December 15, 1967
Page 37391
Dickey and the Consumer
EXTENSION OF REMARKS OF HON. ROBERT T. STAFFORD OF VERMONT IN THE HOUSE OF REPRESENTATIVES
Friday, December 15, 1967
Mr. STAFFORD. Mr. Speaker, at the request of interested citizens of Vermont, I place in the RECORD a speech of the distinguished Senator from Maine [Mr. MUSKIE], which he delivered to the New England Association of Active Co-ops in Boston, Mass., on December 6, 1967. It concerns the so-called Dickey-Lincoln School Hydroelectric Project on Maine's St. John River:
DICKEY AND THE CONSUMER
(Remarks by Senator EDMUND S. MUSKIE, to the New England Association of Electric Co-Ops, Boston, Mass., December 6, 1967)
I am grateful for this opportunity to meet with you today. It is appropriate that we do so.
We share a desire to see power rates in the Northeast reduced. We understand the value
of public power. And we know firsthand that the consumers' interest is not always placed first in the planning and operations of our region's privately-owned utilities.
There is more at stake in the congressional debate over Dickey than the construction of a large multipurpose water resource project.
The fight over the Dickey-Lincoln School hydroelectric project on Maine's St. John River helps illuminate the major obstacles to achieving lower-cost power: the private utilities and their lobby.
At issue is–
Whether the private utilities will retain their stranglehold on our region:
Whether their lobby can quash a justified, beneficial project;
Whether the public interest will be represented in the planning and development of a balanced and integrated power system for our region;
Whether the basic national policy for resource development will survive; and
Whether the Northeast is an equal partner among other regions under that policy.
Let me begin by reviewing the policy and the development of the Dickey proposal. Since 1959, I have been a member of the Public Works Committee, where the bulk of our resource development projects are reviewed and evaluated. In the nearly nine years I have worked with my colleagues on hundreds of projects, I have followed a simple rule: A project should be evaluated on its merits -- without reference to the region in which it is located -- it should be approved if it meets the tests of being in the public interest, if it contributes to the welfare of the area in which it is located and if it is economically feasible. These are the tests the Public Works Committee and the Senate have applied.
When it is examined objectively, Dickey Lincoln School meets all of these tests. The project is the product of a long series of studies beginning with the New England-New York interagency study of the late 1940's and early 1950's, coupled with the earlier Passamaquoddy tidal power project, advocated by President Franklin D. Roosevelt. I know many of you are familiar with the history of the project, but it may be helpful for us to recall some of the details which have been obscured in recent debates.
In 1959, the Joint Engineering Board of the International Joint Commission (United States and Canada) recommended the construction of the Passamaquoddy tidal power project, coupled with the construction of a high dam on the upper St. John River at Rankin Rapids. The Rankin Rapids project was designed to provide low-cost, flexible hydroelectric energy to smooth out the peaks and valleys in power production at the tidal generating station. It would have flooded the upper St. John and the Allagash rivers.
The engineering report was referred to the International Joint Commission for review and evaluation. In April, 1961, the Commission rejected the proposed Passamaquoddy tidal power project, but suggested possible development of the upper St. John.
In the meantime, the National Park Service of the United States had proposed the protection of the Allagash River as a free flowing, "wilderness" waterway.
I recommended to President Kennedy that the Department of the Interior be assigned the responsibility of reviewing the recommendations of the Joint Engineering Board, the findings of the International Joint Commission and the recommendations of the National Park Service for the purpose of recommending a balanced development of the resources of northern and eastern Maine.
In July, 1963, after two years of study, Secretary of the Interior Udall recommended to the President the development of the Dickey project as a flood control and hydroelectric program, designed to provide 100,000 kilowatts of low-cost firm energy, and 650,000 kilowatts of low-cost peaking power. The project would consist of a high dam on the upper St. John, above the confluence of the St. John River and the Allagash River in the town of Dickey, and a low, re-regulating dam below the confluence of the two rivers at the site of Lincoln School. The project, which would fit into the power requirements of Maine and New England, was hailed by conservationists because of the protection it provided the Allagash River.
