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merely a matter of policy, which, of course, I do not believe was contemplated by law and is in excess of what should be the power and authority of the General Accounting Office and the Comptroller General.
That is the evil we are seeking to correct by that provision.
Senator OVERTON. What this bill does in that connection-I may be wrong; if I am wrong, correct me-considering other provisions of the bill in addition to the one under discussion, is to put it in the discretion of the Administrator in the name of the Columbia River Power Administration, and all funds are to go into that particular fund, whether appropriations are made by the Congress or whether revenues are derived from the sale of electric energy; and the Administrator can then draw out those funds and use them as he sees fit, without being subjected to any supervision by the General Accounting Office or by Congress. I just want to get that clear.
Senator BONE. I would like to direct your attention to the provision on page 15, in section 10, of this bill, where it says: The forms, systems, and procedures prescribed by the Comptroller GeneralSenator OVERTON. Where is that?
Senator BONE. Page 15, section 10. They are also required to be in accordance with the requirements of the Federal Power Act with respect to accounts of electric operations of public utilities. There is an audit here by the General Accounting Office.
Mr. DONDERO. I had in mind that a great deal of criticism has been leveled at the T. V. A. because it is an empire unto itself. My purpose in bringing up the question is to see if this bill might be so framed to avoid that criticism, so that there would be an accounting that would be satisfactory to the Government and to the public,
Senator Bone. Under this set-up, Mr. Dondero, it would be required to keep its accounts precisely the way the Federal Power Commission requires. They would be subject to audit by the General Accounting Office,
Mr. DONDERO. You think that under the section you just called attention to on page 15 there would be a certain practice!
Senator BONE. There is no question about that.
This language is different from that in the T. V. A. Act. This concern is going to be nothing but a sales agency, largely; it may in the course of its operations acquire some additional power plants, although under the act these may be sold in case some districts or cities or towns want them and can finance the purchase.
In the main this will be a sales agency and it will be required to keep its accounts precisely the same as the Federal Power Commission requires private business organizations to conduct their accounting systems. I think it is a very wholesome provision.
Senator OVERTON. Suppose they make expenditures according to the rule prescribed by section 10.
Senator Boxe. Well, they are required to preserve their accounting system,
Senator OVERTON. If we vest authority in the Secretary of the Interior to make expenditures
Senator Boxe. In the scope of the bill, for instance, in the hiring of men and in ordinary operations in the sale of electric energy, he will have to meet precisely the same conditions that a private concern meets.
My thought has been throughout the whole contemplation of the problem that if this concern is going to do business, it ought to do it as nearly as possible with the freedom a private company enjoys. It is not a benevolent institution. It has got to pay its way. It will derive the funds it gets for the purpose of expansion through the acquisition of these utility systems, by the sale of revenue bonds. They are hedged in by a great many restrictions that are imposed by the nature of the instrument itself, the bond, much more so than if you use general obligation bonds. I happen to have had considerable contact with that type of security.
I feel that it would be a sad blunder to compel an administrator of a system to submit every little $5 account to someone back here in Washington for approval when he is under oath, under bond, and his accounts are checked, and he has to submit reports regularly, and they will be subject to the scrutiny of Congress, the Treasury Department, and everyone else interested in the operation.
There is no way of absolutely preventing corruption, but we have penitentiaries open for persons who do that sort of thing, and the doors are quite wide.
Senator OVERTON. Does not the law in reference to the T. V. A. provide a certain fund that can be expended without any particular accounting! I do not recall the amount, but my recollection
Senator BONE. I am not wholly familiar with that.
Senator BONE. Here we restrict the payment of claims to a certain amount.
Mr. Smith. Payments of claims I think are limited to a thousand dollars.
Senator BONE. And in the event of a claim above that the claimant has to bring suit in a Federal court. In other words, we are not going to give an Administrator power to settle every kind of claim. If a man has a just claim he can bring it to court unless it be a petty claim.
We do make this institution sui juris. It can sue and be sued, like a private outfit, and it can set up legal defenses that are avail. able to private concerns.
