MUSCLE SHOALS THURSDAY, APRIL 13, 1933 HOUSE OF REPRESENTATIVES, Washington, D. C. The committee met at 10 o'clock a.m., Hon. John J. McSwain (chairman) presiding. The CHAIRMAN. The committee will come to order for the further consideration of the various bills relating to the development of the Tennessee Valley. We have with us this morning representatives of the power companies and of the fertilizer companies. For the convenience of the witnesses we will hear the representatives of the power interests first. I will first present to the committee, Mr. W. L. Willkie. Will you please identify yourself, Mr. Willkie, by stating your official position? STATEMENT OF W. L. WILLKIE, PRESIDENT OF THE COMMONWEALTH & SOUTHERN CORPORATION Mr. WILLKIE. I am president of the Commonwealth & Southern Corporation. The CHAIRMAN. Will you make such statement as you may see fit concerning the subject? Mr. WILLKIE. At this time, Mr. Chairman, I desire to make a very brief statement, namely, that Mr. Thomas W. Martin, president of the Alabama Power Co., Mr. Preston Arkwright, president of the Georgia Power Co., Mr. James Longley, vice president of the Tennessee Electrical Co., Mr. E. A. Yates, vice president of all those companies and the Commonwealth and Southern Corporation, and myself, are here this morning, to represent the electric power interests operating in the Tennessee Valley. As such, we represent some 300,000 security investors with investments representing some $500,000,000. I want to say, Mr. Chairman, that no one has read or referred with more gratification than we have of this magnificent proposed development of the Tennessee Valley. As the responsible executive officers representing this investment in the Tennessee Valley, the largest investment in that valley, we view with a great deal of anticipation the proposed program of the President of the United States with reference to that valley. And we do not come here either as opposition or protestant witnesses against that proposition. 107 We have heard and been advised with equal gratification that the President of the United States, in his proposition, has no desire to destroy or impair the invested capital already in that valley. In examining this bill that is before this committee, we believe that there are certain provisions of the bill that interfere, or, perhaps, not interfere, but are not quite clear as to the latter of those two propositions, namely, the impairment of the large investment already in that valley. We do not believe, in connection with those provisions, which we believe are not clear upon the question of the investment of the electric utilities in that valley, that the modification of such provisions in order to protect such investments will in any way interfere with the President's proposition. Now, at this time, Mr. Chairman, I would like to present to you first, Mr. Yates, who, as I say, is vice president of these companies operating in that valley, and who is also vice president of the Commonwealth and Southern Corporation, who will be followed by Mr. Arkwright, president of the Georgia Power Co., who, in turn, will be followed by Mr. Longley, and then by Mr. Martin, after which, as the president of the Commonwealth and Southern Corporation, if there is anything untouched, or that any member of the committee desires to make any inquiry about concerning the relationship of the Commonwealth and Southern Corporation, which is the holder of the common stock of all these companies, I shall take the stand so that you may have full opportunity to inquire of me about that relationship, or anything I may know in regard to those operations. I would like now to introduce Mr. Yates to the committee. STATEMENT OF E. A. YATES, VICE PRESIDENT COMMONWEALTH & SOUTHERN CORPORATION, AND ALSO VICE PRESIDENT OF ALABAMA POWER CO., GEORGIA POWER CO., TENNESSEE ELECTRIC POWER CO., MISSISSIPPI POWER CO., SOUTH CAROLINA POWER CO., AND GULF POWER CO. Mr. YATES. Yes, sir, that is correct. The CHAIRMAN. Will you please identify yourself by stating your residence and your official connection with the business interests you represent? Mr. YATES. I am vice president of the six southern companies of the Commonwealth and Southern group, namely, the Tennessee Electric Power Co., the Alabama Power Co., the Georgia Power Co., the Mississippi Power Co., the South Carolina Power Co., and the Gulf Power Co. in Florida. I am also vice president of the Commonwealth and Southern, looking after the operation and engineering of these six southern companies. The CHAIRMAN. You live where? Mr. YATES. I live in New York. Mr. COCHRAN. The Commonwealth and Southern is the holding company of the stock in these six companies? Mr. YATES. Yes, sir. The CHAIRMAN. Proceed in your own way with your direct statement, Mr. Yates. Mr. YATES. I have been associated with the development of these companies during the last 20 years, living most of the time in the South, and have seen the development of these six companies from practically their inception until the present day. My work has been largely in connection with the operation and the engineering. I would like to distribute copies of a map, if I may [presenting copies of map to members of the committee]. This map indicates the completeness of the service that is rendered by these six companies in the territory they serve. It only, however, covers the six companies I have mentioned. The surrounding territory in Florida, North Carolina, Kentucky, and the western half of Mississippi, is also saturated or covered with transmission lines to the extent that this territory is covered. The three major companies of the Commonwealth and Southern group in the South are the Tennessee Electric Power Co., the Alabama Power Co., and the Georgia Power Co. These companies, you might say, started to expand about 1912. At that time there was very little hydorelectric development in the South, and almost simultaneously, and acting independently, Tennessee Power Co. was building the Hales Bar Dam, the Alabama Power Co. was building Lock No. 12, under a license issued by Congress, and the Georgia Power Co. was building the Tallulah Falls development in the northern part of Georgia. At that time the major cities in these States were served by steam plants, and the cost of steam generation was high, as compared with present-day costs. The purpose of building these hydroelectric plants was to build transmission lines to serve the principal cities in these States and do away with steam operation. The growth of these companies since 1912 until 1929 was constant; in fact, their growth averaged between 8 and 9 percent a year. Because of the improvement in service and the price of power, the market was extended, and gradually line after line was built until today service is rendered practically 100 percent within the territory. It was found expedient and economical, as the years went on, to tie these respective companies together with transmission lines. The first tie was between Tennessee and Georgia. Then a tie was made between Georgia and South Carolina and into North Carolina. Finally, Georgia and Alabama were connected, then Tennessee and Alabama, and finally lines were extended into Mississippi. I would like to explain, or tell something about the extent of the generating system maintained by these companies, and how it is operated. At the present time each of these companies has plants scattered throughout the territory. There are 834,000 kilowatts of installed capacity in hydroelectric plants owned by the companies, and 400,000 kilowatts of steam. 