of from 1 to 11⁄2 million kilowatts capacity providing a total of 154 million kilowatts. About 40 of these would be nuclear units.

POWER SUPPLY FOR SMALL SYSTEMS (CH. 16)

Chapter 16 of the survey is devoted to the smaller systems which constitute about 3,200 of the approximately 3,600 power systems in the Nation. The FPC explored the various alternatives by which small systems in every segment of the industry can participate in fully coordinated power networks and thus obtain their power supply from low-cost sources so that they too can share in the benefits of new technology.

The report finds that "Although there are inherent economic disadvantages in self-generation by the small systems, using small units operating in isolation, no comparable disadvantage is interent in their performance of the distribution function. The small distributor may be able to distribute energy fully as economically as a large utility. This is especially true where a low rate policy enables the small system to build up high average user per consumer and high customer density per mile of line, which in turn result in lower unit costs."

The report points out that "Opportunities for greater coordination and intersystem enterprise for the smaller systems are abundant." The economy in generation achieved by doubling the size of units in the 25 to 50-megawatt range is greater than in the range of 250 to 500 megawatts, the report states. Similarly, it says "where two or three generating units form the basis of a system's supply the reduction in system reserves made possible by interconnections is greater percentagewise than the reduction attained by interconnecting larger systems where each has 20 or 30 units available. The opportunities for lower power costs in the future are thus just as promising for the small systems as for the large ones."

The Commission said it is attempting to contribute to the growth and improvement of small systems by "effective and impartial regulation of wholesale electric rates and the terms and conditions of service for transactions in interstate commerce." Where regulation is effective, long-term wholesale relationships can be built firmly on a foundation of legally enforced rights and responsibilities, the report declares.

OUTLOOK FOR COST REDUCTIONS (CH. 17)

Chapter 17 brings to a focus the economic significance of the patterns of growth the FPC has visualized. It projects the potential savings to consumers which will result from the growth and technological improvements projected in the survey report. The chapter suggests the magnitude of these possible savings region by region and projects an overall reduction in the unit cost of electricity of 27 percent by 1980. The reductions are expected to be greatest in New England where existing rates are the highest and to be quite small in the Pacific Northwest which already enjoys the lowest average rates of any region.

The projected nationwide average price decrease from 1.7 cents per kilowatthour today to about 1.2 cents in 1980 will result from reductions of 26 percent in the generation component of power costs and 35 percent in distribution. The cost of transmission is expected to remain unchanged because of the numerous added major transmission interconnections.

Today's wide differentials in the cost of power among regions are expected to narrow by 1980. Reductions are projected for every region. The largest decrease, from 2.18 cents to 1.27 cents per kilowatt-hour, or 42 percent, would be in the north-central region, now one of the highest cost areas.

Substantial reductions also are indicated for the northeast, from 2.16 to 1.51 cents (30 percent); south central. 1.84 to 1.16 cents (37 percent); and west central, 2.15 to 1.48 cents (31 percent) regions. Virtually no change is forecast for the Pacific Northwest, where the present 0.87-cent price is lowest in the Nation. Projected reductions in other regions range from 16 to 25 percent below today's levels.

The FPC's National Power Survey Report is for sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C., 20402. The price is $2 for the main report and $2.50 for part II, which contains all advisory committee reports.

Mr. FALLON. Now in the report itself, National Power Survey, Federal Power Commission, 1964, part 1, on page 6 it refers to the Harland report, chapter 15. In that the staff study supports estimates

of the potential net economies in the order of $11 billion annually from the increased usage and from Icosely integrated power networks covering broad areas of the country, fully recognizing, of course, that the offsetting cost of obtaining closer coordination must be accounted for in determining the net savings.

This is the $11 billion I spoke about this morning.

Mr. DUNHAM. Yes.

Mr. JOHNSON. In the press release that was out, it did not include the 1980. So for the file, I would like to ask unanimous consent that the report itself be included in the file so there can be no misconception and misconstruing of what is in the record.

This morning Mr. Cree made mention of your company's sale of power to his company.

Mr. DUNHAM. Yes.

Mr. JOHNSON. At 5 mills. Was that right?

Mr. DUNHAM. I think it will be a little higher than that, sirprobably around five and a half, I think. On a high load factor basis, that is to say, on a high use of the capacity sold to Mr. Cree's company, we expect this will be the resulting cost of the power which we have sold to him. In order for us to build this big unit, which is big for our system because we are not one of the larger companies of New England, we are a medium sized company, in order for us to build that and make it stretch, we have to have the cooperation of our neighboring companies to take the surplus from that unit during its early life. So Mr. Cree's company is taking 15,000 kilowatts the first year, Public Service Co. of New Hampshire is taking 40,000 kilowatts the second year.

