to its value, because you put down an operating loss as a part of an item in making up the value of your dam, so that Wilson would have become much more valuable at the end of 50 years, than when it started.

Mr. KELLOGG. It would have become much more costly; it would have represented a larger investment.

Mr. BIDDLE. Then these cost figures have nothing to do with value? Mr. KELLOGG. That was net cost only.

Mr. BIDDLE. They represent cost only?

Mr. KELLOGG. Yes; there is no representation as to value.

Mr. BIDDLE. And the cost of the dam increases every year that it isn't used?

Mr. KELLOGG. Necessarily.

Mr. BIDDLE. Necessarily?

Mr. KELLOGG. Yes. If money has been borrowed to build it. Mr. BIDDLE. Well, I should think Wilson would have been a great deal more costly than the other dams on that basis, wouldn't it?

I

Mr. KELLOGG. Its cost per kilowatt is not so very different. have some figures on that here. The kilowatts at Wilson Daminstalled capacity at Wilson Dam-I get this from the hearings before the Appropriations Committee on the independent offices appropriation bill for 1929, page 919-920, the installed capacity of Wilson Dam was 184,000 kilowatts, and the initial capacity of Wheeler Dam, 64,000 kilowatts.

Wilson Dam has a 90-foot head, compared with a 53-foot head at Wheeler, and contains a million and a quarter cubic yards of concrete as against 630,000 at Wheeler.

The excavation required was 1,387,500 cubic yards at Wilson compared to 545,000 at Wheeler.

Mr. BIDDLE. I was not so much interested in

Mr. KELLOGG. I wanted to answer your question as to the propriety of the cost of Wilson Dam as compared with other dams.

Mr. BIDDLE. I was speaking only from the point of view of the length of time it has been operated, rather than the original cost that went into it. Was that built, by the way, for national defense or for power?

Mr. KELLOGG. Wilson Dam?

Mr. BIDDLE. Yes. It was built for national defense, was it not? Mr. KELLOGG. I assume it was, I don't know.

Mr. BIDDLE. You charged 100 percent power against the dam, didn't you?

Mr. KELLOGG. By 100 percent power you mean

Mr. BIDDLE. You charged all of the costs against power, on Wilson Dam?

Mr. KELLOGG. Yes.

Mr. BIDDLE. Now, did you include the

Mr. KELLOGG. Pardon me, may I just finish that statement? According to the figures I have, this total cost of Wilson, including these carrying charges, was $77,581,000, as against $39,384.000 for Wheeler, a little more than 2, perhaps 2.2 to 1.

And yet apparently most of the factors which would control size indicate Wilson as being about twice the size of Wheeler. As I say, the yardage of concrete was more than twice, of excavation was very much more than twice, the ultimate capacity 444 for Wilson against 256 for Wheeler, and so forth, so that I did not think that the resulting

costs of Wilson Dam figured in the way I had figured it is necessarily, or makes it necessarily a much worse investment than Wheeler.

Mr. BIDDLE. Did you credit the amount of money taken in by the Government from the Commonwealth and Southern on the operation of the dam?

Mr. KELLOGG. In the case of Wilson?

Mr. BIDDLE. Yes.

Mr. KELLOGG. Oh, yes.

Mr. BIDDLE. How much was that, how much did you allow for it? Mr. KELLOGG. I have it all by years in this same way that I mentioned.

Mr. BIDDLE. What was the total?

Mr. KELLOGG. Well, I will have to add up a lot of figures.

Mr. BIDDLE. Well, I don't want to do all that.

Mr. KELLOGG. I'm sorry.

Mr. BIDDLE. You did credit it anyway?

Mr. KELLOGG. Yes; I definitely did.

Mr. BIDDLE. How about the cost of locks? Did you make any allowance for that?

Mr. KELLOGG. No; it is just total cost.

Mr. BIDDLE. So that the cost of locks was allocated against power, is that correct?

Mr. KELLOGG. Yes.

Mr. BIDDLE. Why did you allocate the cost of locks, that I thought of as being used for navigation against power production?

Mr. KELLOGG. Well, principally because most of the dams I was familiar with had to pay for them.

Mr. BIDDLE. So you allocated that to power. Now, I don't want to take too long on this. I have a few more questions.

FAILURE TO DISTINGUISH BETWEEN SALES OF DIFFERENT KINDS OF

POWER

Will you glance at page 5? There is given the kilowatts sold by T. V. A. each year from 1935 through 1938, or that portion of 1938 about which we have figures. I suppose that is 6 months, isn't it, the 1938 figures?

