STATEMENT OF NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION Mr. Chairman and gentlemen of the subcommittee, my name is Charles A. Robinson, Jr. I am the staff engineer and staff counsel of the National Rural Electric Cooperative Association (NRECA). NRECA is the national service organization of REA-financed, nonprofit electric systems which serve 5 million meters in the agricultural areas of 46 States. Of the 1,000 operating systems financed by REA, approximately 94 percent hold voluntary membership in NRECA.

ASTRONOMICAL WHOLESALE POWER COSTS

During the year ended, June 30, 1964, REA-financed electric systems throughout the United States purchased 38.7 billion kilowatt-hours of wholesale energy, the average cost of which was 6.6 mills per kilowatt-hour. For the 15.2 billion kilowatt-hours of wholesale energy which they purchased nationally from investor-owned power companies, the average rate was 7.6 mills per kilowatt-hour. By contrast, the electric cooperatives in Maine, which purchase at wholesale all of the energy which they distribute, paid from 10.7 to 34 mills per kilowatthour for the 20 million kilowatt-hours which they distributed during the fiscal year 1964. Their average wholesale cost was 13.9 mills per kilowatt-hour; more than twice the national average for all power purchased nationally by rural electric systems and 83 percent higher than the average cost of all wholesale energy purchased nationally by rural electrics from private power companies.

The single cooperative in New Hampshire paid, during the same period, an average wholesale power cost of 13.3 mills per kilowatt-hour; again more than twice the national average cost of all purchased power, and 75 percent above the national average cost of wholesale energy purchased by rural electric from private power companies.

Rural electric systems in Vermont, by comparison with those in other New England States, enjoy lower wholesale power costs. Their average wholesale rate is 9.4 mills per kilowatt-hour which, though low for New England, is still 42 percent above the national average. The comparatively lower wholesale rate in Vermont is directly traceable to the availability in Vermont of a 150,000 kilowatt block of wholesale hydroelectric power developed by the Power Authority of the State of New York at its St. Lawrence-Niagara project. This power is marketed to consumer-owned electric systems in Vermont by the public service board of that State at an average rate of 8.4 mills. The board, however, cannot supply the total requirements of the Vermont cooperatives, with the limited availability of power imported from New York and, as loads continue to grow, the amount of such power delivered by the board constitutes a constantly decreasing percentage of their total requirements. The remainder of cooperative requirements is purchased from the private utilities of Vermont at from 12.4 to 32 mills per kilowatthour; averaging 14.4 mills per kilowatt-hour.

The very high cost of wholesale energy in Maine and New Hampshire tends to seriously restrict the growth of the rural electric cooperatives, to hold their operations to marginal levels and to discourage the economic development of the territory which they serve. As time progresses and St. Lawrence-Niagara power becomes less of a factor in Vermont, the same situation will obtain unless in that State additional sources of cheap wholesale energy are developed.

VERY HIGH RETAIL POWER RATES

It is not only the wholesale rates to cooperatives which are high in New England. All of the region's power bills are high. The motto of New England's electric utility systems might well be "home of highest electric rates in the United States."

FPC reports that the average monthly bill for 250 kilowatt-hours of electricity throughout the United States, as of January 1, 1964, was $7.43. In Maine, 250 Kilowatt-hours cost $8.91, or 20 percent above national average. In New Hampshire, the bill was $8.82, 19 percent above average; in Connecticut, $8.24 or 11 percent above average; in Rhode Island, $8.73 or 17 percent above average. Only in Vermont, which enjoys the effect of relatively low-cost, St. Lawrence-Niagara power, does the average bill of $7.63 for 250 kilowatt-hours come close to the 1ational average.

52 529-65-pt. 2--13

INDUSTRIAL ELECTRICITY RATES ALSO VERY HIGH

A comprehensive study performed by Electric Consumer Information Committee of Washington, D.C., in July of 1963 showed that in 1961 eight of New England's major industries purchased 7.9 billion kilowatt-hours of electricity for which they paid $110.9 million. The ECIC study compared this cost with the cost at which the same amount of electricity could have been purchased for at the national average rate. The study concluded that the savings would have been $26.7 million for that 1 year alone; equivalent to 24 percent of the actual power bills paid.

The industries studied included paper and allied products, textile mill prod ucts, primary metals, machinery except electrical, rubber and plastics, food and kindred products, fabricated metal products, and miscellaneous including ordi

nance.

ELECTRIC COOPERATIVES ESPECIALLY HARD HIT

There is also substantial evidence in support of the assertion that privately owned electric companies in New England are using their dominant position in the industry and the total dependence of electric cooperatives on them for whole sale power supply as the means by which to deprive the cooperatives of the ability to serve large loads.

