Federal project. There are serious questions, both legal and economical, involved in this first attempt to impose upon the people of the State of New York a Federal preference policy. Here in New York we have a fully developed area, the leading industrial State in the Nation, and the second largest dairying State. Every farm is electrified, the industrial rates are among the very lowest in the country, including those in the TVA area. The residential and farm rates are below the national average. There is no popular demand or need for the application of the so-called yardstick.

The law of the State of New York has enabled municipalities to go into the business of distributing electricity since 1934. Yet within the market area of this project there are only 26 municipal systems serving only 55,000 people. There are only 2 REA co-ops serving 1,700 people. As a matter of fact, on February 1, 1957, the people of he city of Dunkirk by referendum voted to sell their municipal powerplant to the Niagara-Mohawk Power Corp., and on June 19, 1956, the people of Ogdensburg, N. Y., by referendum elected not to condemn and take over Niagara-Mohawk power system in that city but voted to continue to be served by the utility.

In the entire State of New York, the power consumed by customers of municipally owned plants amounts to only about 2 percent of the power consumed in the State. In all of the State of New York, there are only 5 REA co-ops with an aggregate demand of 4,600 kilowatts serving 0.1 percent of the people of the State and using less than one-twentieth of 1 percent of the power. Moreover, in New York, rate and other regulation are the strictest in the Nation. Rates are fixed on a bare cost-of-service basis and rates of return are very closely policed and appropriately limited.

When the New York Power Authority was an applicant before the Federal Power Commission for a license to develop the St. Lawrence project, certain public power advocates appeared before the Commission and asked that there be included in the license an absolute preference for municipalities and rural cooperatives similar to those presently contained in the Clark bill.

The Commission found and I quote: "The provision for rural and domestic consumers carried in the New York State law under which the power authority must distribute power is equitable and in the public interest and does not appear that the Federal Power Act authorizes imposition of a preference clause similar to that imposed in the sale of power from some Federal powerplants." It must be remembered that it is proposed to integrate the power developed at Niagara with the power presently being developed in the St. Lawrence River by the New York Power Authority, and what a chaos and confusion it would be if the St. Lawrence power were not subject to a Federal preference provision and such a provision controlled the power developed at Niagara.

It is estimated that this project will cost $600 million and it must be wholly financed by the State Power Authority. by the sale of bonds in the public market, not backed in any way by State credit. In connection with the Federal preference provision as incorporated in the Clark bill, the present chairman of the New York State Power Authority, Mr. Robert Moses, said on March 13, 1954, and I quote: "This bill (referring to the Lehman bill introduced in the 83d Congress) provides for a license to the New York State Power Authority but with conditions and provisions not incorporated in the State law and never approved by our State legislature. Such legislation by Congress would represent an unwarranted interference by the Federal Government in the State affairs."

And on March 27, 1954, he said and I quote: "The existing State law covering our authority gives no preference in service to public powerplants. We must operate under this law and we do not and cannot prefer municipal as against private utility operation, nor can we as a practical matter sell our bonds on any such theory.

And he further stated on April 23, 1954: “95 percent of New York consumers are at present served with publicly owned facilities. This assures benefits for the majority of consumers no matter by whom served ***."

The great tragedy of this situation is that this additional water was authorized to be diverted for public purposes by a treaty with Canada in 1950 which contained a reservation upon ratification by the Senate that it should not be developed until the Congress had determined by what agency.

We have had almost 7 years of debate but not power, and while it was an economic catastrophe that our State and our country lost the contribution which might have been made durnig these past years to the total strength of

our Nation by this inaction, all to the benefit of Canada which has now and is, pursuant to the terms of the treaty, using the American share of the water. It would now be a national tragedy to pass a bill which would in effect lead to only further litigation, inaction and stalemate because the legislation contained provisions inconsistent with the laws of the State of New York and terms which would make it legally impossible for the State Power Authority to accept the license.

