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torily and timely accomplishment of such work would likewise result in significantly higher costs than performance of the work through use of purchased equipment.

Question: Provide for the record a detailed breakout of the type of equipment being purchased showing the cost and the type of equipment being replaced, if any.

Answer: The proposed equipment and estimated costs include hardware purchases, consisting of communications equipment, terminals, and other peripherals, $25,000; software purchases, includ ing operating system upgrade and accounting system, $30,000; and associated costs, $3,000. The proposed purchases will enhance the present computer system rather than replace existing equipment.

Question: What are your future plans regarding ADP purchases?

Answer: With the proposed additions, Southeastern's computer system will have the capacity, storage, and telecommunications hardware and software necessary to meet Southeastern's ADP demands for the immediate future. The only additional purchases anticipated will be replacement of obsolete equipment and purchase of equipment for unique tasks that may arise in the future that are not anticipated at this time. These purchases would be minimal.

POTENTIAL RESOURCES

Question: Explain why Southeastern is examining potential hydroelectric projects as far North as Pennsylvania and as far West as Ohio and Indiana. Are your service areas limited by law?

Answer: Southeastern's service area is not proscribed nor limited by law. The Secretary of Energy has nationwide authority for power marketing and carries out his responsibilities through the several power marketing administrations. At present there is no Federal marketing agency located in the area East of the Mississippi and North of the Ohio and Potomac Rivers; therefore, responsibility for study of any proposed Federal power in this area for feasibility and marketability belongs to the Secretary of Energy. The Secretary, through his Office of Power Marketing Coordination, has assigned to the Southeastern Power Administration the task of providing the U.S. Army Corps of Engineers feasibility and marketability studies of projects under consideration in the area that is East of the Mississippi and North of Southeastern's normal 10-State region.

Question: How much is budgeted for these studies in 1985?

Answer: There are no funds in Southeastern's budget assigned to this item, rather it is essentially an addition to existing activities with minimal cost generally associated with additional travel and communications.

CUMBERLAND MARKETING,

Question: Can you explain how Southeastern interfaces and coordinates its marketing functions with TVA? How can Southeastern propose to serve the TVA area?

Answer: At present, TVA has complete operating control of te Barkley, Center Hill, Cheatham, Cordell Hull, Dale Hollow, old Hickory, J. Percy Priest, and Wolf Creek Projects located on the Cumberland River in Tennessee and Kentucky except for certain quantities of capacity and energy which Southeastern withholds for market ing to four generating and transmission cooperatives in this area. Southeastern coordinates the scheduling of the cooperatives' needs through the TVA operation center. TVA reimburses Southeastern for the scheduled repayment of the projects based on the inflow of water rather than generation. Credits are allowed TVA for the quantities of capacity and energy which Southeastern withholds to supply its commitment to the cooperatives.

Under the proposed marketing plan, significant quantities of capacity, of which TVA has a surplus, together with minimum quantities of energy, which TVA could use, are to be withdrawn from the TVA system to expand the delivery of Government power into Mississippi, western North Carolina, and unserved areas of Kentucky in accordance with the mandate in section 5 of the Flood Control Act of 1944 to "... encourage the most widespread use thereof at the lowest possible rates to consumers consistent with sound business principles. ..." Scheduling of the power through the TVA operations center would continue, and distribution to the periphery of the TVA system would be over TVA transmission lines for which TVA would receive a suitable wheeling fee.

The remainder of the capacity and energy generated from the Cumberland system would remain in the TVA system for TVA'S distribution to preference customers in TVA's area.

LITIGATION

Question: Can you review for the record the history and issues relating to the litigation with the Kentucky Utilities Company? What is the potential impact on the consumer and budget of FERC's actions denying to order wheeling services?

