II. Amend paragraph (d), section 10, as follows:

Page 16, line 12. after the word "regulations" insert the words " and shall be based upon the actual power generated."

As amended, said paragraph would read as follows:

(d) That the licensee shall pay to the United States reasonable annual charges in an amount to be fixed by the commission. A schedule of annual rates of charge, which rates shall in no case be less than 10 cents per horsepower per annum, shall be set forth in each license. Such schedule of rates shall be fixed by the commission under general methods to be prescribed in the regulations and shall be based upon the actual power generated; and in fixing such schedule the commission shall give due consideration to any benefits accruing to the licensee through the construction, operation, or maintenance by the United States of any navigation structures or headwater improvements, and shall also give due consideration to and due credit for the annual interest. maintenance, and operation costs to the licensee on account of any lock or locks or other aids to navigation constructed, maintained, or operated at the expense of the licensee: Provided. That licenses for the development, transmission, or distribution of power by States or municipalities solely for State or municipal purposes may be issued without charge; and that licenses for the development, transmission, or distribution of power for the utilization by the licensee of national forest timber to the extent that power developed under license is so used, and for domestic. mining, or irrigation use in projects of not more than fifty horsepower capacity, may be issued without charge; but in no case shall a license be issued free of charge for the development and utilization of power created by dams or other works constructed and owned by the United States for the improvement of navigation."

II. Amend paragraph (a) of section 11 as follows:

Page 18, l'ne 2. after the word "license." insert the words "Provided, That in any valuation of the property of the licensee for rate making or other purposes, the cost of such lock or locks, booms, slu'ces or other structures for navigation purposes shall be included."

As amended, the paragraph would read as follows:

"(a) That such licensee shall, to the extent necessary to preserve and improve navigation facilities at least equivalent to those existing prior to the construction of such dams, construct in whole or in part, without expense to the United States, in connection with such dam, a lock or locks, booms, sluices, or other structures for navigation purposes, in accordance with plans and specifications approved by the Chief of Engineers and the Secretary of War and made part of such license: Provided, That in any valuation of the property of the licensee for rate making or other purposes, the cost of such lock or locks, booms, sluices or other structures for navigation purposes shall be included."

IV. Amend section 15 as follows:

Page 22, line 9, after the word “or." insert the words "in case such license is rejected by the original licensee."

As amended the section would read as follows:

SEC. 15. That if the United States does not, at the expiration of the original license or of any license subsequently issued, exercise its rights to take over. maintain, and operate any project or projects of the licensee as provided in section fourteen hereof, the commission is authorized to issue a new license to the original licensee upon such terms and conditions as may be authorized or required under the then existing laws and regulations. or in case such license is rejected by the original licensee to issue a new license under said terms and conditions to a new licensee, which license may cover any project or projects covered by the original license, and shall be issued on the condition that the new license shall, before taking possession of such project or projects, pay such amount for the property taken. and assume such contracts as the United States is required to do, in the manner specified in section fourteen hereof: Provided, however, That if any project or projects shall not be taken over by the United States or by a new licensee, the terms and conditions imposed upon the original licensee in any new license tendered shall not be such as to impair the net investment of the increase in said project or projects."

STATEMENT OF HON. ALBERT JOHNSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON.

Mr. JOHNSON. Mr. Chairman, I beg leave to present resolutions adopted by the city councils of Tacoma, Seattle, Bellingham, and Spokane, with reference to water-power legislation. These resolutions have been recently adopted and these are attested copies. I call attention to the fact that the resolutions of the city councils of Tacoma, Bellingham and Seattle are identical. Therefore I shall offer for the record only the Tacoma resolutions, which are as follows:

RESOLUTION 6744 (BY GRONEN).

Whereas the city of Tacoma has a municipally owned light and power plant of the value of approximately five million dollars ($5,000,000), and said plant now has more than twenty thousand (20,000) customers, and the city is now contemplating the acquisition and development of a power site on the South Fork of the Skokomish River in the Olympic National Forest, or the Cowlitz River in Rainier National Forest; and

Whereas the President of the United States has recommended, and Congress is considering, the passage of additional legislation relating to the use of the lands of the United States for the development of water power, and a bill has been introduced in the House of Representatives during the month of January, 1918, known as the "Administration bill," and an examination of said bill discloses that no authority is expressly conferred upon the States or legal subdivisions thereof to condemn the rights of the licensees under the provisions of said bill: Now, therefore,

Be it resolved by the council of the city of Tacoma, That the city of Tacoma respectfully urges that Congress, in passing any water-power legislation, specifically authorize the several States and legal subdivisions thereof to condemn the rights of the licensees upon Government lands, upon making just compensation therefor under the provisions of the eminent-domain statutes of the various States.

