own plant, without having to pay interest or taxes. They are the bare bone figures but take into consideration the actual figures that TVA is charging AEC after all taxes have been paid.

Mr. HOLIFIELD. I am not going to enter into a controversy with the gentleman on that point. That is not the point in issue. The point in issue is whether the powerplant in the area to be served will be more economical to the taxpayers by being built by the TVA at Fulton or by the Dixon-Yates plant to be built at West Memphis. That is the point at issue.

Mr. GATHINGS. I put in the RECORD in the remarks I made the other day that it resulted in a saving to the Government after you took into consideration the amount of money the Government of the United States would have to throw into these various districts because of the school impacted problems that would exist, for one thing.

Mr. HOLIFIELD. The gentleman's statement will stand for itself, and I refuse, Mr. Speaker, to yield further at this time. However, I will yield later to the gentleman.

Now, in Mr. JONAS' statement there is a sheet of figures which is noted as attachment 1, a comparison of actual cost to Federal Government for power supplied and to be delivered to the TVA SYStem at the Memphis area, and the DixonYates proposal is analyzed. This, as far as I know, is an accurate presentation, and it again shows at the bottom of the page, additional cost to the Government per year of $3,685,000.

Now, attachment No. 2 attached to Mr. JONAS' remarks is a comparison of the Dixon-Yates proposal with the TVAPaducah contract and it shows an additional cost of $2,923,000 a year. And, I point out again that this is not a comparison between the Dixon-Yates proposal and the proposed Fulton-TVA plant, but it is a comparison with the Paducah contract with TVA.

And, at this time I want to say that the cost at the Paducah plant at the present time, of the TVA delivery of power to the AEC at Paducah at this time, is a higher cost than the contract price by Electric Energy, Inc. The reason for that is that an emergency requirement has been placed upon the TVA to furnish power for that plant. TVA does not have the capacity to supply it with its own facilities. It has gone out into the private utility market and made at least 4 contracts-maybe more than 4, but 4 to my knowledge-with private utilities for high-priced kilowatts. And, of course, the total price of the high-priced private utility kilowatts and the low-cost TVA kilowatts has to be balanced, and that is what makes the present cost of the TVA delivered power, which is not again, as I say, TVA-produced power in its entirety, but it makes it higher at the present time than the long-term contract of the EEI. But, the TVA has testified that as soon as they get their additional plants into operation at the Shawnee site that the cost of delivery will go down to 3.47 mills per kilowatt, and will at that time be substantially cheaper than the long-term

Mr. JONAS of North Carolina. Mr. Speaker, will the gentleman yield? Mr. HOLIFIELD. I yield to the gentleman from North Carolina.

Mr. JONAS of North Carolina. I am asking for information. I do not know. I have read in the record a speech made by a Member in the other body to the effect that TVA is charging the AEC today more for the power it delivers at Paducah than TVA is selling its power and charging its customers in the Memphis area. Is that right?

Mr. HOLIFIELD. That is true, beThat is true, because the power it is delivering to its customers in the Memphis area is not TVA produced power; a large part of it is purchased from private utilities. At is purchased from private utilities. At Paducah it is purchased, as I said before, Paducah it is purchased, as I said before, from private utilities, not all of it, but a major portion of it is being purchased outside of TVA. The original requirement by AEC of the TVA at Paducah was 500,000 kilowatts and the original requirement from Electric Energy, Inc., was 500,000 kilowatts. Later on AEC came to them and asked them for another 1 million kilowatts. At that right to take 50 percent of that additime Electric Energy, Inc., had the tional load. It turned down its right to kilowatts out of the 1 million kilowatts, take 50 percent and only took 205,000 kilowatts out of the 1 million kilowatts, and at that time TVA contracted to give the other 735,000 kilowatts, and I believe I am quoting the right figures from not have but four of its generating plants memory. Now, in order to do that, it did not have but four of its generating plants built-others were budgeted for but not built, and in order to take the load which the EEI turned down to furnish to the AEC, it made these private utility contracts and, of course, it had to pay a higher price, and that brought up the cost of the delivery by TVA to AEC at Paducah. But that is a temporary emergency arrangement and the rates will be reduced when the new generating capacity is built at Shawnee which is now budgeted, and in process of construction and on which the AEC has a firm contract.

Mr. JONAS of North Carolina. Mr. Speaker, will the gentleman yield at that point?

Mr. HOLIFIELD. I yield.

Mr. JONAS of North Carolina. I am seeking information; I am not trying to get into an argument.

Mr. HOLIFIELD. I understand.

