other utility gets a concession or subsidy or benefit in the way of a fast tax writeoff is not reflected in the rates to the consumer.

Mrs. Prost. It has not been and I am sure that it will not be, Sena

tor.

Senator KEFAUVER. Mr. Chumbris, do you have any questions? Mr. CHUMBRIS. I have no questions, Mr. Chairman.

Mrs. Prost. Again thank you very much.

Senator KEFAUVER. Thank you very much, Mrs. Pfost.
Congressman Ullman, we will be glad to hear you now.

Mrs. Pfost, we will be happy to have you sit at our big table here. Congressman Ullman, you represent the Second Congressional District of Oregon.

STATEMENT OF HON. AL ULLMAN, MEMBER OF THE HOUSE OF REPRESENTATIVES, SECOND DISTRICT OF OREGON

Mr. ULLMAN. Yes, Mr. Chairman.

Senator KEFAUVER. The Second District is the district that contains the Hells Canyon site?

Mr. ULLMAN. That is correct, Senator. I have the eastern Oregon district that is adjacent to the Snake River on which the Hells Canyon site is located.

Senator KEFAUVER. You are in a position to give us firsthand information and impressions on this subject. We will be glad to hear from you, sir.

Mr. ULLMAN. Thank you, Senator. First I want to congratulate you and the other distinguished members of your committee for holding these hearings and commend our great friend of western resource development, the chairman of the Interior Committee, Senator Murray, for the fine job he is doing on resources. I'm going to make my statement brief this morning. I come from the district adjacent to the dam site at Hells Canyon. I have long been in the fight for full river development out there and have had occasion to stump the district time and again on behalf of a full development program rather than the type of underdevelopment and giveaway that we have seen practiced the last 4 years out in the Snake River Basin. It has been obvious that the main argument that the power company has used out there through these years has been the story that the power company dams would not cost the taxpayers any money and that the high dam, of course, would be all chargeable to the taxpayers of the United States.

Senator KEFAUVER. Where was that argument made that you say has been made out there?

Mr. ULLMAN. One of the main places it has been made is in the slick magazines of the Nation in a series of very expensive advertisements which have attempted to discredit the Federal multipurpose dam-building program. These advertisements have been paid for by the private utilities of America and they have said that the Idaho Power Co. dams would not cost the taxpayers any money.

Senator KEFAUVER. Do you have copies with you or can you furnish them to the committee?

Mr. ULLMAN. I would be very happy to do so.

It is revealing that this argument was also made by R. P. Parry, the Idaho Power Co. counsel, in the hearings before the FPC when he said

The applicant is here before you asking the privilege of constructing solely with its own money and without one cent of cost to the taxpayers of the United States for these dams.

That was hearing transcript, page 1234.

Senator KEFAUVER. What was the name of that man?

Mr. ULLMAN. Mr. R. P. Parry, who is the counsel of the power company.

Senator KEFAUVER. When did he say that?

Mr. ULLMAN. I would be glad to supply that information. It was page 1234 of the hearing record. Further in the license decision the Chairman of the Federal Power Commission, Mr. Kuykendall, stated in his opinion, No. 283, page 17, referring to the Idaho Power Co. projects

will be realized without expense to the United States to the extent that the projects are constructed by a non-Federal entity.

At the same time he rendered these decisions, tax amortization certificate applications were outstanding and were pending, so the point I would like to make

Senator KEFAUVER. You say they were outstanding. They had not been granted.

Mr. ULLMAN. They had not been granted but the applications were pending. These applications have been pending for about 4 years. Senator KEFAUVER. But my understanding is they were only announced about 10 days ago.

