D. To the headwater-improvement fund (under administration of the War Department): 50 per cent of the charges collected for use of Government dams, and 50 per cent of the amounts collected to defray costs of administration.

E. To miscellaneous receipts: 122 per cent of receipts from public lands and reservations, 50 per cent of the charges collected for use of Government dams (121⁄2 per cent being specifically provided for in section 17 of the Federal waterpower act, and 371⁄2 per cent being likewise disposed of in absence of specific provision in the act); 50 per cent of the amounts collected to defray costs of administration (121⁄2 per cent being specified in the act, and 371⁄2 per cent unspecified as above.)

The comparison between the amounts collected to reimburse costs of administration and the amounts actually made available for that purpose in the Treasury, as the act has been interpreted by the comptroller, is as follows:

that is, only slightly over one-half of the moneys actually collected to reimburse costs of administration are being applied to that purpose, even indirectly.

The commission is of the opinion that when the cumulative receipts for costs of administration have overtaken the cumulative costs it will have no authority thereafter to collect larger amounts than are necessary to offset current costs. It is also of the opinion that the moneys collected to reimburse costs should be used exclusively for that purpose, and that to insure such use they should be placed in a special fund in the Treasury to be appropriated from time to time by Congress for the purpose for which collected.

No withdrawals have yet been made from the "Headwater improvement fund" (item D of the preceding tabulation of distribution of receipts). The amount is too small to be of any real consequence in any program of construction even though under the comptroller's decision this fund receives one-half the charges collected to defray costs of administration. The fund will, however, eventually amount to a sum which could be usefully employed in the conduct of surveys on navigable streams and in the preparation of plans for their improvement such as the commission is authorized to undertake and such as it has recommended in its annual reports be undertaken. The commission is, therefore, of the opinion that moneys collected for the use of Government dams should likewise be placed in the proposed special fund to be made available for defraying costs of administration and of investigation. If this be done there will be no need for appropriating thereafter any moneys from general tax receipts for the work of the commission, but it will have been made entirely self-supporting. This would appear to be the most businesslike manner of handling the costs of its work.

For the reasons above set forth the commission recommends amendment of the Federal water power act in the form attached hereto so as to accomplish the following:

(1) Direct employment of its own personnel.

(2) Direct appropriations for all its activities.

(3) Ability to reimburse other departments, or the Treasury, for expenditures incurred in cooperative work by other departments, particularly with respect to field work performed for it by the three departments.

(4) Segregation of receipts for cost of administration and for use of Government dams into a fund from which Congress shall appropriate for the administrative and investigative work of the commission.

It is the opinion of the commission that the steps proposed are necessary if the commission's activities are to be put on a business basis, and if it is ever to be able to perform its duties satisfactorily. The proposals do not involve authorization for expenditures not now authorized. They merely transfer the authority from the three departments where it now rests to the commission where it belongs. The proposals, furthermore, would transfer from the Treasury to the licensees of the commission the obligation of maintenance of the commission's activities, and place these activities upon a permanent self-supporting basis.

97646-30-PT 29

In his message to Congress on December 8, 1925, the President said:

66

Along with the development of navigation should go every possible encouragement for the development of our water power. While steam still plays a dominant part, this is more and more becoming an era of electricity. Once installed, the cost is moderate, has not tended greatly to increase, and is entirely free from the unavoidable dirt and disagreeable features attendant upon the burning of coal. Every facility should be extended for the connection of the various units into a superpower plant, capable at all times of a current increasing uniformity over the entire system.

The major projects with which this commission deals, and will continue to deal involve combined navigation and power developments. Under the jurisdiction of the commission are 85 per cent of the water-power resources of the United States and there are no projects of magnitude which do not require its authorization. If this commission is to continue to be so handicapped that it can not administer these resources either efficiently or promptly, water-power development will be discouraged, not encouraged. The commission is annually dealing with hundreds of thousands of horsepower of new hydroelectric development, and with hundreds of millions of dollars of new investment. The economic loss. to the country through the delays unavoidable so long as present conditions exist is a hundred times greater than the entire cost of a reasonably effective and expeditious administration of the act-something which under existing arrangements is not possible.

Very truly yours,

DWIGHT F. DAVIS, Secretary of War, Chairman. HUBERT WORK, Secretary of the Interior. W. M. JARDINE, Secretary of Agriculture.