When former Gov. Thomas E. Dewey testified before this committee concerning this problem on Thursday, July 23, 1953, he had this to say concerning a Federal preference provision, as reported on page 30 of the Senate hearings, and I quote: "Preference is a matter as we all know, preference means whoever will set up a municipally owned plant or as a cooperative gets a preference on the use of the public power and then you have to build a line to deliver it to them-that has certainly helped in the development of many areas in the western part of the United States particularly. It is entirely inapplicable in New York, because we are fairly fully developed and we have adequate transmission lines to every corner in the State and every spot in the State. We are almost completely electrified rurally

*

The New York State Power Authority Act (Pub. Auth. law, par. 1005, subdiv. 5) declares that the Power Authority "shall, in addition to other methods which it may find advantageous, make provision so that municipalities and other political subdivisions of the State ** may secure a reasonable share of the power generated by such project."

The former Attorney General of the State of New York and the present distinguished junior Senator from the State of New York, the Honorable Jacob K. Javits, had this to say about the New York law and the preference provision of the former Lehman bill and the present Clark bill on July 9, 1956, and I quote: "This preference policy of the State of New York was deliberately formulated so as to give the benefits of project power to all the people to whom it could be economically made available (1) because 95 percent of the consumers in the State are served by private distributing systems and there has been no marked dissatisfaction with the service such distributing systems have provided, and (2) because the benefits of low-cost production of power can be entirely lost in high cost transmission of power.

"H. R. 11477 (referring to the bill introduced by Congressman Buckley in the House of Representatives in the 84th Congress which is identical with the bill presently introduced in the Senate by Senator Clark of Pennsylvania) would direct the Federal Power Commission to include in the license issued to the Power Authority the condition that municipalities and rural cooperatives, irrespective of their locations, be given an absolute preference in the purchase of project power, and the condition that contracts for the sale of project power to private distributors contain a provision for withdrawal of power to meet the future requests of such preferred customers. The bill is, in this respect, in my view not consonant with the policy or the laws of the State of New York. It prefers the very few in the State to the many, and in so doing is contrary to the interests of he great majority of farmers who are served by private utilities. There are only 5 cooperatives serving a small number of rural consumers in this State and there are only 24 villages and other small municipalities in this State that have their own distributing system. It ignores the economic factor in transmitting power. It renders uncertain the marketability of project power and the financing of project construction. It seeks to force people who may not want them into municipal ownership or cooperatives. And, it fails to meet adequately the situation created by the loss of the Schoellkopf plant.

"Finally, under the present preference provision of H. R. 11477 (referring to the bill introduced by Congressman Buckley in the House of Representatives in the 84th Congress which is identical with the bill presently introduced in the Senate by Senator Clark of Pennsylvania), the Power Authority would not only have to make a reasonable portion of the project power available in neighboring States-which is entirely consonant with the New York law-but would also, in the allocation of such power, have to give absolute preferences to municipalities and rural cooperatives irrespective of their locations in those States and notwithstanding anything to the contrary in the laws of those States."

My entire record in the House of Representatives for the past 7 years will prove that I believe fully in the proposition of States' rights, and I am predicating my argument for the support of the Ives-Javits bill, S. 1037, entirely upon that basis. This project is to be built in the State of New York by funds raised and spent wholly by an agency of the State of New York and for and upon a proposition

that affects primarily only the residents of the State of New York. I ask you only to treat us in New York in the way you would legislatively have me act in connection with matters affecting primarily the people within the States you represent.

On June 23, 1954, when I was present on the floor of the House of Representatives, the bill, S. 119, of the 83d Congress, was passed by the House of Representatives providing for the construction by the Grand River Dam Authority of the State of Oklahoma of what is known as the Markham Ferry project, providing a total capacity of 72,000 kilowatts of power. As the two distinguished gentlemen from the State of Oklahoma in the House of Representatives, Mr. Thomas Steed and Mr. Ed Edmondson, can testify, I aided in the passage of that bill by a voice vote. A rollcall was not requested and no objection was registered to that bill. The Grand River Dam Authority is a creation of the State of Oklahoma just as the New York State Power Authority is a creation of the State of New York. The Federal preference clause is not mentioned in the Markham Ferry legislation nor was the clause made a condition of the Federal Power Commission license issued September 12, 1956, to the Grand River Authority.

