consumers. And, finally, there is the contention that a preference clause would be meaningless because, for reasons of geography and cost, the marketing area for the power must be narrowly delimited. These contentions appear variously in the following documents: New York Power Authority report to Governor Harriman, January 30, 1957, entitled "Power Marketing"; letter of March 12, 1957, from Chairman Moses to Senator Joseph S. Clark, released by the power authority on March 13, 1957 (herein referred to as "Moses letter"); letter of Congressman William E. Miller (cosponsor of the Ives-Javits bill), dated March 19, 1957, to the Liberal Party (herein referred to as "Miller letter"); opinion dated July 9, 1956, by Jacob K. Javits, as attorney general of New York State, addressed to all Members of the House of Representatives (herein called "Javits opinion"); letter of March 22, 1957, from Senator Jacob K. Javits to the Liberal Party (herein called "Javits letter").

1. The contention that the preference clause is contrary to the New York pattern, and therefore cannot work

This appears in the Miller letter, the Moses letter, and the Javits opinion and letter. Since the Clark bill is identical with the former Lehman-Buckley bill, one reference alone is sufficient to dipose of this argument. On July 10, 1956, after the collapse of the Schoellkopf plant had already occurred, the New York Power Authority published a full-page advertisement, signed by Chairman Moses and the other four trustees, which appeared in the New York Times at page 15, and presumably in other papers. Its last two paragraphs read:

"It will be seen that the only question before the House is that of amendments to the Lehman-Buckley bill which has already passed the Senate.

"This authority will undertake to finance by sale of its bonds to private investors, build promptly and operate an adequate powerplant which will serve all immediate needs under the terms of the Lehman-Buckley bill with or without amendments."

This should occasion no surprise, for the power authority had consistently taken that position for many years.

When the Lehman bill was reported by the Senate committee January 19, 1956, Chairman Robert Moses publicly stated on behalf of the trustees of the authority:

"There are certain features of the Lehman bill which could be improved upon, but we can work under it and shall be glad to do so if it becomes law." Again, after a special meeting on June 14, the board of trustees of the authority reported to the Governor on the terms of the Lehman-Buckley bill, stating that "the authority believes it can work under it, and will, in the event of its passage in its present form, make every effort to do so."

At the last hearing held by the House committee on the Niagara bills, Trustee Charles Poletti, formerly a supreme court justice in New York and counsel to Governor Lehman, testified as a witness for the power authority. On June 17, 1956, Mr. Poletti said in a public statement:

“On a realistic and practical basis, there is no conflict between the Lehman bill as passed by the Senate and our authority act. That is my opinion. *** The authority can finance it self and operate under it."

Review of previous congressional hearings shows that the power authority itself has repeatedly supported the policy of giving preference to public bodies and cooperatives in New York and neighboring States, as an integral part of its program for the marketing of Niagara-St. Lawrence power.

The record shows, moreover, that the power authority under both Governor Lehman and Governor Dewey, until the last years of the Dewey administration, unanimously gave its support to a preference provision virtually identical with the preference clause contained in the present Lehman-Buckley bill.

At public hearings held before the Committee on Rivers and Harbors in 1941, Chairman Mansfield, of Texas, presiding, the five trustees of the power authority presented a formal statement outlining the authority program for future operation of the St. Lawrence power project in the public interest.

In this statement, in which the Governor and the Lieutenant Governor concurred as witnesses before the committee, the authority said:

"In disposing of the power generated by the project, preference should be given to counties, municipalities, and public power districts; and provision should be made so that municipalities and other political subdivisons and public agencies, now or hereafter authorized by law to engage in the distribution of electric current, may secure a reasonable share of the power generated at the project."

Again, in 1946, the power anthority trustees unanimously presented the same program, including the preference provision, at public hearings of the Senate Committee on Foreign Relations.

In the course of the hearings, Gen. Francis B. Wilby, chairman of the authority (1946-50), submitted a joint recommendation of the authority and the Corps of Engineers referred to in the report of the Senate committee as the "Federal-State accord." This accord eontained the identical recommendation of the preference provision set forth above.

Nor is there any conflict between the Clark bill and the provisions of New York law purporting to reserve inalienable ownership and control over navigable waters. The report of this committee, and its acceptance by the Senate in 1956, resolved that issue, by pointing out that since Niagara is a Federal resource, there was no unwarranted invasion of States rights in requiring a New York State agency to observe Federal power policy in marketing Niagara power (p. 11, Rept. No. 1408). The Federal Power Commission had earlier, in 1953, made a similar ruling with respect to St. Lawrence power, in granting a license to the power authority (FPC, opinion 255, p. 9.)

