there, gives entirely a distorted view of values. That is the very reason that I have suggested that there should be created an impartial committee to determine the question.

Acting Chairman SCHWARTZ. We understand that. The proposition was made a while ago that one of the elements of value was "a going concern."

Mr. WILLKIE. If the dollars were actually invested.

Acting Chairman SCHWARTZ. And there may have been a question there as to what you thought that investment was and you were not required to say that your books showed so much, but I think that you gave tentatively your own idea of what that was.

Mr. WILLKIE. I am trying to give you facts, not anticipating this. Mr. BIDDLE. You don't think that your answers gave a distorted view of the situation, and why do you say "distorted view?"

Mr. WILLKIE. To pick out an isolated instance here, and one there, in valuation, rather than to have it gone into in every detail. Obviously that can't give, and therefore gives a distorted picture.

Representative THOMASON. Without giving a lot of figures, what I am interested in is the fair and just and proper items that go into a valuation of this kind.

Mr. WILLKIE. The cost.

Representative THOMASON. Or present values, as a going concern. Mr. WILLKIE. Now, that is just where you run into your difficulties, Mr. Thomason. You have, if you go into the question just of cost, if you are going to go on the basis of what it cost the investor, that is one problem, and if you are going into the question of valuation on reproduction new, minus depreciation, that is an entirely different question.

Representative THOMASON. We have gone into the question of original cost, reproduction cost, depreciation, and taxes, and what not, and what I am interested in knowing are the proper and just items that should go into a valuation of a property of this kind if it is to be acquired by somebody else.

Mr. WILLKIE. Well, I think that that is quite a subject, and it will take a long, long time.

Representative THOMASON. I don't mean the details and figures, but the items which go to make up the valuation of a property of this kind.

Representative JENKINS. Let me ask a question: I assume that Mr. Biddle bases his authority under that provision of the resolution which provides that this committee should go into anything that has been more or less embarrassing to the T. V. A., and in other words, any activities of any power company that was putting an impediment of any kind in the way of the progress of the T. V. A., we would have authority

Mr. BIDDLE. Certainly I won't accept that. What would embarrass the T. V. A. by negotiating with Mr. Willkie?

DISCUSSION RE YARDSTICK

Representative JENKINS. While we are at that, will you point out to us what provision of the resolution than do you claim that you have a right to ascertain the value, unless it is to fix the yardstick?

Mr. BIDDLE. What you started to say, was embarrassment to T. V. A. That seems to me to have nothing to do with the yardstick, to begin with; and secondly, may I say that the resolution directs us to go into the entire administration of the T. V. A. Act by the Board; and now if this isn't an administration of the T. V. A. Act, I don't know what it is.

Representative THOMASON. And also to determine what is a fair yardstick.

Representative JENKINS. Just a minute. I think that I have the floor, gentlemen. I want to find out, now, from the counsel, just where we are, with reference to this basis. I maintain that the resolution does provide that we have not only the right, but we have the bounden duty to go into any activity of any power company that has been embarrassing or that has been an impediment, or has in any way made an assault on the activities of the T. V. A. For instance, we went into any litigation they participated in; we went into any unjust or illegal competition that they would raise up against the T. V. A., but whenever you go into this proposition of value, I maintain that unless you can show me different that we have no right to go into this value except to fix a yardstick.

Now, just there, if you are ready to answer me

Mr. BIDDLE. I will answer you right away [reading]:

Section 2. It shall be the duty of the joint committee to make a full and complete investigation of the administration of the Tennessee Valley Authority of the act of 1933, as amended.

Now, if these activities were not a part of administration of that act I don't know what they were.

The second answer is this: Mr. Willkie has stated, and this is after all to a certain extent cross-examination, that the greatest thing this committee could do was to recommend a sale procedure to protect investors. Now, that is what we are trying to find out, and now wait a minute, I am answering you; it may be that the committee does not wish for me to cross-examine Mr. Willkie on his theory of what is a fair basis of protecting investors, and if they do not, and will so direct me, I am through with these questions, and as a matter of fact I am almost through with them.

Representative JENKINS. Did he make this statement?

Mr. BIDDLE. Yes.

Representative JENKINS. He didn't make it before he started here? Mr. BIDDLE. No.

