Nonfederal Development and Operation

Material Information

Nonfederal Development and Operation
President's Water Resources Policy Commission


Subjects / Keywords:
Navigation ( jstor )
Dams ( jstor )
Public land ( jstor )
Spatial Coverage:
North America -- United States of America -- Florida


Richard Hamann's Collections - Nonfederal Development and Operation
General Note:
Box 12, Folder 9 ( Water Resources Law - Vol #3 - 1950 ), Item 28
Digitized by the Legal Technology Institute in the Levin College of Law at the University of Florida.

Record Information

Source Institution:
Levin College of Law, University of Florida
Holding Location:
Levin College of Law, University of Florida
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Power Act would embrace many of the foregoing developments
of the 1900-1920 period. Sharp were the conflicts among views
as to the proper means for development of hydroelectric power
in streams and on lands subject to the jurisdiction of Congress.
During the period from 1913 to 1917, many power bills dealing
with navigable waters and many dealing with public lands were
actively and often heatedly debated in Congress without
passage." Shortly after the beginning of World War I, Presi-
dent Wilson sought a coordination of executive and legislative
attack on the problem, focusing attention in 1918 on the "Ad-
ministration Bill" which combined both the land and water
jurisdictional bases." Despite extensive consideration of this
and related legislative proposals, the 65th Congress adjourned
without adoption of any bill." But the 66th Congress finally
enacted the Federal Water Power Act of 1920, which in many
respects corresponds with the 1918 "Administration Bill." "
Elaborate attention would be required to measure the degree
to which this Act represents a compromise between the zealous
contentions of the early "conservationists" and those of their
equally zealous opponents, each group having long persevered
for general acceptance of its views. Suffice it for present pur-
poses to say that beginning with this legislation we may best
summarize existing law relating to both nonfederal and federal
development and operation. As we discuss these two main
divisions, we shall continue simultaneously to treat the growth
of the multiple-purpose concept in relation to individual

Nonfederal Development and Operation

As we have seen, Congress until 1920 generally gave direct
legislative authorization on a project-by-project basis for non-
federal development of power on streams under its jurisdic-
tion. Restrictive conditions in grants were few and incon-

"Id. ch. V; H. R. 8716, 65th Cong., 2d sess. (1918).
Kerwin, op. oit., supra, n. 67, at p. 253.
Id. pp. 261-263; Act of June 10, 1920, 41 Stat. 1083.


sistent. And many of the grants were perpetual in their
terms. With rare exception, they included no provision for
imposition of a charge for the privilege itself, or for disposition
of properties. But with the uncertainty of a grantee's tenure
and investment under grants subject to termination, private
development had moved slowly.
Seeking to remedy this situation, Congress in 1920 passed the
Federal Water Power Act, regularizing and facilitating federal
permission for nonfederal development through a licensing
system. The Act's history reflects a legislative purpose to en-
courage nonfederal development while safeguarding the pub-
lic interest and making possible ultimate public ownership."1
And as we shall see, the Act itself reserves a right to ultimate
public ownership of licensed projects and also holds the door
open to direct federal development by prohibiting the issuance
of licenses whenever the Federal Power Commission determines
that development should be undertaken by the United States.
The statute created the Federal Power Commission, com-
posed of the Secretaries of the Army, the Interior, and Agri-
culture." Federal development of power, it will be remem-
bered, is a responsibility principally assigned to the Army
Engineers, under the supervision of the Secretary of tle Army,
and to the Bureau of Reclamation, under the supervision of the
Secretary of the Interior." These two Secretaries, therefore,
had dual power responsibilities for a time. In 1930, Congress
made the Commission an independent agency consisting of five
members." In 1935, the 1920 Act was made Part I of the
Sen. Rep. No. 179, 65th Cong., 2d sees. (1917) ; H. Rep. No. 61, 66th Cong.,
1st sess., p. 8 (1919); Sen. Rep. No. 180, 66th Cong., 1st sess., p. 8 (1919).
Senator Jones, Chairman of the Senate Committee on Commerce, discussing
the proposed legislation which ultimately became the Federal Power Act,
said, "It will thus be seen that under the terms of the act the Federal
Government has, through its commission, the first right to develop any of the
water powers under its jurisdiction. Should the Federal Government elect
not to do so, then States and municipalities are accorded a preference right to
licenses on even terms over citizens, associations of citizens, or corpora-
tions organized under the laws of the United States or any of the States
thereof." 59 CoNG. REc. 246 (1919).
1, 41 Stat. 1063.
See supra, pp. 103, 109-110, 141, 147, 239-240.
SAct of June 23,1930, 1,46 Stat. 797, see 16 U. S. 0792.

