(The matter referred to folows:)

Yes; it is expected that incremental revenue of the first 10 years will equal or exceed incremental annual costs of the additional transmission facilities. This is the test set forth in our feasibility policy.

CONSTRUCTION BY UTILITIES

Dr. FENTON. Have any of the non-Federal utilities, public or private, proposed or indicated a desire to construct any transmission lines or substations that would have made any of the proposed Bonneville construction work unnecessary?

(The matter referred to follows:)

No. All proposed budget items are reviewed in advance with our customers. We do not request funds for any item they wish to build.

FEDERAL AND NON-FEDERAL CONSTRUCTION OF GENERATING FACILITIES

Dr. FENTON. It is my understanding that considerable non-Federal generating capacity has been or is being constructed in the Pacific Northwest, and I think the records should show what the area people are doing to supply their own power needs.

Will you furnish for the record the amounts of new generating capacity that has been constructed in the Pacific Northwest in each of the past 5 years and that is now under construction or actually scheduled for future construction, breaking this down between Federal and non-Federal construction?

(The matter referred to follows:)

COMPTROLLER GENERAL'S REPORT

Dr. FENTON. I have here a copy of a letter dated December 31, 1958, from the Comptroller of the United States to the Secretary of the Interior, relative to the results of the fiscal year 1958 audit on the Columbia River power system. I ask that it be included in the record at this point.

This report notes several deficiencies and inconsistencies in the accountancy practice on the Columbia River power system and concluded that

Accordingly we have concluded that we cannot report that these financial statements present fairly the financial position of the Columbia River power system and related activities at June 30, 1958, and the financial results of power operation for the fiscal year then ended.

I would like to ask the Bonneville representatives if they want to comment at this time on this criticism by the Comptroller General. (The Comptroller's letter and agency's comment follow :)

The Honorable the SECRETARY OF THE INTERIOR:

COMPTROLLER GENERAL OF THE UNITED STATES,

Washington, D.C., December 31, 1958.

DEAR MR. SECRETARY: The General Accounting Office has made audits of the activities of the Bonneville Power Administration and the Bureau of Reclamation, Department of the Interior, and the Corps of Engineers (Civil Functions), Department of the Army, pursuant to the Budget and Accounting Act, 1921 (31 U.S.C. 53), and the Accounting and Auditing Act of 1950 (31 U.S.C. 67). connection with these audits, we examined the accounts and records pertaining to the Columbia River power system and related activities for the fiscal year ended June 30, 1958, and the accompanying financial statements were prepared from those accounts and records, some of which are maintained specifically for this purpose. Insofar as the accompanying financial statements are concerned, our examination was made in accordance with generally accepted auditing standards and included such tests of the accounting records and such other auditing procedures as were considered necessary in the circumstances.

The Columbia River power system consists of the Bonneville Power Administration and the generating facilities for commercial power purposes of the multiple-purpose projects built and operated (or under construction) by the Bureau of Reclamation and the Corps of Engineers in the Pacific Northwest, for which the Administration acts as the transmitting and marketing agency. The transmission system of Bonneville Power Administration and the hydroelectric plants of these multiple-purpose projects are operated as an integrated power system. In addition to the generation of electric energy, other activities of these projects include the operation of irrigation, flood control, and navigation facilities. The accompanying financial statements present, in accordance with the accounts and records maintained for this purpose, the combined assets and liabilities at June 30, 1958, and the financial results of commercial power operations for the year ended on that date of Bonneville Power Administration and the multiple-purpose projects (including those under construction) for which it is the power marketing agent. These financial statements are deficient in the

following important respects.

1. Insofar as they relate to commercial power activities, the accompanying financial statements were prepared from accounts and records that have been maintained generally in accordance with the uniform system of accounts prescribed by the Federal Power Commission under the Federal Power Act. achieve conformance with the uniform system of accounts and to permit a more consistent financial presentation of assets, liabilities, and results of operations, special memorandum accounts have been maintained for the purpose of this report by the Bureau of Reclamation. The memorandum accounts differ from the official accounting policies and practices of the Bureau. Officials of your Department have informed us that they do not consider the accompanying

financial statements representative of the Bureau of Reclamaiton operating results under existing instructions and policies because they are not prepared from official records and reflect a number of specific differences from normal Bureau practices.

2. The accounting policies on which the accompanying financial statements are based are not consistent in several important respects, such as accounting for depreciation on plant in service, interest on the Federal investment, and costs incurred by other agencies. These matters are discussed in notes 2 and 3 of schedule 6.

3. Firm allocations of the construction costs of the Hungry Horse and Yakima projects (Bureau of Reclamation) and the Albeni Falls, Detroit-Big Cliff, McNary Dam, Lookout Point-Dexter, and The Dalles Dam projects (Corps of Engineers) have not been made to power and nonpower purposes. As explained in note 3 of schedule 6, tentative allocations of these costs have been used in preparing the accompanying financial statements. When firm allocations of costs are made, the accounts and financial statements relating to these projects may require adjustment.

These deficiencies have existed for several years without being satisfactorily corrected or resolved. Our audit reports have regularly included recommendations urging that these matters be resolved. The periodic addition of new generation and transmission facilities to the system will probably compound the problems resulting from the existing deficiencies in the financial statements. Accordingly, we have concluded that we cannot report that these financial statements present fairly the financial position of the Columbia River power system and related activities at June 30, 1958, and the financial results of power operations for the fiscal year then ended.

Sincerely yours,

(S) JOSEPH CAMPBELL.

AGENCY'S COMMENT

A review of the Comptroller General's letter of December 31, 1958, reveals that it concerns other agencies, including some outside the Department of the Interior, than Bonneville Power Administration. Accordingly we do not believe it appropriate to comment at this time.

TACOMA-COWLITZ

Dr. FENTON. Why should not Tacoma construct item 158? (The matter referred to follows:)

This short line ties two existing BPA circuits to create, in effect, an additional circuit between Covington and South Tacoma. The existing Covington-South Tacoma facilities are heavily overloaded and this new tie will relieve this overload on Federal facilities. Hence, this new tie is an integral part of the Federal grid system.

TACOMA SPARE TRANSFORMERS

Dr. FENTON. Item 871: Last year I questioned the justification for installing spare transformers for Kaiser Aluminum at Tacoma. What funds and effort were expended on the duplicate transformation for the Kaiser Aluminum load at Tacoma before you found out that your defense of this item now appears to be very questionable as the plant has now closed down? When did this happen?

Was this transformer contracted for?

(The matter referred to follows:)

The Administration was advised March 10, 1958, of the impending shutdown of the Tacoma aluminum plant, Further action on the Tacoma transformer addition (budget item 871) was deferred indefinitely. No funds, other than a very minor amount for preparing the budget justification and estimates, were expended.