Representative JENKINS. You can hide behind that if you want to and say on this general proposition that we have a right to go into any of the activities of the T. V. A., all right, and I am willing to accept that, if that is your answer, but it seems to me that all of this investigation has been for one purpose only, and that is to fix the values so that Mr. Lilienthal can have the advantage of it, or it is for the purpose of providing us figures with reference to the yardstick.

Now, up to this time, not a single word, not a single question has been asked of this witness with reference to the one primal, most important duty that we have got to perform, and that is to find facts. upon which we can determine about this yardstick.

Mr. BIDDLE. I am coming to that, and I can't do it all at once. Representative JENKINS. Why doesn't somebody ask him something about the yardstick?

115943-39-pt. 10- -14

Mr. BIDDLE. I am coming to yardsticks, but I haven't had a chance to come to it yet.

May I proceed, Mr. Chairman?

Acting Chairman SCHWARTZ. I would like to make one suggestion there: We are supposed to investigate the administration of the T. V. A., and if the T. V. A. has been standing back here with a club and knocking people down, we are entitled to find out, and it has been charged, and now we want to find the basis of it.

Representative JENKINS. You wouldn't ask this man, that knows the least about T. V. A. in the world, that would have the least chance to know anything about it.

Mr. BIDDLE. He said a great deal about it, and whether he knows anything about it or not I don't know.

Representative JENKINS. The club has been wielded on his head.

PURCHASE OF POWER BY ALABAMA POWER CO.

Mr. BIDDLE. We will leave that, now, and come to a few other incidental matters suggested to me by your testimony on Wednesday. Have you any objection to T. V. A. selling power to farmers and cooperatives, that you don't serve?

Mr. WILLKIE. Farmers' cooperatives that we don't serve? No. Mr. BIDDLE. Now, Mr. Willkie, the Alabama Power Co. for 6 or 7 years bought power at the switchboard from Wilson Dam, did they

not?

Mr. WILLKIE. I was trying to think of the number of years.
Mr. BIDDLE. I will take your number; 5 or 6 years.

Mr. WILLKIE. 1925; yes.

Representative THOMASON. It was a 25-year contract?

Mr. BIDDLE. They paid how much, 2 mills?

Mr. WILLKIE. They paid on a rate which-I think the amount that they took amounted to 2 mills.

Mr. BIDDLE. Two mills?

Mr. WILLKIE. Yes.

Mr. BIDDLE. Well, now, how was that very cheap purchase of power reflected in sales, let us say, to some of the cities right at the dam, at Sheffield? What did you resell to Sheffield for?

Mr. WILLKIE. In the first place, it wasn't cheap power, because it was temporary power.

Mr. BIDDLE. Well, taking out the word "cheap" and calling it "temporary," what was the power resold for at Sheffield? Was there any reduction in the Sheffield rates?

Mr. WILLKIE. No; we always adopted the principle advocated strongly by President Roosevelt, that the man located immediately at the dam site should not get an advantage in his rates over the man located far away, that rates should be uniform throughout wide areas, and that the man who lived under the dam shouldn't get any advantage.

Now, let me explain a little more to you about this 2-mill power. You understand that prior to the creation of T. V. A., we could only buy power from the Federal Government on the basis of a day-to-day contract. That is, the War Department would only sell the power subject to cancelation, immediate cancelation. That was because the final disposition of the Wilson Dam had not been determined upon.

The result was that we could use it only as extra power, if you want to describe it as such, and had to go ahead and provide our own generating facilities, adequate to serve our need without regard to it. Representative JENKINS. When was that?

Mr. WILLKIE. All the time from 1925 to 1931.

Mr. BIDDLE. What was the clause in the Alabama contract, with respect to ending the contract?

Mr. WILLKIE. I think it was a day-to-day basis. I will see whether I can locate the contract.

It may be 30 days, but I think it was day-to-day.

QUESTION OF THE RETAIL YARDSTICK

Mr. BIDDLE. Have you studied any operating statements of municipalities purchasing power from T. V. A.?

Mr. WILLKIE. Yes, I have looked at some of them.

Mr. BIDDLE. Which one?

Mr. WILLKIE. Well, in times past, I have looked at Tupelo, and I have looked at Alcorn County.