This past year the State of Maine and the Department of the Interior entered into an agreement under which the State of Maine is acquiring title to land on both sides of the Allagash and protecting this beautiful river in its primitive state. The Federal Government and the State are sharing in the costs of the project.
The 1963 proposal contained an additional recommendation that the Passamaquoddy project should receive continuing study, particularly with reference to technological advances.
I want to underscore the fact that the 1963 proposal, which is the foundation for the present project, was based on the concept of a generating station designed to produce the bulk of its energy as peaking power. This is absolutely essential to a soundly balanced power system in which there are very large thermal plants -- fueled either by fossil fuels or nuclear energy.
Dickey-Lincoln school is not an alternative to thermal plants; it is essential to their economic and efficient operation as part of a regional system.
Dickey-Lincoln School is important to New England as a substantial source of power which will be available for short periods of peak demand such as rush hours, early evening and early morning -- the kind of power the Northeast needed and didn't have during the blackout of November 9, 1965.
Dickey-Lincoln School is an eminently sound project, with a benefit-cost ratio of 1.91-1. It would provide wholesale firm energy for Maine communities at rates two-thirds below those now charged by the private utilities. It would supply essential peaking power to the New England market at rates nearly one-third below current charges and at costs lower than the best alternative proposals made by the private companies.
Since its authorization in 1965, Dickey Lincoln School has been the subject of the most intensive re-study ever required for a public works project. The staff of the House Committee on Appropriations conducted a special study of the project, including an extensive analysis of the findings of the Corps of Engineers, the Department of the Interior and the Federal Power Commission. They reviewed the allegations made by New England's private utilities. The staff findings sustained the favorable verdict of the public agencies and discredited the arguments advanced by the private companies.
The private power companies have claimed that Dickey-Lincoln School would not affect power rates in New England. The fact is that the threat of Dickey-Lincoln has already had an impact on the power companies of my own State.
Between 1946 and 1963 the three privately owned power companies in Maine sought increases -- but no reductions -- in their rates. Indeed, during my terms as Governor, the Public Utilities Commission was under constant pressure from power company attempts to push their rates higher and higher.
But in 1963, when the Department of the Interior recommended the construction of the Dickey-Lincoln School project, the three companies, within two months of the Dickey proposal, suddenly discovered it was possible to reduce rates. The reductions weren't impressive and they provided almost no benefits for homeowners, but they were reductions. The total reductions, in 18 announcements made by the power companies since the advent of the Dickey-Lincoln proposal, have totaled $4.161,527.
It should be noted that since 1965, all but one of the reductions were announced just prior to or during the hearings and floor consideration of the Dickey-Lincoln School project.
This record is extraordinary for companies which had not sought reductions and had been busy pushing rates up for the preceding 17 years. This record and the record of rate reductions in other areas of the country where publicly owned power projects are located indicate the desirability of competition in the power business.
I could cite case after case where the presence of a competitor or even a prospective competitor has caused a power company to reduce rates or forestall increases. But let me cite only the most recent example. In Texas, the Southwestern Public Service Company has proposed rate increases in 60 west Texas towns. But in three communities, which also are served by municipal systems, the company is not seeking increases.
In Maine, it should be noted that the rate reductions did not result in any belt-tightening by the private utilities. A study of the rate of return received by the power companies indicates that during and since the reductions, two of the three utilities involved have been getting returns in excess of the six percent normally set by the Maine Public Utilities Commission. As a result of the discussion stimulated by Senator Metcalf's book, "Overcharge," the Maine Public Utilities Commission contracted for a special study of rates of return for Maine utilities. That study moved Governor Curtis to ask the Public Utilities Commission to institute a rate case seeking reductions.