Mr. JONAS of North Carolina. I think the facts will show that TVA is buying power from private utilities all around the periphery of the TVA area. It is buying power in the Memphis area. Mr. HOLIFIELD. This is undoubtedly true.

Mr. JONAS of North Carolina. Therefore, I cannot see how it is a legitimate excuse that TVA gives, as the reaTherefore, I cannot see how it is a legitison why the power it sells to AEC at Paducah costs the Government more money than AEC has to pay for private

adjoining private utilities throughout their system. It does not amount to a substantial figure at any other place except at Paducah, where there is a tremendous purchase of power from private utilities for this emergency need of the AEC at the Paducah plant.

Mr. EVINS. Mr. Speaker, will the gentleman yield?

Mr. HOLIFIELD. I yield to the gentleman from Tennessee.

Mr. EVINS. As long as we continue to have private power piped back into the TVA system at higher rates, we are going to continue to have higher rates to the Government and to others; is not that correct?

Mr. HOLIFIELD. Not only is that right, but I point out another factor in this Dixon-Yates contract. The DixonYates contract provides that the TVA shall build a $9 million transmission line from the middle of the Mississippi River at the delivery point of Dixon-Yates terminal up to the Tennessee Valley grid near Memphis. This will cost the TVA $9 million for the purpose of procuring higher-cost power than they could manufacture in their own plants. This is charged up to the TVA budget, and, as the gentleman from Tennessee [Mr. EVINS] Said, it will help to pad the cost of TVA, run up their cost-in my opinion, unjustly, because if they built their own plant at Fulton, which is an approved site, approved by the Corps of Engineers, while the Memphis site is not an approved site, then they could build their own plant cheaper, and they would not have to build a $9 million transmission line to hook up with their grid system.

Mr. JONES of Alabama. Mr. Speaker, will the gentleman yield?

Mr. HOLIFIELD. I yield.

Mr. JONES of Alabama. Since the creation of TVA, there has not been anything unusual about TVA buying power from the private utilities in the neighborhood, nor is there anything unusual about TVA seling power to them.

Mr. HOLIFIELD. No. This is just a straw man. No one has claimed that this is anything unusual.

Mr. JONES of Alabama. All of the testimony adduced before the Committee on Appropriations every year from the private utilities and the TVA is that their relationship has been one of cordiality and one of total satisfaction on the sale of power between the private utilities and the Authority; is not that correct?

Mr. HOLIFIELD. That is correct. Mr. MURRAY. Mr. Speaker, will the gentleman yield?

Mr. HOLIFIELD. I yield to the gentleman from Tennessee.

Mr. MURRAY. I am intensely interested in the continued independence of the Atomic Energy Commission.

Mr. HOLIFIELD. This is the most important issue involved in this controversy, I may say.

Mr. MURRAY. The AEC was created by Congress as an independent commission.

Mr. HOLIFIELD.

That is right.

Mr. MURRAY. Free from the influence or interference of the executive

branch. If this directive finally becomes effective and the contract is entered into, then I am afraid that it will set a dangerous precedent for the future of the Atomic Energy Commission.

opinion has not apparently been asked for and, if it has been asked for, I am not aware of it. Therefore, this point is up in the air as far as I know.

Mr. JONES of Alabama. Is there any legal precedent for one agency to make

Mr. MURRAY. I fear the AEC will simply become a pliant tool, a puppet of the Executive, instead of remaining an independent commission. The AEC is our most highly sensitive agency, our most vital defense instrumentality. By all means it should be kept absolutely free and independent from dictation from the Executive or from anyone else on the outside.

Mr. HOLIFIELD. I agree with the gentleman from Tennessee [Mr. MURRAY]. He has expressed by opinion on this much more brilliantly than I could. This is really the important factor. I would rather talk about that principle than talk about the public-private power issue.

Mr. EVINS. Mr. Speaker, will the gentleman yield at this point?

Mr. HOLIFIELD. I yield.

Mr. EVINS. The gentleman from California is a very distinguished member of the House-Senate Joint Committee on Atomic Energy. I would like to ask him this question as to whether or not there is any authority in law for the Atomic Energy Commission to be in the powerbrokerage business?

