PROTECTION AND DEVELOPMENT OF LOWER COLORADO

RIVER BASIN

COMMITTEE ON IRRIGATION AND RECLAMATION,

HOUSE OF REPRESENTATIVES, Washington, D. C., March 12, 1924.

The committee met at 10 o'clock a. m., Hon. Addison T. Smith (chairman) presiding.

The CHAIRMAN. When we adjourned our last meeting Colonel Fly had not finished; and I have advised him that we have here this morning Mr. Ballard, from California, who has been requested to address the committee and wishes to return to-morrow.

Mr. FLY. Mr. Chairman and gentlemen of the committee, in view of the fact that Mr. Ballard has come such a long distance at your special request, I ask that you let me defer the continuation of my statement until some time later.

The CHAIRMAN. That is very generous of you, Colonel Fly.

Mr. SWING. Or if it turns out to be advantageous, may I suggest that it be in the alternative-that is, that he can submit an additional statement in writing?

Mr. FLY. That will be perfectly agreeable.

Mr. RAKER. I do not know about that, Mr. Swing.

The CHAIRMAN. We can take that question up later, Judge Raker. Mr. RAKER. We agreed to that the other day, in another committee, and it caused a lot of trouble.

TESTIMONY OF MR. R. H. BALLARD, VICE PRESIDENT AND GENERAL MANAGER OF THE SOUTHERN CALIFORNIA EDISON CO., LOS ANGELES, CALIF.

(The witness was duly sworn by the chairman.)

The CHAIRMAN. Will you give your name and residence and state whom you represent?

Mr. BALLARD. My name is R. H. Ballard. I am the vice president and general manager of the Southern California Edison Co. Its principal office is in Los Angeles, Calif. The Southern California Edison Co. is one of the five largest electric light and power companies in America, and we operate over a very large territory in. southern and central California.

Mr. HAYDEN. Are you an engineer, Mr. Ballard?

Mr. BALLARD. No, sir; I am not an engineer. I am a graduateoffice boy; I have been in this business for the past 34 years and in no other. In fact, my entire knowledge of life consists, I think, of what I know about the electric light and power business.

If there are any involved engineering questions, Doctor Hoxie is here. He is a consulting engineer for our company. I had rather expected that he would have testified to some facts before now, as I heard that the committee, or some members of the committee, had asked him to stay here for that purpose. If he is wanted, I suggest that he be put on immediately following my testimony, as we have need for him in California, and I want to take him home with me. Matters in Los Angeles and in southern California are of such moment just now that, if it is the pleasure of the committee and the committee can finish with me, I would like very much to leave here not later than to-morrow afternoon in order to get back there as quickly as possible. Operating conditions there are not normal. The rainfall has been low, and we are experiencing one of our trying years.

I have come down here on invitation of the committee to answer such questions as you may wish to ask me and also to state the position of the Southern California Edison Co. with respect to the Colorado River development; and if it meets with your pleasure I think that we would save time and perhaps make a number of questions unnecessary if I would proceed and make a brief statement and submit some data respecting the position of the company.

Just formally, I understand that my name has been mentioned several times in the proceedings; and I wish at the outset to make a formal denial on behalf of the company that the Southern California Edison Co. is in any way opposed to an appropriation by the United States for either a flood-control dam or a dam at which power may be developed on the Colorado River.

A number of gentlemen have said, I think, that I have made certain statements. Most of those statements-in fact, all of them, I think-have been misquotations. I have been accused of saying things that I did not say and unwarranted and unjustified conclusions have been derived from some of the things I did say.

Mr. RAKER. Mr. Ballard, with regard to that question would you just pick out those that you have stated and give your version of them as you go along?

Mr. BALLARD. Yes. I do not know, Judge Raker, that I can remember them all. I think Mr. Mulholland said he had heard me say that the Southern California Edison Co. proposed to take the entire Colorado River, in spite of the Government or anybody else, or some such statement as that.

Mr. Mulholland has never heard me say any such thing. I think there have been other statements along that line.

I believe I can best give you the position of the company as it is now and as it has been since the question of the Government's building a dam on the Colorado River was first brought up in this way:

As far back as September 15, 1921, an official statement was issued by the Southern California Edison Co. over the signature of its president, Mr. John B. Miller, and given to all the papers in Los Angeles. I have with me a copy of that statement from the Los Angeles Times of September 16, 1921, and while it probably will not be necessary to read all of the statement I will read to you two or three paragraphs and then file it with. you, if you wish.

In that statement Mr. Miller said, among other things:

Recent communications from Director Davis, of the United States Reclamation Service, to the Imperial irrigation district which have been made public indicate that Secretary of the Interior Fall sees some hope of an appropriation by Congress for the construction of the huge flood control and irrigation dam on the Colorado River by the United States Government.