Mr. JOHNSON. At what rates?

Mr. DUNHAM. It will be a better rate than Mr. Cree's.

Mr. JOHNSON. Would you mind putting the rate in the record as to what you are actually selling power to the other companies for? Mr. DUNHAM. Yes, I will.

The estimated cost to construct this plant was $12.5 million, and to that we have added the proportionate cost of the common facilities, because that would be a third unit in an existing plant, and the common facilities include the dock where oil barges come in, and other common facilities. So we have to add that amount in.

On that basis, the total average investment is $14,887,000 or $123 per kilowatt ($14,887,000 divided by 120,000 kilowatts, the net capacity of the unit). And the resulting annual costs, on an 85 percent load factor basis, are 2.67 mills per kilowatt-hour for the fixed charges for the capacity and 3.25 mills per kilowatt-hour for the fuel, or a total cost for the power of about 5.9 mills per kilowatt-hour.

I said that we would be selling at a lesser amount the second year. We will. That will go down because of depreciation that occurs on the unit during this first year and the public service company will buy at a little better rate than Mr. Cree in the second year and they will buy at an even better rate the third year, because of the cumulative effect of depreciation.

Mr. JOHNSON. I wonder, since the State of Maine wishes low-cost power, if you could make low-cost power available to your consumers in Maine.

Mr. DUNHAM. The answer to that is that were we building this plant for Maine only, we simply could not have stretched into as big a plant as we did. In order for us to build as big a plant and to get the fuel efficiencies that result that big unit we had to have our neighbors take the surplus.

Mr. JOHNSON. It has been my experience that whenever a rate reduction was offered in the power field the consumption went up. Mr. DUNHAM. The what?

Mr. JOHNSON. The consumption went up.

Mr. DUNHAM. We agree with you, sir.

Mr. JOHNSON. You offer lower rates to people of Maine than other companies that operate in the State of Maine, I presume, and some of the Maine companies service some of the cooperatives and municipalities that you do, I presume, and if this power was offered to them at reduced rates I presume they could get rid of some of it, too.

Mr. DUNHAM. Along that line, sir, we made a million-dollar decrease in September 1963, and we are just about to announce another. Mr. JOHNSON. I cannot help but go back to the statement made by your Governor, supported by all people, that their support for the Government project is to bring low-cost power to Maine, and at the same time construct a multipurpose project with some flood control, some fish and wildlife and recreation, some stream control on pollution, and benefits to the New Brunswick Province. Those are all benefits. He stated quite plainly that it was his objective and supported by all Maine people and it has been supported by the President of the United States and the Secretary of the Interior and it has been planned and programed by the joint effort of the Corps of Engineers and the Bureau of Reclamation.

Mr. DUNHAM. Yes, sir.

Mr. JOHNSON. Will this bring low-cost power to Maine, lower than they are now receiving?

Mr. DUNHAM. No; I do not believe so, sir.

Mr. JOHNSON. How much are you charging, or would you charge if you were servicing this area? I do not know whether you are serving the area.

Mr. DUNHAM. I will make that plain, sir. We do not. We serve in central and southern Maine and then we have a 115,000-bolt tie with Bangor Hydroelectric Co. which is up and above the center and eastern part of Maine. They, in turn, have a tie, which is a small one, 33,000 volts to Maine Public Service Co. which serves the very northerly part of Maine, and that is the area where the proposed Dickey plant would be built. "So we do not serve in Aroostook County, which is that

area.

Mr. JOHNSON. You were concerned, too, with the power availability in the State of Maine from the Government project and who it would go to.

Mr. DUNHAM. I did not get that, sir.

Mr. JOHNSON. You were concerned with the distribution of power from the Government project.

Mr. DUNHAM. Yes. Those are questions and I recite them, because our customers coming into our company offices are asking them.

Our stockholders have written me about it and, of course, it is a matter of concern when your stockholders write in. As an illustration,

I have an editorial here from one of our Maine papers, and, if I may, I will just quote from it.

Mr. JOHNSON. Certainly.

Mr. DUNHAM. This is a quote:

Maine people are going to be interested in who owns the power station and the high-voltage transmission line estimated to cost nearly $100 million. They are going to be interested in whether Dickey will provide peaking or firm power or both, how much it will probably cost, who will sell the power, who will buy it and under what conditions. The waters of the St. John as they flow through Maine belong to the State of Maine and the people of Maine are entitled to the full benefits of their exploitation. They will not look kindly upon any plan which generates power here for exportation before the needs of Maine industry and other energy users are met.

