In oral argument on the case an FPC attorney said the cost to taxpayers would be "out of reach" if the Commission permitted the companies to charge consumers for taxes which they do not actually pay.

FPC Counsel Abraham R. Spalter said the utilities, under the proposed ruling, could build up reserves for deferred taxes which would snowball into billions of dollars. He said class A and B electric utilities in 1954 spent $2.946 billion on additions and expansion, and that, based on 33 years of life for these facilities, assuming the same rate of expansion, the reserve could be as high as $8.622 billion by 1987, with the rate payers contributing $17.962 billion.

The higher contribution by consumers results from the fact that a utility must collect $2.08 from its customers in order to retain $1 under the present 1952 tax rate.

In the case of Amere Gas Utilities Co., the FPC declared: "The argument that the sums in the reserve account will rightfully belong to the rate payers or that the rate payer will bear any burden they do not bear by reason of the creation of the reserve is wholly erroneous."

Now, returning to my prepared statement-the Federal subsidies to privately owned electric utilities raise serious questions relating to monopoly.

In an industry in which direct competition is generally uneconomic, the institutional competition provided by rival types of ownership has proved effective in protecting the interests of the consumers. The public-power yardstick has been demonstrably successful in reducing rates to electric users. Rural electric cooperatives led the way in providing modern electric service in rural areas. Federal power projects, while not serving many electric consumers directly, have furnished low-cost wholesale electricity to many of the consumerowned electric utilities. Yet, despite the success of these power programs, the electric utility industry today is, roughly, four-fifths privately owned.

Competition in this vital area of our economy depends upon the health and vigor of approximately 20 percent of the industry composed of the consumer-owned systems-municipal utilities, publicpower districts and other types of local publicly owned electric systems, and the rural electric cooperatives. These consumer-owned utilities are not only smaller in the aggregate than the privately owned utilities, but individually they are also considerably smaller than the private power companies. For example, the average class A and B local publicly owned utility is only about one-tenth the size of the average class A and B privately owned utility. The Federal Power Commission defines a class A and B utility as one having gross annual electric revenues in excess of $250,000 per annum.

Since the benefits of the rapid-writeoff subsidy accrue only to privately owned power companies, this program defeats competition in the industry by strengthening the 80 percent represented by private power companies to the disadvantage of the 20 percent consisting of the consumer-owned electric utilities. The magnitude of the subsidy to the companies and of the monopolistic threat it poses to competition in the industry can be seen if we compare it with the plant investment of the consumer-owned systems.

According to Federal Power Commission and Rural Electrification Administration statistics for the year 1954, the local publicly owned electric utilities had an investment in electric utility plant less reserves of $2.800 million, and the rural electric cooperatives $2,003,041,000, or a total electric utility plant less reserves for the consumer-owned portion of the industry of $4,803,041,000. This compares with the total

94133-57-pt. 1- -12

subsidy to private power companies from the certificates of necessity issued in the past 6 years of $4,940,429,000.

Thus, Federal tax subsidies to the power companies under the rapid amortization program have exceeded the total plant investment less reserves of all of the consumer-owned electric systems as recently as 3 years ago.

In view of power company propagandists' charges, it is pertinent to note that this subsidy of $4,940,429,000 also far exceeds the total electric plant less reserves of the Federal Government which in 1954 amounted to $3,141,206,000.

Senator KEFAUVER. Mr. Radin, I think it might be useful for the record if we read two sections from the hearings before the Joint Committee on Defense Production of the 84th Congress, 1st session, in connection with the Defense Production Act, pages 31 and 32. At page 31 the chairman asked Dr. Flemming:

You wouldn't expect tax amortization to take this up, would you?
And Dr. Flemming answered:

Mr. Chairman, in the past we have had pretty good success with the taxamortization program in this area. It is true, as I indicate here, that under our former goal there was construction of 42 million kilowatts of capacity, about 30 million of which was private construction. Of this private construction, about two-thirds, or 20 million kilowatts, was covered by tax amortization. The remaining, namely, a little more than 11 billion, resulted from Federal, State, or municipal projects. Both public and private construction contributed to the attainment of the goal. Our feeling is based on some contacts that we have had in terms of applications that are pending and/or on file. We feel we can make considerable progress in the direction of reaching the new goal as a result of holding out this particular incentive. Of course, time alone will tell us, but the history of the past is encouraging.

