Mr. RUSSELL. Well, the bulk of it was money that I had indorsed in notes to the bank and borrowed money from personal individuals. If you want them I can get from my office a complete list.

Senator DILL. For necessities of life, or for property you bought? Mr. RUSSELL. Some of it was. Some for notes that I indorsed, some securities for others that I had indorsed.

Senator DILL. What percentage of them have gone to judgment? Mr. RUSSELL. There was only a matter of, I imagine, $600 or $700 that they tried to make me some trouble with when I went with the Interstate Commerce Commission. The matter was fully explained at that time to the Interstate Commerce Commission, and if Mr. Bonner further wanted to be fair there are letters from the Interstate Commerce Commission that he recently obtained from the Secretary, that my affairs were being straightened out as fast as possible. Now not only that, Senator, I have arranged to borrow the money and pay every one of these debts. But due to the fact that I have this money coming I have not felt that I was called upon to do it. If it is impossible to realize on these assets that I have, I have arranged with friends of mine in Washington to borrow the money and pay it. So these debts need not conern anybody.

Senator DILL. Now he said you were not paying your debts here, I understand it.

Mr. RUSSELL. There has no charge been made, and there is no bill outstanding but what I have paid or can pay, Senator.

Senator DILL. Well, I may have misunderstood him, but that is what I understood him to say.

Mr. RUSSELL. No; these are old debts that arose out of a partnership that existed from 1918 up until 1925. Some of those are partnership debts.

Senator DILL. Well, then, there isn't anything new or secret that had to be discovered by some agent of the Department of Agriculture going out and digging up a lot of things?

Mr. RUSSELL. Not a bit. Every bit of it is explained in memorandum in the files of this commission. Every bit of it is explained before the Interstate Commerce Commission. There has been no attempt to cover up, there has been no attempt to evade, there has been no attempt to deny a dollar of it.

The CHAIRMAN. May I say at this point that I am not clear yet that Mr. Bonner said that you owed a lot of District bills that have not been paid.

Mr. RUSSELL. If there are I do not know anything about them. Mr. BONNER. I think that misapprehension grew out of my statement, Mr. Chairman, to the effect that there were several judgments in the District of Columbia courts that there had been no settlement made on.

Senator DILL. Those are Montana debts?

Mr. BONNER. Those are due to Montana parties.

Mr. RUSSELL. Certainly, they are out of these old debts, and I had to move out of my home and turn over my automobile and walk out. And I have paid $4,450 of that indebtedness up to the last pay day, and I am now paying between $200 and $230 a month out of my salary in an endeavor to pay these debts up. But I have felt during the last few months, due to the fact that this settlement was pending and there was a possibility of release there, that it was not incumbent

upon me to continue those payments, and I have arranged to borrow the money if the settlement does not to through. Now that is all there is to this indebtedness.

Now with regard to that retirement fund; I never heard of it from the day the money was paid to me until this morning. There has never been anything said to me about it, there has never been any demand ever made to me about it, and when I left the Interstate Commerce Commission I resigned and went out of the service, and filed an affidavit, and after several days-it must have been a week or more I was in New York, and upon my return the check from the retirement fund was at my house, and I cashed it, and I never heard a word from it since.

The CHAIRMAN. You are not a member of the civil service now? Mr. RUSSELL. I have no protection under the civil service at all. The CHAIRMAN. And you do not claim any?

Mr. RUSSELL. And I do not claim any.

Senator DILL. Protection under the civil service is not worth anything anyhow if the head of the department wants to fire you. Mr. RUSSELL. Certainly, and this is as good an excuse as any.

The CHAIRMAN. Are there any further questions? If not we will hear Mr. Tyler.

TESTIMONY OF M. C. TYLER, LIEUTENANT COLONEL, CORPS OF ENGINEERS, UNITED STATES ARMY, CHIEF ENGINEER OF THE FEDERAL POWER COMMISSION, WASHINGTON, D. C.

(The witness was duly sworn by the chairman of the committee.) The CHAIRMAN. You may start. I do not know whether we can complete with you this morning. I understand that you have suggested that you might be of service to the committee in some of their recommendations.

Lieutenant Colonel TYLER. My name is M. C. Tyler, and I hold a commission as lieutenant colonel in the Corps of Engineers, United States Army. I am detailed by War Department orders as chief engineer of the Federal Power Commission.

The CHAIRMAN. Are you on the Federal Power Commission pay roll?

Lieutenant Colonel TYLER. No, sir.

The CHAIRMAN. You are on the War Department pay roll?
Lieutenant Colonel TYLER. Yes, sir.

The CHAIRMAN. And how long have you been chief engineer for the Federal Power Commission?

Lieutenant Colonel TYLER. I reported for duty on September 1st. The CHAIRMAN. Last year?