We are sure that the Public Utilities Commission, keenly aware of its duty to Maine people, will make this clear in the months and years to come.

That is simply an expression, more clearly worded than I can, of the concern of Maine people about it.

Mr. JOHNSON. That same problem exists throughout the United States and in our most recent one out in the Pacific Northwest-Southwest, there was preference work done and legislation granting preference to the Pacific Northwest for power taken into the State of California from the Bonneville project. I presume all those things will be worked out later. I presume that is why the transmission line is not in here at the present time, because the project would be authorized and then it would be up to the appropriations departments to see which would be the most feasible way and most economical way to transmit this power.

In all of the other areas they have worked out a suitable agreement. For the most part private power was included in the final agreements. Wherever the private companies could furnish the transmission in the most economical cost that is what has taken place.

Mr. DUNHAM. I did not hear that.

Mr. JOHNSON. That is what has taken place. The latest was the Upper Colorado.

The latest was the Pacific Northwest-Southwest.

Mr. DUNHAM. You say the private companies built the line? Mr. JOHNSON. Yes; they are building a good portion of the lines. They are transmitting a good portion of the power. They are participating. In other areas they wheel over their own facilities to preference customers. So I think that the State of Maine and the preference customers will be amply protected and if a joint venture is entered into, I presume that the private companies will further firm more power within the project and they will participate in the power output and benefits. The power that is taken from our other areas under a similar situation is working out very well. The private people are handling a lot of the power and selling it to their customers and individual consumers. I cannot see why the private power would be in opposition to this, because I think in the long run you benefit from it. Possibly you do not have any other competitor in the area for all I know other than private utilities. There are no public developments as far as generation is concerned. That is a very good atmosphere to operate.

Mr. DUNHAM, No; that is not true, sir. We have a heavy competition in the central Maine area from bottle gas, manufactured gas, and natural gas is coming in this fall according to the announcement.

It is true that we do not have electric utility competition as such because we do operate in a franchised area and have the exclusive right to serve that area.

Mr. JOHNSON. At the present time, do any of the private utilities tie in with Canada?

Mr. DUNHAM. No, sir. I am wrong on that. Maine Public Service Co., in Aroostook County, the one farthest up and in the Dickey area, does have interconnections with the New Brunswick Power Authority and they have both firm and secondary power, but mostly secondary power from New Brunswick Power Authority in times past. Mr. JOHNSON. Do you have any ideas what the rates are for firm and secondary power?

Mr. DUNHAM. No; I am not fully acquainted with that, sir. I was told, I believe, once by the president of the company, that they have both, I think, secondary somewhere around 7 mills and firm for around 9. But I do not want to put that out as a fact because that is just my recollection on it.

Mr. JOHNSON. Are there any further questions?

Mr. BALDWIN. Mr. Chairman, I have a question or two.

Mr. Dunham, have you been approached at any point by any representatives of the Department of Interior as to whether or not your company would be willing to purchase power from the proposed Government dam or reservoir if it were built?

Mr. DUNHAM. No, sir; we have not. I do not want to be misleading on this. One of our officers was in Washington about 3 weeks ago and went over to see, I believe, Mr. Moore, who has charge of oil imports to see if we could get an additional quota because of the drought situation that we had in Maine. While in Mr. Moore's office, Mr. Moore asked him if he did not want to meet Mr. Udall and he said he did, and he went in and met him for the first time.

Mr. Udall did tell Mr. Kimball, the officer of Central Maine, that at some point he would like to sit down with the utility leaders in New England. But we have never had any discussions whatsoever on the matter of the power.

Mr. BALDWIN. My second question: Have you had any requests for power from any users or potential users that you have not been able to fill in Maine?

Mr. DUNHAM. No, sir.

We have never been too little or too late with any of our power. We have been in business for 65 years. The trick, if I can put it that way, of course, is to anticipate the needs of your customers and build reasonably in advance of those needs but not so far in advance that you are asking your customers to support the unnecessary plant.

Mr. BALDWIN. You mentioned there were two other private utilities. in Maine north of the area you serve. One or two as I recall.

Mr. DUNHAM. Yes; two.

Mr. BALDWIN. To your knowledge, have they at any time had requests from users or potential users for power that they were unable to fill?

Mr. DUNHAM. I do not know of any, no. I would like to qualify that a little bit. We have a gentleman here from St. Croix Paper Co. that testified yesterday. They are right on the border between Maine and New Brunswick. It is my understanding that they buy most of their power secondary from the New Brunswick Power Authority.