Representative RAINES. Mr. Chairman-you don't mean that all of the privately owned investments were made under the tax-amortization program. As a matter of fact, in the South, as I understand it, most developments were made without the tax-amortization program.

Dr. FLEMMING. Mr. Congressman, our figures indicate that of that 30 million of private investment that I talked about, 20 million was certified under the tax-amortization program. I don't know what the breakdown is geographically. Then, without objection, the section marked here on page 32, which presents the breakdown insofar as steam plants and hydroelectric plants and private power as against public power, will be included in the record. It shows that a large part of these amortization awards. have been for steam plants, while some have been for hydroelectric plants. It shows that Federal, State, and municipal agencies, on their 11,199,000-kilowatt installed capacity during this time, received no aid of this kind, and that private power received aid on 20,197,000kilowatt capacity installed.

(The material referred to is as follows:)

Steam.

I. Certified under tax amortization program (Jan. 1, 1952-Dec. 31, 1954)

Hydroelectric..

Total...

Senator KEFAUVER. All right, Mr. Radin.

Mr. RADIN. An advertisement appearing in the Saturday Evening Post of last December 29, sponsored by private power companies composing the electric companies' advertising program, asserted:

Right now America's more than 400 independent electric light and power companies are planning and building to have twice as much electricity for you by 1965. These companies can have the power ready when you need it because they don't have to wait for an act of Congress-or for a cent of tax money— to build plants.

We can only interpret this as an admission by the companies that they do not need the $4,940,429,232 in tax subsidies provided by the certificates of necessity for rapid tax amortization issued to them by ODM. We believe that Congress should act immediately to stop this program, and that methods should be explored for assuring that the consumers of these companies receive the benefits of this needless subsidy. We have a special interest in this action being taken, inasmuch as many of the member systems of our association purchase power at wholesale from privately owned electric utilities.

We further respectfully call to the attention of this subcommittee the potentially greater abuses which might arise under the liberalized depreciation authorized in section 167 of the Internal Revenue Act of 1954.

And finally, we submit that the only answer to the subsidized exploitation of a great natural resource as provided by the recent issuance of subsidy certificates to the Idaho Power Co. is authorization by the Congress of the high Hells Canyon Dam.

Thank you, sir.

Senator KEFAUVER. Thank you, Mr. Radin, for a clear and useful statement.

Senator O'MAHONEY. Mr. Chairman, I think the witness has done the committee, the Senate, and the country a substantial service in the presentation of this material. I have no questions at the moment. Senator KEFAUVER. Thank you very much, Mr. Radin.

Mr. RADIN. Thank you very much, Mr. Chairman and members of the committee.

Senator KEFAUVEK. Mr. Richard Shipman, you are appearing for Mr. James G. Patton, president of the National Farmers Union; is that correct?

STATEMENT OF JAMES G. PATTON, PRESIDENT, NATIONAL FARM-
ERS UNION, REPRESENTED BY RICHARD SHIPMAN
Mr. SHIPMAN. That is correct. Mr. Patton unfortunately was de-
tained in Chicago by a meeting of the executive committee of the

International Federation of Agricultural Producers, of which he is vice president. So I have the privilege of presenting his statement to you this morning.

Senator KEFAUVER. Mr. Shipman, what is your position with the Farmers Union?

Mr. SHIPMAN. I am assistant coordinator of legislative services for the National Farmers Union.

Senator KEFAUVER. You have some familarity with the subject matter under discussion personally?

Mr. SHIPMAN. Well, considerable, although I have not been in touch with it as recently as I used to be. I have some familiarity with it. Senator KEFAUVER. All right, Mr. Shipman, do you want to read Mr. Patton's testimony?

Mr. SHIPMAN. If I may, please.

Senator KEFAUVER. All right, sir.

Mr. SHIPMAN. Mr. Chairman and members of the committee, it is an honor and an opportunity to appear before this subcommittee with members who devote themselves so unflaggingly to the public interest in our water and power resources.