Mr. HOLIFIELD. In the July 6 speech which I made, which the gentleman will find in the RECORD, he will find adequate treatment of that point, I brought forward testimony of Mr. Boyer, the then General Manager of the Atomic Energy Commission when he appeared before our committee and asked for the legislation which is now section 12 (d) of the Atomic Energy Act of 1946, as amended, and which will be carried over in the socalled Cole-Hickenlooper Atomic Energy Revision Act as section 164. He testified at that time before our committee that this was strictly limited to the three atomic energy plants named in the section, which were the atomic energy installations at Oak Ridge, Portsmouth, and Paducah. He expressed beyond any shadow of a doubt the meaning of his language and this was not challenged. In fact, the gentleman from California [Mr. HINSHAW] and I questioned him at some length on that. That was our understanding, as is revealed by the record, and it was the understanding of the rest of the Joint Committee on Atomic Energy at that time, I am sure, because no one challenged the gentleman's testimony. Mr. JONES of Alabama. Mr. Speaker, will the gentleman yield?

ment, for Government corporations or independent operations?

Mr. HOLIFIELD. The gentleman is taking in a great deal of territory. I personally know of no such precedent and I know that none was contemplated in this particular instance.

Mr. JONES of Alabama. Has any comment been made by the Atomic Energy Commission that it did possess the inherent authority, and that the power was vested in it to execute contracts for the TVA or any other Government agency?

Mr. HOLIFIELD. The testimony on that point from the lawyers of the that Atomic Energy Commission was they felt section 12 (d), which I referred to just a moment ago, did give them that authority. I think they are completely wrong in making that statement, and I challenge their interpretation of it.

Mr. JONES of Alabama. If they have the authority to acquire power for the Tennessee Valley Authority, would not they have equal justification to obtain power for the General Services Administration to furnish energy for the Capitol buildings and the House and Senate Office Buildings and to contract as to all the other contractual relationships between the Federal Government which are taken care of by the General Services Administration?

Mr. HOLIFIELD. I would say so.

Mr. JONES of Alabama. Would they not equally have the same authority to acquire power for the Department of Defense?

Mr. HOLIFIELD. The gentleman is right. I will have to ask the gentleman now to give me a little of my own time, Mr. Speaker.

Mr. JONAS of North Carolina. Mr. Speaker, will the gentleman yield? I would like to respond to those statements.

Mr. HOLIFIELD. If the gentleman will wait just a few minutes, I would like to complete my statement. Then,

I will be glad to yield to the esteemed gentleman from North Carolina.

Mr. Speaker, there is one point which I wish to completely clarify at this point. There have been various talks of replacement by the proponents of the Dixon-Yates proposal on the floor, in the language of the Bureau of the Budget and so forth.

I want to read from page 970, part II, 'Atomic Energy Commission hearings, in which I questioned the general manager, Mr. Nichols. This is the colloquy which took place:

Mr. NICHOLS. In other words, the Bureau of the Budget says that we should bear the cost of the taxes. It would be just a financial transaction whereby in making our payments to TVA we would reduce the amount due at Paducah by the amount we had paid Dixon-Yates less taxes.

Representative HOLIFIELD. Yes, but this is not a reduction of power commitments of TVA to the AEC, is it?

Mr. NICHOLS. It is what you would call replacement power.

Representative HOLIFIELD. No, it is not replacement power. You may have a bookkeeping transaction that you may call offsetting, but it is not replacement, because you made the contract with the TVA for the AEC Paducah plant prior to any such consideration as this, did you not?

Mr. NICHOLS. That is right.

Representative HOLIFIELD. And you had no contingency in there for furnishing at a later date offsetting power to that amount, did you?

Mr. NICHOLS. No.

Mr. Speaker, this proves beyond doubt that the idea of replacement is something completely new, and there is other testimony which I could give. At this time, Mr. Speaker, I ask unanimous consent to place in the RECORD at this point a letter to the then Director of the Budget, Mr. Dodge, from Mr. Lewis L. Strauss, of the Atomic Energy Commission, containing five pages, and which is an analysis from the AEC standpoint of the Dixon-Yates proposed contract.

The SPEAKER pro tempore (Mr. CANFIELD). Is there objection?

There was no objection.

The matter referred to follows:

UNITED STATES
ATOMIC ENERGY COMMISSION,
Washington, D. C., April 15, 1954.

Hon. W. STERLING COLE,

Chairman, Joint Committee on Atomic Energy, Congress of the United States. DEAR MR. COLE: By letter dated March 3 and March 22, 1954 from Mr. Nichols to Mr. Allardice, we have advised the Joint Committee of the progress made in response to the President's Budget Message and the request of the Bureau of the Budget to explore the possibility of reducing existing commitments of the TVA to AEC by 500,000 to 600,000 kilowatts.

Enclosed for your information is a copy of a report made today to the Bureau of the Budget covering the present status in detail. It is our understanding that the Bureau plans to arrive at a conclusion shortly.

