PROPOSED ELECTRIC TRANSMISSION LINES

From the map attached, to which I have already referred, you will note that acific Power plans to construct additional electric transmission lines in central ad southern Wyoming. These plans were outlined formally in our letter of eptember 29, 1959 to the U.S. Department of the Interior, Bureau of Reclamaon, region 4, reading as follows:

"We are now planning for and working on a 230,000-volt circuit from the icinity of Pilot Butte through Riverton and Lander to a point near Atlantic ity, Fremont County, Wyo. It is our intention to extend this 230,000-volt line rom Atlantic City to the vicinity of Rock Springs before the middle of 1963. "Initially, it is expected that these lines will be operated at 115,000 volts but ill be so constructed and insulated that the voltage may be raised to 230,000 olts whenever necessary. Our intention is to build enough capacity into these nes to take care of all of the present and foreseeable requirements for electric ervice in this area.

"In order to thoroughly integrate the Pacific Co.'s system with those of the Bureau and neighboring utilities, we plan to construct at least one 230,000-volt circuit from Casper to Rawlins to Rock Springs and westward to interconnect with the systems of Utah Power & Light Co. and Idaho Power Co. It is our opinion that the construction of this line will be justified prior to the end of 1965.

"These new lines have been under consideration by the company since May 1954, and are a part of the Pacific Co.'s long-range program. They will tie together Pacific Co.'s present generation and other resources which are planned. They also take into consideration present resources of others and the future resources which we know about. It is our belief that this program will be helpful to all concerned."

The Southern Wyoming Utilities Co. at Rock Springs has proposed to construct a high-voltage transmission line, from Rock Springs south across the Wyoming border to Flaming Gorge, of sufficient capacity to transmit power which might be destined for delivery to Wyoming.

WYOMING ENTITLED TO SOME COLORADO RIVER POWER

Inasmuch as drainage water from the State of Wyoming contributes to the feasibility of the upper Colorado River storage project and byproduct electric energy, it is only right that the State should be allocated its fair share of any such power generated. It is the position of Pacific Power to assist, in any practical and economical ways, to insure the citizens of Wyoming a share of Colorado River power.

In the event immediate power requirements of Wyoming preference users are not sufficient to utilize the State's entire allocations of power, Pacific would be willing to accept delivery of any of the State's surplus allocations, when available, in order to insure that Wyoming citizens will retain the State's allocations until such times as the allocated quantities can be utilized by preference customers in the State.

WHEELING ARRANGEMENTS

Pacific Power is now wheeling Bureau power over its transmission system under contracts that are agreeable to both parties. Likewise, the Bureau is wheeling power for Pacific under the same terms.

This arrangement has proven satisfactory to all parties concerned, and we believe a similar arrangement would be equally satisfactory in bringing Colorado River power to Wyoming.

UNNECESSARY DUPLICATION OF TRANSMISSION LINES WASTEFUL

Congress specifically stated in the act authorizing the Upper Colorado River storage project that electric power generation was strictly a byproduct of this vast irrigation and reclamation project, but recognized the potential contributions possible from power sales. Nevertheless, major emphasis of the project should not be placed on generating electric power, which might easily happen. For instance, proposals have been made for the Federal Government to spend in the neighborhood of $155 to $165 million to deliver Colorado River power

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only to preference users, and, it is doubtful, even with such a huge ene that further demands will not be made for additional Federal expendin' transmission lines.

The five electric utility companies mentioned later are already plan consaven transmission lines costing $90 million which could partially e of üstbeting Colorado River power to preference users so that it w essary for the Federal Government to spend only approximately $£a for essencial transmission lines.

The $4) million expenditure by the investor-owned utility companies fry mission facilities is definitely programed, thus it would appear wastefu Federal Government to duplicate these facilities.

Furthermore, the $90 million investment being made by private utilitie resuit in substantial Federal and local tax revenues.

These taxes are paid as part of the normal service costs of investor-m axpaying electric utilities.

Pacific Power's proposed expenditures for new high-voltage transmission. n Wyoming, as I have outlined, represents an investment of $17 millie.