The fact that you have called these hearings is a fitting rebuke to those who insist that the American people are no longer concerned with the grave questions that have arisen, particularly as to whether their public resources should be developed for the welfare of the many and of the Nation, or exploited for the selfish purposes of a few.

I do not doubt their answer, once the people know the truth. It is part of the purpose of this hearing to pierce the veil of doubletalk, of cant, and of conspiratorial confusion on this issue.

Let me assure you that the truth will eventually come out. Those who have attempted to deceive and to cheat the people will ultimately find no place to hide. I am as sure of that as that I am that day follows night, although I am not so sure that it will happen in time to stop some more major giveaways.

Farmers have long known the interdependence of land and water, although it has been more recently that they learned the interdependence of land and power. And the hard facts which farmers of the arid West long ago learned about water are now coming home to the entire country and to the entire pouplation.

This Nation faces a water crisis-East, West, North, and Southfarmer, industrialist, gardener, homeowner, sportsman, and business

man.

It is largely a crisis of supply. One can express one phase of it with a few figures. We Americans are now using somewhat over 200 billion gallons of water daily. By 1975 we shall be using 400 billion gallons daily. The supply from the skies remains constant, but we shall be confronted with a larger and heavier task in finding, developing, and directing the supply where it is needed.

To put it bluntly, the days of cheap water are gone forever. Save for a few fortunate communities, every city in the land is finding it harder to develop water, and enormously more expensive.

On the farm front, and particularly on the irrigation front which is so vital to continue development of the great West, the crisis is not so much in continuing to develop supply. Rather the question is who

shall profit-the people, or other interests which may be more powerful?

I am thinking in particular of the sad story of the so-called 160acre limitation, which was adopted to insure that the reclamation program should be a homestead program, dedicated to making new family-farm homesteads in the West, rather than factories in the fields with an overseer and a lot of hired laborers who have no hope of ever owning a farm of their own.

This principle says that federally financed water shall not be offered to more than 160 acres in 1 ownership unless, or until, the Federal facilities are fully paid for. It is a just and a mild stipulation.

In the past 20 years Congress has repeatedly refused to repeal this provision because of its manifest intrinsic merit. Nevertheless, the limitation has now been so bypassed and eaten into by specific congressional exceptions, by bureaucratic rulings, particularly in the last 5 years, and by other subtle and indirect means, that it is almost dead. It has been, as the saying goes, "nibbled to death by ants." But it is my observation that a man subjected to that peculiarly cruel form of punishment is as dead as he who has died by the clean stroke of a sword or a bullet.

The slow death of the 160-acre limitation is one of the great untold stories, untold by a national press that has found it expedient to be much more interested in other matters. It should be told, and it will be told.

In the field this hearing has been called to consider-that of electric power, the muscle of a mighty and growing Nation to renew its strength like the eagle which is its national emblem-several considerations appear to me.

One that I find most significant is that the party in national power recently held a worried conference in Salt Lake City, Utah. That meeting was called to cope with the fact that the Republican Party had lost heavily in the West and Northwest in the recent electionsa loss so grave as to deprive it of its control of the Senate.

The consensus of the meeting seemed to be that the party must do a harder job of selling something which has been christened by its publicity men as "modern Republicanism," or "the new Republicanism." Well, I have a kindly feeling for those who would modernize either the Republicans or the Democrats. Such people deserve our support, even though events have shown that in cases where they become too sincere and zealous, they may also need our sympathy and commiseration. As it happens, the prescription was right at hand. But, so far as I can gather, it was totally ignored in the Republican meeting in Salt Lake City. The Republican leaders who were there 2 weeks ago should have listened to the following quotations which I will identify in a moment.

We should make it our duty to see that hereafter power sites are kept under control of the General Government for the use of the people as a whole, in a way which shall encourage development of the water power, but which shall not create a monopoly or permit the development to be antisocial, to be in any way hostile to the public good. The Nation alone has the power to do this effectively. Listen-that is not all. I am omitting a little for brevity, but the quote continues:

I have been genuinely amused at having arguments presented to me on behalf of certain rich men in New York and Ohio, for instance, as to why Colorado and