Lieutenant Colonel TYLER. Last fall; a little less than six months. The CHAIRMAN. Did you have any connection with the Federal Power Commission work prior to that time?

Lieutenant Colonel TYLER. I made the first report that was made. for the Federal Power Commission in 1921 on the Potomac River, at which time the Federal Power Commission held public hearings on the report. I afterwards did work in the field for the Federal Power Commission on the Tennessee River, on some of the projects down there.

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I have been on duty in the Chief Engineer's office, where these Federal Power Commission matters are referred and come back from the field. I have familiarity with the work through those contacts and through personal acquaintanceship with both the previous Chief Engineers.

The CHAIRMAN. I understand it that since 1921, when you made your first report, that you have been more or less active in work for the Federal Power Commission?

Lieutenant Colonel TYLER. I have. More or less contact with the work since the initiation of the commission.

The CHAIRMAN. You may proceed to make a statement.

Lieutenant Colonel TYLER. I have written out a statement which I would like to read into the record. The first part of it is directed toward an idea which occurred to me from the testimony which I have heard before this committee, and that is that the valuation of these Federal power projects had now a relation to the rates charged the public, and that will explain the point of the first part of this statement. [Reading:]

I. REGULATION OF RATES

It is generally conceded that there must be effective regulation of the rates charged to consumers by public-service corporations engaged in the production, distribution, and sale of electric power. There is much difference of opinion, however, as to how effective regulation is best accomplished. This is not an argument either for or against Federal or State regulation of the electric power industry, but an attempt to set forth the relation of federally owned water-power sites to the Federal regulation of rates.

The whole theory of rate regulation is based on the proposition that not more than a fair return shall be allowed on the capital invested in property used and useful in the generation, transmission, and distribution of power.

As a rule, to-day, power is delivered to an individual consumer from a net work of distribution and transmission lines fed by a number of generating stations. It follows that in the consideration of the fairness of any rate the starting point is the investment in all the generating stations, substations, transmission lines, distribution lines, and equipment involved in the service rendered.

After almost 10 years of administration of the Federal water power act the installed generating capacity in federally controlled sites under license is only 6.2 per cent of the total installed generating capacity in the United States devoted to public utility purposes. The total installed generating capacity used in public utility service in the country is approximately 31,500,000 kilowatts. That installed in federally licensed water-power sites is 1,875,000 kilowatts.

The annual increase in installed capacity not under Federal license is much greater than the annual increase in installed capacity under Federal licenses. The number of water-power sites in the United States is limited, and the number of sites controlled by the Government is even more limited. The best sites naturally were developed first. Moreover, the great improvements recently made and still in progress in the efficiency and cost of fuel stations is eliminating many water-power sites heretofore considered possibilities. During the fiscal year 1929, only four major licenses were issued by the Federal Power Commission, aggregating 69,000 kilowatt of ultimate capacity.

The annual increment of generating capacity from the licensing of federally controlled sites will reach a maximum and then gradually decrease. The annual increment due to the construction of generating stations not under Federal control will continue at a normal rate. It appears that while at the present time the federally licensed stations have an installed capacity of 6.2 per cent of the total, in 10 years this may increase to about 7.2 per cent of the total and then will gradually decrease.

Now the capital invested in generating stations is somewhere in the neighborhood of 50 per cent of the total investment in electric power properties, the other 50 per cent being invested in transmission and distribution lines and equipment. Very little of the transmission and distribution properties come under Federal control. It follows, since the investment in generating stations is only one-half that in the business, that the investment in water-power properties on federally

controlled sites does not now exceed 3.1 per cent of the total investment in power properties used and useful in the generation, transmission, distribution, and sale of power. It is improbable that the investment on federally controlled sites will ever exceed 3.6 per cent of the total investment in the industry, and in the not distant future the investment on federally owned water-power sites will be an almost negligible factor in the rate structure.

It is obvious as a general proposition that no regulation of any business can be effective when the regulator has jurisdiction only over approximately 3 per cent of the property.

Federal regulation of electric power rates can not be soundly set up on the narrow base of the Federal ownership of a limited number of water-power sites. Federal regulation to be effective must be founded on the broad and continuing power of the Congress to regulate all corporations engaged in interstate commerce in the form of electric power.

While the investments in Federally licensed sites will continue to be a small factor in the rate base and must be included, the leasing or licensing of such sites is not properly a function of the rate regulating body.

The capital invested in public utility electrical properties is approximately $11,000,000,000. That invested in steam railroads in the United States is stated to be about $24,000,000,000. The regulation of railroad rates and the incident valuation of railroad properties has been and still is a task of some magnitude.

The electric power industry is equally as complex a business. Though not yet as large as rail transportation, it is growing rapidly. Effective Federal regulation of the rates charged for power by public service corporations engaged in interstate commerce will therefore require the creation of a regulatory body similar to the Interstate Commerce Commission with broad powers to valuate all the properties of the industry, and to establish rate bases which will include both the large investment in privately controlled properties and the comparatively small investment on federally licensed water-power sites.

