utility suppliers would have to provide the additional capacity as the load growth demanded until the exact moment Devils Jumps power displaced the capacity of the existing suppliers.

For economical system planning, it is necessary at all times for a utility to be able to forecast with some exactness its loads at least 3 years in advance. This is the approximate time required to add generating capacity. The forecasts, of course, are subject to revision due to changes in economic and climatic conditions and other circumstances which would cause deviations from the demands originally forecast. However, these deviations would be relatively minor and are taken into consideration in applying forecasts to system planning. To meet its responsibility to its customers, a utility must plan and build its system to continue to supply their power demands. Only in this way can a utility bring to all of its customers the benefits of lower cost power from new, larger, and more economical generating units.

Now with the prospect of a Federal project displacing part of the utility's load, the utility's planning is drastically upset. The utility still has the job of providing capacity until the new project comes on the line and takes over some segments of its total load. It cannot be sure of the precise timing of the loss of these loads because of political decisions, construction schedules, litigation and other probable factors totally outside of its control. If the utility assumes it will continue to serve its total load and adds the largest feasible units for projected load growth, its customers will be penalized with the cost of unused capacity later displaced by the Federal project. If, on the other hand, the utility assumes the loss of segments of its load, and installs or contracts for the minimum required additional capacity to serve until the takeover, at relatively high cost. its customers are likewise penalized.

After the Federal takeover of preference-type loads-municipal operations, cooperatives and others-the utility's remaining customers are denied for the life of the Federal project the cost benefits of a portion of new construction which the utilities would otherwise undertake.

In my opinion, there are serious deficiencies in some of the data and conclusions submitted to this committee in regard to the feasibility of this project.

The construction cost estimates currently submitted for this project are the same as those developed when the proposal was first presented for committee consideration in 1958. In view of the rising price trends for labor during the 7 years since 1958, it is unusual that there has been no adjustment in this estimate. In determining the feasibility of the project, the Army Corps of Engineers compared the capacity and generation of Devils Jumps with alternative methods of providing power and came up with a comparability ratio of 1.05. Information on the specific comparably financed alternatives selected by the corps is not available to us. My analysis of comparability with several alternatives shows comparability ratios considerably below the 1.05 given by the corps. In other words, each of the three alternatives used in our analysis would provide peaking capacity and power at substantially lower cost than Devils Jumps. I would like to submit a copy of our analysis as part of my testimony and discuss it briefly.

The three alternative methods of providing peaking capacity and energy which we have selected are basic methods in the electric utility industry identified as such and dealt with at some length in the recent national power survey of the Federal Power Commission. We have based our alternative analyses on an overpressure system now under construction and a pumped storage proposal under consideration by our company, and an existing jet engine installation. Each of the three alternatives would be located in the areas which are claimed as potential markets for Devils Jumps power.

One alternative used in our analysis is what is referred to as an overpressure system. A number of electric utilities have found that an economical method of providing peak capacity is by incorporating additional capacity in the boiler and turbogenerating units of their base steam generating units. By building these peaking features into new units at the time of station design, it becomes possible to operate the units continuously for several hours at a steam pressure slightly in excess of the normal operating pressures. This method provides additional capacity with a very nominal additional capital and operating expenditure.

A steam generating unit now under construction by the Public Service Co. of Indiana at its Wabash River generating station is a current example which incorporates in its design this type of peaking capacity. We have determined that for a capital investment of $10,478,400 peaking capacity equivalent to the Devils Jumps capacity can be installed in future steam generating units. We further

find that the total annual cost of this capacity and energy would amount to $1,856,700, only 31 percent of the comparable annual costs for Devils Jumps, producing 0.31 as the comparability ratio.

Our second alternative is a pumped storage project. The principle of this pumped storage hydroelectric power project is the use of off-peak power produced by steam generation to pump water to a storage reservoir at a higher elevation. During on-peak load hours the water flow is reversed and used for generation of power.

Pumped storage is becoming more attractive economically to electric utilities and is expected to be used to a substantial degree in serving peakloads.

Several years ago, Kentucky Utilities Co. commissioned the Schmidt Engineering Co., Inc., of Chattanooga, Tenn., to undertake a study covering power and generating capabilities under pumped storage operation at the company's Dix Dam facility. The recommendations from this study are presently under consideration by the company. We have used the data in this engineering report in preparing the second alternative peaking power supply in our comparative analysis. We find the pump storage alternative could supply comparable peaking power capacity for a total investment of $65,090,000 and at an annual cost of $4,925,100. This produces a comparability ratio of 0.82.