Federal Power Act, which added provisions for the regulation
of electric utilities engaged in interstate commerce, as well as
procedural and administrative provisions for licenses and pub-
lic utilities.7
It may be noted preliminarily that the total estimated cost
of all major projects under Federal Power Commission license
is just under one billion dollars." Also, of the 282,698,-
214,000 kilowatt-hours total 1948 electric generation in the
United States, 82,469,742,000 kilowatt-hours, or approxi-
mately 30%, was generated at hydroelectric plants. Of this
latter figure, nonfederal hydroelectric generation was 49,741,-
060,000 kilowatt-hours, or approximately 600%.
INVESTIGATIONS AND SuRVEYs.-Examination of the Commis-
sion's broad investigative powers and duties will aid our later
consideration of its many other responsibilities. Thus, es-
pecial significance attaches to its wide authority to make in-
vestigations and collect data concerning the "utilization of the
water resources in any region to be developed, the water-power
industry and its relation to other industries and to interstate
or foreign commerce, and concerning the location, capacity,
development costs, and relation to markets of power sites." "
And also whether power from federal dams can be "advan-
tageously used by the United States for its public purposes,"
and what is a fair value of such power." In such investiga-
tions, it may cooperate with state and federal agencies." The
data thus collected the Commission may make public in the
form and manner "best adapted for public information and
use." "
Furthermore, the Commission has extensive investigative

"Federal Power Act; Act of June 10, 1920, 41 Stat. 1063, amended by Act
of August 26, 1935, 49 Stat, 838, as amended, 16 U. S. C. 791a-825r.
Federal Power Commission, S-70, 1948.
4(a), 41 Stat. 1065, as amended, 16 U. 5. 0. 797(a).
Sg 4(c), 41 Stat. 1065, 16 U. S. 0. 797(c).
4(d), 49 Stat. 840, 16 U. S. 0. 797(d). Originally before amendment
designated 1 4(d), 41 $Stt, 1065.

power to secure information as a basis for recommending leg-
islation." "So far as practicable," it must secure and keep
current information regarding the ownership, operation,
management, and control of "all facilities" for generation,
transmission, distribution, and sale of electric energy, however
produced. So also as to the "capacity and output of such
facilities and the relationship between the two; the cost of
generation, transmission, and distribution; the rates, charges,
and contracts in respect of the sale of electric energy and its
service to residential, rural, commercial, and industrial con-
sumers by private and public agencies." Moreover, this duty
to secure and keep current information includes the relation of
the foregoing facts to "the development of navigation, indus-
try, commerce, and the national defense."
nature and scope of the Commission's authority with respect to
investigations and surveys indicate a legislative expectation
that the functions delegated to the Commission would require
its consideration of multiple uses of projects and comprehen-
sive development." Moreover, preference among applicants
for a license depends in part upon which has plans best adapted
to develop, conserve, and utilize in the public interest the
water resources of the region."
Other provisions leave no room for doubt as to the importance
under the Act of multiple use and comprehensive development.
For example, the project adopted must be such as in the
judgment of the Commission will be: "
best adapted to a comprehensive plan for improving or
developing a waterway or waterways for the use or bene-
fit of interstate or foreign commerce, for the improve-
ment and utilization of waterpower development, and
for other beneficial public uses, including recreational

1" 311,49 Stat. 850, 16 U. S. C. 825J.
See nfra, pp. 276-281.
"See infra, pp. 281-282.
4 10(a), 41 Stat. 1068, as amended, 16 U. S. C. 803(a).

