Mr. KELLOGG. We have about 10 percent of their stock. Representative THOMASON. You refer to Stone & Webster? Mr. KELLOGG. No; I refer to my own holding company, Engineers Public Service. Representative THOMASON. Stone & Webster own a large block of that stock. Mr. KELLOGG. No; they have none, well, one of their subsidiaries, as brokers, bought some. They are in process of selling it. They bought some to sell. They were just one of a banking group that bought it to distribute it. Representative BARDEN. Where is the Gulf States Utilities located? Mr. KELLOGG. It is along the Gulf coast, it runs from Baton Rouge way over into Southeast Texas, away almost over to the Colorado River. We lost a town or two out of this lower Colorado River Authority. It runs about 350 miles along the Gulf coast. Representative BARDEN. What is one of the towns comparable to El Paso, Tex.? Mr. KELLOGG. Beaumont, Tex., is more or less comparable. Of course it is not as good a town as El Paso, but it is a good-sized town. Representative THOMASON. Do any of your companies own an interest in this gas company that Mr. Barden referred to? Mr. KELLOGG. No; none whatever. Mr. BIDDLE. Had you finished with this comparative cost of steam and hydro? Mr. KELLOGG. I had. Mr. BIDDLE. May I ask you a couple of questions about that? Then your figure for the invested cost of hydro is between $200 and $220 per kilowatt? Mr. KELLOGG. Yes; I didn't want to be too specific about the figures. Mr. BIDDLE. I understand. Mr. KELLOGG. Yes; that is right. Mr. BIDDLE. So we can accept that as a fair yardstick measure of course, per kilowatt investment? Mr. KELLOGG. I think so; yes. Mr. BIDDLE. Now, is the purpose of your thesis to show that the private utility companies in the valley cannot compete with the T. V. A.? Mr. KELLOGG. No; my purpose is to show that T. V. A. ought to have developed with steam. Mr. BIDDLE. That is one of the purposes. But do you conclude from your statement that the private utilities cannot compete with the T. V. A. as a result of these figures? Mr. KELLOGG. I should say more on account of other things than just these particular figures. That is to say I should say more because of the retail rates which I am coming to later. Mr. BIDDLE. In other words, you say the T. V. A. had invested more than $500 in its hydroelectric plant, per kilowatt, and that the proper investment would be $200, so I take it you would not call that a disadvantage of the private utilities in competing with T. V. A., would you? Mr. KELLOGG. Not that alone, no, obviously not. Mr. BIDDLE. I am speaking of the entire investment summarized in that unit comparison. Mr. KELLOGG. The real strength of those figures is the measure of what the taxpayers get soaked. Mr. BIDDLE. The real strength of your figures is in showing the taxpayers invested through T. V. A. investment more than a private company would have invested had they erected the dam system for power? Mr. KELLOGG. Right. Mr. BIDDLE. Right? Mr. KELLOGG. Right. Mr. BIDDLE. One other question. Does the 4.18 mills cover all of the costs of production by steam? Mr. KELLOGG. Yes; if it is figured accurately it covers all of it. Mr. BIDDLE. And covers 6 percent return on the investment as one of the costs? Mr. KELLOGG. Right. Mr. BIDDLE. So that there again that would be a fair yardstickfigure of what would be a fair yardstick for wholesalers, would it not? Mr. KELLOGG. At the power station. Mr. BIDDLE. At the power station. Mr. KELLOGG. That is, it is untransmitted power at that load factor. Mr. BIDDLE. Could you add any figure to show what it would be if the power were transmitted on any particular basis that you choose? Mr. KELLOGG. Not without knowing how far it was going. Mr. BIDDLE I was going to let you take the base. Mr. KELLOGG. I would rather figure that during the lunch hour, and perhaps let you know, than to sit here and figure it. It would depend entirely upon the physical conditions you assume, the distance, and so forth. Mr. BIDDLE. Have you examined the municipal contracts with the T. V. A., all of them? Mr. KELLOGG. Not all of them. I have read them in the T. V. A. annual reports. Mr. BIDDLE. Are rates in any of those contracts figured on the basis of untransmitted power? Mr. KELLOGG. I don't recall. Mr. BIDDLE. How about Tupelo? Mr. KELLOGG. I assume it must be transmitted power because it is not at the dam, but I don't know, I don't recall at any rate. Mr. BIDDLE. So you don't know any contract of T. V. A. on which the rate for untransmitted power is less than 4.18, do you? Mr. KELLOGG. I couldn't answer that without refreshing my memory. Mr. BIDDLE. That would be a very important factor in a retail yardstick, would it not? Mr. KELLOGG. It would be a very