Mr. KELLOGG. I don't know; I don't know the income of those companies by years, so that I can't answer that. Representative WOLVERTON. I think, Mr. Kellogg, that this discussion that we have had for the last few minutes over the relative effect of T. V. A. rates with respect to private utility companies is one of the most important that the committee can consider. That is so for this reason: That if it does have an effect in reducing rates of private utilities, then that is used as an argument in favor of Government or municipal ownership. Now, if it is established that lower rates make Government or municipal ownership proper, then the question remains if there is to be a change of policy in the Nation, from private initiative or private companies, over to the Government owned, it raises what I think is the most important question that this committee then could consider, namely on what basis should there be a change of policy from private to Government owned, having in mind that it would be proper to protect the interests of the individuals who under a private initiative policy have invested their money, so that I think that the basic thought as to whether Government ownership is preferable, if it is to be based on lower rates, it must then lead us to another consideration, as I have said; on what basis then should there be a change from private to Government ownership? Now, in the Tennessee Valley, I have thought that the previous witnesses have rather emphasized the fact that with T. V. A. competition, it is impossible for them to carry on their business, and it will mean eventually a disruption of their business. Now, if that is true, and if the facts presented to this committee sustain that thought, I think then one of the most important things that this committee will have to consider is: Are you willing that a Government agency shall wipe out of existence private utilities and all of their investments by the sheer force of Government competition, or will some policy be adopted that will enable the people of that region to have Government operation, and at the same time some policy be pursued that will preserve to those who have invested their money under a different policy, a right to expect then some return from it? Mr. KELLOGG. In answering that question, Mr. Wolverton, I would like to see or I would like to present another point that I have often tried to show. Representative WOLVERTON. Before you do that, may I make this further observation, and then I have finished. Those figures that were given by Mr. Biddle, in which he was pointing out that subsequent to 1934, that there had been a more precipitous decline in private utility rates than prior to 1934, I think that there is another consideration that enters into that, that makes it even more pronounced than the way in which Mr. Biddle brought it to your attention. For instance, if 31 cents in 1 year is the reduction on a basic price of, we will say, 5 cents, that is a much higher percentage of decline than it would be to have a 9-cent decrease on a 60-cent basic rate. Mr. KELLOGG. That is right. Representative WOLVERTON. So that it is really more pronounced in my opinion than the figures would indicate? Mr. KELLOGG. May I reply to another angle of that point that you suggested, Mr. Wolverton, to this effect: There is no doubt whatever that through the T. V. A. and the P. W. A., and so forth, a large amount of funds collected from the taxpayers are being used as a subsidy for the alleged purpose of reducing electric rates in the communities benefited by that largess. Now, as I have said from the beginning, I am not here to discuss or criticize Government policies in any way, but simply to talk about facts, but I would like to bring out as a fact, something that arises from the very high investment required for the utility business which I have mentioned many times, and which cannot be mentioned too many times, and that is this: Assuming that it is considered good policy for the Government, through collecting taxes, from various taxpayers, to help out other taxpayers in various ways. If that is correct, then the most inefficient and costly way which the Government could select to hand out that largess would be through the electric power route, because of the very large investment required in the electric business. They could help the people a great deal more by reducing the price of chewing gum, or cigarettes, or movies, or cosmetics, or half a dozen other articles of that sort that would require very little capital, and which in the aggregate are very much larger, two or three times larger than all of the electric residence bills of the Nation, which after all, is only about $700,000,000 a year from the whole United States, and I got up not long ago, a list of those various miscellaneous items, that I have mentioned, which adds up to about two and a half billion dollars a year, articles that require very little capital to produce, and if the Government really felt as a matter of policy that it was wise to help out people by these hand-outs, they could do it very much more efficiently, and so much more quickly and