On the other hand, the Act may not be construed as affecting
rights acquired under state laws relating to the "control, appro-
priation, use, or distribution of water used in irrigation or for
municipal or other uses, or any vested right acquired therein." "
Otherwise, "the detailed provisions of the Act providing for
the federal plan of regulation leave no room or need for con-
flicting state controls." "
A number of provisions assure special consideration of navi-
gation interests. For example, no license may be issued affect-
ing the navigable capacity of navigable waters without approval
of plans by the Chief of Engineers and the Secretary of the
Army." Without expense to the United States, a licensee may
be required to construct looks, booms, sluices, or other struc-
tures for navigation purposes.89 If such structures are not
made part of the original construction, the licensee may be
later required to convey to the United States such lands and
right of passage, and to permit such control of pools as may be
required for the United States to complete such navigation
facilities.90 Also, the licensee may be required to furnish free
power for operation of navigation facilities." If the Commis-
sion finds that navigation needs require construction of naviga-
tion structures which cannot, consistent with a reasonable in-
vestment cost to the licensee, be provided at its expense, the
Commission may grant the license upon condition that the
licensee install such structures "if the Government fails to
make provision therefore" within a time fixed in the license.92
The Commission must report the facts to Congress with recom-
mendations concerning the participation of the United States
in the cost."
27, 41 Stat. 1077, 16 U. S. C. 821.
First Iowa Hydro-lecttric Cooperative v. Federal Power CommissJon,
328 U. S. 152, 181 (1946) ; State of Iowa v. Federal Power Commisason, 178
F. 2d 421, 426-427 (C. A. 8, 1949), cert. den., 339 U. S. 979 (1950); see
9(b), 41 Stat. 1068, 1 U: S. 0. 802.
"4(e), 49 Stat. 840, 16 U. S. C. 797(e). Originally before amendment
designated 4(d), 41 Stat. 1065.
S 11(a), 41 Stat. 1070, 16 U. S. 0. 804(a).
11 (b), 41 Stat. 1070, 16 U. S. C. 804 (b).
11(c), 41 Stat. 1070, 16 U. S. C. 804(c).
12, 41 Stat. 1070, 16 U. S. 0. 805.

Furthermore, the licensee must construct and operate at its
own expense such lights and signals as may be directed by the
Secretary of the Army." Likewise, the operation of all project
navigation facilities is subject to such rules as the Secretary of
the Army may make "in the interest of navigation." The
licensee must maintain the project works in a condition of
repair "adequate for the purposes of navigation" as well as for
their efficient operation for power, and it must also make neces-
sary renewals and replacements and establish and maintain
adequate depreciation reserves for such purposes." Moreover,
it must maintain and operate the works "so as not to impair
navigation." 9" On the other hand, in any valuation of the
property for rate making, there must be included the cost to
the licensee of the construction of required "aids of naviga-
tion.""9 Noteworthy also is the provision that a portion of
the proceeds derived from annual charges be reserved as a
"special fund" to be expended under the direction of the Secre-
tary of the Army in the maintenance and operation of federal
navigation structures, or in the construction, maintenance or
operation of "headwater or other improvements of navigable
Under other provisions, consideration of uses in addition to
power and navigation is necessary. Provision is made for fish-
ways and for consideration of the effect of proposed projects
on fish and wildlife.10 Licenses must be so conditioned as to
protect adequately and not interfere with the purposes of any
reservation of the United States.1& Likewise, when the Com-
mission deems a contemplated improvement "desirable and jus-
tified in the public interest" for improving a waterway for the
"use or benefit of interstate or foreign commerce," it shall in-
18, 41 Stat. 1073, as amended, 16 U. S. C. 811
S10(c), 41 Stat. 1069, as amended, 16 U. S. C. 808(c).
"8 20, 41 Stat. 1073, 16 U. S. 0. 813.
17, 41 Stat. 1072, as amended, 16 U. S. C. 810.
18, 41 Stat. 1073, as amended, 16 U. S. C. 811; Act of August 14, 1946,
2, 60 Stat. 1080, see 16 U. S. C. 662.
5 4(e), 49 Stat. 840, as amended, 16 U. S. C. 797(e). Originally before
amendment designated 4(d), 41 Stat. 1065.

elude a finding to that effect in its records.10 Also, in emer-
gency cases requiring protection of "navigation, life, health,
or property" a licensee may make certain alterations in ap-
proved plans."
In addition, we should mention here certain legislation de-
signed to protect lands of the United States suitable for power
development against disposal or use for other purposes. To this
end, Congress has enacted a number of statutes authorizing
withdrawal of such lands.1" The Federal Power Act itself
withdraws lands included within any application for a pre-
liminary permit or license."05 Furthermore, it authorizes the
Commission to permit the release of power withdrawals or to
permit nonpower uses of withdrawn lands, where it finds that
their future power value will not be injured or destroyed, and
to impose suitable restrictions on the interim nonpower use.
IsSUANCE OF LICENSES.-As amended in 1935, the Act makes
unlawful the construction, operation, or maintenance of power
dams or incidental works in navigable waters, or upon public
lands or reservations, or the utilization of surplus water or
power from any government dam, except as authorized by a
license under the Act, or a pre-1920 permit.'
Also, it requires the filing with the Commission of a decla-
ration of intention to construct dams or other project works
in waters other than "navigable waters, and over which Con-
gress has jurisdiction under its authority to regulate com-
merce." '" If the Commission after investigation finds that the
"interests of interstate or foreign commerce" would be affected
by such construction, a license must be obtained."