The DIRECTOR, BUREAU OF THE BUDget. Mr. MERRILL. In response thereto comes a letter under date of March 10, 1926, from the Director of the Bureau of the Budget:

MY DEAR MR. SECRETARY: I have before me the letter of January 28, 1926, signed by you as chairman of the Federal Power Commission, and by the Hon. Hubert Work, Secretary of the Interior, and the Hon. William M. Jardine, Secretary of Agriculture, as members of the commission, submitting a draft of proposed legislation to amend the Federal water power act and for other purposes. I have submitted this matter to the President, who has directed me to advise you that the proposed legislation is in conflict with his financial program.

Now, the bill in fact was only for enabling legislation. Under date of March 13, 1926, Secretary Work for the commission replied to the Director of the Bureau of the Budget:

I have been given a copy of your reply of March 10 to the commission's letter of January 28, 1926, submitting proposals for an amendment of the Federal water power act which would permit of employment of personnel directly by the commission rather than through the medium of the Departments of War, Interior, and Agriculture.

These proposals were made in order to cure the unsatisfactory situation of operating with a borrowed personnel. The amendment proposed would not authorize any expenditures not already authorized, but would merely transfer the authority over selection of its personnel from the individual departments to the commission, where we think it logically belongs, if the commission is to perform its functions with a greater degree of satisfaction.

No new expenditures would be authorized, and the amendment proposes that all expenditures hereafter made shall be charged against the licensees of the commission instead of against the general receipts of the Treasury as is now done.

If in conflict with the President's financial program, as you state, of course, I shall not press the matter but I fear its importance has not been properly presented.

Now, on March 16 comes another letter from the Budget Bureau: MY DEAR MR. SECRETARY: I am in receipt of your letter of March 13, 1926, relative to the proposal for an amendment of the Federal water power act, in which you make the following statement:

"If in conflict with the President's financial program, as you state, of course I shall not press the matter, but I fear its importance has not been properly presented to you."

On receipt of the original paper in this case the matter was very carefully studied and submitted to the President by me personally, showing in detail what it was planned to do, with the recommendation that he disapprove it, which he did.

Now, that was the situation that we met with constantly in the Bureau of the Budget. From the time when the organization was created an attempt was made to reduce the commission appropriations year after year, and it was scarcely possible to operate with borrowed personnel. I had made arrangements with other departments to do work for the commission, investigate work, out of funds appropriated to the commission; but I was compelled by the Director of the Bureau of the Budget to strike them out.

After this refusal of the Director of the Bureau of the Budget to approve a piece of enabling legislation, not financial legislation, it was too late in the session to permit the commission to proceed further with the proposed legislation.

Senator WHEELER. How far do you think this commission ought to go with reference to the regulation of power companies? Mr. MERRILL. Might I take that up later?

Senator WHEELER. Yes.

Mr. MERRILL. Then I will be glad to answer it.

The CHAIRMAN. You may go ahead.

Mr. MERRILL. Then in 1928 the matter was brought up again, and this time in order to overcome the objection of the Bureau of the Budget it became necessary for the commission to go direct to the President, which they did.

Senator PITTMAN. What date was that?

Mr. MERRILL. That was in 1927, I believe. In any event under date of January 16, 1928, there is this letter from the Secretary of War to the Director of the Bureau of the Budget:

I submit herewith, through the Bureau of the Budget to the chairman of the Committee on Interstate and Foreign Commerce of the House of Representatives, a report requested by that committee upon H. R. 8141, a bill introduced on December 20, 1927, by Mr. Burton, of Ohio, for the purpose of authorizing additional employees for the Federal Power Commission. The bill is in the identical form in which it was introduced, with the personal approval of the President, in the last Congress, in which it passed the Senate. It reached the House too late for passage there. I recently discussed this bill again with the President, and he, again, gave it his approval.

Now that I contend was the situation in the Bureau of the Budget. That was why the commission has been maintained so long in a condition of inability to perform its work. We were not allowed to go past the Director of the Bureau of the Budget to the committees on appropriations to ask for anything different, but constantly through out this period the reports of the Federal Power Commission to Congress stated the conditions that existed.

The CHAIRMAN. Might I ask right here in that connection: As I remember it Mr. Bonner testified that you stopped the district

engineers from doing work-I mean out in the field. What do you say about that?

Mr. MERRILL. That is not correct. I did object to turning over questions of detailed accounting to district engineers, and if that is what he meant, why, that is correct.

The CHAIRMAN. May be that was about it.

Mr. MERRILL. And that was because I think there is as much difference between engineering and accounting as there is between surgery and veterinary medicine.

The CHAIRMAN. Have you concluded your presentation now?

Mr. MERRILL. No, Mr. Chairman. I want to bring up now this report of January 28, 1928.