Be it further resolved, That section 19 of said so-called Administration water-power bill be, and the same is hereby, approved by the city of Tacoma for the reason that the wording of said section relating to the regulation of the rates and management of the corporation developing the site upon the public domain is not prejudicial to the interests of the city. Congress, however, is expressly urged to refrain from amending said section to embody the provisions of the so-called "Shields" Senate bill, for the reason that under the said provisions of the "Shields" bill the city of Tacoma would be prevented from acquiring or developing the water-power site upon the public domain, since the provisions of said “Shields" bill make it obligatory that the licensee thereunder, whether a municipal or private corporation, shall be under the regulation of the State public service commission, whereas the municipalities of the State of Washington are permitted to, and do, regulate and govern their own publicly owned utilities.

Be it further resolved, That a copy of this resolution be immediately forwarded to the special committee of the United States House of Representatives, to which has been referred all questions relating to water-power development, and to each Senator and Congressman from the State of Washington. Adopted on roll call February 13, 1918. Yeas-Atkins, Drake, Gronen. Pettit, Fawcett. Nays, 0. A. V. FAWCETT, Mayor.

Attest:

W. D. NICKEUS, City Clerk.

The Spokane resolutions are in different form and are as follows: City Clerk's File No. 29757:

RESOLUTION.

Whereas there are pending before Congress several bills providing for additional legislation in relation to the use of the lands of the United States for the development of water power; and

Whereas the primary purpose of legislation in the disposal of such lands, with the water-power rights appurtenant thereto, should be to secure to all the people the greatest possible benefit from these public resources; and

Whereas by the laws of the State of Washington municipally owned public utilities are not and, in the opinion of the council, should not be, subject to regulation by our public service commission: Therefore,

Be it resolved by the city council of the city of Spokane:

First. That any water-power legislation passed by Congress should provide that, as between rival claimants for land or power, municipalities should have the first right.

Second. That the rights acquired by private corporations or individuals under such legislation should be subject to condemnation by the State, or by municipal subdivisions thereof, in accordance with the laws of the State in which such power or lands are situated, upon payment of just compensation therefor.

Third. That, while recognizing the wisdom of limiting the acquisition of such rights, as to private corporations or persons, to such corporations or persons as are subject to regulation by the public-service commissions, this limitation should not be imposed upon municipal corporations, where the laws of the State do not subject municipally owned utilities to such regulation. Passed the city council February 11, 1918.

F. W. KELLAM, City Clerk.

Mr. Chairman, as the committee has summoned numerous witnesses who are present and waiting to be heard, I shall not take much time. Permit me to call attention to the fact that the resolutions urge that as between rival claimants for power or for land on which to build power houses, municipalities should have first right. and I sincerely hope that the committee will take this suggestion into consideration in framing the bill. Also, I desire to call attention to the paragraph in the Tacoma resolution which asks that municipalities shall have the right to go to Federal domain for water power. It is desired that they shall always have that right, and the first right. Representatives Taylor, of Colorado, and La Follette, of Washington, who are members of this special committee, have long advocated the rights of western municipalities to secure power from adjacent Federal domain. They are familiar with the subject, they know the success of municipal power in our western cities, and they know that as our growth becomes more rapid towns will quickly expand into cities of size, and have need for much water power, which in many localities is to be found in the public domain which, as things are now going, is likely to continue to be public domain.

The CHAIRMAN. You may proceed now, Mr. Townley.

STATEMENT OF MR. CALVERT TOWNLEY, ASSISTANT TO THE PRESIDENT OF THE WESTINGHOUSE ELECTRIC & MANUFACTURING CO., NEW YORK CITY.

Mr. TOWNLEY. I am at present assistant to the president of the Westinghouse Electric & Manufacturing Co., and was formerly vice president of the Niagara, Lockport & Ontario Power Co., and at another period vice president of the Housatonic Power Co., I have been giving attention to the various features of the water power situation for many years. My company is the manufacturer of electrical apparatus needed when water powers are developed and therefore hopes that favorable legislation may be enacted. Further, I am here because I have a deep personal interest-not financialin water powers.

I would like, if you please, to speak of this subject not on a war basis, but on a peace basis, because the development of water power

takes quite a while, and unless the war should be drawn out to last a very long time it would be difficult to develop any very large number of water powers and have them in operation in time to be of service in the war.

The introduction of electricity as a means for transmitting power over considerable distances and its subsequent rapid development. completely changed the status of hydraulic power. Previously such power could only be used near falling water. Now it is commercially available in convenient form within a radius, in some instances, up to 200 miles a fact that has made it possible to utilize water powers even when located in remote and inaccessible places. Indeed, to-day practically all hydraulic devlopments of any magnitude are hydroelectric.