S 10(b), 41 Stat. 1008, as amended, 18 U. 8. 0. 808(b).
SSee Act of February 15, 1901, 81 Stat. 790; Act of June 25, 1910, 1 1,
36 Stat. 847; Act of March 4, 1911, 36 Stat. 1285, 1258. Of these, the 1910
statute is principally relied upon and is codified in 43 U. S. C. 141.
24, 41 Stat. 1075, as amended, 16 U. S. 0. 818 (Supp. III).
28 (b), 49 Stat. 846, 16 U. S. 0. 817. Of. the general prohibition of the
1899 River and Harbor Act, discussed supra, pp. 116-117.

The Commission is authorized to issue licenses for the con-
struction, operation, and maintenance of dams or other project
works "necessary or convenient for the development and im-
provement of navigation and for the development, transmis-
sion, and utilization of power" in streams over which Congress
has commerce authority, or upon public lands and reserva-
It may also issue licenses "for the purpose of utilizing the sur-
plus water or water power" from a government dam." Vol-
untary transfers of licenses without Commission approval are
"For the purpose" of enabling an applicant for a license to
secure certain project data and evidence of compliance with
state law, as required by the Act, the Commission is author-
ized to issue "preliminary permits." When issued, such a
permit is nontransferable and is for "the sole purpose" of
maintaining priority of application for such time as the Com-
mission deems necessary, not exceeding three years."'
In connection with the Commission's licensing authority, it
should be observed that it is also empowered to order an inves-
tigation of any occupancy of, or evidenced intention to occupy
public lands, reservations, or waters under the commerce au-
thority of Congress, "for the purpose of developing electric
power." Thereupon, it may issue such order as it finds "ap-
propriate, expedient, and in the public interest to conserve
and utilize the navigation and water-power resources of the
region." Exercising this authority, the Commission may

1 4(e), 49 Stat. 840, 16 U. S. 0. 797(e). Originally before amendment
designated 4(d), 41 Stat. 1065. See also Act of March 8, 1921, 41 Stat 153
repealing so much of the 1920 Federal Water Power Act as authorized
licensing specifed uses of "existing national parks and national monuments."

S8, 41 Stat. 1068,16 U. S. C. 801.
mi 4(f), 49 Stat. 841, 16 U. S. 0. 797(t). Originally before amendment
designated 5 4(e), 41 Stat. 1066.
M 5, 41 Stat. 1067, as amended, 16 U. S. 0. 798.
4(g),49 Stat. 841,16 U. S. 797(g).

require licensing of a project constructed in navigable waters
before enactment of the statute."
In issuing a license for a "minor part" of a complete project,
undefined in the Act, or for a complete project of not more
than 100 horsepower installed capacity, the Commission has
discretion to waive the conditions required by the Act, except
the license period of 50 years."
Specific provisions protect permits and grants obtained prior
to the Act's passage.'9 Moreover, as already noted, Congress
stipulated that the Act shall not be construed as interfering
with certain state laws relating to water.'"
Under the Act, provision is made for a mandatory preference
which is especially important in any contest between plans for
nonfederal development and plans for federal development."
For if in the judgment of the Commission the "development of
any water resources for public purposes" should be undertaken
by the United States, it is directed not to approve any applica-
tion for "any project affecting such development." a In such
case, it must prepare certain data and submit its findings to
Congress with recommendations concerning the proposed de-
velopment." While the Commission has joined the Army
Engineers in certain recommendations relating to federal navi-
gation and flood-codtrol projects,'" no record has been found
of Commission action taken directly pursuant to the foregoing
requirements."m With the winning of federal interest under

n Pennsylvania Water & Power C. v. Federal Power Commission, 123 F.
2d 155, 163 (1941), cert. den., 315 U. S. 806 (1942).
S 10(1), 41 Stat. 1070, as amended, 16 U. S. C. 808(1). This authority
does not extend to annual charges for use of lands within Indian reservations.
See supra, pp. 262-267.
27, 41 Stat. 1077, 16 U. S. C. 821; First Iowa Hydro-Eleotric Co-
operative v. Federal Power Commission, 328U. S. 152, 170 (1946).
m Recent examples of such a contest will be discussed infra, pp. 439-442.
n 7,41 Stat. 1067, as amended, 16 U. S. 0. 800.
SSee supra, n. 162, p. 103, and p. 141.
SBut presently pending for Commission action are exceptions filed to a
decision by a Presiding Examiner on December 19, 1949, ordering that an
application for nonfederal'development of the International Rapids Section
of the St. Lawrence River be not approved, and that the matter be submitted
to Congress with a recommendation for federal development. Be The