If it is possible for the Secretary of the Interior to secure from Congress an appropriation sufficient to erect a dam on the Colorado River which will equate the stream; reduce the menace from flood; and establish the necessary water supply for irrigation, I believe it would facilitate the whole development.

If the construction of the whole flood control and irrigation dam be undertaken by the United States Government, it would correlate the interests of the several States directly interested, make, perhaps easier of solution any international problems that may arise, and greatly benefit the lands, by reason of the flood control and the increase in the minimum flow of water for the irrigation of several million additional acres of land. Development along those lines would be so productive as to tremendously increase the public wealth of the entire southwest; and it would seem that this is an expenditure which might very proprely be initially made by the Federal Government. The applications of our company now filed with the Federal power commission include the dam construction, as well as power development; and we are prepared to proceed along those lines. But if it is possible that the dam construction would be done by the Federal Government, then it would be a simple matter for us to make such changes in our applications as to confine them to power developments only, which is our regular business.

Looking ahead, and wishing to be fore-handed in the protection of its consumers, and at the instance of various interests tributary to the Colorado River the company has taken initial steps pointing to the development of that river, and is willing and able to undertake its whole development. It is not actuated by any selfish motive as under the regularation of its rates, it is not allowed to make a profit, in the ordinary sense of the term, but is limited to a return upon its investment which will only cover its reasonable expenses of operation and the going cost of money. The company's sole desire is to do its full duty as a public utility in the service of the people.

I make this brief statement because, in some directions, for selfish and political reasons, a persistent effort has been and is being made to misrepresent and misinform the public as to the position of this corporation with respect to the Colorado River.

That was a statement, gentleman, made by the president of our company on September 16, 1921; and our position to-day is the

same.

We know that the Imperial Valley, the Coachella Valley, the Palo Verde Valley, and the Yuma Valley are all entitled to protection from the menace from the erratic flow of the Colorado River. We know that it is advisable and necessary that all of the natural reSources of the river be developed. It is simply a question of method. I have now for your consideration a statement addressed to you, Mr. Smith, as chairman, and to you, gentlemen of this committee, and signed by the president of our company; and it is not very long; and with your permission, I would like to read this also. It gives the position of the company in a little greater detail at the present time. and will indicate to you something of what the southern California Edison Co. is, and what its scope of operations consist of.

It is as follows [reading]:

FEBRUARY 18, 1924.

To the Hon. ADDISON T. SMITH, Chairman, and to the Members of the Committee on Irrigation and Reclamation, House of Representatives of the United States:

Your honorable body has had referred to it H. R. 2903, a bill introduced by Mr. Swing, entitled "A bill to provide for the protection and development of the lower Colorado River Basin." This measure authorizes and empowers

the Secretary of the Interior to construct a dam and reservoir on the Colorado River at or near Boulder Canyon, and makes appropriation from the United States Treasury of amounts necessary for such purpose, not exceeding $70,000000. It is assumed that your investigation of this meaure will cover not only the question of the desirability and necessity of the proposed works, but als the question of whether agencies other than the United States Government itself are available for the accomplishment of the result desired, and if so, how such agencies can best be utilized with a view to the public interest. As bearing upon this possible phase of your consideration of the measure, Southern California Edison Co., of Los Angeles, Calif., presents the following statement: This company, if given authority by the States whose water' rights are affected, and if granted a license therefor under the Federal water power act. is prepared to undertake and itself finance dam construction on the Colorado River which will not only serve the purpose of hydroelectric power production. but will also provide the same full measure of flood control and supply of water for irrigation of arid lands as is contemplated under the pending bill. Its applications for license to carry on power development on the Colorado River are already on file with the Federal Power Commission, and can be referred to for particulars.

Southern California Edison Co. is a California corporation, engaged exclusively in the business of generating, transmitting, and distributing electricity as a public utility. It operates in 10 counties in central and southern California, as follows: Fresno, Tulare, Kings, and Kern, in central California, and Santa Barbara, Ventura, Los Angeles, San Bernadino, Riverside, and Orange, in southern California. While it has retired from retail business in the city of Los Angeles, it furnishes at wholesale a large part of the electricity used by that city, now having an estimated population of 1,000,000 people. At the close of the year 1923, it had 247,953 consumers. During the year 1923, it generated 1,548,896,120 kilowatt-hours of electricity and supplied a maximum peak demand of 418,900 horsepower. It now has an installed capacity of 503,000 horsepower, of which 376,200 is hydroelectric and 126,800 steam. The connected load served from this sustem as of December 31, 1923, was 899,950 horsepower. The following tabulation shows the rate of growth of the company's load during the past six years, beginning in 1919:

There is appended hereto profit and loss account of the company for the year ending December 31, 1923, and a balance sheet as of that date, certified to by Price, Waterhouse & Co., certified public accountants. The balance sheet shows that the issued and subscribed capital stock of the company amounts to $61,624.672 par value, and its funded debt to $101,786,700, and its total assets amount to $189,040,711.72.