It seems very clear that there are two separate and distinct fields relating to the electric light and power industry within which the Congress may legislate, viz:

(a) The regulation of public service power companies engaged in interstate

commerce.

(b) The leasing or licensing of federally owned water-power sites. These are two separate and distinct problems, and if they are examined sepa rately much confusion of thought and conflict of opinion can be avoided.

II. LEASING FEDERALLY CONTROLLED WATER-POWER SITES

It has been shown that the water-power sites controlled by the Federal Government are a minor factor in the electric light and power business in the United States. It is in the interest of the general public however, both for conservation and economic reasons, that such federally owned sites as are economically sound should be developed and used.

The Federal Government's jurisdiction over a portion of the water-power sites in the country is derived from two sources. Through its outright ownership of public lands and national forests, the Government may specify the terms on which sites on such lands may be leased or licensed to private parties.

Also the Government, through the interstate commerce clause of the Constitution, has the paramount right to maintain navigable waters in a free and unobstructed condition. It can, therefore, prevent the construction of any power plant in a navigable water or can permit such construction under such terms as Congress may authorize. Through decision of the Supreme Court the Government has the further right to prevent the impounding of water on nonnavigable tributaries of navigable waters in any manner detrimental to the navigable capacity of such navigable waters.

The national forests, largely in the Pacific Coast States, are administered by the Agriculture Department through the United States Forest Service. That Service is decentralized with district offices in local charge of the forests, and a supervising office in Washington. The Forest Service has developed a highly able engineering force and they are thoroughly familiar with all the water-power sites in the national forests. No other organization could do the work which that service performs with respect to licensing water-power sites in the forests anywhere near as well and no other organization could do it at all except at many times the present cost to the taxpayer.

The Interior Department has jurisdiction over public lands and Indian Reservations. That department, through the United States Geological Survey and the Engineers of the Indian Bureau is entirely competent to pass on any project for the development of water-power sites in its control.

Navigable waters of the United States are administered by the War Department through the Chief of Engineers and the Corps of Engineers, United States Army. That organization is charged by Congress with the duty of maintaining navigable waterways and of making such improvements in the interest of navigation as Congress may order. It is in possession of all the facilities, through its decentralized field service, to pass upon the merits of any proposed power development in navigable waters or the relation of any proposed development on a tributary to the interests of navigation.

Most federally controlled water-power sites are either entirely in a national forest, entirely on public lands, or entirely in navigable waters, or entirely on tributaries thereto. Some involve two of the sources of Federal jurisdiction and, therefore, two departments, and occasionally a power site may involve all three departments.

The major purpose of the Federal water power act was to set up a method by which water-power sites controlled by the Government and in charge of three different executive departments could be put to work in the public interest under standard terms which would retain public ownership of the sites, permit recapture, guarantee the most efficient use of water, and at the same time allow safe investment of private capital through a long-term lease.

In enacting the law Congress had certain definite principles in mind.

First. It recognized that the development of water power by private interests on Government property must be kept subordinate in principle to the major purpose of that property. It therefore provided that the investigations and reports on water-power applications should be made by the existing Government agencies having the properties in charge.

Second. It realized that excellent machinery already existed for performing all the work required in licensing water-power sites, except a small coordinating staff and a board or commission to take final action. Since all the Federal waterpower sites are in the charge of three departments, Congress directed that the commission be composed of the Secretaries of War, Interior, and Agriculture. Third. Congress was fully aware that once an independent Government agency is set up it is almost impossible to stop its growth. The thing grows on what it feeds on and makes work in order to grow. The debates on the bill and testimony at hearings on subsequent appropriation measures clearly support this statement.

Fourth. Congress knew, since it already had in operation all the necessary field organizations, that by setting up a commission made up of representatives of the three interested departments, it would get the work done at a minimum of expense and had the right to believe that there would be no incentive to build up an organization in duplication of those already in existence.

The operations for nine years under the act demonstrates that the decision of Congress was sound. In so far as the work of the commission has been done by and through the three departments as prescribed in the law, it has been well and economically done.

It is now proposed in the bill before this committee to set up an independent commission with a broad authorization to build up its own organization. The new commission will have authority_over water-power sites over which either the War, Interior, or Agriculture Department also has and must maintain authority.

The CHAIRMAN. Do you mind an interruption at that point?
Lieutenant Colonel TYLER. No, sir.

The CHAIRMAN. Early in your statement you made a designation as between the grant of license and the regulation of rates of power in interstate commerce.

Lieutenant Colonel TYLER. Yes.

The CHAIRMAN. I rather gathered from your statement that you thought they were in conflict.

Lieutenant Colonel TYLER. No; not in conflict.

The CHAIRMAN. Not in conflict?