The Bangor Hydro Electric Co., for instance, which charges electric cooperatives between 15.9 and 20.1 mills for wholesale energy, simultaneously offers wholewholesale service to relatively small industrial consumers at rates as low as 17 mills. Similarly, the Public Service Co. of New Hampshire, which charges the New Hampshire Electric Cooperative 13.3 mills, offers wholesale service at as low as 15 mills to relatively small industrial loads.

Obviously, the cooperative cannot compete for rural industrial loads against this discriminatory type of rate structure. And, even where actual competition is precluded by territorial separation, a potential industrial consumer is strongly influenced to locate in the company's service area and to avoid the cooperative

area.

WHAT ARE THE CAUSES?

In an October 19, 1962, address to the Electrical Council of New England, FPC Chairman Joseph C. Swidler highlighted some of the reasons for high power rates in New England.

Among his other statements, Swidler said:

**** New England is still an undeveloped power market * * the pace of growth in this region has not matched the national average despite the fact that per capita income in New England is 11 percent above the national average These figures raise sharply the question whether consumers in New England are achieving the full benefits of electrical living.

"The low level of use in New England is accompanied by a relatively high level of rates * * *. The low level use *** not only reflects the existing higher costs, but helps to keep the unit cost at a high level.

"Not since 1953 has a generating unit installed in New England been included among the first 20 in the country in efficiency ***. In 1961 * New England was 4 years behind. Its average heat rate in 1961 * was reached in the United States as a whole by 1957 ***. If New England had merely kept up with the national average in the efficiency with which it uses the fuel it imports, it could have reduced its fuel bill by more than $7.5 million a year in each of the last 5 years.

"In brief, New England * * *still relies on too many small and inefficient generating units and on too few of the large, low-cost units *** an area which relies on units of this size (50 megawatts) for baseload is not getting the benefit of modern power technology."

In his book, "High Cost of Electricity in New England," Willard D. Shipman wrote "*** The organizational pattern of New England's electric utilities can only be described as 'quaint'."

The failure of New England to develop its water resources according to any comprehensive multiple-purpose plan was well stated by the late Leland Olds— son of a New England college professor, born and educated in New England. Chairman of the Federal Power Commission, and one of the world's recognized authorities on multiple-purpose water resource development and public utility regulation.

Testifying before the Select Committee on Water Resources of the U.S. Senate in 1959, Mr. Olds stated:

"Tragically for the New England States and for the entire northeastern part of our country, that principle (Federal multiple-purpose river basin development) is not being applied to the region's rivers. The opposition of a certain kind of State isolationism or antifederalism, played on by power, rail, and coal interests has blocked the true multiple-purpose planning and development of the region's river basins."

"As a result, flood control has been delayed; regulation of streamflow has not made the rivers the cleansing recreational assets they could become; and their hydroelectric power potential has not been fully developed."

The Federal Power Commission, in its national power survey, reports that "Electric power systems in the lower New England area-Massachusetts, Rhode Island, and Connecticut-can profit greatly from the further coordination of their enterprises * * *. Systems in New Hampshire and Vermont are now rather poorly interconnected ***. Systems in Maine operate in virtual isolation * *.""

Stated simply, these authorities are saying that the power companies of New England have not built modern generating stations, have not developed a modern regional transmission system, and have expended little effort in bringing to the territorities which they serve the benefits of up-to-date low-cost electric service. The result is high cost, low consumption, wide public dissatisfaction, an exodus of industrial payrolls, and a depletion of the industrial tax base.

Never was there greater need for and justification to support the construction of a Federal "yardstick" hydroelectric project.

DICKEY-LINCOLN SCHOOL-THE FEDERAL YARDSTICK PROJECT

The proposed Federal development on the St. John River in Maine contemplates installed capacity of 760,000 kilowatts at Dickey Reservoir with an additional 34,000 kilowatts available at the Lincoln School reregulation impoundment downstream. The natural flow at the Dickey site, controlled by 8 million acrefeet of reservoir storage, will assure annual generation of just over 1 billion kilowatt-hours by the combined project.

Power and energy from the project could be marketed via a twin circuit 345kilovolt transmission line system with terminals at Bangor, and Portland, Maine, and Boston, Mass.

Total Federal investment in the Dickey-Lincoln School project is estimated at $227 million. The above-mentioned associated transmission system would cost an additional $73 million; bringing the total investment in all Federal facilities to $300 million including interest during construction.