effectively, and get so much further, with those things, than they could by selecting the most greedy capital eater that I know of, practically, among any of the industries, namely the electric business, as a funnel through which to feed that hand-out. Representative THOMASON. Do you think that that is a fair comparison? Electricity, next to food, shelter, and clothing, is one of the most necessary things of everyday life and should be within the reach of every person, so that it is hardly fair to compare electricity to chewing gum and cosmetics. Mr. KELLOGG. I was taking them on the statistical basis of the way the people use them, and I agree with you that for the preservation of life and happiness electricity and chewing gum cannot be compared, but with us Representative THOMASON. Electricity ought to be brought within the reach of everybody in these modern days, shouldn't it? Mr. KELLOGG. Yes. Representative THOMASON. That is what we are trying to promote. Mr. KELLOGG. We certainly are. NAVIGATION AND FLOOD CONTROL Representative THOMASON. But assuming that navigation and flood control were an absolute necessity in the Tennessee Valley, and the dams to be built for those purposes, what would you do with the power that would be incident to those dams, assuming that flood control and navigation was a necessity, or a wise undertaking? 115943-39-pt. 10-5 Mr. KELLOGG. Well, if flood control and navigation were thought to be wise, I would develop them as such. Representative THOMASON. But if you have a potential power site there, with the facilities, and the ability to generate a great quantity of power, which the people in that area very much need, in order to keep abreast of the modern conditions, and you built the dam for flood control, and navigation, and they were there, wouldn't you generate any power from them at all, and if so who would develop it and how? Mr. KELLOGG. Well, if I were doing that I certainly wouldn't kid myself by thinking that I could get much flood control out of a full dam that flooded more land than the normal floods would flood anyway, which if you used for power would have to be kept practically full all of the time. Representative THOMASON. You would build dams for flood control, and you wouldn't develop power in the Tennessee River? Mr. KELLOGG. No. Mr. BIDDLE. That would go to waste? Mr. KELLOGG. I don't believe that it would be a waste, in view of the cost. Mr. BIDDLE. There is power running down the river, and there are dams already built for navigation and flood control. Mr. KELLOGG. Of course, the flood control has always seemed to me to be a very minor thing. Mr. BIDDLE. But we have assumed from the basis of the Congressman's question, it was based on the fact or the assumption that these dams were built for, and effective in, controlling floods and navigation, and now assuming that, you would let all of the power that could be generated in those dams go to waste? Mr. KELLOGG. Yes; because if those dams were really and truly built for flood control, Mr. Biddle, they would be like the Miami Conservancy District; they would be dams which would just allow a certain amount of water to flow through, under normal conditions the river would peacefully and quietly flow right through, and which would be effective when they were needed for flood control, and the amount of power in the sense of salable power would be just exactly zero. On the other hand, if you build the dams up high, and close them up tight, so that they can't let water through, and keep them full of water, and get a head of water to produce power, you have just vitiated their flood-control value. Mr. BIDDLE. But those conclusions are specifically contrary to the finding of fact of the court that tried the case, are they not? Mr. KELLOGG. I don't know about the court finding, I was talking about it from an engineering standpoint. Mr. BIDDLE. I am talking about a finding of fact after both engineers had told their story. Mr. KELLOGG. I can't answer that question, I don't know. COMPARISON OF COSTS IN TUPELO, MISS. AND LAS CRUCES, N. MEX. May I go on to my final point, which is to take up these retail rates, that is pages 10 and 11, and I have some copies of that as an exhibit, not necessarily an exhibit but just something to look at, so as to make it easier to follow the discussion. For the purpose of analyzing the retail rates, which the T. V. A. in its contracts with municipalities has required those municipalities to charge its retail customers, I have compared the city of Tupelo, Miss., which is one of the earliest of the purchasers of T. V. A. power, with one of the companies in my own group, the Messilla Valley Electric Co. of Las Cruces, N. Mex., and the reason that I have selected these two companies is because one is more or less of a typical T. V. A. situation, and the other is a privately owned and operated company, but they are about the same size. Senator FRAZIER. Where is this other company located? Mr. KELLOGG. In New Mexico, just about 40 or 50 miles north of El Paso. As I say, I have selected them because they are so comparable in the main factors, that they will