Of the contention in the Miller letter and the Moses letter, that the preference clause will make it difficult or impossible to sell bonds and secure operating revenue, it need only be said that this is nonsense. The Moses report (p. 2) concedes that $335 million of bonds had already been sold even before the recent allocations of St. Lawrence power. It cannot be disputed that Niagara power is a very valuable asset, for which there is an overwhelming demand. The project therefore commends itself to investors. This committee met, and disposed of, a similar contention in 1956, when it held that a preference clause was not unreasonable and would not prejudice the conduct of operations of the power authority (Rept. No. 1408, p. 10.)

2. The contention that the preference clause is unnecessary because New York has provided adequately, and will provide for the needs of domestic and rural consumers.

This argument appears in the Javits letter, the Moses report, the Moses letter and the Miller letter. In addition, Congressman Miller challenges those who disagree with his point of view to specify any municipality or cooperative which applied for and did not receive St. Lawrence power, and to list any preference customers for Niagara power who would not be adequately taken care of under the Ives-Javits bill. That challenge is easy to meet since the record presents the answer.

What has already happened in the allocation of St. Lawrence power cannot be disregarded, since Chairman Moses states that "we shall treat the municipalities and cooperative within the Niagara economic area as we have treated those in the St. Lawrence." (Moses letter, p. 9.) There are two aspects of this problem, that pertaining to customers in New York State and that pertaining to customers in adjoining States.

The New York State municipalities and cooperatives will undoubtedly speak for themselves, but a few observations are in point. If they have adequately been taken care of, they do not seem to be aware of that. The record at the February 6, 1957, hearing before counsel for Governor Harriman discloses the violent dissatisfaction of the New York municipalities in the form of a letter from the president, Municipal Electric Utlities Association of New York State, read into the record, which stated in part:

"Will you please present the findings of our Syracuse special meeting, so that His Excellency Governor Harriman may know that the mayors and other top officials of 29 cities and villages in attendance at the meeting do not approve the Reynolds Metals Co. contract at all, and believe the Niagara Mohawk Power Corp. contract should be rewritten. If these two contracts were approved as they stand, we could not advise our members to sign their contracts with the New York Power Authority as they may well be signing their death warrant as municipal electrical distribution systems, and without the municipal systems all rural and domestic customers would suffer eventually." (Vol. 2, pp. 427-428.)

Similarly, the same record discloses complaint by the New York cooperatives that they are being charged double the rate charged to other customers of St. Lawrence power.

"The large industrial customers and private utility companies will purchase St. Lawrence power at the bus bar for 5.4 mills. The power authority has offered the cooperatives the same power at 9.5 mills. It is true that the cooperatives are unable to purchase power at the site. The difference between 5.4 and

9.5 mills represents, however, double charges for transmission, double charges for energy."

The fact is that over 50 percent of all St. Lawrence firm power has been allocated to one industry. Nineteen percent was allocated to private utilities, ostensibly to serve the needs of domestic and rural consumers. Only 13.1 percent was allocated or reserved for municipalities, and cooperatives.

It is true that some St. Lawrence power is being allotted to all of the 12 municipalities and to 3 cooperatives who are within 150 miles of the St. Lawrence project. But this can scarcely be said to represent adequate provision, since 30 municipalities and 2 cooperatives have been arbitrarily excluded from the marketing area.

In addition, both groups point out that they are being offered very unsatisfactory contracts, in two respects. In the first place, they have been asked in most cases to enter into 29-year contracts, whereas the power allotted to them would cover their determinable needs only for the next 10 years or even less. That same record discloses that the power authority offered to allocate 50,000 kilowatts to 11 municipalities, which would be their portion for years to come although the expectable increase in their power needs during the next 10 years would be 220 percent, and the offered power would not cover those needs even during those years (pp. 323-323A, 595–597).

In the second place the contracts offered to them would call for a demand charge of $1 per kilowatt, whether or not the power was used. This charge amounted to an increase of 51.3 percent for most municipalities over their present costs. Thus, effectively, since there was no withdrawal clause, which would make other power available to which they could resort, this demand charge in effect would cripple their activities for many years to come.

What the allocations from Niagara power will be, cannot yet be foreseen, but the tentative allocations are somewhaat more cheerful. Nevertheless, the proposed imposition again of an arbitrary marketing area limited to 150 miles from the Niagara site, will hamper at least some of the municipalities.

