Mr. KELLEY. I never heard of any. Mr. RAKER. I mean that you do not extend your lines? Mr. RAKER. Do you get any other revenue out of your concern except for the power? Do you deliver water for irrigation? Mr. KELLEY. Yes, sir; the Montana Power Co. has developed, through a subsidiary company, the Montana Reservoir & Irrigation Co., a considerable business in irrigating arid lands. Our policy in that respect is this: The irrigation season comes at a time of surplus water, and any revenue from surplus water is better than no revenue; and we have done what we could to develop irrigation projects on that theory. Mr. RAKER. Isn't it a fact that in practically all of the projects that are now in operation, and those that could become so in the intermountain States, those on the east side of the slope, those in the intermountain States, and those on the Pacific slope, in addition to the water power, a primal consideration is the question of conservation of water and using it for irrigation? Mr. KELLEY. If I understand your question, yes; I think so. Mr. RAKER. And this legislation should keep that in view, as well as the power projects? Mr. KELLEY. Well, yes; of course, all these things dovetail. You can not do the whole job at once. I should say the thing to do is to do the most necessary thing first. Every water-power development is a conservation of water. Every storage dam that you build, whether you build it primarily for irrigation or primarily for power, helps to conserve water. It regulates the flow. Mr. RAKER. Thta's all. Mr. HAUGEN. Mr. Kelley, a number of statements here would lead one to believe that the water-power development is not a profitable proposition; that it is possibly an elusive proposition. Would you mind stating what the profits have been and what your experience has been with profits. Mr. KELLEY. You can not say that any business is of itself profit making or losing, because of the character to which it belongs. Mr. HAUGEN. I understand that. Mr. KELLEY. All of the elements that go into the business-favorable location, development of markets, and all of those things-are factors which make for the success or failure of a business. Now, you might have just as much power developed as the Montana Power Co. has in some place where you could not sell it, and it would be a tremendous liability. But if you can sell as much power as you have developed and if you can develop as much power as you can create a market for, and you can get a fair rate, you are going to have a money-making business. Those are the factors you have got to work out. Mr. HAUGEN. I appreciate that; but could you give a range of profits from the highest to the lowest and what the general profit is also? Mr. KELLEY. I could not give that offhand. The Montana Power Co.-do you ask concretely or generally? Mr. HAUGEN. Generally. Mr. KELLEY. I haven't any idea about it. 53983-18-PT 1-21 Mr. HAUGEN. Well, whatever your experience or knowledge may be, I understand that you are operating a number of projects. Mr. KELLEY. I am counsel for a number of plants. Mr. HAUGEN. Well, are you familiar with the profits made by them? Mr. KELLEY. I haven't them in mind. In a general way, I think I am. Mr. HAUGEN. Well, how do the profits compare with other investments? What per cent of dividends do they pay, 5 per cent or 10 per cent? Mr. KELLEY. I don't know of any water-power proposition in the United States that is paying what might be termed an exceedingly high profit. I don't know of any power proposition in the United States that is paying more than a fair return. And by fair return I mean the amount of money which placed with as much care and prudence in some other line of investment would return an equally high rate of interest. Mr. TAYLOR. What per cent are they making? Mr. KELLEY. I don't know. I know from hearsay the statements that have been made around committees that most-I think that most power companies are like most other public utilities, they have to go through reorganization once or twice and wipe out a certain amount of the investment before they finally make any money. I think that is the experience generally of people in that business. And water-power securities under the best conditions are not looked upon favorably, and they are not a desirable commodity, and you have to offer attractive rates to bankers to get them placed at all. Mr. HAUGEN. Can you approximate the profits in percentage? Mr. KELLEY. I don't know of any water-power company that is paying over 5 per cent. Mr. HAUGEN. In dividends? Mr. KELLEY. In dividends. Mr. HAUGEN. Does that represent actual investment? Mr. HAUGEN. Or common stock that does not represent any investment? Mr. KELLEY. As a rule, I think that common stock has in it more or less water. And I do not know that you would care or be interested in my view on that, but I am not one of those who have Mr. HAUGEN (interposing). The only thing that I thought was simply to get at the profits made, in order to make a comparison with other investments. Mr. KELLEY. My