SEC. 4. (a) In order to insure that the facilities for the generation of electric energy at the Bonneville project shall be operated for the benefit of the general public, and particularly of domestic and rural consumers, the administrator shall at all times, in disposing of electric energy generated at said project, give preference and priority to public bodies and cooperatives.

(b) To preserve and protect the preferential rights and priorities of public bodies and cooperatives as provided in section (a) and to effectuate the intent and purpose of this Act that at all times up to January 1, 1941, there shall be available for sale to public bodies and cooperatives not less than 50 per centum of the electric energy produced at the Bonneville project, it shall be the duty of the administrator in making contracts for the sale of such energy to so arrange such contracts as to make such 50 per centum of such energy available to said public bodies and cooperatives until January 1, 1941: Provided, That the electric energy so reserved for but not actually purchased by and delivered to such public bodies and cooperatives prior to January 1, 1941, may be disposed of temporarily so long as such temporary disposition will not interfere with the purchase by and delivery to such public bodies and cooperatives at any time prior to January 1, 1941: Provided further, That nothing herein contained shall be construed to limit or impair the preferential and priority rights of such public bodies or cooperatives after January 1, 1941; and in the event that after such date there shall be conflicting or competing applications for an allocation of electric energy between any public body or cooperative on the one hand and a private agency of any character on the other, the application of such public body or cooperative shall be granted.

(c) An application by any public body or cooperative for an allocation of electric energy shall not be denied, or another application competing or in conflict therewith be granted, to any private corporation, company, agency, or person, on the ground that any proposed bond or other security issue of any such public body or cooperative, the sale of which is necessary to enable such prospective purchaser to enter into the public business of selling and distributing the electric energy proposed to be purchased, has not been authorized or marketed, until after a reasonable time, to be determined by the administrator, has been afforded such public body or cooperative to have such bond or other security issue authorized or marketed.

(d) It is declared to be the policy of the Congress, as expressed in this Act, to preserve the said preferential status of the public bodies and cooperatives herein referred to, and to give to the people of the States within economic transmission distance of the Bonneville project reasonable opportunity and time to hold any election or elections or take any action necessary to create such public bodies and cooperatives as the laws of such States authorize and permit, and to afford such public bodies or cooperatives reasonable time and opportunity to take any action necessary to authorize the issuance of bonds or to arrange other financing necessary to construct or acquire necessary and desirable electric distribution facilities, and in all other respects legally to become qualified purchasers and distributors of electric energy available under this Act.

SEC. 5. (a) Subject to the provisions of this Act and to such rate schedules as the Federal Power Commission may approve, as hereinafter provided, the administrator shall negotiate and enter into contracts for the sale at wholesale of electric energy, either for resale or direct consumption, to public bodies and cooperatives and to private agencies and persons. Contracts for the sale of electric energy to any private person or agency other than a privately owned public utility engaged in selling electric energy to the general public, shall contain a provision forbidding such private purchaser to resell any of such electric energy so purchased to any private utility or agency engaged in the sale of electric energy to the general public, and requiring the immediate canceling of such contract of sale in the event of violation of such provision. Contracts entered into under this subsection shall be binding in accordance with the terms thereof and shall be effective for such period or periods, including renewals or extensions, as may be provided therein, not exceeding in the aggregate twenty years from the respective dates of the making of such contracts. Contracts entered into under this subsection shall contain (1) such provisions as the administrator and purchaser agree upon for the equitable adjustment of rates at appropriate intervals, not less frequently than once in every five years, and (2) in the case of a contract with any purchaser engaged in the business of selling electric energy to the general public, the contract shall provide that the administrator may cancel such contract upon five years' notice in writing if in the judgment of the administrator any part of the electric energy purchased

under such contract is likely to be needed to satisfy the requirements of the said public bodies or cooperatives referred to in this Act, and that such cancelation may be with respect to all or any part of the electric energy so purchased under said contract to the end that the preferential rights and priorities accorded public bodies and cooperatives under this Act shall at all times be preserved. Contracts entered into with any utility engaged in the sale of electric energy to the general public shall contain such terms and conditions, including among other things stipulations concerning resale and resale rates by any such utility, as the administrator may deem necessary, desirable or appropriate to effectuate the purposes of this Act and to insure that resale by such utility to the ultimate consumer shall be at rates which are reasonable and nondiscriminatory. Such contract shall also require such utility to keep on file in the office of the administrator a schedule of all its rates and charges to the public for electric energy and such alterations and changes therein as may be put into effect by such utility.

(b) The administrator is authorized to enter into contracts with public or private power systems for the mutual exchange of unused excess power upon suitable exchange terms for the purpose of economical operation or of providing emergency or break-down relief.

SEC. 6. Schedules of rates and charges for electric energy produced at the Bonneville project and sold to purchasers as in this Act provided shall be prepared by the administrator and become effective upon confirmation and approval thereof by the Federal Power Commission. Subject to confirmation and approval by the Federal Power Commission, such rate schedules may be modified from time to time by the administrator, and shall be fixed and established with a view to encouraging the widest possible diversified use of electric energy. The said rate schedules may provide for uniform rates or rates uniform throughout prescribed transmission areas in order to extend the benefits of an integrated transmission system and encourage the equitable distribution of the electric energy developed at the Bonneville project.