The stress in the Miller letter and the Javits letter that these public agencies service only 5 percent of the consumers in New York State, is wholly irrelevant in the light of established Federal power policy. A major purpose of that policy was to use public agencies as a yardstick to lower rates in general and this policy was adopted with full knowledge of the fact that such agencies may service only a relatively small number of consumers. The Federal experience is quite clear that even a small number of municipalities and cooperatives can wield an influence in lowering rates in general, completely out of proportion to their own size. The policy adopted with respect to St. Lawrence power by the power authority has minimized the effectiveness of this weapon.

But perhaps more important is the fact that no adequate precaution was taken by the power authority to safeguard the domestic and rural consumers for whom was destined the power allotted to private utilities. The largest allocation in this respect was made to the Niagara-Mohawk Co. The formula which was supposed to assure that savings would be passed on to the ultimate consumers was incredible (contract S-6). In the first place, there is no adequate procedure set up for computing what savings there are. In the second place, the formula adopted could scarcely have been better designed to minimize or eliminate any possible saving. Even after revision, at the insistence of Governor Harriman, it still provided for minute savings. Originally, the formula, it was estimated, would produce savings of about $2 million per year, or about $36.60 per year, per customer. The revision raises the savings to about $4 per year per customer, or about $2,200,000. This contrasts shockingly with the $95 million of savings for New York consumers alone from an integrated Niagara-St. Lawrence system which was predicted by the power authority itself in 1952 in its application for the St. Lawrence license.

When this defect is coupled with the absence of any effective withdrawal clause, it becomes clear how far from adequate was the provision made for municipalities and cooperatives by the New York Power Authority. The preference clause in the Clark bill, and provisions regulating resale prices therefore become doubly important.

The same or a similar situation will obtain with respect to consumers in States adjoining New York, unless the preference clause is enacted. The Moses letter indicates intention to adhere again to another arbitrarily limited marketing area for Niagara power. The alleged difficulties cited in that letter in the way of providing Niagara power for other States, although largely figments of

a fertile imagination, again demonstrate an intention to restrict the customers for Niagara power to a relatively small group close to the site.

In essence, the marketing program contemplated by the power authority is completely opposed to the philosophy of the Federal power policy and even to the philosophy of the Power Authority Act. The policy and the statute contemplate the widest possible distribution of the power, with consequent benefit to industry and the entire economy through increased purchasing power and the better standard of living which lowered rates would help effect. The power authority program is based, instead, on "trickle down" theory which assumes that the sale of power to a few large buyers will ultimately result in some trickling down of benefit to the great mass of consumers. It is therefore imperative that the preference clause be adopted to halt this program.

3. The contention that a preference clause would be meaningless because, for reasons of geography and cost, the marketing area for the power must be narrowly delimited.

The Moses letter indicates a firm intention to apply in the marketing of Niagara power, the same narrowly limited marketing area used in connection with the St. Lawrence allocations, namely, an area of 150 miles from the Niagara site. If unchecked, this concept would eliminate the great bulk of municipalities, cooperatives who might otherwise expect to have resort to Niagara power.

This concept of a "150 mile market area" is sought to be justiced first, for reasons of geography, and secondly, for reasons of cost. Neither justification has the slightest foundation in fact.

Before this committee, it is not necessary to dwell at length upon the fallaciousness of the concept that Niagara power cannot be transmitted more than 150 miles. If that were true, neither TVA nor the Bonneville system would be able to operate. Boulder Dam is transmitting for almost 300 miles. Ontario Hydro, which is marketing St. Lawrence power, is supplying that power to many industrial customers "many of them located hundreds of miles from the major projects of Ontario Hydro on the Niagara and the St. Lawrence" (hearing February 6, 1957 before counsel to Governor Harriman, vol. 2, p. 532.)

One of the leading engineers in this country, S. E. Schultz, then Chief Engineer of the Bonneville Power Administration, pointed out before the Federal Power Commission on October 6, 1948, in support of the Power Authority's plan for a coordinated and integrated transmission system covering all of New York State:

"Advances within recent years in the art of transmission have substantially if not completely offset the effects of increased transmission construction costs, with the result that today power can be transmitted long distances at essentially the same cost per kilowatt-hour as has been contemplated in the studies and reports by the Power Authority and other agencies. * * *

"From the experience gained in the operation of large transmission systems, notably that of the Bonneville Power Administration, the assumptions in the studies and reports of the power authority to date regarding transmission line capabilities may be considered conservative.