legislation for navigation, flood-control and reclamation under-
takings, the duty of the Commission correspondingly increases
in importance. Yet the relevance of this duty to a definition
of the respective spheres of federal and nonfederal power de-
velopment is limited by the fact that it is merely a part of the
Commission's administration of the licensing provisions of the
Act, a purpose of which was the encouragement of nonfederal
development, as already noted."2
If the Commission finds that any government dam may be
"advantageously used by the United States for public purposes
in addition to navigation, no license therefore" may be issued
until two years after it reports the relevant facts to Congress.12
Here again, no record has been found of Commission action
taken pursuant to this requirement. In this connection, it will
be remembered that the Commission is specifically authorized
to collect data showing whether power from "Government dams
can be used advantageously by the United States for its public
purposes," and what is the fair value of such power."
PFamuncNs.-In issuing preliminary permits or licenses, the
Commission must give preference to applications by states and
"municipalities," defined by the Act to include cities, counties,
irrigation districts, drainage districts, or other political sub-
divisions or agencies of a state competent under the laws

Power Authority of the State of New York, Project No. 2000, 15 F. R. 946
(1950). In the case of the Clark Hill project on the Savannah River, the
Commission in 1928 granted a license for nonfederal development, which was
surrendered with Commission consent in 1982. In 1939, the Commission
directed a letter to the President recommending early federal construction
of the project. Subsequently and after congressional authorization of fed-
eral construction and appropriation of funds, the Commission dismissed an
application for nonfederal development, an action affirmed on judicial review.
Savannah River Electric Co. v. Federal Power Commission, 164 F. 2d 408
(C. A. 4,1947). See also Re White River Power Co, 6 F. P. C. 784 (1947).
See supra, p. 273.
m 4(e), 49 Stat. 840, 16 U. S. C. 797(e). Originally before amendment
designated I 4(d), 41 Stat. 1065. This provision does not apply to dams
constructed prior to June 10, 1920. A "Government dam" means a dam or
other work constructed or owned by the United States for government pur-
poses with or without contribution from others. 3, 41 Stat. 1063, as
amended, 16 U. S. 0. 796(10).
SBSee supra, p. 274.

thereof to carry on the business of developing, transmitting,.
utilizing, or distributing power." But such preference applies
only if the plans submitted are deemed by the Commission
equally well adapted to "conserve and utilize in the public
interest the water resources of the region," or may be made
equally well adapted within a reasonable time fixed by the
Commission." As between other applicants, the Commis-
sion "may" give preference to an applicant with plans best
adapted to "develop, conserve, and utilize in the public inter-
est the water resources of the region." l
TEaM OF LICENse.-The Act provides that licenses shall be
issued for a period "not exceeding 50 years." Exception to
this requirement is not permitted even in the case of "minor
part" licenses, or those for a complete project of not more than
100 horsepower installed capacity, with respect to which the
Commission is authorized to waive certain other requirements.1"
Time-limit provisions are stipulated respecting the com-
mencement and completion of construction.1" So also as to
termination of a license on failure to commence construction
within the prescribed time, and as to revocation where con-
struction is begun but not completed within the prescribed
time." In addition, provision is made for approval of power
contracts extending beyond the termination date of the license,
"whenever the public interest requires or justifies" such
Although Congress expressly reserved the right to alter the
Act, it stipulated that no such alteration shall affect licenses
theretofore issued under the Act, or a licensee's rights there-
under." But expressly reserved is the right of the United
States or of any state or municipality to take over a licensed
2* 7, 41 Stat. 1067, as amended, 16 U. S. C. 800; 8, 41 Stat. 1068, as
amended, 16 U. S. 0. 796(7).
"1 I
"' 6, 41 Stat. 1067, as amended, 16 U. S. C. 790.
1* 10(1), 41 Stat. 1070, as amended, 16 U. S. 0.808(i).
1 13, 41 Stat. 1071, 16 U. S. 0. 806.
SId., and 1 26, 41 Stat. 1076, 16 U. S. C. 820.
S1 22, 41 Stat. 1074, 16 U. S. C. 815.
28, 41 Stat 1077, 16 U. S8. 822.

project at any time by condemnation proceedings upon pay-
ment of just compensation.1 In this connection, it may be
noted that the Act specifies certain circumstances in which a
licensee may exercise the right of eminent domain.1"
IMPosrrTON OF CHAnmBs.-In the case of projects on streams
under the commerce authority of Congress, the Act makes no
provision for imposition of a charge for the license privilege,
as such, except for nonfederal power plants at government
dams. This, it will be remembered, was one of the most con-
troversial issues of the 1900-1920 period.
The Act does require, however, that the licensee pay rea-
sonable annual charges for reimbursing the United States for
the costs of administering the licensing provisions, and for
recompensing it for the occupancy of its lands or other prop-
erty.?" Also, annual charges must include an amount for
expropriation to the Government of "excessive profits" until
the respective states make provision for preventing excessive
profits or for expropriation thereof to themselves, or until
the period of amortization is reached.14 In fixing annual
charges, the Commission must seek to avoid increasing the
price to the consumers of power by such charges?. Special
provisions are included for the fixing of charges in the case of
use of government dams or Indian tribal lands.1
State and municipal licensees are granted an exemption from
payment of annual charges if the power "is sold to the public

