The other point I would like to make is that, consistent with the long-established policy of the rural electric systems, we would like to see the latent waterpower at this site in question developed.

On the first point, the electric business is by far the fastest growing major industry in America, we believe. We have made that statement many times and have not been challenged on it.

The total industry is doubling its capacity, people are doubling their use of electricity about every 10 years. That is the total industry. The rural electric systems are doubling their use of power about every 5 to 7 years. The rural electrics are using so much power now by comparison with what they have in times past, that to even think of doubling their use in the next 5 to 7 years, to think of finding the power supply somewhere is almost incomprehensible. Where are we going to get the power? That is the question everywhere.

Most of the rural electrics do not generate their own electricity. Only about 16 percent of the power we use is generated by ourselves. Therefore we must look to others.

Now, on the question of developing the latent power of the river. In my opinion, the time has come in America when we cannot afford waste of resources. Whenever power is going to waste, where it is needed and I know of no place now that it is not-whenever power is going to waste that could be used that is cheaper-going to waste down the rivers-where it would be cheaper than developed any other way, it ought to be developed.

Our electrical engineer, Charles A. Robinson, has been with NRECA for 10 years. You were asking for qualification this morning. He is a graduate electrical engineer, and this week has completed his work for a law degree here at George Washington University, in addition. Charley has made most of the statements for NRECA dealing with wholesale power supply for several years, and I defer to him at this point, with your agreement.

Mr. SELDEN. The Chair recognizes Mr. Robinson.

STATEMENT OF CHARLES A. ROBINSON, JR., STAFF ENGINEER, NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION

Mr. ROBINSON. Mr. Chairman, in essence, we are asking that the second paragraph of section 2 of the bill, be deleted completely. That is the paragraph that begins at line 21, page 2, and ends at line 9, page 3. This is the contingent authority to lease the falling water from the project.

We ask that that portion of the bill be deleted because we believe it would preclude the rural electric systems in Texas from purchasing any of the power that may be developed at this project.

There is no single rural electric that can bid on all of the power at the project, and if such a co-op existed it could under REA borrow only funds to serve rural consumers, so even if we were able to bid for the lease of this falling water as lessees, it would probably not be in the public interest to do so because you would then be tying all of that power up for rural consumers, and we believe the power should be equitably divided between all the people who can use it.

We don't want all of it. We only want a reasonable portion. But we believe that part of the bill would preclude our getting any of that

power.

Our position is based on the conviction that 75,000 kilowatts of firm power can be attributed to that project-75,000 kilowatts.

We base that on the FPC letter to Colonel Hewitt, which appears at page 81 of the report of the IBWC, in which the Commission staff states that a public utility company might be willing to purchase this power as firm power, although the Commission itself found-the Commission staff, I should say, found that it could not contribute any firm power capability.

We further base our contention on the existing contract for the sale of Falcon power, which is downstream from Amistad, and the hydroelectric power is of decidedly inferior quality. Yet the Central Power & Light Co. is, under its contract with the Bureau of Reclamation, paying firm power rates for a portion of the Falcon output.

Now, that contract is based on a situation in which, during the years when the firm power is available at the project, the firm power rate is paid. If a year goes by when there is no firm power at the project, then, of course, there is no capacity charge paid and there is no firm power considered for that year.

I am willing to concede that an occasion may arise when there is not sufficient water to make firm power available at the Diablo (or Amistad) project. This would be the worst possible way of looking at it, but that 1 or 2 years out of a long stretch of time would simply mean that for that particular year there would be no firm power. But, the project would be interconnected to an existing utility system and it would be a very simple matter to meet that demand for capacity during that short period from some other part of the system. During all of the remaining period, there would be firm power available from the project.

We further base our contention that there is firm salable power there on the very contract offer submitted by the Central Power & Light Co. This is the offer about which we have heard so much and under which the company offers to pay $337,000 per year for the output of the project. It will install the generators and purchase the falling water. But this offer is conditioned on 100 percent availability of peaking capacity, which is the same thing as saying it is based on 100 percent availability of firm power.

Now, if the firm power is not there, presumably the offer of the company will either be nonexistent or its value will go way down.

If there is firm power in the project, which we believe there is, we calculate that the Government must realize a net revenue per year on that firm power of something like $1,337,400 per year. If you charge against that $811,000 per year-and these calculations are appended to my statement-table 1 appended to the statement-that calculates the value of the firm capacity and energy at the project per year, you will see that that is $1,337,400.