If there is any further information you desire, we shall be happy to furnish it. Senator HICKENLOOPER is also being advised. Sincerely yours,

LOUIS STRAUSS, Chairman.

LETTER FROM MR. STRAUSS TO MR. DODGE AN-
ALYZING THE DIXON-YATES CONTRACT FROM
THE COMMISSION'S VIEWPOINT
Hon. JOSEPH M. DODGE,

Director, Bureau of the Budget. DEAR MR. DODGE: On March 3, 1954, in a meeting held in Mr. Hughes' office was furnished an analysis of a proposal dated February 25, 1954, which the Atomic Energy Commission had received from Mr. E. H. Dixon, president of the Middle South Utilities, Inc., and Mr. E. A. Yates, chairman of the board, the Southern Co., for the supply of 600,000 kilowatts of firm power. This proposal was in response to the President's budget message and your letter of December 24, 1953, requesting the Atomic Energy Commission to explore the possibility of reducing existing commitments of the TVA to AEC by 500,000 to 600,000 kilowatts.

As you requested, since March 3 we have been meeting separately and jointly with staff members of the Federal Power Commission and representatives of the sponsors of the proposal in an endeavor to work out a fair and equitable arrangement to the Government which could serve as a basis for negotiations leading to a definitive contract.

These discussions have been on the basis of an analysis of comparative costs between our TVA Paducah contract and the DixonYates proposal as revised during the course of the meetings.

We have proceeded on the basis that there would be no contract cancellation for a like portion of the AEC-TVA Paducah contract; that AEC would contract with the sponsors for power needed by TVA for load growth in the Memphis area on the basis of replacement. This approach assures AEC of continuity and reliability of power to the Paducah project.

On April 10, 1954, a joint meeting was held at the Atomic Energy Commission's office and was attended by the leading representatives of the sponsors; the Chief, Bureau of Power, Federal Power Commission and the General Manager of the AEC. As a result of this meeting, the sponsors withdrew their proposal of February 25, 1954, and later submitted the revised proposal attached to this letter.

Under the revised proposal, the sponsors have offered, subject to securing financing on the basis described in (b) below, (a) to form a new company sponsored by Middle South Utilities, Inc., and the Southern Co.; (b) to secure the necessary capital requirements presently estimated at $107,250,000, by subscribing 5-percent equity capital which will bear a return of 9 percent and issuing 30-year bonds to institutional investors for the remaining 95 percent based on an interest rate of 32 percent; (c) to build a 650,000-kilowatt steam-electric station near West Memphis, Ark., to provide transmission facilities from the sponsors' new facilities to the middle of the Mississippi River between Shelby County, Tenn., and Crittenden County, Ark., including modifications to existing river crossing interconnections between TVA and Arkansas Power & Light Co., and its existing and future points of connection between subsidiaries of the Southern Co., Mississippi Power & Light Co., and TVA; and (d) to enter into a contract with the Atomic Energy Commission for a term of 25 years from date of commencement of commercial operation to the first unit under the following provisions:

(1) An annual base capacity charge, exclusive of taxes, of $8,775,000, which is equivalent to $14.625 per kilowatt-year, subject to variation (a) up or down in case of increase or decrease in actual cost of construction compared with present estimate, with a maximum annual increase of $285,000 or 47.5 cents per kilowatt-year, (b) up or down for changes in cost of fuel from 19 cents per million British thermal units for fuel component included in the base capacity charge required to keep the plant in operation under no load conditions, and (c) upward only for power factor correction or less than 93 percent.

(2) An energy charge of 1.863 mills per kilowatt-hour subject to adjustments up or down in case of increase or decrease in fuel costs from 19 cents per million British thermal units and for increases or decreases in labor rates based on the hourly earnings of production workers in gas and electric utility industries as compiled by the Bureau of Labor Statistics, using $1.97 per hour as a base.

(3) Reimbursement by the AEC for all taxes, licenses, and fees of every kind or character-State, local, or Federal-paid or payable by the new corporation during the term of the contract except that taxes arising out of use of facilities for purposes other than supply of capacity and energy to AEC will not be paid by AEC.

(4) Cancellation is provided as follows: (a) For TVA to continue to receive and AEC to pay power at the contract rates during a 3-year notice period. This period should be sufficient to permit TVA to make other arrangements for the meeting of the requirements of the Memphis area.

(b) After termination, company shall have first call on the capacity and will absorb as rapidly as load growth will permit, but in any event not less than 100,000 kilowatts per year. Costs associated with capacity absorbed by the sponsors will be borne by the sponsors.