Answer: More than 10 years ago, Southeastern proposed to market the output of the 70 megawatt Laurel Project in Kentucky within a radius of 150 miles of the Project in a geographical area jointly served by Kentucky Power Cooperative and Kentucky Utilities Company. Southeastern proposed to dispose of approximately one-half of the available power to the cooperative, which serves numerous distribution cooperatives, and to deliver the other approximately one-half to the company to be wheeled to eight municipalities owning their own distribution systems and served from the company's system. The cooperative readily agreed to the arrangement but the company after some 5 years of negotiations was unwilling to consider the arrangement except upon anticompetitive, unreasonable conditions. Southeastern then tried to substitute 25 megawatts of superior quality power from the Cumberland system for Laurel power but the company was likewise not willing to agree to a reasonable wheeling agreement. Utilizing newly enacted sections 211 and 212 of the Federal Power Act, added by PURPA, Southeastern sought an order from FERC requiring Kentucky Utilities to wheel. FERC denied the request on the ground that a wheeling order would disrupt existing competitive relationships in violation of section 211(c)(1) of the Federal Power Act. As a result the municipalities are required to continue to purchase all of their requirements from the company,

being denied the benefits of cheaper Southeastern power. Consumers on the eight municipal systems are denied savings of up to an estimated $600,000 per year. By selling the power to East Kentucky in the interim or to TVA for some time into the future, Southeastern's budget requests for wheeling would be reduced by approximately $1,044,000 per year.

STATEMENT OF ROBERT J. CROSS, ADMINISTRATOR, ALASKA

POWER ADMINISTRATION

I appreciate the opportunity to report on Alaska Power Administration's progress and our FY 1985 budget proposals.

We are requesting $3,233,000 in FY 1985 appropriations, or 5% below the 1984 amounts. The request provides adequate funds to continue APA's responsibilities for the Eklutna and Snettisham hydroelectric projects and $100,000 to continue phasing out our investigations work.

The main new items are a proposal to automate the Eklutna Powerplant

and shift to net billing for the operator's contract at Snettisham.

The automation would be started in FY 1984 under a reprograming action which has been presented to your committee. Total costs are estimated at $1,130,000, including $836,000 from prior year appropriations and $294,000 in our FY 1985 request. The automation will allow us to

shift from a fully attended plant to one where operations can be handled

remotely by supervisory control.

Our net billing proposal would use revenues to cover the costs of a contract for non-Federal operators for the Snettisham Project. This reduces our FY 1985 budget requirements by $250,000 with a comparable reduction in receipts to the Treasury.

Other aspects of our budget request are quite routine.

MISSION

APA is responsible for operation, maintenance, transmission, and marketing for Alaska's two Federal hydroelectric projects. These are the 30 Mi Eklutna Project serving the Anchorage and Matanuska Valley areas since 1955, and the 47 MW Snettisham Project, the main power source for Juneau.

Eklutna now provides roughly six percent of the electrical energy requirements for its market area and also provides valuable wheeling and

peaking services. Snettisham provided 76 percent of the requirements for its market area in FY 1983.

APA has also conducted investigations programs in water and power development which are now being phased out. These programs have made many important contributions to recent, non-Federal power development in Alaska, but further Federal funding for this type of work in Alaska is not considered necessary.

MARKETING AND RATES

The two projects produced and marketed 329 million kilowatt hours during FY 1983 with gross revenues of $4.6 million, both records for APA. We estimate a further increase in revenues to $7.2 million for FY 1985, reflecting full use of available firm energy and power from both

projects and rate adjustments.

Our report last year mentioned plans to increase Snettisham rates so as to end the period of interest deferrals at that project. That adjustment became effective December 1, 1983. We also plan a rate

increase at Eklutna at the end of FY 1984, so as to maintain that project's good repayment record.

OPERATION AND MAINTENANCE

We are pleased to report a successful year for the operation and

maintenance programs. We had no significant operating problems or emergencies. The $200,000 in emergency funds appropriated last year remain available.

The justification material lists the several items in our major maintenance and replacement program in FY 1983 and FY 1984. Key items include the upgraded transmission line maintenance for Snettisham, several items to upgrade communications systems, and purchase of new static exciters for installation at Eklutna.

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