1 1 14,41 Stat. 1071, as amended, 16 U. 8. C. 807.
1 21, 41 Stat. 1074, 16 U. S. C. 814.
"* 10(e), 41 Stat. 1000, as amended, 16 U. S. C. 808(e). For the form-
ulae employed by the Commission, see 18 0. F. R. 11.20, 11.21.
a Id.

o Id. A Commission regulation stipulates that, with certain exceptions,
charges in the case of government dams "will be based upon the estimated
value for power purposes of the properties and privileges." 18 C. F. R 11.22.
However, its published opinions do not give the method followed in all de-
tails in arriving at the actual charge. See, e g., licenses for the London
and Marmet power plants on the Kanawha River, West Virginia, Project
p. 147 (1985).

without profit" or is used for state or municipal purposes."
The Commission has been sustained in its practice of refusing
such exemptions to st te and municipal licensees whose account
records disclose a balance of receipts over costs for the period.1"
Such licensees are also granted an exemption from the payment
of annual charges for projects "primarily designed to provide
or improve navigation." 1 No record has been found of ex-
emptions granted on this ground.
Notwithstanding the foregoing provisions, the Act requires
that in no case may a license be issued free of charge for the
development or utilization of power created by any federal
In addition to the foregoing requirements, the Act provides
for payment by licensees for benefits received from construc-
tion work of other licensees, permittees, or the United States,
such as headwater improvements." Also, provision is made
for payments by owners of unlicensed projects for benefits
which they receive from work of licensees, permittees, or the
United States.1"
PROCEEDS FROM CIAMGEs.-Proceeds from charges imposed
to reimburse the United States for the cost of administering the
license provisions are paid into the -Treasury and credited to
miscellaneous receipts. Also, proceeds from Indian reserva-
tions are placed to the credit of the Indians of such reserva-
Other proceeds from charges are paid into the Treasury sub-
ject to the following distribution: (a) 12Y27o to Treasury and
credited to miscellaneous receipts; (b) 50% of charges for use of
"'Id. This provision does not apply where the project occupies tribal
lands within an Indian reservation, or is located at a government dam. See
also 18 0. F. R. 11.24.
Central Nebraska Publo Power & Irrigation Dist. v. Federal Power
Commission, 160 F. 2d 782, 783 (0. A. 8, 1947), cert. den., 332 U. S. 765
1"6 10(e), 41 Stat. 1069, as amended, 16 U. S. C. 803(e). See also 18
C. F. R. 11.24.
14 Id
10(f), 41 Stat. 1070, as amended, 16 U. S. C. 803 (f).

'~ 17,41 Stat. 1072, as amended, 16 U. S. C. 810.

public lands and national forests, to the Reclamation Fund; '
(c) 371/2% of charges for use of public lands and national
forests to the state in which such lands are located; and (d)
50% of charges from all other licenses, to a "special fund" for
expenditure under the direction of the Secretary of the Army
in the maintenance and operation of federal navigation struc-
tures or "in the construction, maintenance, or operation of
headwater or other improvements of navigable waters." l' It
is apparent that this distribution provision involves some
mathematical confusion.'"
RATES AND SERcEs.-Part I of the Act provides for regula-
tion of services and securities of public-service licensees in some
circumstances by states, and in others by the Commission."
Provisions are likewise included in Part I for regulation of both
intrastate and interstate rates, it being stipulated that the
latter must be just, reasonable, and nondiscriminatory.'
The interstate rate standard thus provided is in almost iden-
tical words the same as that to be applied under the 1935
provisions of Part II in fixing the interstate wholesale rate
of an interstate electric "public utility," as defined in that
Part, except as we mention below." A licensee coming
within the definition of a "public utility" is not exempted from
regulation under Part II.7 The Supreme Court has con-
strued a rate standard substantially identical with the one
involved here to free regulatory commissions from adherence
to any particular formula in rate regulation."5 The rate pro-
visions of Part II are applicable only to interstate wholesale
rates, while the interstate rate provisions of Part I are not
limited to wholesale rates. The sole rate-base difference be-

m See supra, pp. 198-202.
1 17,41 Stat. 1072, as amended, 16 U. S. C. 810.
In this connection, see 1 Comp. Gen. 49 (1921).
19,41 Stat. 1073, 16 U. S. C. 812; 20,41 Stat. 1073, 16 U. S. C. 813.
SId.; infra, p. 288. See Safe Harbor Water Power Corp. v. Federal Power
Commission, 179 F. 2d 179 (C. A. 3, 1949), cert. den., 339 U. S. 957 (1950).
m 179 F. 2d 186-187.
179 F. 2d 184-185.
Federal Power Commission v. Hope Natural Gas Co., 320 U. S. 591, 602