important factor in the cost of power, so far as power comes into the retail yardstick. Mr. BIDDLE. Power distribution? Mr. KELLOGG. Yes; but when I come to that point I have some very strong remarks to make, in which the cost of power is almost eliminated. Mr. BIDDLE. I feel sure of that, but I was trying to get at the value of the 4.18. Mr. KELLOGG. I am very glad to state that I believe 4.18 mills for untransmitted power at the power station at 60-percent load factor represents cost; I will say that. Mr. BIDDLE. Including 6 percent? Mr. BIDDLE. Yes, sir; all right. ALLOCATION TO NAVIGATION RECOMMENDED BY ARMY ENGINEER Representative BARDEN. Mr. Kellogg, you are familiar with this report of Major General Brown, dated March 15, 1930, in which along in the latter part of his report it is provided that under the provisions of the Federal Water Power Act the high dams with locks may be substituted for any two or more of the low dams, and built by private interests, States or municipalities, and provided further that in case high dams are built before the United States shall have built the projected locks and low dams which are to be replaced, the United States shall contribute to the cost of substituted structures, an amount equal to the estimated cost of the works of navigation for which substitution is made. Mr. KELLOGG. That is his recommendation? Representative BARDEN. Yes, sir; are you familiar with that? Mr. KELLOGG. No; I am not. It was never done for any company I had anything to do with. Representative THOMASON. Who made that recommendation, Mr. Barden? Representative BARDEN. Maj. Gen. Lytle Brown, Chief of En gineers. Representative THOMASON. When? Representative BARDEN. March 15, 1930. Then I believe subsequent to that there was this report filed, under instructions of the Chief of Engineers and I am reading from the War Department, Office of the Chief of Engineers, Washington, December 7, 1931. This was filed by Major General Brown also: Under instructions of the Chief of Engineers inquiries were addressed on September 6, 1930, to governors, mayors, power companies, civic organizations, and others who might be concerned in the cooperative construction of high power dams on the Tennessee River as provided in the act. On July 14, 1931, further letters were addressed to various power companies and other responsible parties who had previously indicated an interest in cooperative development. These letters were followed by others on October 10, 1931, to the power companies and other responsible interests that had expressed a continued interest in the cooperative development. The reports of the district and division engineers and the cooperation offered are appended. None of the replies received offered definite assurance of early participation in the construction of high power dams or indicated an approximate date when the matter might be taken under consideration by them. There are attached herewith copies of the final replies from the Alabama Power Co. and the Tennessee Electric Power Co., respectively. Have you run across that in your investigation? Mr. KELLOGG. No; but I think it is most natural. They just found it didn't pay to develop these water-power sites on the Tennessee River. They are not desirable water-power sites. Representative BARDEN. I understood you to say awhile ago, or I got the impression at least, that the Federal Government had never offered to assist private utilities, and that therefore you were figuring Mr. KELLOGG. Yes; I said in any dams I had ever built or had anything to do with, and the reason no one took this offer up was that even with the refunding of those low dams the cost per kilowatt on this stream is so high the power companies were not interested. Representative BARDEN. Well, how do you know that now, just what makes you say that on the spur of the moment, if you had not made any investigation? Mr. KELLOGG. No; it is not on the spur of the moment. I am talking about the relative cost of these water-power sites, developments, on the Tennessee River. They are just too high to pay to develop. That is why they had not been developed by private parties. DISAPPROVAL OF ALLOCATION TO NAVIGATION Representative BARDEN. Well, wise or unwise, Congress saw fit to encourage that. The point I am getting to is how, in the light of this, could you refuse to make any allocation of funds for this very purpose? They tendered the same funds to the private utilities or Mr. KELLOGG (interrupting). Well, because it never has been tendered at a place that it would do any good, that is the answer to that. Representative BARDEN. You mean there is no place on that river that they could have used for the production of power? Mr. KELLOGG. Let