The Maine overcharge problem is matched in the rest of New England. A study of Federal Power Commission statistics shows that in 1965, for instance, the New England private power monopoly overcharged New England consumers $21,034.000. This estimate is based on the normal rate of return of 6 percent applied to this industry.
A study of 28 New England power companies shows that 14 of them had a rate of return of 7 percent or more. Five had a rate of return of 8 percent or more, and one had a rate of 11.18 percent. At these rates of return, it is not surprising that New England homeowners pay up to 35 percent more for power than the national average.
The private power companies have made one other gesture in the direction of improved operations since the advent of the Dickey-Lincoln School project -- even that is a mixed blessing.
In January, 1966, the power companies released a series of advertisements, announcing the establishment of the "big 11 power loop." In and of itself, it was a confession of past weaknesses, but it promised an integrated power system for the region, based on large nuclear power plants and larger transmission lines.
Later, however, one of the power company executives admitted in a Vermont public hearing that planning for the "big 11" program consisted solely of preparing the advertisement. The House Public Works Committee could find no evidence of regional planning by the utilities, including generation and transmission, except in the advertisements. The staff study concluded that, "although representatives of the council advised that they have planned to meet the problems of supplying the power needs of New England on a central coordinated basis, they have not produced any document supporting this central planning with the exception of an advertisement that appeared in the public press in January, 1966.”
Recent developments indicate that the underlying intent of the private companies in promoting the "big 11" proposal is not so much an improvement in reliability and service as it is another step in their effort to tighten their grip on the New England power market. As you know, they have flatly refused to permit the publicly owned utilities to join in a regional transmission system.
The Massachusetts case should not surprise us. What the Federal Power Commission has learned here has been echoed across the country. The FPC counsel has determined that the Massachusetts municipals were denied participation in the planning activities of the New England utilities. The FPC also found that such exclusion is detrimental to the city-owned systems and constitutes possible violations of antitrust statutes.
Further evidence that the private utilities want to keep nuclear power all to themselves is overwhelming -- in proceedings before the FPC, the Atomic Energy Commission, the Securities and Exchange Commission and the House of Representatives.
The private utilities are even trying to prevent any Federal agency from building a nuclear power facility.
In another effort to detract from Dickey Lincoln School, the private power companies have attacked the project as a "subsidized" venture while suggesting that they never receive subsidies or any other considerations. The fact is, of course, that the companies benefit from the assured rate of return which is part of the consideration granted a public utility, and in their heavily advertised nuclear power plants, they have been receiving considerable assistance from the public investment in nuclear technology development and in indirect assistance under the Federal Atomic Energy program.
I would like to call your attention to the subsidies received by the Yankee Atomic Plant at Rowe, Massachusetts, the only operating nuclear power facility in New England.
1. Research and development assistance: This amounted to $5 million for AEC assistance in the design, engineering and fabrication of the reactor portion of the plant.
2. Waiver of fuel use charge: The cost of the initial load of fuel in the reactor was $3.7 million. but the fuel was supplied free of charge by the AEC (enriched uranium from Oak Ridge). This was part of the AEC's role due to the experimental nature of the reactor.
3. Plutonium buy-back -- $2.1 million: At the time of construction of the Rowe, Massachusetts, plant, there was no private market for uranium and. therefore, had the AEC not agreed to buy back the plutonium, the utilities would have had to dispose of it as waste. These aids total $10.8 million.
The subsidies will not be available to the nuclear power plants being constructed, considered or advertised in the New England area, but the new plans will continue to receive the benefits of nearly two billion dollars that the Atomic Energy Commission has spent in research, and development of the civilian nuclear power program and related reactor technology and safety programs. The companies also will benefit from the incentives provided by the Price-Anderson indemnity act. It provides liability protection between the coverage provided by the private insurance companies and total liability of $560 million. In the instance of the Connecticut Yankee Atomic Plans, the utility will be able to obtain $485 million worth of liability coverage from the Federal government at a cost of $44,000 per year, while obtaining only $74 million worth of liability insurance from private sources for $280,000 a year. That is one-seventh the protection for six-times the cost.