C ~x~dre

tween the provisions of Parts I and II is that those of Part I
restrict the rate base to an amount not in excess of "net invest-
ment" or "fair value," whichever is the lower." "Net in-
vestment" in a project is defined as the "actual legitimate
original cost," less certain deductions.'" No such limitation
appears in the rate provisions of Part II.
It should also be noted that the Act prohibits agreements
and arrangements to limit the output of electrical energy, to
restrain trade, or to fix, maintain, or increase prices therefore '
DISPOSITION OF PROJECTs.-During the 1900-1920 period,
there were vigorous arguments over proposals as to the dispo-
sition of nonfederal works constructed under federal authoriza-
tion. A number of earlier special grants, it will be remembered,
provided for transfer of the works to the United States upon
completion.' The 1920 Act provides for a maximum license
period of 50 years, and then for an option under which the
United States may, at the end of that period, take over and
operate the licensed project at an acquisition price limited to
"fair value" or "net investment," whichever is lower." To
enable the Commission to determine the net investment in a
licensed project, it is authorized to require detailed cost state-
ments by the licensee and to have access to its records."
If the United States does not take over the project at the
end of the license period, the Commission may, subject to
provisions of law and regulations then existing, issue a new
license to the original licensee, or to a new licensee.'" Absent
a take-over, a license to a new licensee, or a license "upon
reasonable terms" to the original licensee-the Commission
"shall" issue from year to year an annual license to the "then
2 20, 41 Stat. 1073, 16 U. S. C. 813; i 14, 41 Stat. 1071, as amended, 16
U. S. C. 807.
m 3, 41 Stat. 1063, as amended, 16 U. S. 0. 796(13). See also 179 F. 2d
187, 193-194.
10(h), 41 Stat. 1070, as amended, 16 U. S. 0. 808(h).
SSee supra, n. 41, pp. 266-267.
"* 14, 41 Stat. 1071, 16 U. S. C. 807; $ 6, 41 Stat. 1067, 16 U. S. C. 799.
4(b), 49 Stat. 839, 16 U. S. 0. 797(b). Originally before amendment
designated 4(a), 41 Stat. 1065. See also I 10(d), 41 Stat. 1068, as amended,
16 U. S. C. 803(d), concerning amortization reserves.
115,41 Stat. 1072,16 U. S. C. 808.


licensee" under the terms and conditions of the original
Furthermore, when in the opinion of the President the safety
of the United States demands it, temporary possession of a
project may be taken "for the purpose of manufacturing
nitrates, explosives, or munitions of war, or for any other
purpose involving the safety of the United States." In
so doing, the United States must pay "just and fair compensa-
tion" as fixed by the Commission under a prescribed formula.1
Congress in 1935 made the 1920 legislation Part I of the Federal
Power Act and added provisions for the regulation of inter-
state electric utilities, as well as procedural and administrative
provisions for licensees and public utilities."'
Especially relevant to our survey is the 1935 inclusion of a
direction to the Commission to divide the country into regional
districts for "voluntary" interconnection and coordination of
electric facilities: I0
For the purpose of assuring an abundant supply of
electric energy throughout the United States with the
greatest possible economy and with regard to the proper
utilization and conservation of natural resources *
Within and between such districts, it is the "duty of the Com-
mission to promote and encourage such interconnection and
coordination." The Commission has not yet established such
With respect to a "public utility" as defined in the 1935
Act,1 the Commission may order interconnections under cer-
tain circumstances.1 But it may not compel the enlargement
of generating facilities for such purposes, nor impair the public
16, 41 Stat. 1072,16 U. S. C. 809.
See upra, pp. 273-274.
1 202(a), 49 Stat. 848,16 U. 8. 824a(a).
1 For a Commission order tentatively dividing the country into power
districts and power regions, see 1 F. R. 5M (1986).
m 201(e), 49 Stat. 848,16 U. S. C. 824.
S 202(b), 49 Stat. 848, 16U. S. 824a (b).