POWER REQUIREMENTS OF FIVE-STATE AREA IN 1980

Pacific Power has worked closely with the Bureau of Reclamation and four other electric utilities of the Rocky Mountain area adjoining the Colorado River storage project: Arizona Public Service Co., Public Service of Colorado, Public Service Co. of New Mexico, and Utah Power & Light (ə. planning to supply future power needs of the area throughout the next 20 ye and beyond.

Noncoincident peak loads of the five-State area (Arizona, Colorada, N Mexico, Utah, Wyoming) are estimated to increase from about 3,900,000 554 watts at present to 9,200,000 kilowatts in 1970, and to 20 million kilowatts 1980. Maximum generation of the upper Colorado River project is 11004 kilowatts, or only 12 percent in 1970 and 5% percent in 1980, of the fiveSa area's future power requirements.

Plans are already underway for expansions in electric power generation the above-named companies for supplying the major requirements of the 2vState area's electric power needs for the next two decades.

These are not detailed in my presentation. My only purpose in mentionin them is to point out that the total generation of all upper Colorado R project generation when completed, represents a small portion of the overs future requirements of the five-State area.

CONCLUSION

Since the problem of power allocation for Wyoming has not yet been ful resolved, we sincerely request your careful review and study of this matter insure that Wyoming citizens will receive a fair and equitable allotment power from the upper Colorado River storage project.

Also, we wish to emphasize again the importance of acting in the best interes of all of the Nation's taxpayers by avoiding wasteful expenditure for duplic tion of electric transmission facilities connected with the project.

You may be assured that Pacific Power will continue, as it has for the p 35 years in Wyoming, to work constructives with the Bureau of Reclamati in our electric power planning and operation, to the end that the best interests all electric customers in the State are properly served and the development our great State's natural resources insured.

STATEMENT BY D. W. REEVES

My name is D. W. Reeves. I am president of thhe Public Service Co., of Mexico with principal offices in Albuquerque, N. Mex. Our company provid electric utility service to principal communities in north-central New Mexic including Albuquerque, Belen, Santa Fe, andd Las Vegas, and to the De area in the southwestern part of New Mexico.

I appreciate the opportunity of appearing before you today and should to outline my views of the power situation in the Rocky Mountain region, W respect to the marketing of the byproduct or incidental hydroelectric energ to be generated by units of the upper Colorado River storage project.

Representatives of the investor-owned, taxpaying electric utilities in the area the Colorado River storage project have appeared at numerous times before nmittees of Congress with reference to this project. In every instance, they ve supported the project and its basic principle of reclamation and water servation as being vital to the economy of the area. They have expressed › conviction that incidental electric power to be generated by the project uld be marketed at a rate that would make a maximum contribution of wer revenues to the irrigation, or participating projects and thus insure the liest possible completion of the participating projects. For the same reason, › utiilties have expressed the belief that Government expenditures for transssion facilities should be kept to a minimum. This would reduced the reired payout of transmission facilities by power revenues and make power venues available at an earlier date and in large amounts for the participating igation projects.

My company has participated with others in studies to determine the power quirements of the entire area for the next 20 years. These studies have inlved estimates of the load in the area in 1970 and 1980 and the generating and ansmission facilities which the private utilities will require to supply the cusmers they serve. The studies were expanded to cover the use of these facilities r the purpose of wheeling power to be generated by the Colorado River storage oject. Results of these studies have been made available to the Bureau of eclamation and to other interested bodies. We have had conferences with the ureau of Reclamation in which both parties were looking for solutions to this oblem and attempting to determine the best manner of distribution in order at maximum funds from power revenue will be available to the participating ojects at the earliest possible date.

Certain groups have circulated propaganda which centers around the idea that e power from the Colorado River storage project should be made available ridiculously low rates under conditions which would result in subsidy to cerin small, favored power users at the expense of the participating irrigation ojects. For this reason, I would like to establish some of the basic principles hich should be taken into account in determining the market areas and prices -r the electric power.