SEC. 7. It is the intent of Congress that rate schedules for the sale of electric energy which is or may be generated at the Bonneville project in excess of the amount required for operating the dam, locks, and appurtenant works at said project shall be determined with due regard to and predicated upon the fact that such electric energy is developed from water power created as an incident to the construction of the dam in the Columbia River at the Bonneville project for the purposes set forth in section 1 of this Act. Rate schedules shall be drawn having regard to the recovery (upon the basis of the application of such rate schedules to the capacity of the electric facilities of Bonneville project) of the cost of producing and transmitting such electric energy, including the amortization of the capital investment over a reasonable period of years. Rate schedules shall be based upon an allocation of costs made by the Federal Power Commission. In computing the cost of electric energy developed from water power created as an incident to and a byproduct of the construction of the Bonneville project, the Federal Power Commission may allocate to the costs of electric facilities such a share of the cost of facilities having joint value for the production of electric energy and other purposes as the power development may fairly bear as compared with such other purposes.

SEC. 8. Notwithstanding any other provision of law, all purchases and contracts made by the administrator or the Secretary of War for supplies or for services except for personal services, shall be made after advertising, in such manner and at such times, sufficiently in advance of opening bids, as the administrator or Secretary of War, as the case may be, shall determine to be adequate to insure notice and opportunity for competition. Such advertisement shall not be required, however, when (1) an emergency requires immediate delivery of the supplies or performance of the services; or (2) repair parts, accessories, supplemental equipment, or services are required for supplies or services previously furnished or contracted for; or (3) the aggregate amount involved in any purchase of supplies or procurement of services does not exceed $500; in which cases such purchases of supplies or procurement of services may be made in the open market in the manner common among businessmen. In comparing bids and in making awards, the administrator or the Secretary of War. as the case may be, may consider such factors as relative quality and adaptability of supplies or services, the bidder's financial responsibility, skill, experience, record of integrity in dealing, and ability to furnish repairs and maintenance services, the time of delivery or performance offered, and whether the bidder has complied with the specifications.

SEC. 9. (a) The administrator, subject to the requirements of the Federal Water Power Act, shall keep complete and accurate accounts of operations, including all funds expended and received in connection with transmission and sale of electric energy generated at the Bonneville project.

(b) The administrator may make such expenditures for offices, vehicles, furnishings, equipment, supplies, and books; for attendance at meetings; and for such other facilities and services as he may find necessary for the proper administration of this Act.

(c) In December of each year, the administrator shall file with the Congress, through the Secretary of the Interior, a financial statement and a complete report as to the transmission and sale of electric energy generated at the Bonneville project during the preceding governmental fiscal year.

SEC. 10. The administrator, the Secretary of War, and the Federal Power Commission, respectively, shall appoint such attorneys, engineers, and other experts as may be necessary for carrying out the functions entrusted to them under this Act, without regard to the provisions of the civil-service laws and shall fix the compensation of each of such attorneys, engineers, and other experts at not to exceed $7,500 per annum; and they may, subject to the civilservice laws, appoint such other officers and employees as may be necessary to carry out such functions and fix their salaries in accordance with the Classification Act of 1923 as amended.

SEC. 11. All receipts from transmission and sale of electric energy generated at the Bonneville project shall be covered into the Treasury of the United States to the credit of miscellaneous receipts, save and except that the Treasury shall set up and maintain from such receipts a continuing fund of $500,000, to the credit of the administrator and subject to check by him, to defray emergency expenses and to insure continuous operation. There is hereby authorized to be appropriated from time to time, out of moneys in the Treasury not otherwise appropriated, such sums as may be necessary to carry out the provisions of this Act, including installation of equipment and machinery for the generation of electric energy and facilities for its transmission and sale.

SEC. 12. The administrator may, in the name of the United States under the supervision of the Attorney General, bring such suits at law or in equity as in his judgment may be necessary to carry out the purposes of this Act; and he shall be represented in the prosecution and defense of all litigation affecting the status or operation of Bonneville project by the United States Attorneys for the districts, respectively, in which such litigation may arise, or by such attorney or attorneys as the Attorney General may designate as authorized by law, in conjunction with the regularly employed attorneys of the administrator.

SEC. 13. If any provision of this Act or the application of such provision to any person or circumstance shall be held invalid, the remainder of the Act and the application of such provision to persons or circumstances other than those as to which it is held invalid shall not be affected thereby.

Approved, August 20, 1937.

Senator OVERTON. Mr. Smith, will you make an opening statement with respect to the bill before us, its purposes and objects, and so forth?

Mr. SMITH. Yes.

Mr. PETERSON. The Senate bill and the House bill are identical? Senator OVERTON. They are word for word. I have not compared them, but that is my understanding.

STATEMENT OF HON. MARTIN F. SMITH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON

Mr. SMITH. Mr. Chairman and gentlemen of the committee, in order that the members of the committee

Senator OVERTON. Before you proceed, do you prefer to complete your statement before being interrupted by questions?

