delayed from lack of sufficient clerical force to perform the purely mechanical work of typewriting.

There are certain duties prescribed by the act, particularly those relating to property valuation, which it has not been possible to undertake under the existing limitations on personnel. With respect to valuations the act provides:

Sec. 23. * * * That when application is made for a license under this section for a project or projects already constructed, the fair value of said project or projects, determined as provided in this section, shall for the purposes of this act and of said license be deemed to be the amount to be allowed as the net investment of the applicant in such project or projects as of the date of such license, or as of the date of such determination, if license has not been issued. Such fair value may, in the discretion of the commission, be determined by mutual agreement between the commission and the applicant or, in case they can not agree, jurisdiction is hereby conferred upon the district court of the United States in the district within which such project or projects may be located, upon the application of either party, to hear and determine the amount of such fair value.

Up to November 1, 1921, 6 licenses have been authorized by the Commission, upon which valuations under the provision quoted will be required, and which involve an aggregate of over $50,000,000. There are applications pending or soon to be presented which involve valuations aggregating not less than $75,000,000 more. The Commission can not with the force now at its disposal undertake any considerable part of this valuation work. No work of this character has been done by the three departments, and they have no personnel with the necessary training or experience. Until, therefore, the Commission has its own personnel available for the work it must either grant licenses with provisions for valuation some time in the indefinite future, or decline to approve applications where valuations are involved. In all cases where applicants are operating existing plants under any form of Federal authority the Commission proposes to suspend action upon the applications until provisions can be made for valuation. If the applicant is operating without the necessary Federal authority licenses will be issued with provision for future valuation, this course being taken in order that the investment made may have the protection afforded by a license.

5

The act requires that valuations be made as of date of the license. Delay means, therefore, the necessity of segregating property and improvements constructed or made after the date of license from those made before, of determining values and conditions of property for a date other than that on which it is inventoried and examined, and will, in general, add to the difficulty and cost of the work. Furthermore, values by agreement can be reached far more readily before license is issued than after. The delay in undertaking valua

5 See Orders, No. 10, Appendix C, p. 132.

tions made necessary by the lack of personnel will largely increase the cost of the work, will almost certainly result in protracted litigation, and is likely to make a difference in the valuations finally determined many times greater than the entire cost of the operations of the act. 1

Certain important general investigations upon which must be based the action of the Commission with respect to pending applications have been delayed on account of lack of any personnel with which to undertake the work, with consequent postponement of action. In some instances it has been possible to make arrangements with the departments to detail individuals temporarily for specific investigations. The volume of work before the Commission is so much greater, however, than was ever presented to the executive departments before, that despite the assignment and temporary details that have been made and the amount of work which the departments themselves are performing the work as a whole is not progressing at a rate which is satisfactory to the Commission or which the interests of power development require. Meanwhile the appropriations made for the express purpose of performing this work are being turned back into the Treasury unused for lack of authority to expend them for purposes which would correct the situation.

The inability of the Commission to use any part of its appropriation in the employment of personnel other than its executive secretary, and the inability of the departments either to assign to the Commission or to employ on work done for the Commission the number or character of persons required, is having the following unsatisfactory results:

1. The Commission is barely able to act upon the applications for permits and licenses as fast as they are examined and reported upon by the field officers of the departments.

2. The field forces of the departments are unable to keep current with work assigned to them. Delays of many months have already occurred, and it may be a matter of years before all of the applications can be presented for action.

3. Neither the Commission nor the departments have been able to make investigations of the character which the law contemplates as a prerequisite to issuing licenses.

4. The Commission is unable properly to enforce the safeguards which the law contemplated should attend the issuance of licenses and the administration of the act.

5. The Commission is unable to undertake the valuations required by the act when projects already constructed are brought under license.

6. It is impossible to segregate the costs to the several departments of the work performed by the Commission and thereby to determine the total cost of administration of the act.

7. Instead of substituting in water-power administration one agency for the three previously existing, the actual result, due to the limitations in the law, is to add a fourth. The present method, therefore, as compared with full responsibility in the Commission increases overhead and adds to the cost of administration.

8. The Commission by having no control over the greater part of its work (that performed by the field forces of the departments) can not organize it in an effective way or secure the best results for the moneys expended.

What is seriously needed in the interest of adequate administration of the act is a small organization of trained and experienced men capable of meeting intelligently the important and perplexing engineering and economic problems which are constantly arising and upon the correct solution of which will depend the value of the legislation and, in no small degree, the future of the electric power industry. It is, therefore, earnestly recommended that immediate steps be taken to amend the act, at least to the extent necessary to permit the Commission to employ its own personnel.