In the area where the Devils Jumps power is proposed to be marketed, there are a number of sites suitable for pumped storage projects. Pumped storage developments at a relatively small number of these available sites could provide peaking power capacity equal to that of Devils Jumps at, or less than, the cost determined in our pumped storage alternative.

The third alternative, the jet engine, is based on the recently completed installation of the Cincinnati Gas & Electric Co. at its Dicks Creek plant near Middletown, Ohio. This installation has a net generating capacity of 125,000 kilowatts. The capital cost and operating expenses of this project were used to estimate an alternative for the Devils Jumps capacity.

This type of installation has the decided advantage of flexibility as to size and can be located near the load center thereby eliminating very substantial transmission investments and power losses in contrast with a facility located as remotely as Devils Jumps. The jet engine type of peaking generating station is used rather extensively in the electric industry at the present time to provide capacity that will be required only during the hours of peakload conditions. Our analysis shows that the 592,000 kilowatts of peaking capacity claimed for Devils Jumps could be supplied by this alternative with an investment of $39,664,000. Annual costs would be $4,874,900. This is only 81 percent of the separable power cost of Devils Jumps, producing a comparability ratio of 0.81.

We seriously question the availability of a market for such a substantial amount of "peaking" power in the potential marketing areas.

The most significant fact relative to the value of power from the proposed Devils Jumps project is the consistent refusal of the Tennessee Valley Authority to agree to purchase any portion of this power.

TVA is the only utility in the potential marketing areas for Devils Jumps that has had actual experience with the purchase and utilization of the power from the Cumberland River dams. Therefore, when TVA states, as it has, that Devils Jumps power cannot be economically utilized, TVA's position in itself casts grave doubts on the economic feasibility of the proposed project.

The Southeastern Power Authority of the Department of the Interior, without evident means of delivering power to large portions of the area, claims that it can market the Devils Jumps power output, but no information has been made available to support this claim. SEPA, presently, has no customers in area 12 and its only customer in area 19 is a co-op which it proposes to serve under a contract currently being litigated in Federal court.

Southeastern Power Authority proposes to market this power in power supply areas 12 and 19. These areas include Indiana, parts of Michigan, parts of Ohio, and most of Kentucky. These areas are presently and for many years past have been adequately served, at rates regulated by the applicable regulatory authorities, by the electric companies and other power suppliers in the areas. These suppliers have ample reserve capacity from their own generating facilities and interconnections with neighboring utilities and regional and national power pools. These suppliers have developed long range plans that will adequately serve the future load requirements of the area.

It is further true that on the basis of past experience there is every assurance that these utilities will continue to supply the power needs of their customers

adequately and at reasonable cost without the construction of this unneeded project.

In summary, Mr. Chairman, this committee is considering a project the major purpose of which is to supply power, power which private utilities can and wil! supply, at reasonable rates without the necessity to expend Federal funds for the purpose. What we would like to see the Federal Government do for the citizens of Kentucky is to provide assistance to prevent the types of floods which have so recently devastated parts of the State, not to provide power which we can provide for ourselves.

Comparability ratio analysis for alternative methods of providing peaking capacity, all based on 592,000 kilowatts capacity and 533,000,000 kilowatthours

Hon. GEORGE H. FALLON,

Chairman, House Public Works Committee,
Washington, D.C.

DEAR REPRESENTATIVE FALLON: We note with interest that two of your Subcommittees (Flood Control and Rivers and Harbors) are presently conducting hearings, to continue during August of 1965, concerning various proposed Federal power projects, including Devils Jumps on the Cumberland River in Kentucky and Tennessee.

As in the past, we feel obliged to note some pertinent facts in relation to this controversial project, and to point out the dubious value of a $165 million investment in this area.