The CHAIRMAN. Is that the report that was first submitted to the Committee on Interstate and Foreign Commerce of the House of Representatives and then withdrawn?

Mr. MERRILL. That is it.

The CHAIRMAN. Do you know what the testimony was on that that was given here?

Mr. MERRILL. No; I have not read any of the testimony.
The CHAIRMAN. Then why do you raise the question?

Mr. MERRILL. Oh, I am bringing up here the recommendations made by the Federal Power Commission in that report.

Senator WHEELER. Is that the one that was deleted, Mr. Chairman? The CHAIRMAN. Yes. There was a report submitted to the Committee on Interstate and Foreign Commerce of the House of Representatives on January 28, 1928.

Mr. MERRILL. Yes; that was it.

The CHAIRMAN. The testimony here was, or at least we got the information somewhere, that the original report was first submitted to the Committee on Interstate and Foreign Commerce of the House of Representatives, and then later that report was withdrawn, and a substitute report submitted. I understood that they deleted some matter, which we were informed was objectionable to the power interests. I think the members of the committee around the table have a memorandum before them showing the items that were deleted from the report that were withdrawn when the second report was submitted. Is that the report you are going to deal with, Mr. Merrill?

Mr. MERRILL. This happens to be that report.
The CHAIRMAN. Then you may proceed.

Mr. MERRILL. I should like to read the covering letter, that sent that report up to the chairman of the Committee on Interstate and Foreign Commerce of the House of Representatives:

The proposed legislation is for the purpose of curing a serious situation in the work of the Federal Power Commission

Senator HASTINGS (interposing). This was a letter sent by whom? Mr. MERRILL. By the three members of the Federal Power Commission.

Senator WHEELER. I think I am confused about that. Are you going to tell us why this portion of the report that we have before us was deleted?

Mr. MERRILL. If you want to know.

Senator WHEELER. That is what we would like to know.

The CHAIRMAN. Let him conclude the other part first, Senator Wheeler.

Senator WHEELER. All right.

Mr. MERRILL. I continue quoting from that letter [reading]:

The commission was created in 1920 and was given responsibilities over the disposition and use of the Nation's water-power resources many times greater than had previously been placed upon the several executive departments. It was, however, given no personnel with which to perform its work, and, in consequence, it has been necessary for the commission to leave the greater part of its duties unperformed. Attention has repeatedly been called to this situation both in the annual reports of the commission and in recommendations heretofore made in reports on similar legislation.

It was the purpose of Congress in passing the Federal water power act to afford means for a rapid development of the Nation's water-power resources under conditions which safeguard the large investments involved, and which would at the same time fully protect the public interest.

Senator WHEELER. Is the public interest in anywise protected at the present time in this bill?

Mr. MERRILL. In what bill?

Senator WHEELER. By your present legislation.

Mr. MERRILL. Do you mean under the Federal water power act? Senator WHEELER. Yes.

Mr. MERRILL. Yes; in holding down the amounts entered in the fixed capital account of the companies, and the actual investment involved.

Senator WHEELER. But anything outside of that? As to that I agree with you.

Mr. MERRILL. Well, outside of those there are the requirements that the plan shall be a comprehensive plan, that full development shall be effective, that the plant shall be kept in good operating condition, and there are provisions of the statute regarding regulatory functions of the commission over rates, securities, and so forth.

Senator WHEELER. What have you done with reference to rates and securities?

Mr. MERRILL. They have in one case acted in regard to securities. Do you mind if I pass that over for the moment? You understand that I am perfectly willing to discuss it, but I do not want to bring it up here.

Senator WHEELER. Very well.

The CHAIRMAN. You may continue.

Mr. MERRILL. Let me start out with this again:

It was the purpose of Congress in passing the Federal water power act to afford means for a rapid development of the Nation's water-power resources under conditions which safeguard the large investments involved, and which would at the same time fully protect the public interest.

The first part of this purpose has been reasonably well accomplished, although action upon many important applications for power project has been suspended by agencies other than the commission and therefore, beyond its control. It has been possible to act fairly promptly upon the remaining cases. If, however, all existing applications were in such a status that the commission could act upon them it would be many months before final action could be taken on them all, even if new ones were not being filed at a rate of about 100 per annum.

The second part of the purpose of Congress, namely, fully to protect the public interest in the issuance and administration of licenses has, because of lack of adequate personnel, been impossible of accomplishment. The commission has proceeded with the issuance of licenses in the annual expectation that it would be given the means to exercise adequate supervision over them. This has not been given, and is a serious question whether the commission ought not to cease