The principal hydroelectric development of the company is located in the Sierra Nevada Mountains on the San Joaquin River, and one of its principal tributaries. Big Creek, a distance of some 240 miles north of Los Angeles. This development is called the Big Creek project. The total construction costs for this project down to the close of 1923, including transmission to load centers and terminal substations, have been $63,038,000, and the approved budget of the company covering the years 1924 to 1927, inclusive. calls for an additional $44.536.000. These figures do not include distribution. The company expended in 1922 for new capital construction, including distribution, approximately $24.000.000. For 1923 the amount was approximately $30,000,000. The approved budget for 1924 for all capital construction is $26,288,000.

Included in the construction work at Big Creek during the last two years is the installation of the Big Creek No. 3 plant, situated on the main San Joaquin River, and having an installed capacity of 105,000 horsepower, the total cost of

the plant being approximately $15,212,000. The conspicuous feature of this installation was the construction of a dam across the main San Joaquin River, 138 feet in height from bedrock, and having a length at the crest of 715 feet. The problems encountered and overcome in the course of this work are believed by engineers to be similar to those which will be met on the Colorado River. Since the completion of the No. 3 plant, the principal item of construction now going forward on the Big Creek project is the Florence Lake Tunnel, which is approximately 15 feet square in cross-section and extends for a distance of 13 miles through the solid granite under Kaiser Pass, bringing the waters of the South Fork of the San Joaquin River into Huntington Lake. This work involves a total expenditure of approximately $16,333,000.

These figures are given with a view of showing the size of the operations now being conducted by this company. They certainly approach, if they do not equal, in magnitude the operations which will be necessary for the development of power on the Colorado River. The construction program during the past several years has been carried on by the company's own forces, which are now thoroughly trained and experienced in such work. They will be available for a similar undertaking on the Colorado River.

Southern California Edison Co. is distinctly a community enterprise. Its stock is held by 67,000 individual stockholders, of whom 59,000 reside within the territory covered by the company's operations. Out of a total subscribed stock of $61,824,672, the largest single holding is $1,759,900, and the number of stockholders having more than 1,000 shares is but 55. Its officers are all residents of the district it serves, and its directors, with two exceptions, reside in Los Angeles County. Ninety per cent of its permanent employees are stockholders. Its rates and methods of service are strictly regulated by the railroad commission of California, and its securities are all issued under the authority of that commission. Under the principle of regulation established by the railroad commission, it is allowed a far return upon the amount it has invested in property used and useful in the public service. Such return enables it to pay operating expenses and taxes, set aside a proper reserve for depreciation, pay interest on its funded debt, and maintain moderate dividends on its stock, with a very small surplus left over for contingencies.

Owing to the diversified character of its load, and the large extent of territory covered, it is believed that the company can produce and distribute power from the Colorado River at a cost to consumers considerably less than in the case of any other possible agency. In making this statement, due consideration is given to the fact that under present laws a strictly governmental agency would he exempt from taxation on property devoted to the service, and would be able to finance through the issuance of the tax-exempt securities. Whatever advantage to the consumer arises from this source, however, is more than offset, we believe, by the saving which will be effected through the great diversity and high load factor of the company's operations, as compared with those which a new agency of governmental origin would have. An element of diversity worthy of specific mention is that which will result from the interconnection of hydroelectric plants on the Colorado River with the present plants of the company on the San Joaquin and Kern Rivers in California. The two sources of water supply are so widely separated geographically that a shortage in both regions in the same year is extremely unlikely. In a season such as the present one, which is apparently one of low water supply in California, there is an abundant supply in the Colorado River. This diversity, of course, makes for a constant supply of power to the territory served from the interconnected plants.

This company is willing to undertake the task of development on the Colorado River under the terms of the Federal water power act, which provided for a limited tenure of 50 years, with right of the Government at the end of the period to take over the property under license at a net investment figure, and which strictly prohibits capitalizing for rate purposes any intangible rights growing out of the ownership of water rights or the possession of the license, and which further subjects the company as licensee to strict regulation as a public utility in the matter of rates, service, issuance of securities, and the like. Furthermore, this company is willing, under direction of the Federal Power Commission or other proper governmental authority, to so construct its power dam or dams and operate its reservoirs as to coordinate its activities with the plan which may be adopted by the Government for flood control and irrigation.

The company's plans for financing Colorado River development are along the same lines as those which it has successfully followed in California. The