had many power developments in connection with irrigation. All through the West they make these allocations, and because that is the customary set-up, we clung to it here. They seemed to have sufficient experience. I know that the present Secretary of the Interior is certainly "steamed up" on low power rates. He has demonstrated that. He is fighting for low power rates. Senator BURTON. The Federal Power Commission has had no experience at all in Grand Coulee? Senator BONE. No; it is like nothing else in the world. It is enormous. It is a vast problem all by itself. The Government had never undertaken anything like that before. Senator BURTON. I do not know whether that comparative experience is worth considering. They would have to restudy the whole proposition; would they not? I refer to the Federal Power Com mission. Senator BONE. I suspect that they would. Senator BURTON. I do not know anything about that. Senator BONE. I know this, that everyone with whom I have discussed this matter, and I have poured a lot of time into it, has been of the opinion that the $17.50 a kilowatt rate is a rate which the Grand Coulee and Bonneville combination can easily preserve and make a lot of money. The production cost at Grand Coulee, of course, will be much cheaper than at Bonneville, because you have a unique. situation at Grand Coulee. As I have stated before, as a power producer there is nothing like it in the world, and I am convinced that the differential in cost in favor of Grand Coulee would be so great that we do not need to cherish any fear as to what will happen to the present rate structure. Mr. ANGELL. What are the facts with respect to the reclamation feature of Grand Coulee? Is it able to stand on its own feet or I will it have to be subsidized? Senator BONE. I think so. Of course, reclamation projects all vary in the amount of money required, but this I can say to you, with this war going on, of indefinite duration, and the shortage of strategic materials, it may not be possible to proceed as rapidly as planned with the irrigation and reclamation developments. I do not know what may happen. I prophesy nothing concerning that, but I think that Congress will have ample time to prescribe a different formula if this one does not work to the advantage of every one. There is no finality to what we do here. The next Congress could blot out everything. Senator BURTON. There is a lot of finality in allocating the proportion of the Grand Coulee rates to go into these other rates. Senator BONE. I agree with you, but I do not know how soon they will prepare that allocation. We can meet that when it arises. Mr. SMITH. It just occurs to me that the Boulder Dam project is also a power and reclamation project. We must have a precedent there. There must be some experience there as to what was done in allocating the respective costs to power and irrigation. Senator BURTON. I think it might be well to get experts on that from the Department of the Interior Senator BONE. I have been very insistent Senator BURTON (continuing). To see whether they agree on this division. Senator BONE. I have been very insistent on representatives of the Bonneville project and of the Interior Department appearing here. I have asked for a lot of material and looked it over carefully. I have asked them to come up because the committee members may want to question them. I have demanded a great amount of material from them, which I have in my file; and, where I am not prepared to give you the technical information desired, I want you to feel free to call on some of their representatives because I asked them to come here. They have been very kind in furnishing all of the information that I asked for. I do not believe that I have the information in my file on Boulder Dam. Mr. SMITH. How about the T. V. A.? Senator BONE. We can get the T. V. A. information. Mr. SMITH. I am advised that, in connection with Boulder Dam and the T. V. A., the Federal Power Commission did not participate in allocating the costs of the structures. Here, however, we have the rather novel situation of dealing with two different projects, and our duty being to do justice to the consumers and beneficiaries of both. Senator BURTON. At the bottom of page 12, in section 8, it is provided that The rates and charges for electric energy sold under this Act at wholesale and at retail shall be established and maintained at levels which the Administration estimates will produce aggregate revenues that will be sufficient to enable the Administration to pay the operating, maintenance, replacement, and marketing expenses; the payments in lieu of taxes, the payments of interest and principal upon all revenue bonds issued pursuant to section 2 (h) of this Act; and the payments to the Treasury of the United States and so forth. In listing the things that it shall cover, I missed the cost of the power purchased at wholesale; although it may be included in the broader term, "operating." Senator BONE. Senator, I am going to suggest an amendment to that when we get around to it. I have about 15 or 20 little amendments here that I am going to suggest. On page 12, after the word "maintenance", I would run in the word "current" before the word "replacement". That is to get away from the question of capital investment, because that will be made from appropriations by Congress. In other words, we want to keep it current, and come to Congress for any new matters that will have to be secured, in the nature