A bill supported by both Republicans and Democrats, was approved by both House and Senate and signed into law on July 7, 1954, authorizing Public Utility District No. 2 of Grant County, Washington State, a State agency to construct a $364 million Priest Rapids Dam on the Columbia River and this project is now actually under construction. Written into this law was a provision that the power be made available to other States within economic transmission distance just as does the Ives-Javits bill, but there was no Federal preference clause in this legislation guaranteeing first claim to municipalities and rural cooperatives. As a matter of fact, during the course of the Senate debate the distinguished Senator from Washington, Senator Magnuson, offered an amendment to the bill providing for the inclusion of a Federal preference clause. This was defeated on a rollcall vote, 45 to 29.

In the 83d Congress, 2d session, there was enacted Public Law 346, providing for the development of the $100 million Coosa River development by a private utility, the Alabama Power & Light Co. Both House and Senate passed the bill on a voice vote and on June 28, 1954, the bill became law. The application by the Alabama Power & Light Co. is now pending before the Federal Power Commission, but the important point is that there was nothing in the legislation even remotely resembling a Federal preference clause such as is now being suggested for the people of the State of New York.

Actually, the Congress of the United States has never included a Federal preference clause in a bill authorizing power development to an agency other than the Federal Government itself, and the Federal Power Commission has never made a Federal preference clause a condition for issuing any power license. The fact of the matter is that in only one case in its entire history, the St. Lawrence project previously referred to by me, was the matter ever considered by the Federal Power Commission, and at that time by a vote of 3 to 1, the Federal Power Commission decided to give the license to the New York Power Authority without a preference clause because the majority felt it was a violation of the Federal Power Act.

In conclusion, I would like to emphasize that this project, if permitted to move forward expeditiously, would make a mighty contribution to the economie and industrial strength of our country and to our national defense efforts. Enabling legislation is needed urgently but that legislation must take cognizance and be consistent with New York State law and with the realistic economic questions involved.

The only bill which would legally authorize the New York State Power Authority to move and move rapidly for development is S. 1037, which provides for the distribution of the power in accordance with the laws of the State of New York and for the distribution of that power which reaches other States according to the laws of the States in which it is to be distributed.

Unrealistic preference provisions, tending only to encourage condemnation of existing systems some day in the future, perhaps would not present a sound business picture which would attract from investors $600 million required for this project and which the power authorities of the State of New York must secure only from the sale of its bonds and repay only from the proceeds of power. sales made in the normal course of a sound business operation.

I am very grateful to you, Mr. Chairman, and to the members of the committee, for this opportunity to appear before you and I will be delighted to answer any questions.

Senator NEUBERGER. The next witness on the list is Mr. Robert Moses, the chairman of the New York State Power Authority.

Would you like to commence your presentation now for 25 minutes of the time the chairman of the subcommittee suggested we continue here today, or would you prefer to start afresh tomorrow?

Mr. Moses. It will be very difficult for some of us to stay over. I don't know whether we can do it or not. I have to talk to some of the other people who are here.

Senator KUCHEL. If I may interrupt-and I am apologizing for being compelled to leave to go to the Senate-I wonder if it is possible to have a meeting this afternoon. This is a busy public official who has come down here with his staff. I would suggest, if it at all possible, that we convene this afternoon, Senator Neuberger. I want very much to listen to the testimony, and I have some questions of members of his staff.

Mr. MOSES. Senator, you also have the representatives of the utilities and of the industries on the Niagara frontier.

Senator KUCHEL. For tomorrow.

Mr. Moses. If you move this over until tomorrow, where do they come in?

Senator NEUBERGER. We will try to get Senator Kerr. It is obvious I don't have the authority inasmuch as the chairman of the subcommittee requested that we recess until 10 tomorrow morning. I don't have the authority or the desire, either, to counteract his request. I will try to get him on the phone at the Finance Committee and state the situation and see what his wishes are.