170406-33--8 In the interest of economy, this entire system is operated as a unit, under central control. The advantages of unit control or unit operation are many. In the first place 66 percent of the capacity is in water power. There are times of the year when the water is sufficient in the rivers to carry the entire load of the system. If the companies were operating independently, without the advantages of the tie lines, they would be unable to accomplish the economies due to interchange. Oftentimes there are heavy rains in one State, Tennessee or Georgia, and the rivers rise, and if the demand for power was confined exclusively to that State it would be impossible to utilize all the water within the capacity of the machines. Under the present system of operation, with the whole system pooled, if there is a surplus of power in any one State at any one time, and a lack of water in another State, the energy is pumped into the pool and distributed where needed. The ordinary operation is to use the energy from the water-power plants first. There are two classes of water-power plants, first, the run-of-river plants; that is, plants which have no storage capacity, but generate power when and as the flow of the river permits. In the fall months, when these rivers get low, naturally the output of the plants is small. The other class of plants are the storage plants, of which there are several in Tennessee, Alabama, and Georgia. These plants ordinarily are not operated in the wet season, but are used to accumulate the water and hold it in storage and release it in the low-water period to supplement the run of river plants. In addition, steam plants, of which there are approximately 400,000 kilowatts of capacity, are operated when and as the water gets so low that the load cannot be supplied from the hydroelectric plants. Mr. KVALE. How is their location designated on this map, if you will permit an interruption? Mr. YATES. If you consider Alabama, you will see on the map the city of Montgomery near the center of Alabama; look to the northeast about half an inch and you will see Martin Dam. The Martin Dam is the only storage reservoir in Alabama. It has a 150-foot head, and below it there are two other dams, the upper Tallasee and the lower Tallasee, both of which utilize the storage water from Martin Dam. These three plants will store approximately 300,000,000 kilowatthours of energy, which is held and used in the low water season. There is one other advantage in unit operation, and that is a saving of investment, due to less stand-by or spare capacity. The duty of every utility is to be ready at all times to meet any demand for power. These companies, acting independently, would require certain spare capacity in steam plants and hydro-electric plants because at times one unit may be down or other trouble may be encountered. By unit operation the spare capacity can be cut to practically one third of that necessary with independent operation by these companies. The CHAIRMAN. Would a better expression be unified operation? Mr. YATES. Unified is better, yes, sir. If you will look at the map you will see that practically every town and community in the territory in these six States is reached by the transmission lines of these companies. They serve 1,678 towns direct, and they cover 196,000 square miles, or 66 percent of the area of these States. In some of the States the percentage exceeds 90. These companies serve 430,000 electric consumers. Of the communities and towns in that area, there are 78 municipal operations having approximately 50,000 customers, and of the 78, 58 purchase power from the power companies. I do not wish to enter into a discussion of rates, but in speaking of the municipal operations I think it would be of interest to know that these companies have purchased or acquired 307 municipal operations up to the end of last year. The average monthly bill, per customer, for 25 kilowatt-hours per month before acquisition by the power company, was $3.35, and at present, the average monthly bill is $2.22, a reduction of 34 percent. Mr. ROGERS. Within what period did that reduction of 34 percent take place? Mr. YATES. The towns were acquired from time to time, and in the period, I should say, from 1920 to 1933. In 72 towns and municipalities in this area, a comparison of the present rates with the power companies' rates, and taking into consideration the taxes which are paid by the power company in the communities, we find that on a usage of 10 kilowatt-hours per month, the average bill per customer in the 72 municipalities is $1.39, and the average bill per customer on the power company rates is $1.21. On 30 kilowatt-hours of usage per month, we find that the average bill under municipal rates is $3.13, and under the power company rate is $2.29. With an average usage of 100 kilowatt-hours per month, the average bill at the municipal rate is $9.16, and at the power company rate it is $5.46. Mr. Goss. In your opinion, is the cheaper cost from the private companies due to running in parallel and synchronizing the different plants and operating a single system? Mr. YATES. I think that has a great deal to do with it; yes, sir. These companies have about 36,000 miles of transmission and distribution lines in the area, which would reach around the world one and one half times. This mileage is divided into approximately 20,000 miles of so-called high-tension lines, with steel and wood poles, and 17,000 miles of distribution lines in the various cities and towns. Mr. JAMES. What is the average cost per mile to build the transmission lines? Mr. YATES. It runs all the way from $3,000 to $12,000, depending on the capacity and the structures, the size, and the voltage. Mr. JAMES. What does it average? Mr. YATES. We would usually estimate about $10,000 a mile for a high line, 110,000 volts, including the right of way. There is in the bill, a provision for building a transmission line between Muscle Shoals and Cove Creek. It is estimated it will cost $6,000,000. If that line is built prior to the completion of Cove Creek the annual carrying charges will run into hundreds of thousands of dollars. |