Annual benefits attributable to the combined project total $21.5 million per year of which 98 percent represents the hydroelectric potential. The benefits assigned to the hydroelectric features of Dickey-Lincoln School have been corrected downward to reflect FPC estimates of the cost of equivalent power and energy to be produced at a new 500.000-kilowatt steam station and a new 125,000kilowatt steam station scheduled for installation in Massachusetts and Maine, respectively. Annual charges for the combined project, including transmission, using a 100-year economic life and interest at 34 percent, total $11.9 million. The benefit-to-cost ratio thus calculated is 1.8.

Assuming, for purposes of calculation, that 100 percent of all project costs ($300 million), including interest during construction and transmission, must be repaid within 50 years; and assuming 31⁄2 percent interest on investment plus all operation, maintenance, and replacement costs, approximately $14.6 million per year to liquidate the entire project-100 percent of everything-will be required.

The Department of the Interior states that power and energy from the project will be delivered to wholesale customer load centers at a rate schedule of $15 per kilowatt-year for capacity plus 3 mills per kilowatt-hour for energy. At that rate, the United States would realize $14.9 million per year: more than sufficient to meet all anticipated 50-year payout requirements.

The 125,000 kilowatts of load factor energy to be developed by the DickeyLincoln School project would go far toward meeting the loads of the smaller statutory preference customers in New England. The larger preference customers which operate generation of their own and the investor-owned companies would derive major savings from the availability of project peaking capacity.

POWER LOST SAVINGS OF $6.25 MILLION PER YEAR

FPC estimates that the newest steam electric stations scheduled for installation in New England will produce electricity at costs which average $23.50 per kilowatt-year for capacity plus 2.6 mills per kilowatt-hour for energy. Federal power from the St. John development would be marketed at $15 per kilowatt plus 3 mills per kilowatt-hour.

Thus, compared to the most modern steam stations presently in sight for New England, the Dickey-Lincoln School project would directly save the people of New England $6.25 million per year. Compared with existing steam stations in New England which exhibit busbar capacity costs as high as $29 per kilowattyear and energy costs from 4 to 7 mills per kilowatt-hour, the savings to DickeyLincoln School would be even greater.

The "yardstick" effect of the project is difficult to estimate in terms of dollars but in every case where Federal hydoelectric power and energy have been developed and marketed, the entire rate structure of the affected region has been substantially lowered.

The rural electric cooperatives in Maine purchase approximately 20 million kilowatt-hours per year at an average cost of 13.8 mills per kilowatt-hour. Federal power from the proposed St. John River development could be delivered to them at 7 mills per kilowatt-hour. They would save $138,000 per year-49 percent on present cost. In New Hampshire the cooperatives purchase some 75 million kilowatt-hours at an average rate of 13.3 mills. Even at a delivered cost of 8 mills, Federal power would have them $398,000 per year 40 percent on present costs.

The Dickey-Lincoln School development would be the first source in history of a very large block of low-cost power for the New England States; an area of the United States which needs it worse than any other.

POWER COMPANY SUBSTITUTE IS MISLEADING, COSTLY

The Electric Coordinating Council of New England (ECCNE), which numbers the principal investor-owned electric utilities in that region among its membership, has devised a proposal which purports to be superior to and to render the Dickey-Lincoln School development unnecessary. The proposed plan, which, peculiarly enough, was released little more than a week ago, envisions a combined pumped storage peaking plant and a nuclear baseload unit in western Massachusetts as an alternative to the all hydro Dickey-Lincoln School develop ment in Maine. The companies' alternative pumped storage and nuclear combination is designed to parallel Dickey-Lincoln School, but it fails to do this in a number of important respects.

Dickey Dam would develop 760,000 kilowatts at site. Lincoln School Dam, the downstream reregulating impoundment, would develop 34,000 kilowatts additional. The combined project would thus consist of 794,000 kilowatts installed capacity. Of this amount, it is estimated that 635,000 kilowatts of capacity would be used for peaking purposes with an annual output of 330 million kilowatt-hours; the remaining 159,000 kilowatts being used to produce an annual 695 million kil » watt-hours of energy at 50-percent load factor. Net annual generation would therefore be 1,025 million kilowatt-hours.

The ECCNE proposal embodies a pumped storage peaking project with 612,000 kilowatts installed producing an annual 322 million kilowatt-hours. The 159,000 kilowatts of 50 percent load factor power which Dickey-Lincoln School would produce would be supplied by a portion of a much larger nuclear generating plant. Both of the ECCNE proposed plants would be in western Massachusetts. They would develop approximately the same capacity and annual energy as Dickey-Lincoln School. Unfortunately, the similarity between the two plans ends there. The purported economics of the ECCNE proposal is not supported by present experience in the electric industry, and, therefore, may not properly be compared to Dickey-Lincoln School.

This association takes issue with the following assumptions in the ECCNE proposal:

(1) The cost of peaking capacity obtained through pumped storage seems at $80 per kilowatt, unusually low. At chapter 7 (p. 121), of its National Power Survey, entitled "Peaking Power," the FPC states: "Economically attractIN projects usually cost $100 to $120 per kilowatt or less." Experience has taught that this estimate, though essentially accurate, may be slightly liberal

The Taum Sauk project of the Union Electric Co.-the most recently constructed pumped storage project of significance has 350,000 kilowatts installed and cost $50 million to construct, for a cost of $143 per kilowatt. The Cabin Creek project which is under construction by the Public Service Co., of Colorado will have 300,000 kilowatts of installed and cost $32 million, for a cost of $107 per kilowatt. The newly proposed Sweetwater project, also in Colorado, would have 990,000 kilowatts installed and cost $130 million; each kilowatt of this project would cost $131. The only major pumped storage project of which we are aware which even has a chance to approach an $80 per kilowatt cost is the highly controversial Cornwall project on the Hudson. At last examina. tion, it was planned to have 2 million kilowatts installed at a cost of $160 million. However, it is three times as big as the ECCNE project proposed. Moreover, with the problem which it has encountered in satisfying some of the demands of local communities, it is entirely possible that it may end up costing $100 per kilowatt.

In light of the above, we believe that a realistic cost for the ECCNE pumped storage project would be $110 per kilowatt.

(2) The ECCNE assumes a nuclear capacity cost of $114 per kilowatt, which seems extremely low. At the outset, the choice of a 700,000-kilowatt plant as the source of such capacity and the comparison of it with the 159,000-kilowatt capacity which would be available from Dickey-Lincoln School is inherently unfair. Moreover, ECCNE takes credit for the alleged low per kilowatt cost of the nuclear capacity, yet fails to indicate the entire cost of the 700,000-kilowatt plant in its investment cost comparison. Thus, it claims the benefit of the $114 per kilowatt installed cost for purposes of computing annual charges, but does not take into account the entire cost of the plant in computing the total investment costs.

(3) At chapter 5 of the National Power Survey, entitled "Nuclear Power," table 31 indicates that a 500-megawatt plant constructed as late as 1970 would have a cost of from $132 to $152 per kilowatt. Fuel costs for such a project at that time might be 1.7 mills per kilowatt-hour.

Similarily, the Advisory Committee Report No. 15 of the survey, entitled "Nuclear Development," states in its table 1(A) that the installed cost of a 500,000-kilowatt nuclear unit in 1967 will vary between $160 and $185, with fuel costs running about 1.9 mills per kilowatt-hour.

The ECCNE proposal, however, purports to make available 159,000 kilowatts of nuclear capacity at $114 per kilowatt and 1.6 mills per kilowatt-hour, which seems, in view of the survey estimates, low on both counts.

In support of this, we respectfully point out that no project approaching the size of 700,000 kilowatts, which the ECCNE proposal envisions, has yet been built in this country. The best known plant approaching that size which has been proposed for this country is the Oyster Creek plant of the Jersey Central Power & Light Co. which would have a nameplate 515,000-kilowatt unit installed at a cost of $68 million, averaging out to per kilowatt cost of $132considerably above the $114 per kilowatt estimate by ECCNE. Another plant under construction is the Nine Mile Point Plant of the Niagara-Mohawk Power Corp., which would develop 500,000 kilowatts installed at a cost of $90.2 million; this averages out to a cost of $180 per kilowatt. There is a great deal of disagreement among experts as to whether the cost of these plants might not still be estimated too low.

ECCNE's estimated $114-per-kilowatt cost for the ECCNE nuclear plant clearly does not square with the economics of present plants or those which are under construction.

The Nine Mile Point Plant anticipates a fuel cost of 2.17 mills per kilowatthour. No plant has been built in this country with a lower fuel cost, and it does not seem probable that the proposed ECCNE plant would cost lower than 1.8 mills per kilowatt-hour.

(4) The ECCNE estimate of associated transmission is only $3,950.000, as against an estimated $73 million for the Dickey-Lincoln School transmission. The ECCNE proposal thus envisions transmission construction being limited essentially to the State of Massachusetts. Citizens of Vermont and of New Hampshire and of Maine would apparently be limited to existing transmission line voltages, most of which, at 115 kilovolts, have only one-ninth the carrying capacity of the proposed 345-kilovolt Federal lines. Also, western Massachusetts is some 250 miles from central Maine, and it is little solace to residents of Maine, Vermont, and New Hampshire that the ECCNE proposal would spend nearly $4