Table 2 is our estimate of the cost of installing the power features. It is $13,680,000. It includes the power intake, and penstocks which are going to be put into the project by the Government anway, and I might add that the $337,000 which would be paid by the company would have to include something for amortizing those penstocks.

Table 3 of our statement is our calculation of the costs of amortizing and replacing the power facilities. You see that totals out to be $811,000 per year. If you subtract that from the annual value of hydroelectric power, which is $1,337,400, you wind up with a surplus power revenue of $526,400.

Now, in every year that firm capacity and energy were sold from the project, that $526,400 would be available to defray other project costs, such as those costs allocated to water conservation, if those were made reimbursable.

This, we believe, would serve very substantially to satisfy one of the points of opposition to the bill that has been raised by the Bureau of the Budget.

The water users yesterday in this very room conceded that they did not wish to pay the costs of the project allocated to water conservation. Under the plan in which the Federal powerplant would be installed, you would have $526,400 per year to do that job.

If you look at the company plan where you would get a maximum of $337,000 a year and if you subtract from that the $21,000 a year necessary to amortize the penstocks, which must be charged against income under any circumstance, you wind up with $316,000 per year net to the Government, which is $200,000 a year less than you would get were the Government to install and operate the power facilities and to market the power therefrom.

Now, the argument will of course be made that in those years where there is no firm power available this revenue will be less, but let me add that in that same year the revenue you would get from the power company would be less because their offer is predicated on 100-percent availability peaking capacity. When one goes down, the other goes down. You can't escape that fact.

Now, finally, Mr. Chairman, I would like to say that in seeking deletion of this portion of the bill, we are asking for no more than the Congress has seen fit to do on three prior occasions. We are asking that this so-called partnership provision of the bill be deleted.

You may recall that this partnership-type proposal was suggested with respect to the Yellowtail project in Montana, where the Mountain States Power Co. and the Pacific Power & Light Co. asked for this privilege.

It was considered in connection with the Trinity project in California last year, where the Pacific Gas & Electric Co. asked the same privilege of the Congress.

It was considered in connection with the John Day project in Oregon, where the Portland General Electric Co. of Oregon asked for the same privilege.

In each case, the Congress has rejected this contention, has rejected the partnership principle as being against the public interest for the reasons I have outlined, and has proceeded with construction of the power facilities by the Federal Government.

Thank you very much, sir.

Mr. SELDEN. Thank you, Mr. Robinson.

Would you like to have your complete statement included as a part of the record?

Mr. ROBINSON. Yes, sir.

Mr. SELDEN. Without objection, it will be made a part of the record at this point.

(The statement of Charles A. Robinson, Jr., follows:)

Mr. Chairman and gentleman of the committee, my name is Charles A. Robinson, Jr. I am the staff engineer of the National Rural Electric Cooperative Association which is the national service organization representing over 900 rural electric systems located in 46 States, including Alaska.

The rural electric systems which comprise our membership are amongst the strongest advocates of multiple-purpose river basin development. They purchase large quantities of the hydroelectric power that is generated at many such developments as an incident to flood-control water conservation and other principal project purposes.

At the outset, therefore, let me emphasize that we support the authorization of Diablo Dam. All that we ask is that the authorizing legislation be amended to protect the interests of the United States and to permit the rural electric cooperatives of Texas to benefit from Diablo Dam.

H.R. 8080 would authorize conclusion of an agreement between the United States and Mexico for construction of the second of three reservoir projects on that stretch of the Rio Grande which forms the international border between the two countries.

THE SCHEME FOR RIO GRANDE DEVELOPMENT

Falcon Dam, completed in 1953, is the first of the three international Rio Grande dams. It is located 220 air-miles downstream from the Diablo site, and power from it is marketed by the Bureau of Reclamation to the Central Power & Light Co.

The proposed Diablo project would be located some 12 miles above Del Rio, Tex. It would provide 4.8 million acre-feet of conservation and flood-control storage. The hydroelectric potential of the project would be divided between the United States and Mexico; the U.S. portion of which would develop approximately 125,000 kilowatts.

INTEREST OF THE RURAL ELECTRIC COOPERATIVES

The interest of the rural cooperatives in H.R. 8080 arises from their desire to purchase wholesale electricity from the Diablo project if and when it is completed.

Throughout the United States, some 450 rural electric systems now purchase all or a portion of their wholesale power requirements from Federal power marketing agencies to which they pay some $50 million per year.