Mr. BIDDLE. What was the last time that you took a look at Tupelo or Alcorn County?

Mr. WILLKIE. I have taken a look, a general look, at Alcorn County, just recently.

Mr. BIDDLE. Have you studied it?

Mr. WILLKIE. Well, to say "study it," of course, without having all of the means of getting the information

Mr. BIDDLE. Have you studied enough of those contracts to know whether or not the municipalities are losing money at the wholesale rates, at which they purchase electricity and the retail rates at which they sell it, on the average contracts; not a specific one, you can come to a specific one also, but how many have you studied and what is your general conclusion as to whether or not municipalities, which have been in operation, let us say, for 21⁄2 years or over, are making or losing money on their statements?

Mr. WILLKIE. If the municipalities such as you describe, Alcorn County Association, and Tupelo, paid their own costs of operationMr. BIDDLE. That wasn't my question. I said "municipalities." Alcorn is not a municipality.

Mr. WILLKIE. It includes the town of Alcorn.

Mr. BIDDLE. Isn't it a cooperative?

Mr. WILLKIE. I thought Alcorn was included in the Alcorn County operation, and I may be in error about that-am I not correct about that? I think so.

Mr. BIDDLE. Is it a municipal operation or cooperative? I am speaking now of the municipals. They were the ones that got the grants, you know; the cooperatives didn't get any of the grants.

Mr. WILLKIE. Tupelo didn't get any grant. Tupelo was a municipal plant for years.

Mr. BIDDLE. But I am speaking of municipal plants.

Mr. WILLKIE. As I say, municipal plants-I have looked somewhat at the figures of Tupelo.

Mr. BIDDLE. How many operating statements have you studied or looked at somewhat?

Mr. WILLKIE In Tupelo

Mr. BIDDLE. How many cities?

Mr. WILLKIE. Well, I have seen from time to time, Mr. Biddle, I suppose, the figures for all of the cities down there, that the T. V. A. is supplying power to.

Mr. BIDDLE. Well, based on that study of those figures, have you any opinion as to whether or not those figures show operating profits for cities which have been in operation for more than 21⁄2 years?

Mr. WILLKIE. I would say that those cities, that if they paid the fair cost of wholesale power on-its true cost, and they took into account all elements of cost, I don't believe that as a class today they are making any money.

Mr. BIDDLE. That is an "if" answer-I say on their own operating statements, are they or aren't they making money?

Mr. WILLKIE. The way they set it up

Mr. BIDDLE. On their operating statements?

Mr. WILLKIE. The way it is set up, yes.

Mr. BIDDLE. Have you studied them at all and tried to break them down?

Mr. WILLKIE. I have looked at Tupelo's statements. It is pure arithmetic.

Mr. BIDDLE. Let me ask you another question about these contracts, if you can answer it.

Do you know whether or not the operating statements of these municipalities reflect a sufficiently large profit to allow for calculation of interest on the entire investment, including P. W. A. grants and loans, in those cases in which grants and loans were given, and taxes, not on the assessed value of the entire property, but its actual 100 percent book value?

Mr. WILLKIE. Now, if you are taking all true elements of course the answer is no. If you are taking into account the T. V. A. arithmetic, the answer is yes.

Mr. BIDDLE. I am taking into account neither. I am taking into account the sworn operating statements of the municipalities.

Mr. WILLKIE. That is based upon that type of arithmetic.

Mr. BIDDLE. What is the answer?

Mr. WILLKIE. Well, I don't know how else to answer it.

Mr. BIDDLE. Now, you are answering it by taking two things which weren't in the question, based on the operating statements of those municipalities; what is the answer to the question?

Mr. WILLKIE. Let me answer it. The operating statements do not truly reflect the cost but such as they are, some of them show a profit, or maybe all of them. Does that answer your question? Mr. BIDDLE. Yes. I come to the next one now.

Now, let us assume that these municipalities are purchasing electricity from T. V. A. at wholesale rates, which are in excess of the cost of public-utility production of such electricity, including a fair return on their investment, and in their operation are showing a sufficient profit to allow for a calculation of interest and taxes on their entire investment comparable to those paid by public utilities. Would the retail rates in such operation be fairly comparable to those charged by public utilities?