Senator OVERTON. While section 10 does prescribeThe forms, systems, and procedures prescribed by the Comptroller General for the Administration's administrative appropriation and fund accounting shall be in accordance with the requirements of the Federal Power Act with respect to accounts of electric operations of public utilitiesand so forth, in section 5 of the bill, pages 5 and 6, it is declared that
The Secretary of the Interior may prescribe by regulation the Administration's procedure for authorizing or approving its expenditures, contracts, agree. ments, and arrangements; and the Secretary's determination as to whether this Act authorizes particular expenditures, contracts, agreements, or arrangements of any kind or class shall be final and conclusive upon all officers of the Government.
That would be inclusive of the General Accounting Office or anybody else.
Senator BONE. Well, in the course of operations, if they had to come to Washington for approval of every small expenditure, we would not do any business out there. That is the size of it.
Senator OVERTON. I realize that. Possibly it could be amended so as not to be quite so sweeping.
Senator BONE. Under this bill the Comptroller would audit the accounts, and I would assume that if there was anything challenging, he certainly would bring it to the attention of Congress and call attention to it in his report.
Senator BURTON. Mr. Chairman, as I understand this section 10 which we have been discussing, that is an admirable feature. It helps the whole project by putting the public operation under the same regulations as that which Federal Power Commission has prescribed for private and publicly operated concerns.
What the chairman is bringing out is that it does not call for a required audit. Neither the chairman nor anyone else would argue that it should not be put under the same type of control as a private business operation. But there is involved in this, it seems to me, a double feature. One is that the enterprise is authorized by the Gov
. ernment, in the first place, and the other one is that these bonds are revenue bonds that are sold in the open market. It therefore becomes a vital factor in their salability, their market, and their general standing in the industry, that assurance be given of an audit that will safeguard the holders of the these bonds.
Therefore, as a business proposition, I think there is value in setting forth in your act the degree of supervision by someonewhether you call him comptroller or auditor—that will stabilize the confidence of the public in the bonds as well as the confidence of the public in the project. When we eliminate the usual provisions of law governing audits, I think we are under a duty to put in the act some provision stronger than one merely prescribing that the. Secretary of the Interior shall prescribe what he thinks will be suitable.
Senator BONE. Well, we have to vest discretion in someone. We have to vest it either in someone who is directly running the job or someone here in Washington, 3,000 miles away. Discretion must ultimately be vested in the hands of someone somewhere. I have never been able to escape that fact in working on this legislation.
I do not think this bill is perfect, by a million miles, but you have to make some elections and reach some definite decisions. vest discretion in one man or another man, it is not a very pleasant thing to suggest any lack of honesty or integrity in either.
With respect to the bonds, you will find in this bill—I do want to make one or two little changes in it in order to tie these ideas together more completely—there is a certification required as to the scope of the use of the revenue bonds that are to be issued. They must and will be made to rest upon a declaration filed with the Secretary by the Administrator as to the acquisition, the amount to be employed, and the utilization of the proceeds of the bond issue. Now, that becomes part of the contract with the bond buyer. It would be so regarded by any court.
Before this bill was introduced it was submitted to men who are interested in that particular type of security, in order to find out
whether they thought the bond language of the bill provided the reasonable margin of security necessary to them, and so far they have indicated it does.
I think a word or two might be changed in order better to tie the certification required here to the declaration which sets out the specific purpose of a bond issue. If you are to acquire plant A at a cost of $10,000—or any amount--you would make a certificate that the purpose of the issue was to secure that plant, and a declaration would follow which would be filed with the Interior Department, and upon that declaration and that certification would rest this issue of bonds.
That makes a complete record. It is a procedure somewhat like our revenue issues in public utilities out West. There they use an underlying city council or commission resolution, and its sufficiency has been thrashed out in court a number of times and every question brought to repose. The Columbia Administration could not go beyond or outside the scope of this declaration and certificate, in my judgment. I think all the lawyers who are familiar with those issues will agree with my general conclusions.