This Federal power accounts for nearly half of all the energy distributed by all rural electric systems in the United States. It is the only major competitive factor in the national power market which is 80 percent controlled by investorowned companies. And, it is the only major bargaining instrument upon which the rural electric systems can depend in their efforts to acquire at reasonable cost the constantly increasing quantities of electricity which their members demand.

The some 20 rural electric systems which serve areas in the vicinity of the Diablo Dam site are most anxious to secure for their 130,000 consumers the benefits inherent in the hydroelectric potential of the proposed project. As the authorizing legislation now stands, these cooperatives will not benefit because the bill is drawn to permit leasing of the project power features to a nongovernmental agency. This means, in effect, an investor-owned utility company-the Central Power & Light Co. which has already submitted just such a lease proposal.

What we are asking, therefore, is that the U.S. portion of the Diablo project be authorized in a manner that will assure installation of the power features by the Federal Government. This can be accomplished by deleting from H.R. 8080 the contingent leasing authority contained in section 2 of the bill. It is only in this way that the cooperatives can be assured of a chance to participate in the project benefits.

FEDERAL POWER AT DIABLO IS JUSTIFIED AND ECONOMICALLY NECESSARY

Reports submitted to the electric cooperatives of Texas by their consulting engineers, and Senate Document No. 65, 86th Congress, 1st session, show conclusively that the installation by the U.S. Government of hydroelectric generators in the Diablo project, concurrent with construction of other project features, is fully justified. These engineering studies further show that if the power features are installed and operated by the United States, the revenues derived therefrom will repay the cost of such facilities over the usual 50-year period, with interest at 4 percent, and create an annual surplus of $526,400 per year with which to defray the costs allocated to other project features, such as water conservation. The application of such a surplus would eliminate a major point of opposition to the bill that has been interposed by the Bureau of the Budget.

In the absence of the very substantial revenues which would be derived from the sale of Federal power, the water conservation features of the project would have to be established as a partially nonreimbursible feature at added cost to the Government, and contrary to the desires of the Bureau of the Budget; the payout period for such features extended or the water users asked to bear a heavier cost burden. And, the prospective water users themselves concede that they do not wish such a burden imposed on them.

We therefore suggest that the lease language, beginning at line 21, page 2 of H.R. 8080, and ending at line 9, page 3, is contrary to the interests of the electric co-ops, contrary to the interest of the United States, and contrary to the interest of the beneficiaries of other project features.

CONGRESS HAS REJECTED PARTNERSHIP

A scheme of this type is sometimes referred to as partnership. It is a type of proposal that has been repeatedly rejected by the Congress as not in the public interest. It was proposed for application to the construction of Yellowtail project in Montana, the John Day project in Oregon, and the Trinity project in California. And in each case, the Congress rejected partnership and authorized construction of project hydroelectric features by the United States.

These precedents are not without reason. Partnership almost inevitably results in higher costs to the Government; it deprives the electric cooperatives of their traditional preference right to purchase Federal power without which they cannot continue to exist, and it reduces the availability of power sales revenue to defray the costs of other project features.

Let us examine how partnership would operate as applied to Diablo Dam. The second paragraph of section 2 of H.R. 8080, which would authorize partnership disposition of the project's hydroelectric potential, clearly arises from a proposal submitted to the Government under date of April 14, 1958, by the Central Power & Light Co., of Texas, in which that company proposed to pay the United States a maximum of $337,000 per year for the privilege of purchasing falling water at the dam, and to install and operate the hydrogenerators. The company, however, in its proposal expressly conditions its offer of $337,000 per year on 100 percent availability of peaking capability. This means that the company is willing to pay $337,000 per year for power with a value of over $1 million per year. With this partnership-type proposal, the maximum revenue payable into the U.S. Treasury from the power of the project would be limited to $337,000 per year and might be much less. After deducting from this figure the $21,000 cost of penstock amortization, only $316,000 per year would remain, based on a 50-year payout, to subsidize other project features.

FEDERAL POWER WILL MAXIMIZE BENEFITS

If, however, the United States installs the power feature, gross power revenue from sale of capacity and energy on the order of $1,337,400 per year, can be anticipated. (See attached table I.) Subtracting from this figure, interest and amortization on total power investment, and operation replacement and maintenance costs, the United States will enjoy annual surplus revenue of $256,400, which would be available (see table III attached) to repay the capital cost of the project's water conservation features.

It is therefore abundantly clear that, in this case, the partnership proposal of the Central Power & Light Co. is decidedly less desirable from the standpoint