CHAPTER 65

THE FEDERAL POWER COMMISSION

1. Origin and Mission

The Federal Power Commission was created as an independent administrative agency composed of the Secretaries of War, the Interior, and Agriculture in 1920,1 to exercise general administrative control over all water power sites and kindred establishments located on the navigable waters, on the public lands, and on the reservations of the United States. The commission co-operates with state and national governments in making investigations of water resources and in publishing the results thereof. It issues permits and licenses for the construction, operation, and maintenance of dams, reservoirs, power houses, water conduits, transmission lines, and kindred project works. Under certain conditions it regulates the financial operations of water power licenses, including the rates of service. It makes physical valuations of the properties of power enterprises, determines the character of their services, and controls the operation of power projects. 2. Significance of Functions

"The significance of these functions is obvious from the almost inexhaustible immensity of the water power of the United States, the growing practice of substituting water power for steam power, and by the constant appearance of new inventions for the further utilization of water power in industry." 2 In 1921 the United States Geological Survey estimated the potential water power resources of the United States at 53,905,000 horse power, while the installed capacity of water wheels was only 9,242,000 horse power.3

It is also estimated that there is sufficient water power in the country to do the work of 500,000,000 tons of coal annually, and the energy derived from it may be transmitted thousands of miles. Thus the waters of the Sierra Nevada. Mountains might be translated into the electric lights of New York City. Utilization of hydroelectric power is not limited to the milling industries and to the cities. It may now be extended to the manufacture of nitrogen from the air and to the manufacture of fertilizer from phosphate rock; to the operation of mines, transportation facilities, and farm machinery; to the lighting and heating of remote country houses; and to the execution of the simplest of the farmyard and household arts, such as milking cows, churning butter, cooking, sewing, laundrying, and sweeping.5 The seemingly unlimited uses of hydroelectric power in industry and in the rising standards of living indicates tne undetermined volume

1 Act June 10, 1920 (41 Stat. 1063 et seq. [Comp. St. Ann. Supp. 1923, § 99921⁄4 et seq.]). 2 Milton Conover, The Federal Power Commission, 1923.

3 World Atlas of Commercial Geology, pt. II, p. 14.

4 Sirrine, "The Relation of the Federal Government to the Owners of Undeveloped Water Powers on Technically Navigable Streams," in Professional Memoirs, Engineer Bureau, United States Army, pp. 216, 217 (1908).

5 Department of Agriculture Year Book, 1919, pp. 223–238.

of future water power permits that must be granted by the Federal Power Commission, and the vast amount of industrial regulations that they may have to exercise.

3. Activities; General Investigations

Preliminary investigations as to the water resources of the region that is to be developed is a necessary preliminary to all other activities of the Commission. The inquiry may be directed to a study of the projected water power industry in its relation to other industries; to its location, capacity, and development costs; and the relation of power sites to markets. When the United States can advantageously use power from its own dams for public purposes, the Commission is to determine the fair value of the power. Investigations are frequently made to determine whether public lands that have been reserved to the United States as power sites may be opened to entry subject to reservations for power uses. Other investigations have for their object the determination of deterioration of structure and equipment to establish rates of depreciation and the amount of depreciation reserves. The government is concerned with the relation of depreciation reserves to the purchase price of the property, since such accumulated reserves may be deduced, under certain conditions, from the original cost if the properties are taken over by the government upon termination of the license.

4. Same; Special Investigations

Special investigations are necessitated in order that the Commission may report findings to Congress. These include all cases where a United States dam may be used advantageously for public purposes, including navigation.

5. Same; Technical Investigations

The Commission is requested to make technical investigations when legal proceedings are brought to cancel licenses. It must advise the Attorney General. Indeed, the Commission must co-operate with state and national agencies in these investigations. The several executive departments, in turn, are required to furnish information or personal assistance when requested by the Commission in these investigations.

6. Same; Co-operation with State Commission

When Congress authorized two or more states to enter into a compact as to the apportionment of the water of rivers, as was done in regard to the Colorado river, the Commission awaits the organization of commissions in the several states concerned, and, when these state activities have been outlined, the Commission may determine the scope of its own investigations required to decide upon applications for water rights.

7. Same; Co-operation with International Joint Commission

Co-operation with the International Joint Commission was effected in the matter of the St. Lawrence river, and the Federal Power Commission received reports for boards of engineers of both the United States and Canada.

6 Act Aug. 19, 1921 (42 Stat. 171). See, also, 41 Stat. 1065, § 4b (Comp. St. Ann. Supp. 1923, § 99921⁄4c).

8. Same; Notice of Applications

Notices of applications for permits, required to be published in a daily or weekly newspaper in each country in which a project is situated, at least once weekly for eight successive weeks, necessitated other investigations."

9. Same; Licensee Reports Cost of Construction

The licensee must report in detail the actual legitimate cost of constructions of the project and the price paid for water, land rights of way or other interests in lands.

10. Same; Applicant's Preliminary Investigations

The applicant for a permit, therefore, must make some investigation on his own account before he files his applications, for he must submit therewith, a statement of the nature and amount of data that is available concerning the power site, which may include maps, plans, surveys, explorations, and stream measurements, and a general map showing the nature of the project and its principal features.