utility's ability to render adequate service to its customers.4"
Also included are requirements for temporary emergency
interconnection of facilities.1'"
Moreover, the provisions added in 1935 extend a number of
other regulatory requirements to electric companies coming
within the Act's definition of a "public utility." These include
such matters as regulation of rates,"6 issuance of securities and
assumption of liabilities,17 furnishing of adequate service,"T
ascertainment of cost of property,"7 and cooperation with
Certain of the procedural and administrative provisions also
should be mentioned. For example, authority is conferred
upon the Commission whereby it has established its Uniform
System of Accounts Prescribed for Licensees and Public Utili-
ties."' Likewise, it is authorized to fix proper and adequate
rates of depreciation of the several classes of property of li-
censees and public utilities.'" In specified circumstances, the
Act prohibits officials from dealing in securities and makes
interlocking directorates unlawful.'V
In considering both nonfederal and federal development
of power, significance attaches to another provision of the 1935
legislation. All agencies of the United States engaged in the
generation and sale of electric energy for ultimate distribution
to the public, as to facilities used and energy sold, are required
to comply with the accounting provisions and regulations issued
171 d.
202(c), (d), 49 Stat. 849, 16 U. S. 824a(c), (d).
205, 49 Stat. 851, 16 U.. S. 824d, and $ 206, 49 Stat. 852, 16 U. S. C.
S 204, 49 Stat. 850, 16 U. S. C. 824c.
S 207, 49 Stat. 858, 16 U. S. C. 824f.
S208, 49 Stat. 858, 16 U. S. C. 824g.
209, 49 Stat. 853,16 U. S. C. 824h.
S 801(a), 49 Stat. 854, 16 U. S. C. 825; 804(a), 49 Stat. 855,16 U. S. C.
825c(a) ; 809, 49 Stat. 858, 16 U. S. C. 825h; 3, 41 Stat. 1063, as amended,
16 U. S. C. 796(13); 4(b), 49 Stat. 838, 16 U. S. C. 790(b). Originally be-
fore amendment designated .4(a), 41 Stat. 1065. See also 208, 49 Stat.
853, 16 U. S. C. 824g; 302, 49 Stat. 855, 16 U. S. C. 825a. For the uniform
system, see 18 C. F. R. 101.00-1 et seq.
302(a), 49 Stat. 855, 16 U. S. C. 825 (a).
S 305, 49 Stat. 856,16 U. S. 0. 825(d).

thereunder, including the uniform system.18' But this obliga-
tion applies only "so far as may be practicable." '8
gress established this agency to make loans for rural electrifica-
tion.1 Under the general direction and supervision of the
Secretary of Agriculture, the Administrator is empowered to
make loans: 18
for the purpose of financing the construction and opera-
tion of generating plants, electric transmission and dis-
tribution lines or systems for the furnishing of electric
energy to persons in rural areas who are not receiving
central station service *
"Rural area" is defined as "any area of the United States not
included within the boundaries of any city, village, or borough
having a population in excess of fifteen hundred inhabitants,
and such term shall be deemed to include both the farm and the
nonfarm population thereof." 8
Loans may be made to persons, corporations, public bodies,
and cooperatives, but preference must be given to "States, Ter-
ritories, and subdivisions and agencies thereof, municipalities,
peoples utility districts, and cooperative, nonprofit, or limited
dividend associations."8' Loans are made at an interest rate
of 2% with a maximum amortization period of 35 years."0
Loans have been made under this legislation for construction
of hydroelectric plants, some of them licensed under the Fed-
eral Power Act."
3808, 49 Stat. 855, 16 U. S. C. 825(b).
SAct of May 20, 1986, 49 Stat. 1868, 7 U. S. C. 901 et seq. Authorizations
for loans by REA amounted to $1,880,818,858 as of June 30, 1949. Cus-
tomers connected as of that date totaled 2,778,180. H. Rep. 2908, 81st
Cong., 2d sess., p. 4 (1950).
"Act of May 20, 1936, 4, 49 Stat. 1363, 1365, as amended, 7 U. S. C. 904
(Supp. III).
13, 49 Stat. 1867, 7 U. S. C. 913
4, 49 Stat. 1365, as amended, 7 U. S. C. 904 (Supp. III).
-"Act of September 21, 1944, 502 (b), 508, 58 Stat. 734, 739, 740, see 7
U. S. C. 904, 905.
S" ee, e. g., Ie Dairyland Power Cooperative, Flambeau River Project,
S Wisconsin, Project No. 1960. See also H. Rep. No. 2908, 81st Cong., 2d
sess., p. 26 (1950).