view about it is that in any business enterprise you must reward something more than naked cash that is put in. Mr. FERRIS. Are you going to be in the city for a day or two? Mr. KELLEY. I had a ticket on the 4 o'clock train, but my train is gone. Mr. FERRIS. Are you coming back to this hearing? Mr. KELLEY. I am subject to the call of the committee. Mr. FERRIS. But had you intended to leave the city to-night? Mr. FERRIS. You will not be here to-morrow? Mr. KELLEY. Not unless you wish me to stay. Mr. FERRIS. Well, I might want to ask another question or two later. The CHAIRMAN. Mr. Stuart, of the Fuel Administration, is here, and he will have to leave the city to-night, and it has been asked that he be heard, and, under the circumstances, being a public official, I feel that he ought to be given that privilege. Mr. Stuart, we will hear what you have to say now. STATEMENT OF CHARLES E. STUART, TECHNICAL REPRESENTATIVE OF THE UNITED STATES FUEL ADMINISTRATION, WASHINGTON, D. C. Mr. STUART. The coal problem is one which calls for effective conservation measures to prevent continued shortage of coal during the next 12 months. To avoid or alleviate this shortage three alternatives are possible. These are briefly as follows: 1. Direct curtailment of consumption of fuel. 2. Increased efficiency in the use of fuel. 3. Replacement of fuel power by other power. Under the conditions existing during last January the first alternative was the only practical resort. Every effort is being made by the Fuel Administration, however, to avoid the necessity of similar recourse to this alternative in the future by securing increased efficiency in the use of fuel and, of course, power, and through the replacement of fuel by other power. At the present time the efforts of the Fuel Administration along the lines of the first alternative are directed largely toward the curtailment of nonessentials. Its efforts toward securing increased efficiency in the use of fuel may be divided, first, into those for securing the increased efficiency in combustion and in steam application and in heating and in power plants of all kinds; and, second, into those for securing increased economy through greater centralization in the production of electric power. This latter method depends for its results upon the fact that the average small isolated plant will consume from 6 to 10 pounds of coal per kilowatt hour, whereas the consumption of the average central station will usually range from 21 to 5 pounds of coal per kilowatt hour. The work of conserving fuel by the centralization of power is handicapped in some localities, such as Philadelphia and Pittsburgh, by the fact that the central stations are already fully loaded and are thus not able to carry an increased load which would result from the addition of the loads now carried by isolated plants. In such cases there is sometimes an additional method of securing results by interconnecting power stations. Owing to the fact that the maximum loads on different stations usually occur at different hours, two plants if interconnected can usually supply a greater output than if operated separately. It may be stated in respect to these localities that the question of conserving fuel is secondary to that of conserving loads of vitally important war material manufacturing plants. To do either in those sections which are short of power it will obviously be the case of enlarging central stations, building isolated stations to handle individual loads, or through a third means, namely, the inter connection of power systems. The building of isolated stations should be absolutely discouraged, as a general rule, to which we consider there are important exceptions. The rule is based on the fact that the money spent in constructing isolated stations will usually develop a far greater generating capacity where used in the enlargement of existing modern generating plants. The interconnection of power systems possesses far greater merit than does the enlargement of existing plants. Greater use is made of the equipment already installed. The cost of interconnecting for increased capacity should be less, the class of material and of labor required to effect interconnection is less competitive with war-material requirements, both as regards character of material used and as regards labor requirements. The average load factor, which in this case means a ratio of average load to maximum load of the plant of the United States, probably does not exceed 25 per cent. This means that during certain hours of the day a large part of the capacity of the central stations of the country is not used. The exact meaning of this has been indicated elsewhere by Mr. Merrill in the form of charts and diagrams. In reference to this subject, it is our prime object to lay emphasis on this fact and on the means by which relief can be had expeditiously, and that is by the interconnection of power systems. Such interconnection through the diversity of load carried by different stations, technically