For 10 years water-power development practically ceased while the form of legislation was being discussed. A satisfactory law has been passed, but its full benefits are not being received because of lack of adequate means for its administration. Until the situation is corrected the Commission must pursue one of two courses-carry out the provisions of the law, act only upon such applications as it can handle in compliance with the law and defer action indefinitely upon the remainder; or ignore the requirements of the law, issue permits or licenses without adequate investigation, without making the valuations required by the act and without enforcing the safeguards provided by the act.

As industrial conditions improve, there will be pressing need for more and cheaper power. This can be supplied to the degree needed only from the sources under Federal control. Instead of further delay the Government should be bending every effort toward releasing under reasonable safeguards the water powers it has been hoarding for so many years. The expense of administration will not become a charge against Federal taxation, for under the provisions of the act the cost will be paid by its beneficiaries. In from three to five years the moneys collected even under the purely nominal rates of charges prescribed by the regulations should have paid off the entire accumulated cost of administration.

3. RULES AND REGULATIONS.

Immediately after the approval of the Federal Water Power Act, and even before the organization of the Commission, applications in considerable number were filed with the departments. These applications were largely informal in character. In order that applicants might be appraised at the earliest practicable date of the information which the Commission under the requirements of the act would need before acting upon applications, the. interdepartmental committee, assisted by details from the Forest Service and the Corps of Engineers, undertook at once the preparation of a draft of regulations covering forms of applications and general provisions concerning permits and licenses and related matters. Copies of the tentative draft were mailed to applicants, to officers of the National Electric Light Association, and to other interested individuals for examination and criticism. Written comments were received from several sources, and beginning August 13 a series of conferences was held which were attended by engineers, bankers, and representatives of the National Electric Light Association. As a result of these conferences the tentative draft of Regulations 1 to 10, inclusive, was amended, presented to the Commission, approved, and promulgated by Orders No. 6, on September 3, 1920.

The first 10 regulations included matters which had been covered in considerable degree by regulations of the several departments under earlier laws. The remaining subjects to be covered were largely new, concerned matters not hitherto involved in Federal administration, and required a careful study of the act and the consideration of legal, economic, and financial questions of considerable complexity. In the preparation of these regulations advice and criticism were freely sought in order that the regulations, when adopted, might be suited to the actual conditions surrounding electric-power development.

Engineering Council, a joint organization of several of the national engineering societies offered the services of its committee on water conservation consisting of Messrs. Calvert Townley, Charles T. Main, Allen Hazen, Arthur E. Morgan, M. O. Leighton, H. Hobert Porter, A. P. Davis, and Fred W. Scheidenhelm as technical advisors to the Commission in the preparation of its regulations. A draft of matters to be considered was presented to this committee, conferences were held on September 10 and 11, and a final report submitted by the committee on October 9. After preliminary conferences, particularly with representatives of the National Electric Light Association, a draft of Regulations 11 to 20, inclusive, covering "General considerations affecting approval," "Project works," "Lands reserved or

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classified as power sites," "Annual charges," "Benefits from headwater improvement," "Depreciation reserves," "Amortization reserves," "Expropriation of excessive profits," "Allocation of earnings," and "Accounts and reports," was prepared and distributed. Informal public hearings were held on February 10 and 11 and the draft amended in several particulars as a result of such hearings was submitted to the Commission for approval. On the request of the Empire State Gas and Electric Association of New York, a hearing on the proposed regulations was granted by the Commission itself and was held on February 25. Objections were primarily directed to the regulations concerning depreciation and amortization reserves, and toward certain provisions which it was feared would result in conflict of jurisdiction between the Federal Power Commission and the various State commissions. Request was made, therefore, that the Commission suspend action upon the adoption of the regulations. In view of the fact that many important applications were pending upon which delay was highly undesirable and since action could not be taken on such applications in the absence of general regulations, the Commission declined to suspend action and Regulations 11 to 20, inclusive, together with certain amendments to Regulations 1 to 10, were approved by the Commission and promulgated by Orders No. 9, on February 28, 1921.

On March 5, the water power committee of the National Electric Light Association requested a rehearing on the regulations adopted on February 28. A hearing was held on March 25, following which, at the request of the Commission, a conference was arranged between the members of the committee and the staff of the Commission, which conference extended over a period of about two weeks. In considering the relation to financing of certain features of the regulations a committee of bankers representing Lee, Higginson & Co., the Guaranty Trust Co., Harris, Forbes & Co., and the Electric Bond & Share Co., at the request of the executive secretary, came to Washington to present their views. The regulations were reviewed more thoroughly than had been possible previously and particular consideration was given to removing to the fullest practicable degree any possibility of duplication on the part of the Commission of any duties or functions exercised by the States in matters of a regulatory nature, and also, in the case of licensees under State regulation, of avoiding so far as consistent with the express requirements of the act the placing of burdens upon such licensees in respect to accounts and reports in addition to those required by the regulating bodies of the States. Later on in this report will be found a more detailed discussion of the relation between the Federal and State commissions under the regulations now in effect.