Mr. ULLMAN. That's right. But the applications were pending. They had applied for these even before the license was granted. I will be glad to supply the date when the applications were officially submitted by the Idaho Power Co. for the record. The point I would like to make in all of this is that now as a result of the granting of these rapid tax amortization certificates, the low dams, the private dams that have been licensed are going to cost the taxpayers of the United States a far greater sum of money than a high dam at Hells Canyon would cost because as we all know these projects in the Pacific Northwest, such as Hells Canyon, pay for themselves, they are merely capital investments on the part of the United States, the rate payers pay interest into the Treasury on the full amount of their indebtedness and repay the whole amount with a small fraction excepted for nonreimbursables into the Treasury of the United States.

So the private dams are going to cost the taxpayers in the form that has already been referred to by Senator Morse, a great amount of money, a greater amount than the public development at Hells Canyon would cost the taxpayers of this country.

The second point I would like to bring out, and I think this is particularly significant to your committee, is the aspect of this problem that relates to the type of agency and type of corporation that has been granted these certificates. This is not as you referred to a minute ago, granting something like a small-business corporation or a store down on the street a tax writeoff. It isn't the same thing even as granting General Motors a tax writeoff, because this corporation is a

public utility and operates in completely different fashion because that is a guaranteed return on its investment.

In order to hasten this argument and summarize it, I would to quote from the Portland Oregonian of May 6, 1957, wherein Mr. Herbert Lunde, editorial writer, editorializes:

What burns up the Government dam proponents and may interest all taxpayers and power consumers is this. The $6,500,000 a year withheld in taxes by the company for 5 years is collected from rate payers and put into a deferred account.

Yet it can be paid to stockholders as dividends subject only to capital gains taxation which is much lower than ordinary taxes. What happens, they ask at the end of the accelerated depreciation period if the money has been paid to stockholders and their answer is this. Probable rate increases to pay the higher Federal tax for the next 45 years. This tax benefit is an outright subsidy from the Treasury, an interest-free loan to private utilities qualifying under a nonexistent defense emergency.

The Government might justify it by requiring a utility to eliminate the loan from its rate base but utilities need not consider it in ratemaking. And, of course, if the tax savings is passed along to stockholders under the heading of capital gains, there is another tax bonanza at Government expense.

I would like to request the committee to look further into this aspect of this whole tax program. As I said before, I think it would be a shocking thing under the existing law to grant these kinds of certificates to an ordinary corporation, even to a little business or to a large corporation, a private corporation operating in the channels of ordinary business, but when they grant this form of certificate to a private utility that operates under a completely different set of rules and has a guaranteed return on its investment, then indeed, I think it is an unconscionable act of political immorality as the Senator from Oregon, Senator Morse, referred to it previously.

I certainly want to express my appreciation for the opportunity to appear before your fine committee.

Thank you.

Senator KEFAUVER. We appreciate your appearance, Congressman Ullman. Senator Murray, any questions of the Congressman?

Senator MURRAY. No; I haven't any questions. I am interested in his statement, and I wish to say I am in full accord with everything he has said. Everything he has said with reference to this matter is absolutely clear.

Senator KEFAUVER. Senator Carroll?

Senator CARROLL. Congressman Ullman, Mr. Chairman, I believe that the Congressman has put his finger on the key difficulty that confronts the consumer and the taxpayer and I would like him to talk just a little bit on that. Will you explain again how the private power utilities place this tax saving into a deferred account? I think this is the key, Mr. Chairman, because if I am not mistaken, this issue was taken up in what I think is called the Georgia power case. I suggest to the staff members they might look into that case, because the question there was whether or not this type of tax saving should be included in the rate structure.

Senator KEFAUVER. I think this is a very important point, Senator Carroll, and I will ask the staff to digest that case and furnish the committee information about it.

Senator CARROLL. I hope I am right about it, but the very thing that Congressman Ullman has put his finger on is exactly the situation

that exists in Colorado today. I think perhaps two of the private power utilities have taken advantage of this fast tax writeoff. I raised the question in Colorado publicly 2 years ago and it was sort of scoffed at, but they used this system and that is why I would like you to go over that again very briefly.

Mr. ULLMAN. I would like to state, Senator, that the distinguished lawyers on this committee know far more about the corporate structure of a private utility than I do, but it is my understanding that when these certificates are granted and this amount of tax saving, amounting possibly to five or six million dollars a year, the utility company places this in a deferred account.