of new capital investment. In other words, we will not take earnings and build new power plants with them. We will have to come to Congress for new facilities and to the President to have our annual operating program approved. Senator OVERTON. We will recess now until 10:30 tomorrow morning. (Thereupon, at 5: 20 p. m., adjournment was taken until Thursday morning, June 4, 1942, at 10:30 a. m.) COLUMBIA POWER ADMINISTRATION THURSDAY, JUNE 4, 1942 JOINT SUBCOMMITTEE OF THE COMMITTEE ON Washington, D. C. The joint subcommittee met, pursuant to adjournment on yesterday, at 10:30 a. m., in the hearing room of the Committee on Rivers and Harbors of the House, Senator Harold H. Burton presiding. Present: Senator Burton (presiding), Representatives Smith, Peterson, Dondero, and Angell. Senator BURTON. Gentlemen, the committee will come to order. I ask that the record show that Senator Overton is ill this morning and is unable to be present, and has asked me to preside temporarily in his absence. The committee is ready to proceed at this time and take up the proceedings where we were when we closed yesterday. Are you ready, Mr. Smith? Mr. SMITH. Yes. STATEMENT OF HON. MARTIN F. SMITH-Resumed Mr. SMITH. Mr. Chairman, I have almost concluded my statement. I do not think it will take me long to finish it. Before I resume with the statement, I would like to refer briefly to a matter that was mentioned at the hearings yesterday. You may recall that I mentioned the fact that the late J. D. Ross, who was the Administrator of the Bonneville project for sometime, had had some negotiations with the Puget Sound Power & Light Co. and the other power companies for the acquisition of their properties. I don't know whether the members of this committee heard it or not, but some person back in the room spoke up and said, "That is not so." I heard it very distinctly. I am not in the habit of making statements that are not so. I would like to substantiate the statement that I made. I think it is important because, also, Mr. Ross had considered a certain specific figure in the purchase of those properties which, of course, is a matter that we are vitally interested in. Mr. DONDERO. Was he the president of the company? Mr. SMITH. No. He was the Administrator of the Bonneville project. I may say to the gentleman from Michigan that I am referring to the late J. D. Ross, who was recognized as one of the greatest living authorities on public power and was so successful in managing Seattle City Light. He was really the father of the city light municipal project at Seattle. Mr. DONDERO. Is this Mr. P. J. Raver now the director at Bonneville? Mr. SMITH. Yes. Mr. Ross was a member of the Securities and Exchange Commission. Then later he became the Administrator at Bonneville, and continued in that position until his death. Mr. ANGELL. And Dr. Raver succeeded him? Mr. SMITH. Dr. Raver succeeded him. I am going to read from the testimony of Mr. Ross when there was under consideration before the Committee on Rivers and Harbors of the House the original Bonneville Act of 1937. I read from the testimony of J. D. Ross on April 22, 1937, when I questioned him with regard to this very matter [reading]: Mr. SMITH. Mr. Ross, Seattle has considered the advisability of purchasing the properties of the Puget Sound Power & Light Co.? Mr. Ross. Yes. Mr. SMITH. How many years have they been considering that proposition? Mr. Ross. It is over 2 years now. Mr. SMITH. And you made a study and survey and recommendation to the city council of Seattle for the purchase of that property? Mr. Ross. Yes. Mr. SMITH. You recommended that it be bought for how much money? Mr. Ross. I said I thought a price of $37,000,000 would be fair. Mr. SMITH. And was that offer, or is that offer, being entertained by the city council of Seattle? Mr. Ross. They appointed a committee to see if the company was willing to sell at that price, or at what price, and so on, so it is now in the hands of the council there. Mr. SMITH. Are the negotiations still pending? Mr. SMITH. They have never been consummated? Mr. Ross. No; and I think it is my fault. After 35 years of fighting and prejudice—prejudice must be turned to reason, so I advocated a long period for the people to study it in. So, perhaps, if I had been more aggressive and brought it to a head quicker, it would have been considered before this. think all of the people should weigh it, because it is being followed now by the rest of the State, too. Mr. DONDERO. May I interpose a question there? Mr. SMITH. Yes. But 1 Mr. DONDERO. You say that it was followed by the rest of the State. Do you mean to say that the question of public ownership was a predominant issue in the rest of the State? Mr. SMITH. Yes. I think that that is what Mr. Ross intended to convey by that statement. That, of course, is very true, as Senator Bone pointed out yesterday, that we have had a phenomenal development of public opinion in our State in favor of public power, more so probably than in any other region of the United States. That is one reason, of course, why we have taken more advantage of Bonneville in our State. It was mentioned yesterday when we were looking at the map, showing how much more this power is being utilized in the State of Washington. That is due to the fact, I think, that our people are more public-power minded. For instance, in my own district, in the nine counties in my district, every one of them has organized a public utilities district and |