not only to cover increased construction costs, but also to cover arbitrarily assigned allocations to power of construction cost component which may be considerably higher than those now in effect.

There were those who said that based on engineering calculation, the rural electrification program would be a failure, but the program has been a roaring success. The social benefits to the farm economy of the Nation and the willing. ness and ability of the farm people to use greater quantities of electricity have dumbfounded the experts, and have made the technical difficulties of the program seem inconspicuous.

We feel that the same applies to the Federal power-marketing program. Each of the multiple-purpose projects has great social significance in its area in addition to the problem of economic feasibility, and we urge that all of the tangible and intangible factors be considered in allocating costs to these projects.

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