It had a small power plant located in the Queen Victoria Park, and under its charter it could only use power generated therefrom to run the Canadian railway. In 1901 this charter was amended so as to permit the use of electricity for its railroads on both sides, and the plant has been developed by the expenditure of $265,000, so that now it can generate 3,600 horsepower. The effective head is 68 feet, so that it takes about twice as much water to develop this power per horsepower as in the great plants I shall hereafter describe. It is quite clear that the original investment in the purchase of the railway was not made to secure the transmission of electric power across the boundary, because there was no power to do so under the charter. The subsequent investment of $265,000 can perhaps be said to have been made with this in view. Capt. Kutz recommended that 2,500 horsepower be reserved for this company. The commissioners of Queen Victoria Park refused to approve the plans of this company for a transmitting line to the boundary, so that it can not now use the electricity except on the Canadian line, where it uses 1,200 horsepower. It generates now 3,600 horsepower. The permit of 2,500 horsepower would effect a saving of $30,000 a year. The investment for transmission to the United States does not exceed $265,000. All that can be reasonably expected from the outlay under the circumstances is not to exceed 7 per cent on the remainder, or about $18,000. The permit should not, therefore, issue for more than three-fifths of 2,500 horsepower, or 1,500 horsepower. The fact that it may generate 8,000 horsepower by the expenditure of $150,000 I do not regard as important, and I carry out the purpose of Congress in taking away any motive for making such an investment. The amount of 1,500 horsepower will be reserved to await the decision of the Dominion Government in the controversy between the International Railway Co. and the commissioners of Queen Victoria Park. This leaves out of the 160,000 horsepower 158,500 horsepower to be distributed to the other three Companies. Let us consider their financial status and prospects.

The Ontario Power Co. was incorporated in 1887, and there was no limitation in its charter upon the amount of power which it might generate. Its plans, however, were subject to the approval of the commissioners of Queen Victoria Park, and plans for its works have been approved for 180.000 horsepower. The head works for this amount have been constructed and located above the first line of rapids. It was necessary under the plans to construct three conduits through the park. Only one of these conduits has been constructed, and it has a capacity to supply six generating units, three for 10,000 horsepower each and three for 12,000 each, or 66,000 horsepower in all. The cost to complete the six units and thus produce 66,000 is $6,500,000.- The amount required to complete the plant to the projected size, producing 180,000 horsepower, would be $6,500,000 additional; and the amount required to produce 120,000 horsepower woull be about $3,200,000. In addition to this, the Ontario Transmission Company, an ancillary company to the main power company, has expended about $1,000,000 in transmission, right of way and plant, and the power company has entered into contracts for the furnishing of 6,000 horsepower, with an option by the purchasers to increase this to 13,000 for Canadian consumption. The Niagara, Lockport & Ontario Co. of New York is affiliated wtih the Ontario Power Co., and has constructed a very elaborate transmission plant from the international boundary to Lockport, from Lockport to Buffalo, and from Lockport by way of Rochester to Syracuse. It has expended $2,785,000, of which $1,200,000 was for right of way and $1,162,000 for construction. Its capacity for transmission from the international boundary to Lockport is 60,000 horsepower, and there is the same capacity from Lockport to Buffalo; from Lockport to Syracuse it has a capacity of 10,000 horsepower, and a second line of greater capacity is under construction. It claims that its investment will amount, when its transmission lines are completed, to upward of $4,000,000, and certainly the expenditure will reach $3,000,000.

The Electrical Development Co. received a charter, 5 Edward VII, and was authorized to take 125.000 horsepower, or 8,000 cubic feet a second. The headworks, wheel pit, and tail race have been completed for 11 units of 12.500 horsepower each. The power house has been completed for seven units, but the machinery installed and contracted for is only for four units. The completion of the four units will involve the expenditure of $6,300,000, and it may be increased to 11 units, or 132,000 horsepower, by the expenditure of $1,756,000. This company has erected a transmission plant to Toronto which will convey 20,000 horsepower and that will involve an expenditure when completed of $2.610,000. The demands for Canadian consumption which this company will satisfy are about 30,000 horsepower. There is an electrical transmission com.

pany of American origin and charter affiliated with this company which has expended about $246,000 and has a relation to what is called the Nicholls syndicate, which owns interests in gas and power companies and in an electric railway company from Buffalo to Rochester which is under construction. It has franchises in its own name in seven towns and cities, but the enterprise is largely inchoate and the investment is in prospect rather than actual.

The Canadian Niagara Power Co. was organized in 1892 by the same persons who were interested in the Niagara Falls Power Co., the pioneer of electrical power companies on the American side. It is not limited in the quantity of power which it is to use, and its plans are subject to the approval of the commissioners of the Queen's Park. Plans have been approved for 120,000 horse power, which means 11 units of 11,000 horsepower, with one of these as a "spare," which makes its normal capacity 110,000. Its headworks, wheel pits, and tailrace tunnel are completed for the full development. Five units have already been installed and its power house and transformer have been completed for five units. It has cost $5,550,000, and to make 11 units would cost $1,250,000 more. It has an underground conduit connecting the Canadian plant with the American plant of the Niagara Falls Power Co., with a capacity of 128,000 horsepower transmission, with cables in it of the capacity of 32,000. It has a separate transmission line 16 miles along the Niagara River to Fort Erie, with towers to carry the lines across the river, all of which transmission plant cost $434,000. It sells in Canada 1,340 horsepower, with an option to purchasers to take 4,237 horsepower.

From what has been said it will be seen that the Ontario Power Co. has now invested or under contract $6,500,000, which will produce 66,000 horsepower; that it and its affiliated companies have expended $1,000.000 for transmission in Canada, and about $3,000,000 for transmission in the United States.

That the Electrical Development Co. has invested $6,300,000, which will produce 50,000 horsepower; and a transmission line in Canada of $2,500,000, and perhaps $300,000 in transmission lines in the United States.

That the Canadian Niagara Power Co. has invested $5,350,000, which will produce 55,000 horsepower, and $500,000 in transmission lines in the United States.

Capt. Kutz recommended the allowance to the Ontario Power Co. of a permit for 60,000 horsepower; to the Canadian Niagara Falls Power Co. the same amount, 60,000 horsepower; to the Electrical Development Co. 37,500.

I think the Ontario Co. is entitled to a larger allowance than the other two companies, because it generates 11,000 horsepower more than the Canadian Niagara Falls Co., and 16,000 horsepower more than the Electrical Development Co. It has invested $200,000 more in its power plant than the Electrical Development Co. and $1,000,000 more than the Canadian Niagara Falls Co. It uses for the production of one unit of horsepower perhaps 15 per cent less of water than the other two companies. But more than all, it has expended $3,000,000 in a transmission line from the international boundary to Rochester, Syracuse, Lockport, and Buffalo. This investmenet is almost wholly dependent for use and profit on the importation of electricity from Canada. Capt. Kutz reports that 60,000 horsepower will enable the company to secure a reasonable return on the transmission investment after paying a proper amount for the power at the boundary. This would leave to be divided between the other two companies 99,000 horsepower, and objection is made to this discrimination against them in favor of the Ontario Power Co. because their plants are so arranged that by the expenditure of a million and a quarter the Niagara Co. could increase its output to 110,000 horsepower, and by the expenditure of a million and a half the Development Co. could increase its output to 130,000 horsepower, whereas the Ontario Co. must expend $6,500,000 more to reach its full capacity of 180,000 horsepower, or about $3,200,000 to reach a capacity of 130,000 horsepower. While this circumstance is entitled to some weight against proportioning the allowances to the capital actually expended on the power plants or the horsepower now produced from the present installations, still I thing the considerations already suggested, especially the special expenditure for long distance transmission, really outweigh everything else in requiring that if possible a sufficient amount be allowed to pay a reasonable profit on that investment, which is wholly dependent on transmission.

Coming now to the division between the Niagara Falls Co. and the development company, the conclusion is not so easy. The development company has invested about three-quarters of a million more on its power plant than the Niagara Co., but under its present installation it can not produce as much horsepower by 5,000. It has expended $2,500,000 to carry 20,000 horsepower to

Toronto and has contracts for 10,000 more. The Canadian business does not pay as well as the American business, especially that of the Niagara Co., which is quite profitable under its existing contracts. Considering these contracts, it seems to me that with its slight cost of transmission and the advantageous situation that it enjoys in respect to its affiliated American company, an allowance of 52,500 horsepower for the Niagara Co. will enable it to fulfill all its probable demands at a good profit. The works across the river produce 76,300 horsepower, and adding 52,500 horsepower makes 128,800 horsepower. The American company now earns 9 per cent on its stock of $4,000,000 and interest on a bonded indebtedness of $19,000,000. It has contracts requiring a maximum of 102,000 horsepower. but the call on its capacity has never exceeded $5,000 horsepower, because the calls do not coincide. On the capital invested, there is no likelihood that the Niagara Co. will suffer a loss. It will not make as much as it would have made had it been allowed to transmit its full capacity after building the contemplated additions to its installation, but the act only intended to save the investors from losses on the plant actually invested, not to compensate them for prospective gain.

This leaves for the Electrical Development Co. 46,000 horsepower to transmit to the United States after producing 30,000 horsepower and transmitting it to Toronto and elsewhere. This would justify the company in increasing the number of units in its installation if it could secure transmission to the United States. It is probable that the amount is not enough to justify the elaborate outlay required for transmission to American customers, and this reduces the value of the permit; but I can not think that it will not be able to arrange for the disposition of transmissible current at the boundary at such figures as to be profitable, even if the amount it makes per horsepower be less than that which the two American companies realize, because of their greater facility for reaching customers, the one through the Rochester transmission plant and the other through the American Niagara Co.'s plant and good will. Under this arrangement and allotment the Canadian Co. becomes the only one which, assuming a demand for its American delivery, will be justified in increasing the capacity of its power plant by installing more units. The demand in Canada for the product of the Ontario and Niagara companies may grow some, but not very much, so that they are likely to be confined to their present installation.