I do not object to these incentives, or subsidies. They are designed to accomplish a positive public good. I do object to the double-talk we get on the subsidy question.
In connection with the subsidy argument, it should be noted that the Dickey-Lincoln school project would repay the entire federal investment, with interest, in 50 years. It will return to the federal treasury nearly two dollars for every one of the $227 million in federal funds invested in the project during that time period. It will continue to pay a substantial return on the public investment many, many years beyond the end of the payback period.
I have yet to hear one private power company offer to reimburse the federal treasury for the nearly $2 billion federal investment in the civil nuclear reactor program.
Beyond these substantive issues, there are two other observations which should be made.
Without a public power yardstick to gauge the operations of the private utilities, and to stimulate them to develop economies, there is little hope that the northeast will ever catch up with the lower power costs of every other region of the country. Unless the federal government builds nuclear or other thermal plants in New England, and I have heard of no such proposal, the yardstick must be a hydro plant. There are few suitable sites in New England for large hydro plants. This means if Dickey fails, the chances would be slim for the success of any other public power proposal for our region. In the end, without a yardstick, likelihood of meaningful reductions in power rates would be negligible.
The other observation is this: the Northeast, and New England in particular, has not received the heavy investment in resource development funds which have benefitted every other region.
From 1960 to 1966, the per capital distribution of public works authorizations showed a consistent pattern of large investments in areas outside the Northeast. We received only 58 percent of the Midwest's share 45 percent of the South's share; 33 percent of the Southwest's share, and 35 percent of the Far West's share.
The 1967 public works bill was even less favorable for us. We received 37 percent of the Midwest's share, 23 percent of the South's share, 23 percent o1 the Southwest's share, and only 15 percent of the Far West's share.
Finally, I want to point out that many of the opponents of Dickey have been inconsistent in their positions on the public works appropriations bill, voting against Dickey while supporting rivers and harbors projects in their own districts which do not measure up to the Maine project.
In the House vote of July 25, for example, Congressmen representing districts in which 193 projects covered by the bill were located voted against the Dickey-Lincoln School project, 134 of those projects, with appropriations totaling $241,527,000, had no benefit-cost estimate or had a benefit-cost ratio of less than Dickey's 1.9-1. This represented 24 percent of the total
appropriations approved by the Senate for construction and planning of public works projects.
I cite these figures to demonstrate that there is no consistency in the opposition to Dickey, that the House position threatens a national policy based on the merits and economic feasibility of projects, and that our region is not one to be placed at the top of the list for cutting back on public works projects.
To my mind, the inconsistency can only be explained as the product of one of the most heavy-handed lobbying campaigns in memory.
Congressmen from districts thousands of miles from New England were approached by representatives of their local utilities, and given erroneous information on the project.
The private utility lobby even rewrote a favorable analysis by the Federal Power Commission, attempting to show that the Commission opposed the project.
This move, carried out by the coordinating council of New England. was the most brazen
distortion of the findings of an independent government agency in the history of Federal power projects.
The private power companies sought to confuse the public and mislead the Congress. The nature of the companies' campaign convinces me that their oppositions to Dickey is not motivated by concern for the merits. They obviously enjoy their monopolies and are determined to maintain them -- at the expense of the public.
The private power lobby was successful this year. We will, of course, pursue the project again in the next session, and we face a tough job. If you share my commitment to Dickey, I urge you to do everything you can to encourage support for it from our region. If my mail is any indication, increasing numbers of New Englanders are becoming alert to the high cost of our power, and to the benefits of Dickey. This concern, however, must be translated into political strength. The Congressmen from Massachusetts and Connecticut especially must understand that there is support for Dickey among their constituents. If we are to reverse the House votes against Dickey, the project must have stronger support from within our region.
You who understand the issue can play a strategic role in education on this issue, in organizing a regional program of support, and in carrying the fight to the Congress. And in that fight, you can count on me.