"By applying the advances in the art of transmission and from the experience gained in the operation of the transmission system of the Bonneville Power Administration, it appears practicable to transmit large blocks of power from Massena to New York City, a distance of approximately 300 miles, on a high load-factor basis, at approximately one mill per kilowatt-hour. * *

*** "You can get a very good interplay between steam and hydro in New York State that we cannot get in the Northwest."

Similarly, Gordon R. Clapp, General Manager of TVA for 10 years, and later its Chairman for 8 years, in testifying before this committee in June 1956, as an official spokesman for the New York City Administration in support of the Lehman-Buckley bill:

***** A reduction of each one-tenth of a cent in what the city now pays Consolidated Edison for electricity for city purposes would reduce the city's direct power bill at least $2 million a year.

"We have been told, and I heard it said here this morning, that it is neither physically possible nor economically feasibe to bring Niagara power to New York City. Engineering studies made by the New York State Power Authority have clearly demonstrated that it is physically feasible and at costs that could bring great savings to the city.

"But the point I would like to make clear to this committee * * * is that the real importance of the potential power of the Niagara for the homes, farms, and industrial expansion in New York and the Northeast is not in the

amount of energy it will generate or in its very low cost at the powerhouse. The real and lasting effect of this harnessed natural resource depends upon how the power is marketed, how and where it is sold to the ultimate consumer, and at what rates. If this low-cost power in unwisely sold at the bus bar or confined to distribution at or near the site, it will produce a very limited local benefit confined to the industries and private utility companies already grabbing at this great national asset."

Three other authoritative pronouncements may be noted:

In a decision of presiding examiner Glen R. Law dated May 12, 1953, in the matter of power authority of the State of New York and Public Power & Water Corp., projects 2,000 and 2,121, there appears the following statement (see p. 43): "In the previous initial decision of December 1949, it was found that electric energy from project 2,000, the St. Lawrence power project, could be transmitted in large blocks for distances of approximately 300 miles on a high load-factor basis at a transmission cost of approximately 1 mill per kilowatthour."

Additionally, it is of interest to note that the annual report of the power authority for the year 1949 contains a study by J. D. Ross and Leland Olds which indicates that high-voltage transmission lines could be economically feasible in carrying energy for a distance of about 300 miles.

The Federal Power Commission report, "Possibilities for Redevelopment of Niagara Falls for Power," dated September 1949, states as follows (see p. 54): "If it should be deemed desirable to distribute some of the additional power to be made available from the redevelopment of the Niagara project to areas outside the State of New York, it appears that such power could be delivered to the Cleveland, Akron, and Youngstown, Ohio, and the Erie, Pa., areas.”

It should be noted that both Cleveland and Akron are more than 200 miles from Niagara Falls.

But the crowning refutation of this absurb contention is the admission that the 150-mile limitation is a myth, which appears in the very resolution adopted on February 4, 1957, by the majority of the Power Authority, allocating the Niagara power which it is hoped to secure. That very resolution is predicated upon the transmission of power, and the integration of transmission lines over an area of 268 miles between the St. Lawrence site and Taylorsville and the Niagara site.

Again, with respect to this issue, it may be noted that the Federal Power Commission report for 1955 relating to Consolidated Edison Company of New York indicates that a coordinated transmission system is feasible, beyond the understanding of Chairman Moses. It indicates that Consolidated Edison received 540,508,000 kilowatt hours from Niagara Mohawk, and itself gave to Niagara Mohawk 8,066,000 kilowatt hours. The Niagara Mohawk power received by Consolidated Edison came from Hydroelectric plants and some of that came from the Niagara plant.

Finally, on this issue of geography, it should be noted that the power authority has presented no engineering studies in support of its contention that 150 miles is a transmission maximum, and we suggest, cannot present any such studies. There is no further engineering evidence today, which will buttress that contention. It is a wholly contrived claim, designed to bolster up a marketing concept which will restrict utilization of power to users close to the site.

Nor is there any more merit to the theory that the costs beyond the 150-mile limit make it impossible to transmit economically. This is indeed cost accounting run lunatic. A similar contention was advanced with respect to St. Lawrence power in "power marketing." There, the charts on pages 10 and 11 purport to show the diminishing value of St. Lawrence power, so far as actual savings for domestic and rural consumers are concerned. What appear to be the authority's official estimates of the cost to develop the St. Lawrence in 1907, 1914, 1922, 1933 and 1940 are shown in the first chart on page 10. Examination of these figures shows that they are not the costs actually allocated to the St. Lawrence power development by agreement between the power authority and the Corps of Engineers in 1933 and 1942. They take no account of changes in design of the project from a two-stage to a one-stage development or the technological advances made in the 50-year period in reducing the costs of generation and transmission of electricity.

The figures used in the chart are synthetic figures arrived at, with the use of a price index, by a simple arithmetical calculation, and merely show fluctuations in the price level in the years selected. These synthetic figures are