The revenues will have to be used for the purpose prescribed. They could not be used for any other purpose. Otherwise bondholders could stop it. It is pretty much of an airtight thing, because there is 50 years of judicial history back of it.
Mr. PETERSON. You brought up a discussion of the bond issue with reference to this bill. Does it not appear that this authority can buy another plant that might be operated in connection with one of these plants and proceed to operate that plant also? If so, would it not be possible for this authority to go to an unlimited degree to a point where they finally have developed the whole western part of the United States by setting up in the resolution that they were going to buy a certain plant in a certain town and tie it in with their project and then proceed to operate that plant?
Senator BONE. No. There are two or three barriers set up in the bill which would make that impossible. The first is that the authority may only acquire properties in the States of Washington and Oregon. Second, it may not condemn any publicly owned plant. It may acquire private utility systems in the States of Washington and Oregon.
Mr. PETERSON. It would have the authority at least finally to operate and control all of the public facilities of those two States!
Senator BONE. I perhaps should not have brought myself into this discussion at this point, because I had intended later on to go into these legal angles, but the bill prescribes precisely what the people of that section want, demonstrated time after time over the years.
I have some maps I want to show you of the State of Washington indicating the extent of sentiment there for public power development. These maps will show in green the sections of the State that have voted themselves for public power development-in fact, they nearly blanket the whole State.
The bill provides that upon acquisition of one of these private power systems the Administrator shall forthwith sell back to public bodies the distribution systems so acquired
Mr. PETERSON. Sell back to whom?
Senator BONE. To public bodies and cooperatives, cities, and towns in the States of Washington and Oregon.
Senator OVERTON. What is meant by "cooperatives"?
Senator BONE. Well, we have, Senator Overton, a large number of cooperatives in my State. I have in mind several of them in my own county. I think there are nine farmer power cooperatives in Pierce County, which is my county. Several thousand farmers are on those power lines, and they own them. They are purely nonprofit cooperatives.
Senator BURTON. Section 3 of the Bonneville Act reads: As employed in this Act, the term “cooperative" or "cooperatives," means any form of non-profit-making organization or organizations of citizens supplying, or which may be created to supply, members with any kind of goods, commodities, or services as nearly as possible at cost.
I understand that is not being changed. Senator BONE. That is right. Out of the 39 counties in the State of Washington 30 of them have set themselves up to go into the power business and take over everything in those counties. I helped write the law under which they did it. They have blanket power of condemnation and acquisition. A great many of them have already utilized that power and have taken over large segments of one private power company.
Mr. PETERSON. Did you say that was from 39 counties in the two States ?
Senator BONE. No; in my own State.
Mr. SMITH. If you will allow an interruption, Senator Bone, apparently we have about 17 cooperatives in Oregon and 21 in the State of Washington.
Senator BONE. We also have many R. E. A.'s in Washington.
Mr. ANGELL. Mr. Chairman. May I ask what the procedure of the committee will be and how long you will continue before the noon recess?
Mr. SMITH. The House is likely to consider declaration of war resolutions today.
Senator OVERTON. It is now 3 minutes of the noon hour. Mr. SMITH. How would it be, Mr. Chairman, if we were to suspend and come back at 2:30 or 3 o'clock?
Senator OVERTON. That would be agreeable to the chairman. It is agreeable to Senator Burton. The Senate is not in session today.
Mr. DONDERO. If possible, we will be completed in the House before 3 o'clock. These declarations of war do not take very long.
Mr. Smith. They do not take very long. Well, we could make the hour 2:30, Mr. Dondero.
Mr. DONDERO. I would think so. It might save time. Senator OVERTON. I think we will resume at 3 o'clock. (Thereupon, at 12 o'clock noon, a recess was had until 3 p. m.)
The committee reconvened at 3 o'clock p. m., at the expiration of the recess.
Senator OVERTON. The committee will come to order.
I received a letter from Senator Wallgren, who is a member of this committee, explaining that official duties on the Special