termed diversity factor, will render available considerable quantities of power and at a cost which would be negligible as compared with building new central-station plants or of increasing the capacity of those stations already built. At the same time we do not want to undersetimate either the cost or the difficulties incident to the interconnections. There will usually be an amount of expenditure involved which under the conditions resulting from our war-finance requirements would either represent a burden which the central stations can not under present circumstances carry or else would necessitate Government aid in such financing that would be impossible or would conflict with the efforts of the Govern ment. It may be observed with respect to this question of interconnection that the West has already gone a great deal further than the East. This fact has been clearly developed by Mr. Merrill, particularly in the case of California. The opportunity for interconnections in the East is equal to that which in the past has existed in the West, and the necessity of such interconnections to-day is far greater than that which existed in the West. There is a third alternative which is a question of replacing fuel power by other power. In the case of the hydroelectric development such replacement would, of course, give a maximum saving of fuel, but only at a maximum expenditure of capital where it means the constructing of new works. It is questionable whether a great deal of saving as the result of the construction of new works will be possible while the war lasts. In fact, it is doubtful whether great outlays in such directions will be wise in view of the fact that such expenditure would conflict with other work of more vital character to the conduct of the war. On the other hand, there exists in other fields the possibility of enlargement of plants now operating. For example, 750,000 barrels of fuel oil are being consumed yearly by auxiliary steam plants serving the city of Los Angeles, Cal., and adjacent tertitory. The city of Los Angeles owns a hydroelectric system which furnishes the bulk of the power requirements, the deficiency being made up by the auxiliary steam plants. The hydroelectric development is capable of enlargement simply by the increase of additional generating machinery and transmission lines. Thus at a relatively small cost this fuel consumption could be saved; or, conversely, a considerable additional generating capacity would be developed. There are many examples throughout the country corresponding to the Los Angeles situation. Coming to the question of aid which the Government could most advantageously extend, we believe as follows: First. Assistance should be rendered the power systems wherever interconnections may be deemed practicable and advisable. Second. Financial aid should be rendered for the enlargement of central station systems wherever such need is deemed essential, in order to produce increased power, radical fuel saving, or where there will be obviated what practically amounts to a duplication of investment in the case of the construction of isolated plants at this time. Third. There should be the necessary help to enable a complete systematization of the power situation of the entire country. Duplication of investment should be rendered impossible as a measure of conservation, not only of capital but also of materials, labor, and of fuel. There should be at some centralized point, such as Washington, a complete perspective of the entire power situation, which would prevent any of the now recognized errors and abuses such as exist in the duplication of investment, fuel wastage, etc. The CHAIRMAN. Does any member of the committee desire to ask Mr. Stuart any questions? If not, we are very much obliged to you, Mr. Stuart. Mr. Harris, you may proceed now. STATEMENT OF MR. JOHN J. HARRIS-Resumed. Mr. HARRIS. The thing that I wanted to give the committee is an idea of the volume of work required to work up a water power, and in that connection I have here some of the engineering data that was gathered and which is the most essential, but while I have it here I would like to give a little description regarding it. The project in which we are engaged comprises 68 miles of railway through an agricultural valley. About 70,000 acres of it are already irrigated, and the construction of a high dam at the mouth of our canyon will develop, on a load factor of about 50 per cent, over 200,000 horsepower, figuring an efficiency of about 80 per cent to the turbine. That would be estimated power for the year around. The dam would serve not only the power feature but additional irrigation to the ultimate extent of about 110,000 acres, about 70.000 acres of which would be irrigated by gravity and the other 40,000 acres ultimately by electric lifts. I pointed out the fact yesterday that the United States Reclamation Service in 1904 made a survey of the irrigation feature of the project. At that time they figured on irrigating 45,000 acres. The |