Senator CARROLL. This five or six million you refer to as a tax saving.

Mr. ULLMAN. That is a tax saving that normally would go into the Treasury of the United States under their normal corporation taxes but they don't have to pay it because of these certificates. It is put into a deferred account and, of course, where the main injustice lies is the fact that the ratepayers are not allowed to benefit from this but they are given the privilege of distributing this to their stockholders directly. The company says we are going to pay these taxes in the future, but actually the company won't pay a cent because after the fast writeoff, the company will continue to receive its full return on its investment by raising rates to the consumers under the guaranteed-return provisions of the public utility laws.

Senator CARROLL. You made two very important points. One is that this money that goes into the deferred account is never reflected in the rate structure to the benefit of the consumer and, second, that the money in the deferred account is distributed and, third, if they pay higher taxes in the 45-year periods, they can use that as a cost charge to increase the rate. Is there any way you can document that from records? Mr. ULLMAN. That is my understanding, Senator, and I believe that your committee is in a far better position than I am to document it. I hope you will thoroughly examine this matter.

Senator CARROLL. I don't question at all the Congressman's statement. I wonder if perhaps in your own personal knowledge you knew that to be true in a particular State or did you get your information from a particular document? That is what I had in mind. It would expedite the research on the part of the staff.

Mr. ULLMAN. I would be happy to look through my files and document it as well as I can; yes, sir.

Senator CARROLL. Thank you. Because what you say with reference to the deferred account, I know that to be true in Colorado. I am not advised of how they dispose of the company and that is why I want to follow through. Thank you so much. Yours was a very fine

statement.

Senator KEFAUVER. Mr. Layton, do you have any questions?

Mr. LAYTON. No questions.

Senator KEFAUVER. Mr. Clifford.
Mr. CLIFFORD. No questions.

Senator KEFAUVER. Mr. Chumbris?

Mr. CHUMBRIS. I have here an insertion from the Congressional Record, that might be of interest to the subcommittee itself, on pages 6230 and 62131. It was inserted by Senator Goldwater and presents

a chart with the tax amortization certificates in the Northwestern United States showing electric power detail and statewide totals as of December 31, 1956.

Senator KEFAUVER. What is the date of that Record, Mr. Chumbris? Mr. CHUMBRIS. It is Wednesday, May 15, 1957, the day before yesterday.

Senator KEFAUVER. This refers to the Pacific Northwest?

Mr. CHUMBRIS. Yes, sir; and deals with tax amortization.

Senator KEFAUVER. I think it is very important to get into the record that insertion by Senator Goldwater, so without objection the remarks of Senator Goldwater and the accompanying table will be made a part of the record at this point.

(The document is as follows:)

TAX AMORTIZATION CERTIFICATES

Mr. GOLDWATER. Mr. President, at the outset of this statement, let me assure my colleagues that I am not speaking in favor of the broad, general principle of rapid tax amortization. In times of national emergency, I can see some excuse for using this device to encourage the rapid construction of needed facilities; but in my mind there has been a serious question regarding the continuance of this practice in peacetime.

Recently, the Idaho Power Co. was granted a rapid tax amortization certificate under the terms of the law. There was nothing illegal about this, nor was there anything illegal about the procedure which produced the certificate. But from the statements of those who advocate public power one would draw the conclusion that something funny went on in connection with the certificate. Ι do not mean "funny-ha-ha"; I mean "funny-peculiar." These advocates of public power conveniently overlook the certificates which have been granted in the public-utility field. In order that my colleagues may better know the true picture in this field, I ask unanimous consent to have printed at this point in the Record, as a part of my remarks, a list of tax amortization certificates issued up to December 31, 1956, in the Northwestern section of the United States, and also an article published in the New York Times of May 1, 1957.

There being no objection, the list and article were ordered to be printed in the Record, as follows: