Message to Congress Transmitting and Approving Recommendations for the Administration of the Bonneville Power Project.

Mr. dear Mr. Speaker:

As you know, the Bonneville project is nearing completion and I am informed by the War Department that the first electric power will probably be available for public distribution late this year.

It seems necessary, therefore, to enact legislation at this session of the Congress, setting up machinery for the administration of the dam, locks, fishways and power plant of that project. Such legislation should be of a provisional character pending the establishment of permanent administration of Bonneville and other Federal projects in the Columbia Basin, but should not be inconsistent with national power policies which may be hereafter adopted.

On January 18 I appointed a committee on national power policy, and requested the Committee as its first assignment to make suggestions for the administration of the Bonneville project. The Committee has submitted its recommendations, which I transmit herewith for the information of the Congress. I approve the recommendations and believe that they merit careful consideration.

Very sincerely yours,

Honorable William B. Bankhead,

Speaker of the House,

Washington, D. C.

Recommendations of Committee on National Power Policy for the Bonneville Project.

The Bonneville project, on the Columbia River, some 60 miles from the city of Portland, Oregon, is nearing completion. Incidental to its major purpose of improving navigation, the project will produce electric energy which will be used in the operation of the dam, locks, and fishways, and surplus power will be available for distribution to the public. The War Department, which has had charge of the construction of the project, has reported that electric energy should be ready for transmission late this year.

Further up the Columbia River the Bureau of Reclamation, primarily in the interest of irrigation, is building a gigantic dam at Grand Coulee in 'the State of Washington. This structure will also have a beneficial effect on the potentialities of the Bonneville project. Grand Coulee will produce electric power as an incident to irrigation, river regulation and flood control, and its surplus power, too, will be available for public use.

Although these two major projects in the Columbia River Basin should be considered together, the Committee has been compelled, because of 'the immediate need for legislative action in connection with Bonneville to report on the latter first. However, in recommending an administrative program for Bonneville the Committee has not lost sight of the fact that there must ultimately be a tie-in of other Federal projects in the Columbia River Basin and that recommendations made at this time should be of a nature not incompatible with any national power policy which may ultimately be established.

For that reason the Committee suggests that a special provisional form of administration be set up for the Bonneville project pending the establishment of a permanent administration for Bonneville, Grand Coulee, and other projects in the Columbia River Basin.

The Committee recommends that legislation should provide:

1. For the appointment by the Secretary of the Interior of an administrator for the purpose of maintaining and operating the Bonneville project, subject to the completion of the construction of the dam, locks, power plant, and appurtenant works, and to the continued operation of the locks by the Secretary of War. The administrator should act in consultation with an advisory board composed of a representative designated by the Secretary of War, another by the Secretary of the Interior, and a third by the Federal Power Commission.

2. That the administrator, in the public interest and for the greatest possible public benefit and to avoid the waste of water power, should provide for the generation of salable electric energy as rapidly as markets may be found therefor. He should make all necessary arrangements for the disposition of the electric energy not required for the operation of the dam and locks at such project and the navigation facilities employed in connection therewith.

In order to encourage the widest possible use of available electric energy, to provide reasonable outlets therefor, and to prevent the monopolization thereof by limited groups or localities, the administrator should be authorized to provide electric transmission lines, substations, and other facilities as may be necessary to bring electric energy, available for sale, from Bonneville project to existing and potential markets, and to interconnect Bonneville project with other Federal projects, now or hereafter constructed, for the interchange of electric energy.

To accomplish these ends, the administrator should be authorized to acquire, by eminent domain if need be, such real and personal property, franchises, electric transmission lines, and facilities as may be necessary.

3. In order to insure that the power development at Bonneville project will be carried out for the benefit of the general public, and particularly of domestic and rural consumers, the administrator should, in disposing of electric energy, give preference and priority to public and cooperative agencies, namely to States, districts, counties, and municipalities, including agencies or subdivisions thereof, and to cooperative organizations of citizens not organized or doing business for profit but primarily for the purpose of supplying electric energy to their members as nearly as possible at cost.

To preserve these preferential rights not less than 50 percent of the firm electric energy which the installed generating facilities of Bonneville project are capable of producing should be reserved for sale to such public and cooperative agencies until January 1, 1939. Firm electric energy so reserved for but not yet taken by such public and cooperative agencies may temporarily be disposed of, so long as such disposition will not prevent the purchase by public and cooperative agencies of electric energy as soon as they are ready to make such purchase. However, there should be no limitation or impairment of the preferential rights of public or cooperative agencies after January 1, 1939. In the event that after that date there should be conflicting or competing applications for an allocation of electric energy between such public or cooperative agencies, on the one hand, and private agencies, on the other, the application of the public or cooperative agencies should be given priority and preference.

An application by any public or cooperative agency for an allocation of electric energy should not be denied on the ground that any proposed bond issue necessary to enable such agency to enter into the public business of distributing the electric energy has not yet been authorized or marketed, until after a reasonable time has been afforded such public or cooperative agency to have its bond issue authorized or marketed.

It should be the policy of the Government to preserve the preferential status of public and cooperative agencies, and to give to the people of the States of Washington and Oregon and the people of other States within transmission distance of Bonneville project reasonable opportunity and time to take any action necessary to create such public or cooperative agencies as the laws of such States authorize and permit, including financing, the construction or acquisition of necessary electric distribution facilities, and in all other respects legally to become qualified purchasers and distributors of electric energy available at Bonneville project.

4. The Administrator should be authorized to negotiate and enter into contracts for the sale of electric energy at wholesale, whether for resale or direct consumption, to public and cooperative agencies and to private agencies and persons in conformity with rate schedules approved by the Federal Power Commission. Such contracts should be effective, including renewals or extensions for not to exceed 20 years in the aggregate. The contracts should contain provisions for the equitable adjustment of rates at appropriate intervals, not less frequently than once in every 5 years, and in the case of a contract with a private agency or person who resells the bulk of the energy purchased, a provision authorizing its cancellation upon 5 years' notice in writing if any part of the electric energy purchased under such contract will be needed to satisfy the requirements of public or cooperative agencies. Contracts may contain stipulations concerning resale and resale rates appropriate to effectuate the purposes of Congress and to insure that resale to the ultimate consumer will be at rates which are reasonable and nondiscriminatory.

5. Rate schedules should be prepared from time to time and submitted by the Administrator to the Federal Power Commission for its approval. Such rate schedules should be fixed with a view to encouraging the widest possible use of electric energy, having regard to the recovery, upon the basis of the application of such rate schedules to the capacity of the electric facilities of Bonneville project, of the cost of producing and transmitting such electric energy, including the amortization of the capital investment over a reasonable period of years. In computing the cost of electric energy developed from water power created as an incident to the construction of Bonneville project for other purposes, there may be allocated to the cost of electric facilities not simply the cost of such facilities, but also such a share of the cost of facilities having joint value for the production of electric energy and other purposes as the power development may fairly bear as compared with such other purposes. The rate schedules may provide for uniform rates or rates uniform throughout prescribed transmission areas with a view to distributing the benefits of an integrated transmission system and encouraging the equitable distribution of the electric energy developed.

6. General administrative provisions should be set up, including the application of the civil-service laws to all positions except those of experts in the professional or technical fields, and providing that accounts should be kept as prescribed by the Federal Power Commission.

7. The project should become self-supporting, but in the meantime it will be necessary to provide funds for initial construction of transmission lines, operation and administration. All receipts should be covered into the general treasury.