Senator KUCHEL. I will be available.

Senator CARROLL. I will join with you on that, Senator Kuchel. Senator NEUBERGER. May I tell him, Senator Kuchel, that you can return this afternoon at 2:30 or so?

Senator KUCHEL. I can, and I will.

Senator CARROLL. I will be here, too. We have to get special permission from the floor.

Senator NEUBERGER. I will request that on the floor.

I talked to the chairman of the subcommittee, and he said it will be agreeable with him for the committee to take up again this afternoon. Of course, there will be some Senate votes. During that period we will have to stand in temporary recess.

So I suggest that we come back this afternoon at 2 o'clock, if that is suitable for the witnesses. We will try to do that.

We stand in recess until 2 this afternoon.

(Thereupon at 12: 10 p. m. the committee recessed, to reconvene at 2 p.m. this day.)

AFTERNOON SESSION

Senator Neuberger (presiding). Our time is limited, so I believe we had better commence right at 2 o'clock.

Mr. Moses, we are very pleased to hear from you. I think this is your time for the witness chair. If you would like to sit at the end of the table that will be fine with us.

91898-57--5

STATEMENT OF ROBERT MOSES, CHAIRMAN OF THE NEW YORK POWER AUTHORITY

Mr. MOSES. Senator, if you have no objection I should like to ask Governor Poletti to present a letter for Governor Harriman.

I would like to make this statement before Charles Poletti reads his letter. Our differences in New York are neither as deep as a well nor as wide as a church door. They can be exaggerated. I think that what we all want is a workable bill.

Senator NEUBERGER. Is it agreeable with Governor Poletti to present his testimony at this time?

Mr. POLETTI. I can do it after Chairman Moses or before, as the committee sees fit.

Senator NEUBERGER. If it is all right with you, and that is Mr. Moses' wish, fine.

Mr. MOSES. I think it would be a matter of courtesy to see what the Governor has to say first.

Senator NEUBERGER. I want to be certain that this procedure is agreeable with Governor Poletti.

Mr. POLETTI. I will be ready to answer questions.

Senator NEUBERGER. Will you state your full name and title for the benefit of the record.

STATEMENT OF CHARLES POLETTI, FORMER GOVERNOR OF THE STATE OF NEW YORK

Mr. POLETTI. I am Charles Poltti, and I am a trustee of the Power Authority under the able chairmanship of Mr. Robert Moses.

This is a statement by the chief executive of the State of New York, which he has asked me to read to the committee. It is as follows:

STATEMENT OF HON. AVERELL HARRIMAN, GOVERNOR OF THE STATE OF NEW YORK, AS READ BY FORMER GOV. CHARLES POLETTI, TRUSTEE OF THE POWER AUTHORITY OF THE STATE OF NEW YORK

I am grateful for the opportunity once again, to convey to your honorable committee my views in support of a bill, S. 512, to authorize the construction of certain works of improvement in the Niagara River for power and other purposes.

My position in connection with this legislation has been made clear on numerous occasions. My views remain unchanged. In my opinion one of the most essential needs of the State of New York will be met by immediate passage of this legislation. It would end the wasteful delay in authorizing the Power Authority to develop the State's great potential hydroelectric resources at Niagara Falls, and it would enable domestic and rural consumers, industry, municipalities and rural electric cooperatives to enjoy the benefits of such development. Electrical energy and power, the value of which amounts to millions of dollars per year, is wasted every year that Federal action is delayed. Since testimony was offered before this committee on my behalf in the summer of 1955, a rockslide at Niagara Falls virtually destroyed the Schoellkopf plant where power was generated by one of the public utilities. Subsequently in connection with an application by the New York State Power Authority to the Federal Power Commission for a license for the Niagara project, it was agreed in the event that a license were granted to the authority, that it would sell to this utility company 445,000 kilowatts of power upon terms similar to those offered other purchasers of power for resale, if the company would relinquish its own license. This would enable the utility company to supply this amount of power to the industries which it had supplied with power from the Schoellkopf plant before the rockslide.