The intent of Congress is stated in the act. The first sentence in the act which uthorized the Colorado River storage project is as follows:

“That, in order to initiate the comprehensive development of the water reurces of the Upper Colorado River Basin, for the purposes, among others, of gulating the flow of the Colorado River, storing water for beneficial consumpve use, making it possible for the States of the upper basin to utilize, consistatly with the provisions of the Colorado River compact, the apportionments ade to and among them in the Colorado River compact and the Upper Colodo River Basin compact, respectively, providing for the reclamation of arid nd semiarid land, for the control of floods, and for the generation of hydroectric power, as an incident of the foregoing purposes * [Italic ours.]

It is evident from the foregoing that the act established the fact that power -oduction is incidental to reclamation and the development and conservation of e water resources. This fact seems to have been overlooked by many who pear to believe that electric power generation is the end and principal product the project. They seem to forget that the act plainly states that the electric wer is to be used to provide revenues for the participating irrigation projects. hese participating projects as named in the act are clearly irrigation projects. One of our Senators from New Mexico, the Honorable Clinton P. Anderson, as recognized the business facts of this phase of the project and has stated it ell in his statement on the floor of the Senate on January 27, 1960, when he aid:

"Overall, the cost of power should cover returns adequate to amortize the ederal investment. When the costs are calculated, the net revenues over and bove operating and maintenance costs will provide funds as aid to irrigation the development of the participating projects in the upper Colorado area." With these facts in mind, it becomes crystal clear that it was the intent of the ongress that the incidental power should be sold in such a manner as to avoid ibsidy to any electric system, whether investor or publicly owned. This means at the rates should be such that the revenue from power sales will provide aximum repayment assistance to retire the costs of the participating projects. follows that the investment in transmission facilities should be maintained at me lowest possible level to market the power efficiently and that privately owned

existing and planned facilities, which can be used with no additiona cost to the taxpayers, should be used to the fullest possible extent to acce this purpose. If this policy is followed, then the revenues from electr will, as you and your colleagues intended, make the greatest possible tion to the participating projects and assure their completion at the possible time. On the other hand, if power is sold to any favored p rates too low to produce repayment assistance to the reclamation proje intent of Congress as expressed in the act will have been negated.

It might be well to evaluate the relative importance of the electric» which will be generated by the project. The fact that the authorized contemplates the installation of some 1,100,000 kilowatts of generating de tends to inflate the importance of this power in relation to the total pr quirements of the area. Our utility studies have shown that a total du 000 kilowatts will be required in 1970 and nearly 20 million kilowatts F required in 1980 to adequately serve the area. In other words, the total ["v power represents only about 12 percent of the generating capacity which be required in 1970 and only 52 percent of that which will be required by A group of preference customers formed a corporation known as Cart River Basin Consumers Power, Inc., and retained the Kuljian Corp. to pr a report which has now been completed and circulated. This report reo mends Government construction of lines estimated to cost between $155 and $165 million to deliver power only to preference customers. On the ot hand, the report prepared by the five Rocky Mountain utilities, i.e., Utah Pr & Light Co., Colorado Public Service Co., Arizona Public Service Co., the W ming Division of the Pacific Power & Light Co. and the Public Service Co. New Mexico contemplates construction of transmission lines by the Fede Government totaling approximately $41 million. These lines, in general, are "backbone" lines between principal project features and appear to be requir by the Bureau in order to meet the longstanding policy of the Department whi has been to construct the backbone lines while using the lines of others marketing. The remainder of the lines necessary to distribute the power be built by the utilities in any case and can be used to wheel power for t preference users. The investment by the private utilities to construct the lines would amount to an estimated $90 million.

The investor-owned utilities have pointed out that they will build essential the same facilities to serve their customers regardless of the lines that we be built by the Government to distribute and market Colorado River So project power to the preference customers. The utilities have offered to these facilities available for wheeling power to preference users. It is evide that the cost to the Government for wheeling under such arrangements we be less than with a duplicating Government-owned system. Facilities Th Public Service Co. of New Mexico will make available for wheeling proje power have already been described in a letter dated April 4, 1960, and a fr price established in an offer to the Secretary of Interior. A copy of this offer submitted for the record.

It should be noted that the offer of the utilities provides for firming of entire transmission system. The lines described in the Kuljian Corp. reper are an economic waste in that they duplicate many of the lines that will built by the utilities. The lines described in the Kuljian report also do provide for firming, and that very necessary feature may become the basis f further requests for funds in the future to provide firm service.