me read some figures that I have on that subject. Representative BARDEN. I am afraid you will lose me with your figures. I am trying to deal in a few practical facts here. Mr. KELLOGG. I wanted to be practical, and that is why I was giving figures rather than generalities. I thought you were criticizing me awhile ago for being too general. Here are some figures. I have got a comparison of six dams on the Tennessee River and six dams in the South on navigable rivers at other places. The six dams on the Tennessee River, Pickwick, Wilson, Wheeler, Guntersville, Chickamauga, and Norris showed an estimate ultimate cost of $265,000,000, and the initial cost per horsepower of $291. Six dams at other places, the Coosa project built in 1928 by the Alabama Power Co., the Ohio River project, built in 1927 by the Louisville Gas & Electric Co., the Chattahoochee built in 1928 by the Columbus Electric & Power Co., the Safe Harbor project on the Susquehanna, built by the Safe Harbor Water Power Co. in 1931, the Conowingo plant right below there on the Susquehanna, built in 1928, and the Tallapoosa plant built by the Alabama Power Co., those plants make a very good comparison. The cost claimed by the licensees in those cases was a total of $135,000,000, and the initial cost per horsepower was $123, or a good deal less than half as much as the Tennessee River plants. In other words, it didn't pay to develop those hydros. Mr. BIDDLE. Were they navigation dams, by the way? Mr. KELLOGG. I know the Safe Harbor and Conowingo are on socalled navigable streams. Mr. BIDDLE. Flood control dams also? Mr. KELLOGG. No; there would not be any flood control. You couldn't stop a flood on the Susquehanna River, 700,000 second-feet in floods, you couldn't stop that. Mr. BIDDLE. You still think the cost is comparable, although no flood control was intended or was Mr. KELLOGG. I do, Mr. Biddle. I think this flood control value of the T. V. A. is something that is going to be a great disappointment to the Nation. I will put it that way. I was going to use a much stronger word. Representative BARDEN. May I follow with just one question? In arriving at your conclusion, you did not take into consideration any governmental assistance in the construction of these dams, did you? You made no deduction from the ultimate cost? Mr. KELLOGG. No; because as I understand there were none, so far as I know. Representative BARDEN. You wouldn't say there were no offers, in the light of these documents that I read you, would you? Mr. KELLOGG. There were no offers made where they would do any good. I don't know whether I would call that an offer or not, if some department of the Government just writes the letter out to someone and suggests a certain way of developing a certain place, where they don't care to develop because it is not economical, I wouldn't call that a governmental policy. Certainly it has never been translated to dollars and cents for any private company that I have ever heard of, except in the single instance I mentioned in my earlier testimony, that where some of the more recent dams were built, and later a lock was put in for navigation purposes, the Government paid for the cost of the lock, but nothing else. Representative BARDEN. You claim you had selected all of the good sites? Mr. KELLOGG. Of course the private companies tried their best to get the best sites they could, and that means the most economical ones to develop. Representative BARDEN. And the rest of the section could take care of itself? Mr. KELLOGG. No, no, no, no, no, not that at all. It is not a question of taking care of itself, in some other section where hydro did not pay to develop. Steam plants would be installed. Representative BARDEN. I notice here in your statement "Utilities in the Southeast, in the twenties developed the most economical water power sites. The experience of the licensees under the Federal Power Commission shows an investment cost far below those shown in the T. V. A." SERVICE OFFERED TO RURAL AREAS BY PRIVATE UTILITIES Now, were the utility companies making any provision to serve those areas that were not then being served? Mr. KELLOGG. I think they were trying to serve every square mile that they could possibly afford to reach; yes. They always have. Representative BARDEN. What is the justification now for utility companies refusing to serve rural areas? For instance, when there is a request for a power line extension at the present time, unless that extension figures an immediate profit on the investment at the time. it is installed, they will not consider any extension. Mr. KELLOGG. May I make a short statement about this rural electrification matter, because that cannot be passed off with just a word. |