Mr. SMITH. No, Mr. Chairman; I would be glad to be interrupted. In order that the members of the committee may be fully informed regarding the amendments to the Bonneville Act that we have before

us, I shall undertake to outline these amendments to you and analyze each provision. I shall try to be brief, but I hope to touch upon every matter of interest to this committee so that we may have at the outset a comprehensive picture of what the proposed bill is intended to do. I realize that I am discussing a measure of great interest to all of you and my task is made easier by the knowledge that no group of men has had more experience with, and more appreciation of, the intricate problems that we are attempting to solve than has this committee of Members of the two branches of Congress.

The Columbia power bill that is before this committee is the result of many months of work under the leadership of Senator Bone. It is in every sense a joint effort. Time after time during the days when it was being drafted, the delegation from my State has met to go over its provisions. We have called upon experts in the various executive agencies for advice and assistance. A great deal of time, patience, and effort has been bestowed upon this measure.

The Bonneville Act, which I sponsored in the House, passed almost 5 years ago, set up a framework of legislation for disposing of the power from the Bonneville Dam, then being rapidly rushed to completion. That act of Congress stated a sound basic policy and contained provisions for procedures that have successfully withstood the test of day-to-day operation. Congress wisely recognized that the fuller development of the Columbia, then already under way with the tremendous Grand Coulee project, would require additional legislation. It therefore stated that the Administration established by the act of 1937 was

intended to be provisional pending the establishment of a permanent administration for Bonneville and other projects in the Columbia River Basin.

Extended hearings were held before the House Rivers and Harbors Committee and the printed record, which I have recently reread, consisted of over 500 pages. Most of the spadework was, therefore, done before our committee. Consequently, the hearings on the Senate side were very brief. I am happy to state that several members of our present subcommittee were members of the Committee on Rivers and Harbors at that time-the gentleman from California (Mr. Carter), the gentleman from Georgia (Mr. Peterson), the gentleman from North Carolina (Mr. Barden), and myself, and the record shows that we all participated actively in the hearings. I deem it only fair to acknowledge that our success in reporting out a good bill was due, in large measure, to the interest and assistance rendered by these colleagues, particularly the gentleman from California (Mr. Carter), ranking minority member of our committee, who was present at all the hearings and made many constructive and valuable suggestions. We worked hard and our labors of 5 years ago make our present task much easier.

Mr. CARTER. Will you permit an interruption?

Mr. SMITH. Certainly.

Mr. CARTER. You referred to me as a member of the committee. I was appointed by the chairman of the Committee on Rivers and Harbors to serve on this subcommittee, but I find now that the meetings of this committee conflict with the meetings of the conference

committee on the Interior Department appropriation bill, of which I I am a member.

Therefore I am withdrawing from this subcommittee, and Mr. Dondero, of Michigan, is taking my place.

Mr. SMITH. Personally, Mr. Chairman, I want to express my regret that the distinguished ranking minority member, Mr. Carter, of California, is unable to serve, but of course the reasons which he has given are very tenable, and I consider that the naming of the gentleman from Michigan, Mr. Dondero, is a very good substitution.

We are now engaged in providing much needed additional powers and responsibilities for that agency created 5 years ago. Those of us who have worked closely on this problem have felt that this could be done most expeditiously by simply amending the earlier acts of Congress than by presenting a completely new bill, much of which would necessarily repeat earlier language and plow up old ground. Our effort has been to conserve time and preserve as much of the earlier Bonneville Project Act as is consistent with the new duties that we impose upon the agency charged with selling Columbia River power. You will note as I go through this measure that a minimum of the language of the Bonneville Project Act has been stricken and that the present bill closely follows the pattern of that act. We have had prepared a document which sets forth in parallel columns the text of S. 2430, introduced by Senator Bone, and H. R. 6890, which I have introduced in the House and which is the same text, and the text of the present Bonneville Acts, which we hope will make it possible to follow my discussion more readily.

For instance, section 1 of the Bonneville Act is rewritten only in order to include the surplus power produced from the facilities at Grand Coulee with that produced at Bonneville for sale by the Administration. The name of the agency is also properly changed to the "Columbia Power Administration." Under the new section 1, both dams are to be operated by the agencies that have built themthe Army engineers in the case of Bonneville Dam and the Bureau of Reclamation in the case of Grand Coulee. The power not used in the navigation and irrigation works is turned over at the bus bar to the Columbia Power Administration-the sales agency for this power. In fact this section gives permanence to the present arrangement authorized by the Executive order of the President directing the Bonneville Power Administration to sell the power from the Grand Coulee Dam.

Senator OVERTON. You have now completed your statement with reference to section 2 of the act?

Mr. SMITH. Section 2, amending Section 1 of the Act of 1937. Senator OVERTON. There are three authorities in charge of the project, taken as a whole, and they are the Secretary of War, under the supervision of the Chief of Engineers?

Mr. SMITH. That is correct.

Senator OVERTON. And that is as an aid to flood control and navigation?

Mr. SMITH. Yes.

Senator OVERTON. And also the construction and maintenance of the dams?

Mr. SMITH. Yes.