There is another concern which is beginning to assure increasing importan to a number of us in the West. For many years, our friends in the East South have been sympathetic to reclamation projects. We, as westerners preciate this understanding and the assistance the East and South have given in making possible many of the projects essential to the development of West. I do not believe we can expect our friends in the East and South to tinue to support the reclamation projects which are vital to our area if we a for funds for unnecessary projects. Using the Kuljian Corp.'s estimate on project, the taxpayers of the Nation would be asked to spend an additio $120 million unnecessarily.

All of us recognize the necessity for a strong, sound government and aware that such a government costs money and must be paid for by the ta payers. We believe that the following taxes would accrue to government. agencies as a result of the expenditures by private companies:

(a) To State and local taxing agencies each year, ad valorem taxes, based on prevailing rates in the area on a $90 million investment, of $1,670,000 to $1,800,000.

(b) Directly to the Federal Government (see following), Federal income tax, based on a fair return of 6 percent on the $90 million investment with 50 percent of the investment obtained through issuance of 4-percent bonds, of $3,900,000.

In giving consideration to the above figure for Federal income taxes on the 0-million investment proposed by the private companies, two things should considered: First, as the facilities are depreciated over the life, estimated to some 40 years, the base upon which the fair return is calculated will be creased and thus decrease the annual income taxes. Second, a part of the itial annual tax bill may be deferred to later years by use of accelerated preciation. However, over a 40-year period, allowing for both considerations d assuming that the utilities are actually able to maintain a fair return of 6 ercent on the investment, $78 million in direct taxes will accrue to the Federal overnment. This $78 million in added revenues to the Federal Government sulting from the private utilities' investment would, if appropriated by the ongress, certainly pay for a lot of irrigation.

c) Taxes accruing indirectly to the Federal Government annually as

a result of private investments:

Federal income tax from individuals receiving income from common stock based on 6 percent on the $90 million investment, ($5,400,000, less $1,800,000 for interest, $3,600,000) and assuming 70 percent of this earning paid as dividends, to individuals in 26-percent tax bracket__.

Federal income tax from recipients of interest on borrowed money assumed to be in 26-percent tax bracket

$650,000

470, 000

1, 120, 000

Total indirect taxes to Federal Government_____. Even though, in paragraph 9 of page 3 of the Kuljian Corp. report, taxes are eferred to as "academic," to me they are very real and represent a major conribution to the maintenance of our governmental facilities. There is no eason that a select few should be exempt from paying their proportionate mare of the taxes attached to any service.

I would like to make this further comment: In New Mexico, and I presume other places, the rates charged by the investor-owned, taxpaying utilities, otwithstanding the tax burden, are lower than those charged by "preference" ystems paying only token taxes or no taxes at all, and, as you know, some of he preference customers are enjoying 2 percent interest on money borrowed from he Government. I would also like to point out to the committee that this power s being developed in an area that has never suffered from power shortages egardless of some of the claims and innuendoes based upon minor, temporary, Solated circumstances.

I should like to make it clear for the record that I do not subscribe to the heory of preference. The preference users already have more than enough dvantages and should not be given further advantages at the expense of the articipating projects. The power should be sold on a business basis, at the ighest prices it will bring, through bids or otherwise, in order to provide these epayments. This would not conflict with the existing preference clause. This clause applies to the allocation of power; not to the price. Further, the upport of our Government is an obligation of every citizen. I can see no reason why certain of our citizens served by electric systems classified as reference customers should receive any exemption from supporting government through taxes, nor should the preference classification be used to justify construction of unnecessary and duplicating transmission lines for their sole enefit. The great majority of our citizens, who reside in areas served by an nvestor-owned taxpaying electric utility, such as ours, pay taxes for the support of our Government in their electric bills. Last year, taxes accounted for 28 cents of every dollar paid us by our customers.

To summarize, the act clearly indicates that it was the intent of Congress that ncidental electric power should be sold at rates sufficient to secure the maximum amount of funds for completion of the participating irrigation projects. I believe that the officials of the Bureau of Reclamation want to do the best Dossible job in marketing Colorado River storage project power for the benefit