Five Federal dams are presently in operation in the Cumberland River Basin. Their combined output is 595,000 kilowatts, all of which has hitherto been sold to TVA under long-term contracts. The Barkley project, with a capacity of 130,000 kilowatts, is now under construction by the Army Engineers and is expected to be completed and in operation within the next year. Five additional Federal hydroelectric projects, with combined outputs totaling 212,500 kilowatts, have also been authorized for the basin. If these projects are constructed, the

combined capacity of the Federal dams in the Cumberland River Basin would be 937,500 kilowatts.1

As we understand it, the Department of Interior has created the Southeastern Power Administration (SEPA) and designated it as the agency responsible for marketing the electric power generated at dams under the control of the Army Engineers in the States of West Virginia, Virginia, North Carolina, South Carolina, Georgia, Florida, Alabama, Mississippi, Tennessee, and Kentucky. These 10 States also constitute the area within which SEPA is authorize to market such power.'

We understand that TVA has advised SEPA that it is not interested in purchasing the output from any of the projects in the Cumberland River Basin which are under construction or authorized. Further, testimony by SEPA and TVA officials indicates that the contracts between SEPA and TVA under which TVA purchases all of the power generated at the existing Cumberland dams595,000 kilowatts-may either be rescinded or revised to eliminate or reduce the power purchased by TVA thereunder. In this connection we understand that that representatives of the Interior Department have been advising municipalities in Kentucky and an electric cooperative group in Ohio, which are now served by investor-owned power companies, that power presently being furnished by SEPA to TVA would become available to others.

Thus, depending upon the extent to which TVA's existing contracts with SEPA remain in effect, it appears that SEPA may now have to face the problem of finding markets for between 342,500 kilowatts and 937,500 kilowatts of Cumberland River Basin power. In order to locate markets for this power, SEPA has apparently found it necessary to look well beyond the 10-State area assigned to it and to explore the possibility of disposing of the power in Illinois, Indiana, Ohio, and Pennsylvania.‘

Although the marketing problem posed by the power to be generated at the existing and authorized Cumberland projects is such that SEPA must look beyond its 10-State area for customers, the Corps of Army Engineers is nevertheless proposing the construction of two additional hydroelectric projects in the Cumberland Basin; one having a capacity of 10,000 kilowatts and the other, the proposed Devils Jumps project, having a capacity of 480,000 kilowatts.

TVA has twice stated that it has no interest in the power which would be produced at Devils Jumps. Therefore, a market for its huge output must be found elsewhere.

It seems quite clear, therefore, that the economic justification for the proposed Devils Jumps project is predicated to a considerable extent upon the assumption that markets for Devils Jumps power will exist in States, including Ohio, which are located beyond SEPA's 10-State area.

Insofar as Ohio is concerned, we would like to point out that those most familiar with the present and prospective market for electric power in that State are the electric power companies which have served that State over the years. Yet these companies were at no time consulted or asked to supply data with respect to the Ohio market. Instead, this assumption-apparently accepted by the Bureau of the Budget and the Interior Department-that Ohio, together with other States to the north of SEPA's 10-State area, will afford an adequate market for Devils Jumps power seems to be based in a large measure upon a study by SEPA, an agency which as recently as the year before last admitted that it knew "very little" about markets beyond the 10-State area assigned to it, and in which area no detailed market surveys had been made.®

The marketing problem for Devils Jumps power must be kept in proper perspective by considering that this power is concedely purely "peaking power" which must be sold at the generating site a cost of 12 to 19 mills per kilowatthour, depending on whose figures are used, to which must be added transmission

1 See "Rivers and Harbors-Flood Control, 1963," hearings before Subcommittee on Flood Control of Committee on Public Works, House of Representatives, pt. 1, pp. 67–69. 2 Ibid., pp. 167-169.

a Ibid., pp. 185 and 186; see also "Public Works Appropriations for 1963," hearings before subcommittee of the Committee on Appropriations, House of Representatives, pt. 3, pp. 777 and 944.

4 See "Rivers and Harbors-Flood Control, 1963," hearings before Subcommittee on Flood Control of Committee on Public Works, House of Representatives, pt. 1, p. 168.