11. Same; Requirements of Application

If the application is for a license for a major project, it must be accompanied by field notes or a description by metes and bounds of the project area including transmission lines. It must show compliance with the requirements of the state in which the project is to be located with particular respect to the bed and banks, the right to appropriate the waters for power purposed, and the right to engage in the business necessary to effect the purpose of a license under the act and show the effect of the project upon the normal flow of the stream and of its relation, if any, to navigation, irrigation, reclamation, flood control, and water supply. The applicant must submit a general map showing the principal structures, the entire transmission system, and other features of the general idea of the project. The status of title must indicate as to the property in question and the adjacent public lands, if any.

12. Same; Legal and Judicial

The Federal Power Commission must dispose of many legal questions in the conduct of its activities. This calls for considerable administrative discretion. The administrative problems may be in the nature of interpretations of the original act, or they may pertain to the relation of the Commission to other agencies, state or national. Other problems may involve the state and national laws and international treaties in their relation to the operations of the Commission. It may act both as an attorney and as a judge in legal proceedings, as the particular case may require. (a) It acts as an advisor of the Attorney General for the enforcement of the provisions of a license or in cases of license cancellation. (b) As a judicial agency it must "hold hearings in connection with the application for any permit or license, or the making of any investigation, or the regulation of rates, service, or securities. It may order testimony to be taken by deposition at any designated place. By subpoena any member of the Commission may com

741 Stat. 1066, § 4e (Comp. St. Ann. Supp. 1923, § 99924c).

pel the attendance and testimony of witnesses and the production of documentary evidence from any place in the United States. Should a subpoena be disobeyed, the aid of the proper United States District Court may be invoked. The Commission is empowered to administer oaths, examine witnesses, and receive evidence, and it may designate others to do so in its behalf." (c) Legal opinions are prepared by the legal division as the basis of formal decisions of the Commission. They cover, inter alia, such subjects as transfers of permits issued under former laws, their extensions and revocations; timber in the power reserves; jurisdiction over allotted Indian lands; jurisdiction over power dams in navigable waters and over international boundary streams. The authority of licensees to lease properties to other persons requires legal consideration, as does the character of advertising in its relation to the issuance of licenses. Many informal. opinions, and memoranda are prepared by the legal division for the Commission.

(d) The legal division of the Commission makes reports in the legal situation involved in proposed water power development, such as that of the Niagara river. It also passes upon the sufficiency of all applications filed and the execution of all permits and licenses. This division is also charged with drafting and promulgation of rules, regulations, orders, and forms of permits and licenses. 13. Same; Permits and Licenses

The Commission's authority to issue permits and licenses takes two forms: (a) Preliminary permits for the purpose of enabling applicant for a license to secure necessary data to fulfill the preliminary requirements for license such as submission of maps, plans, and evidence that applicant has complied with the laws of the state in which the project is to be located. Under the act, the Commission must publish a notice of an application for a permit in a newspaper in each country in which the project is located once a week for eight successive weeks.

(b) Licenses to construct and maintain water power plants, and all necessary accessories, and for the construction of project works that may aid navigation are issued to citizens, corporations, states, or municipalities. The Commission's function is then to ascertain if the proposed construction would affect commerce. If it would have such effect, the declarant must obtain a license before proceeding. If commerce would not be interfered with, and if the public domain is not involved, the declarant has only to look to compliance with state laws.

14. Declaration of Intention

When it is proposed to construct a power project in any stream or part thereof, not within the definition of navigable waters, as used in the act, but where Congress may have jurisdiction thereof by reason of the effect of the project on navigable waters below, a declaration of intention may be filed with the Commis

sion.

15. Restoration of Power Site Lands

When application is made for a power permit the public lands that are included in the proposed project are reserved from disposal until otherwise direct

8 Const. U. S. art. 1, § 8.

ed by the Commission or by Congress. When application is made for restoration of lands so reserved the Commission may order their restoration to entry or other disposition either with or without a power reservation. When application for restoration of lands otherwise reserved or classified as power-site lands is made, the Commission determines whether the value of such lands for the purposes of power development will be injured by location or entry under the public. land laws, subject to a reservation of the right to use them for power development. If no injury is evident, the Commission notifies the Secretary of the Interior of its determination to that effect, who will then declare the lands open to entry, subject to the power reservation which must be included in the patent issued for such lands.

16. Accounts and Reports

The Commission may prescribe rules and regulations for the establishment of a system of accounts and the maintenance thereof by its licensees. At any time, within the discretion of the Commission, it may require them to submit reports and statements of accounts for examination, including full information as to assets and liabilities, capitalization, net investment and reduction thereof, gross receipts, interest due and paid, depreciation, and other reserves. It may also require information as to the cost of the project, cost of maintenance and operation, cost of renewals and replacements of the project works, and as to the depreciation of the project works, and as to the production, transmission, use and sale of power. The Commission may require any licensee to make adequate provision for currently determining said costs and other facts.

In states which have, through a public service commission or similar agency, established accounting systems for electrical power companies, operating as public utilities, the Commission permits such licensees to keep their accounts in accordance with such accounting systems, with such additions, if any, as may be necessary to enable them to make the reports required under the rules and regulations of the Commission.

17. Certified Copies of Records

The Commission furnished certified and noncertified copies of its records, in its discretion, upon request at scheduled fees. Such records, include photostat copies of Geological Survey maps, blue-print copies of tracings of General Land Office records, etc.

18. Field Work

The Federal Power Commission's field work is accomplished through the War, Interior, and Agriculture Departments. The United States Geological Survey supervises stream-gauging operations in connection with projects. The 22 district engineers of the Geological Survey, the 8 foresters of the Forest Service, and the district engineers of the War Department, represent the Commission in the field, and submit their reports to their respective departments for the consideration of the Commission.