Mr. KELLOGG. The figures I obtained from an article in the Post Dispatch at St. Louis, that is supposed to have gotten some advanced T. V. A. figures. Of course they are not published yet.

Mr. BIDDLE. These are advance articles from Post Dispatch, advance figures?

Mr. KELLOGG. 1938 only. The T. V. A. report is not out for 1938. Mr. BIDDLE. That is right. Would that be an estimate for the whole fiscal year?

Mr. KELLOGG. Yes, supposed to be an estimate for the whole fiscal year. Mr. BIDDLE. For the whole fiscal year?

Mr. KELLOGG. Yes, sir. It is supposed to be homologous with the other figures as near as I can get it.

Mr. BIDDLE. Now, let's take the first 3 years. Take 1935, $563,000, that represented sales of dump power to the Commonwealth and Southern, didn't it?

Mr. KELLOGG. I can't answer that. I don't know anything about the physical details of these sales at all.

Mr. BIDDLE. Now, if I tell you that the sales for the years 1935, 1936, and 1937 represented very largely sales of dump power first to the Commonwealth and Southern, and then to the large chemical and industrial customers, such as the Monsanto Chemical Co., would you say that that was a fair indication of what the gross income of the T. V. A. would be when the returns from sales of prime power from their municipal and cooperative customers began to come in?

Mr. KELLOGG. As I testified earlier, I would be very much afraid of depending too much on people who bought dump power in the early days of a large power development staying with it when they had to pay larger amounts. I suppose if they got stuck they would have to stay.

Mr. BIDDLE. That is exactly what I mean, I would be very much afraid of depending on the sales of dump power. Why didn't you take the figures on the sales of firm power and calculate that?

Mr. KELLOGG. I was not trying to camouflage the figures at all. I have simply wanted to show all that it had been possible to get out of that situation as interpreted by T. V. A. during that period. I was not trying, as I say, to prove anything except as I say, I think it does show during the early days of these hydro developments you have people swarming in, people who are very glad to get this ultra-cheap power at a time when what is referred to as "dump power" is de facto prime, and I have seen such customers wither away when they had to pay prime power rates later, in other words when the system got loaded up and this power was not available all the time.

Mr. BIDDLE. When you said these figures that the T. V. A. used before the Appropriations Committee, of 4 mills per kilowatt-hour at the generating plant might be compared, did you not know that the 4 mills testified to by T. V. A. was what they expected to get as their sale of prime power, and only that?

Mr. KELLOGG. No; I didn't get that impression.

Mr. BIDDLE. You didn't?

Mr. KELLOGG. NO.

Mr. BIDDLE. Well, then, you don't know that that 4 mills, the figure you have used practically throughout, meant prime power and not dump power or secondary power; I think I should include that.

Mr. KELLOGG. The figures I referred to did show annual primary output of 5,780,000,000 kilowatt-hours, and assumed gross annual wholesale power revenue of $23,120,000, which figures out 4 mills per kilowatt-hour.

Mr. BIDDLE. I know, but that is meant to include prime power, as well as simply this secondary and dump power, isn't it? You don't think that is estimated without considering prime power, the way you have done it here, do you?

Mr. KELLOGG. Possibly not. But as I just pointed out awhile ago, the amount that would be received from the sale of additional kilowatts, discontinuously, would not in my opinion be more than enough to just carry the charges on that, so that 4 mills, I will admit, refers here in this table to primary power output, but I don't think that the effect would be any better, I don't think the showing would be improved by selling a large amount, or somewhat larger amount, according to Mr. Moreland's figures it would be about 2 or 3 billion more kilowatts excess power, which was available only a part of the year.

Mr. BIDDLE. Mr. Kellogg, you agreed, I think, that 4.18 mills was a fair yardstick wholesale rate to take as being cost plus investment of the money in steam generating plants; did you not?

Mr. KELLOGG. At the power station.

Mr. BIDDLE. At the power station, nontransmitted.

Mr. KELLOGG. Nontransmitted, no company overhead of course, that is just the manufacture of raw electric energy at60 pecent load factor. Mr. BIDDLE. If I advised you that on September 30, for the year ending September 30, 1938, the cost to Florence, Ala., of the wholesale rate of nontransmitted T. V. A. power was 4.65, that certainly would come well within the yardstick rate, would it not?

Mr. KELLOGG. Nontransmitted power?

Mr. BIDDLE. Yes; if that is a fact.

Mr. KELLOGG. Yes, that would be higher than that power-if the load factor was 60 percent, if the load factor was 60 percent or better it would be within the

Mr. BIDDLE. 60 percent is one of the factors?