See letter from TVA to Army Engineers dated June 6, 1960, appearing on p. xxxiv of H. Doc. 175, 87th Cong., 1st sess., entitled "Big South Fork, Cumberland River, Ky. and Tenn." See also reference to TVA letter dated Mar. 30, 1961, appearing at p. vil thereof. See "Public Works Appropriations for 1963," hearings before subcommittee of the Committee on Appropriations, House of Representatives, pt. 3, pp. 180-183.

costs to the point of use. To point up the difficulties in such marketing of peaking power in areas well over 100 miles from point of generation, we could cite our own company's recent experience in providing peaking and emergency power for our own thermal generation system, where we constructed gas-fired jet engine generation of 125,000-kilowatt capacity at an installed cost of $67 per kilowatt (as compared to $342 per kilowatt at the proposed Devils Jumps plant) wherein we can generate peaking power at a cost of 6.96 to 8.07 mills per kilowatt-hour at a 10-percent load factor. This device is, of course, readily available to any other similar company in this overall marketing area.

We have been a major supplier of electric energy in the State of Ohio for almost 80 years. In our day-to-day operations we must, of course, keep abreast of developments in the demand for electric energy within our service area and we must anticipate increases in such demand in order to meet such increased demand when it occurs. On the basis of our experience with the Ohio market, we can state categorically that there is no need whatever in the State of Ohio for Devils Jumps power, or for that matter power generated at any of the other Cumberland Basin projects.

Using the latest aggregate figures available, in 1964 the simultaneous peakload of investor-owned companies in Ohio was 11,215,000 kilowatts. Their combined capacity was 14,008,000 kilowatts. Thus, their combined margin of reservethe generating capacity over that required to meet the peak demands for powerwas 24.9 percent. This unusually high reserve was due in part to a decrease in load growth occasioned by the recession of 1960-61. We estimate that the comparable figures for 1967 will be approximately as follows: simultaneous peakload, 12,880,000 kilowatts; combined capacity, 15,145,000 kilowatts; and combined margin of reserve, 17.6 percent. It should also be noted that the investorowned companies serving Ohio are physically interconnected by high-capacity, high-voltage transmission lines with the following 10 investor-owned companies serving areas outside of Ohio: Appalachian Power Co., Indiana & Michigan Electric Co., Kentucky Power Co., Kentucky Utilities Co., Louisville Gas & Electrie Co., Monongahela Power Co., Pennsylvania Power Co., Public Service Co. of Indiana, Inc., West Penn Power Co., and Wheeling Electric Co. All of these companies, including the Ohio companies, comprise part of the largest interconnected group in the world consisting of some 173 systems covering 39 States and Toronto, Canada, which in 1964 had a combined capacity of approximately 152,800,000 kilowatts, a simultaneous peakload of approximately 124,400,000 kilowatts and a margin of reserve of approximately 22.8 percent. Thus, in addition to their own 17.6 percent margin of reserve estimated for 1967, the investorowned Ohio companies will have available to them through their interconnections a substantial additional reserve capacity to cover unusual load requirements. The electric utilities of Ohio are fully capable of providing for all foreseeable future load growth. Consequently there is no need-and it would be uneconomic and wasteful-to transmit power from the Cumberland Basin area into Ohio. The simple fact of the matter is that Cumberland Basin power can only be marketed in Ohio to those who are now customers of the existing electric utilities in Ohio and whose present and future requirements are and be fully met by such utilities. If such efforts were successful, the result would be merely to create unnecessary and wasteful transmission and excess capacity in Ohio in an amount equal to the Cumberland Basin power marketed in Ohio with consequent economic loss to all concerned.

It is noted above that TVA, the logical source of distribution of power if the Devils Jumps project should be developed, has twice examined the proposed project and found it to be of no interest-primarily because of the low-load factor (10 percent) and the high cost per kilowatt estimated for the project.*

7 Ibid., p. 179.

8 See letter from TVA ot Army Engineers dated June 6, 1960, appearing on p. xxxiv of H. Doc. 175, 87th Cong., 1st sess., entitled "Big South Fork, Cumberland River, Ky, and Tenn." See also reference to TVA letter dated Mar. 30, 1961, appearing at p. vii thereof. In its letter of June 6, 1960, to the Army Engineers, TVA said:

"Our experience has been that we could seldom justify the installation of hydrocapacity at as high a cost per kilowatt as is estimated for this project, even when the capacity could be used at a higher load factor than in this case. The low average energy output from the proposed installed capacity would not lend itself well to present TVA power requirements."

The Bureau of the Budget reported that: "By letter dated Mar. 30, 1961, the Tennessee Valley Authority reaffirmed its earlier conclusion that the Devils Jumps project would not be an economically attractive source of generation to supply TVA power requirements." See H. Doc. 176, supra note 3, at p. vii.