Along with improvements in the art of electrical transmission have come equally rapid developments in the application of electricitv. Electric light has become almost the universal illuminant. Electric motors largely drive our factories and propel all our street cars. They have made substantial progress in replacing steam locomotives on some large railroads while the manufacture of nitrogenous products for explosives and fertilizers, and of such products as abrasives and aluminum, depends for its commercial success on electrochemistry. In an endeavor to supply the demand for electric current thus created large central generating stations have been established in or near all large centers of population.

In the light of the foregoing, it might seem reasonable to suppose that a large proportion of the modern demand for electric current would be supplied from the energy in falling water. Such, however, is not the case. Accurate statistics are difficult to obtain but some approximate totals may prove illuminating. It has been estimated by a careful engineer that in 1911 there were over 26,000,000 steam engine horsepower capacity in use (including railroad locomotives), in the United States. Making liberal allowances for correction in these several figures it seems probable that there are in service from four to five times as many steam as water horsepower and that there are still undeveloped water horsepower equal at least to twice that of all the steam capacity in service. Some of the undeveloped power sites are too remote from any market to be now utilized, and an uncertain number are not commercial prospects; but, even so, it is clear that the possibilities of the additional development are very great.

As has been brought out by previous testimony, no accurate estimate of the total amount of hydraulic power is obtainable, but the figure most frequently used for all the water power in the United States is probably 60,000,000 horsepower. I make that statement with a reservation, because it is based on admittedly meager information, but I know of no better figure to use.

The United States census in 1912 gave 4,870,000 horsepower of this hydraulic power developed: and Mr. Merrill's report, which the Secretary of Agriculture presented in January, 1916, estimated that this total had been increased to six and a half millions.

There are two fundamental causes which have militated against the substitution of hydroelectric for steam-electric power. One is economic and permanent; the other is statutory and therefore subject. to modification. Both reasons apply to some powers but neither,

fortunately, to all. The economic and permanent reason is high cost of development due to natural conditions. Electric power generated by falling water is inferior to that generated by steam in every particular except cost and, therefore, water-driven service must be cheaper than steam-driven in order to justify its existence.

The price for service depends primarily on cost, and cost divides itself naturally into two main items, namely, operation (including maintenance), and fixed charges. As a hydroelectric plant consumes no fuel, its operating cost is less than that of an equivalent steam-driven plant. On the other hand, a steam plant only costs usually from one-fifth to one-half as much per unit of capacity as a hydroelectric plant, so that the latter must carry very much heavier fixed charges.

The disability of water service is usually even greater than the ratio of the costs of two equivalent complete developments. A power enterprise seldom comes into being with a market for its entire ultimate output. Therefore, when steam is to be the motive power, only such capacity is installed as initial demands require and the cost per unit is fairly proportional to that of the ultimate development. In a water development, on the contrary, a large part of the cost is for riparian rights, for the dam, impounding reservoir, flume, forebay, etc., and for the transmission right of way, towers, etc., which must at the start be largely provided and constructed for the complete installation. The obvious result is a greater fixed charge per unit of capacity and a higher cost per horsepower delivered for sale.

In forecasting the commercial prospects of a power enterprise the possible market must be studied and, of course, a sale price for power decided upon. As this price is controlled by the cost of similar service from other sources, usually from steam, and as it must be attractive from the start, the additional burden of fixed charges on the initial part of an hydroelectric installation frequently forces the sale of its power below cost. The projectors of the enterprise then must rely for success on a sufficient subsequent increase in their markets. The possibility of an incorrect forecast of the extent of such increase, and of the time when it may come, imposes a serious business hazard against water and in favor of steam.

It has been frequently pointed out that, as the nation's coal supply is depleted, the cost of coal must rise, thus increasing the cost of steam-electric power as a competitor and raising the market value of hydroelectric power accordingly. The rising price of coal is a matter of record, but it is not so generally known that the improved efficiency of steam-producing machinery (boilers, engines, generators and auxiliaries) has more than kept pace, so that the net cost of producing electric power from coal has steadily declined. As applied to the prewar period it may be stated that over a period of 10 years the cost of coal has risen on an average 1 per cent per year while the cost of electric power produced from coal has fallen on an average 21 per cent per year. In addition to these facts still referring to prewar conditions-the cost of steam-electric generating equipment has been greatly reduced. This fact is due partly to the introduction and subsequent improvement of the steam turbine, and in part to the great increase in the size of the units now available.

There is nothing to indicate that the limit of improvement in the design of steam prime movers has been reached or is even in sight.