serve as a comparison. The energy sales of Tupelo were 9,295,100, and Las Cruces 10,033,371. The peak load, for Tupelo 2,304, and for Las Cruces 2,496. The annual load factor, for Tupelo 46.1 percent; and for Las Cruces 46.0 percent. The number of resident customers is somewhat higher in Las Cruces, but the kilowatt hours per resident customer per year, which is generally taken as the criterion for resident use, is 2,012 in Tupelo and 2,094 in Las Cruces. In other words, there is a similar-there is a somewhat larger use of electricity in Las Cruces per resident customer, than there is in Tupelo, or was in Tupelo for the same period. Below that I have shown the percent of saturation of various forms of energy-consuming devices in the home. In the case of refrigerators, Tupelo shows a substantially higher saturation than Las Cruces, 88 percent against about 65 percent, but on the other hand, 65 is a very high percentage of saturation. That means that 65 percent of the resident customers have refrigerators in their homes. In the case of both electric ranges and electric water heaters, which are very much larger consumers of electric energy than is a refrigerator, very much larger, the saturation of Las Cruces is more than double the case of Tupelo in ranges, and in the case of electric water heaters, which are the largest energy consumers of all, the saturation of Las Cruces is almost four times as large as it is in Tupelo. Senator FRAZIER. Can you give us the time that this company in New Mexico was established? Mr. KELLOGG. It has been in operation, well, it has belonged to our system for about 10 years, I should say. Senator FRAZIER. The length of time might have something to do with the percentages of saturation, as you call it. Mr. KELLOGG. Well, there is nothing about the length of time concerned in this particular operation, because the introduction of these so-called inducement rates and active sales work on them, has been more in the last 6 or 7 years than any other time. These figures are put in to show that with rates admittedly higher in Las Cruces than they are in Tupelo, the average gross earnings in Las Cruces, from all sources, is 2.43 cents, in Tupelo 1.32 cents. The residence rates are somewhat higher, and I think that the residence rate in Las Cruces is about 3 cents per kilowatt-hour. Representative THOMASON. Is that the resident consumer rate? Mr. BIDDLE. I think it is about 3.12. Mr. KELLOGG. This figure shown here is for everything-commercial, residents, and industrial. These figures show that low rates alone are not sufficient to cause a great use of electric energy in the homes, and that the same thing applies to the amount of saturation, in the sale of equipment that can be effected. This does not require any lower rates than Las Cruces, for example, has, in order to secure the results. Now, the next section, section 12 of this table, still on the first page, shows the investment in the two places, it shows $95 per kilowatt of peak load in Tupelo as against $371 in Las Cruces. To get a measuring stick on that, I have set down below the ratios for the electric industry of the United States as a whole. Representative THOMASON. Before you leave that, Mr. Kellogg, may I interrupt you? Mr. KELLOGG. Certainly. Representative THOMASON. You give as your plant and equipment investment in Las Cruces, $922,942. Mr. KELLOGG. Right. Representative THOMASON. Will you give us a break-down on that? Mr. KELLOGG. You mean as to lines and so forth? Representative THOMASON. What does that consist of? Mr. KELLOGG. That consists of distribution and miscellaneous facilities, like office, automobiles. Representative THOMASON. Does your company own the distribution plant in the town of Las Cruces? Mr. KELLOGG. Distribution plants only, no power station. Representative THOMASON. You don't have any power station? Mr. KELLOGG. No power station, that is the point I was coming to next on these figures. Representative THOMASON. That town then is supplied direct from your valley plant there, between El Paso and Las Cruces? Mr. KELLOGG. That is right. Representative THOMASON. And you have very little if any distribution system in the town of Las Cruces? Mr. KELLOGG. We have all there is. Representative THOMASON. Yes. Mr. KELLOGG. We have the whole town. Representative THOMASON. I mean you don't have any plant of any sort there, do you? Mr. KELLOGG. No generating plant. Representative THOMASON. Other than the distribution system? Mr. KELLOGG. And in this case also a line running down to the State boundary line between New Mexico and Texas. When this company was organized, it had to be organized because at that time a Texas corporation, utility, public utility corporation, could not do business in New Mexico, and that is what required a separate company to be organized. Representative THOMASON. Do you mean you have $922,000 invested in plant and equipment in that town of Las Cruces, or are you charging part of that to your big plant that lies in the valley? Mr. KELLOGG. No, there is none charged to the large plant. That includes only the transmission line down to the State boundary line. |