Mr. KELLOGG. Is one of the factors.

Mr. BIDDLE. That is one of the factors in arriving at 4.18?

Mr. KELLOGG. Definitely; yes, sir.

Mr. BIDDLE. What would 75 percent be, how much would it affect it roughly? Could you give us that in a few cents?

Mr. KELLOGG. Yes.

Mr. BIDDLE. Are you taking any special load factor?

Mr. KELLOGG. I thought you wanted me to take 75 percent?

Mr. BIDDLE. 75 percent will do, and then I will take a lower one than that. That would be a little under 4.18?

Mr. KELLOGG. Yes; I haven't quite got the answer yet.

Mr. BIDDLE. All right.

Mr. KELLOGG. It would be 3.56.

Mr. BIDDLE. 3.56 mills?

Mr. KELLOGG. Yes, sir.

Mr. BIDDLE. Now, calculate it, which I think is much closer to the facts, I want to get the two extremes on a 46 percent load factor. (The witness made the calculations off the record.)

Mr. BIDDLE. 4.77, wouldn't it?

Mr. KELLOGG. I was meditating on the effect of the economy factor. Mr. BIDDLE. Just within a few mills?

Mr. KELLOGG. I will try to estimate that very roughly. I would make that 4.74.

Mr. BIDDLE. That's close enough. So that if I told you that Florence was operating on a 46 percent load factor, 4.74 would be a fair yardstick?

Mr. KELLOGG. That would be approximately the cost of raw power without any overhead, just the power, untransmitted, at a power station, yes, sir.

Mr. BIDDLE. I am assuming that; it is transmitted right at the station, I understand in this instance, that is why I picked it, and the actual cost as I have already indicated is 4.65, which comes out very close, that is assuming that there was no substation.

CHARGES FOR PROMOTIONAL EXPENSES

You spoke of these promotional costs of T. V. A. Don't the private utilities use any promotional costs in selling electricity to their customers?

Mr. KELLOGG. Sure they do, but they charge it off to operating expense when they do.

Mr. BIDDLE. To wholesale power expenses?

Mr. KELLOGG. Not necessarily wholesale.

Mr. BIDDLE. It is a wholesale promotional cost to a great many retail customers; it might easily be charged to a wholesale operating cost, might it not?

Mr. KELLOGG. As far as I know.

Mr. BIDDLE. It is not charged to the customer, is it?

Mr. KELLOGG. May I just finish the answer? The only company whose sales promotional expense would be called wholesale would be those power companies that were only in the wholesale business. Mr. BIDDLE. Precisely.

Mr. KELLOGG. Of course all ordinary utility companies manufacture wholesale and sell retail.

Mr. BIDDLE. And we are talking about wholesale rates, aren't we? Mr. KELLOGG. Yes; but what I mean is this, a company which was really a wholesale company would have a relatively small number of customers. For instance, when I was at Keokuk, we used to sell power out of that large hydro plant, and we had only, as I recall, 15 or 16 customers. A good many of the ratios were a little bit different per customer from what they would be with a company of the same size, gross, that might have many thousands of customers. Mr. BIDDLE. Of course; so that if T. V. A. actually did charge these promotional costs to its wholesale operations, it would appear in the books, wouldn't it?

Mr. KELLOGG. Yes; one would think so. It certainly should if properly accounted for.

Mr. BIDDLE. In making up these figures, have you ever asked T. V. A. for their figures?

Mr. KELLOGG. No; I have never asked T. V. A. for anything. Mr. BIDDLE. And therefore since you have never attempted to get them, you have never been refused access to their figures?

Mr. KELLOGG. Oh, I never claimed I was refused access. I have tried to work these things out on the basis of published statements entirely.

Mr. BIDDLE. Estimates of what dams would cost, but you have never tried to get what their actual operating expenses are from T. V. A.?

Mr. KELLOGG. Only as published reports, annual T. V. A. published statements only.

Mr. BIDDLE. Well, did you find any broken-down operating costs in their published statements?

Mr. KELLOGG. A slight break-down, yes.

Mr. BIDDLE. A slight break-down?

Mr. KELLOGG. Not much.

Representative Barden. Mr. Chairman, may I ask the witness a question?

Acting Chairman SCHWARTZ. Yes.

ATTITUDE OF PRIVATE UTILITIES TOWARD RATE REDUCTIONS

Representative BARDEN. Mr. Kellogg, you are pretty familiar with the power situation throughout the country, are you not?

Mr. KELLOGG. Yes, I think I am thoroughly familiar with it.