Before closing I ought to notice a claim of the Niagara Co. that it has by its charter a preferential right over the other two companies, so that it ought to be allowed its full 110,000 horsepower for transmission before the other two companies receive permits to transmit any current at all. The preference claimed is really only a priority in taking water from the river, and can not be reasonably extended to apply to rights to transmit current where there is no lack of water for all.

The Niagara Falls Power Co. and its Canadian other self ask that the two permits to them shall contain a provision by which in case of a reduction of the amount of water diverted on the American side below the permitted limit, a corresponding increase beyond the limit permitted on the Canadian side may be authorized. This privilege must be denied. The American diversion and the Canadian transmission must be kept separate in the permits and should be absolute and not variable. It would form an uncomfortable precedent in other cases.

It has been asserted by persons who profess to have information that the three companies here seeking permits are looking forward to an amalgamation of interests or a combination for the purpose of keeping up the prices of electrical power by avoiding competition that will deny to the public the benefit it is entitled to enjoy from the natural water power that these companies use at comparatively small benefit to any one of the Governments which authorize its use. This is denied by the applicants. Just what effect the existence of such a combination ought to have to require a revocation or modification of these permits is a matter of grave doubt, but should evidence in proper form of the existence of such combination be brought to me as a ground for the modification of the action now taken, it will be given careful consideration. The order for permits will, therefore, be for

The International Ry. Co...--

The Ontario Power Co--

The Canadian Niagara Falls Power Co.

The Electrical Development Co-----

1,500

60,000

52,500

46,000

The Chief of Engineers and Capt. Kutz will prepare the permits after consultation with counsel for the respective companies. An order should also be entered detailing Capt. Kutz to report a plan for the supervision of the operation of these companies under the permits, with a view to secure strict compliance with their terms.

JANUARY 18, 1907.

W. H. TAFT, Secretary of War.

A BILL For the control and regulation of the waters of Niagara River, for the preservation of Niagara Falls, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the diversion of water from Niagara River or its tributaries, in the State of New York, is hereby prohibited, except with the consent of the Secretary of War as hereinafter authorized in section two of this Act: Provided, That this prohibition shall not be interpreted as forbidding the diversion of the waters of the Great Lakes or of Niagara River for sanitary or domestic purposes, or for navigation, the amount of which may be fixed from time to time by the Congress of the United States or by the Secretary of War of the United States under its direction.

SEC. 2. That the Secretary of War is hereby authorized to grant permits for the diversion of water in the United States from said Niagara River or its tributaries for the creation of power to individuals, companies, or corporations which are now actually producing power from the waters of said river, or its tributaries, in the State of New York, or from the Erie Canal; also permits for the transmission of power from the Dominion of Canada into the United States, to companies legally authorized therefor, both for diversion and transmission, as hereinafter stated, but permits for diversion shall be issued only to the individuals, companies, or corporations as aforesaid, and only to the amount now actually in use or contracted to be used in factories the buildings for which are now in process of construction, not exceeding to any one individual, company or corporation as aforesaid a maximum amount of eight thousand six hundred cubic feet per second, and not exceeding to all individuals, companies or corporations as aforesaid an aggregate amount of fifteen thousand six hundred cubic feet per second; but no revocable permits shall be issued by the said Secretary under the provisions hereafter set forth for the diversion of additional amounts of water from the said river or its tributaries until the approximate amount for which permits may be issued as above, to wit, fifteen thousand six hundred cubic feet per second, shall for a period of not less than six months have been diverted from the waters of said river or its tributaries, in the State of New York: Provided, That the said Secretary, subject to the provisions of section five of this Act, under the limitations relating to time above set forth is hereby authorized to grant revocable permits, from time to time, to such individuals, companies, or corporations, or their assigns, for the diversion of additional amounts of water from the said river or its tributaries to such amount, if any, as, in connection with the amount diverted on the Canadian side, shall not injure or interfere with the navigable capacity of said river, or its integrity and proper volume as a boundary stream, or the scenic grandeur of Niagara Falls; and that the quantity of electrical power which may by permits be allowed to be transmitted from the Dominion of Canada into the United States, shall be one hundred and sixty thousand horsepower: Provided further, That the said Secretary, subject to the provisions of section five of this act, may issue revocable permits for the transmission of additional electrical power so generated in Canada, but in no event shall the amount included in such permits, together with the said one hundred and sixty thousand horsepower and the amount generated and used in Canada, exceed three hundred and fifty thousand horsepower: Providing always, That the provisions herein permitting diversions and fixing the aggregate horsepower herein permitted to be transmitted into the United States, as aforesaid, are intended as a limitation on the authority of the Secretary of War, and shall in no wise be construed as a direction to said Secretary to issue permits, and the Secretary of War shall make regulations preventing or limiting the diversion of water and the admission of electrical power as herein stated; and the permits for the transmission of electrical power issued by the Secretary of War may specify the persons, companies, or corporations by whom the same shall be transmitted, and the persons, companies, or corporations to whom the same shall be delivered.