(c) Any capacity not absorbed by the sponsors after the 3-year notice period may be assigned to another governmental agency at an increased price to be approved by FPC. (d) In event no capacity is used during the notice period, the base capacity charge will be reduced by $1,500,000 and proportionally in case of partial reductions. After termination, the base capacity charge less the $1,500,000 will be reduced proportionately to the capacity absorbed by the spon

sors.

(e) The total maximum cost of cancellation to the Government, assuming the plant is idle from date of notice of cancellation, is estimated at $40,012,500 plus fair and reasonable expenses payable to third parties.

(5) The making of appropriate arrangements by the AEC with the TVA for the receipt by it and delivery to the AEC in kind of power and energy to be supplied as indicated above.

With respect to (1) above, the base capacity charge is subject to adjustment for changes in the cost of construction from an estimated cost of $107,250,000 or $149 per kilowatt of capability. Under the formula provided in the proposal, AEC shares on a 50-50 basis with the sponsors any decrease or increase in actual costs. In case the actual cost of the facilities is greater than $107,250,000, AEC shares the increase in cost up to a maximum actual cost of $117 million which would result in the maximum annual increase of $285,000 to the capacity charge. Costs greater than this must be paid in their entirety by the sponsors.

The February 25, 1954, proposal used an estimate of $200 per kilowatt which the sponsors assumed was the cost used by TVA for the Fulton steam plant. The sponsors' present estimate appears to be a realistic cost based on current construction costs of new capacity added by private utilities and TVA in a recent period.

In (3) above, the revised proposal provides that since the capacity and energy charges do not include taxes except those included in other reimbursable costs, i. e., social security taxes, etc., the AEC will pay such additional amounts as will result, after payment by seller of Federal, State and local taxes, licenses, fees and other charges in the seller having net operating revenue in the same amount as seller would have had it seller were not liable for such taxes, etc., except those tax liabilities arising out of use of facilities for others than AEC will not be included in additional charges for capacity and energy. The sponsors state that, based on present tax laws, the additional amount to be added to the capacity and energy charges is estimated at $2,319,000 of which $1,499,000 represents State and local taxes, including $83,000 State income taxes, and $820,000 represents Federal taxes on income. The sponsors have indicated that if a favorable ruling is secured from the Treasury Department to the effect that $262,000 included in the capacity charge for replacements is not to be considered as revenue for tax purposes, the taxes estimated above will be reduced by approximately $313,000, resulting in a total of $2,006,000.

The proposal is also subject to securing appropriate Treasury Department rulings or agreements with respect to the sinking fund depreciation upon which the computations are predicated.

In the cancellation covered by (4) above, considerable time was devoted to developing the present provisions. While they are not on a formula basis similar to the OVEC and the EEI contracts, which are based on the expected load growth of the connected sys

tems of the sponsors and provide for a definite date on which the cancellation costs reduce to zero, they do provide for a minimum absorption of 100,000 kilowatts per year with the understanding the maximum possible will be absorbed each year, the absorption to be cumulative with a minimum of 100,000 kilowatts for each ensuing year.

Further discussions with Mr. Dixon on April 12, 1954, on possible revisions to the sponsors' proposal to develop a cancellation provision that would commit the sponsors to an increasing absorption rate each year after full scale commercial operation was not successful. They felt in view of the uncertain future in load growth and recent experience with systems reserves in excess of normal, they could commit the sponsors only to a firm 100,000 kilowatts with the provision that they would absorb as much as they could each year over and above this amount. It should be noted, however, that the cancellation provisions are computed on the base capacity charge as modified and in this respect are reasonable.

There is no cancellation provision in the event of termination prior to full-scale operation. This was also discussed with Mr. Dixon in an effort to provide for this presently unforeseen possibility. His view was since this capacity is to provide for the normal load growth in the TVA and it would take at least 3 years for TVA to provide for replacement, he could foresee no need for cancellation prior to full-scale commercial operation and did not desire to modify the proposal in this regard. Under concurrent major reductions in AEC load and lack of normal load growth in the TVA system, the lack of cancellation provisions prior to completion of the plant could prove to be disadvantageous to the Government.

The attached table covering the major components of cost of the revised proposal has been prepared and is compared with the February 25 proposal and with our present estimate of cost of power, including escalation, to be delivered to AEC from the TVA Shawnee plant, under the terms of our present contract with TVA at 98 percent load factor of 5.2 billion kilowatt-hours per year.

As a result of the meetings previously cited, the additional annual cost over the Paducah contract has been reduced from $4,138,000 to $1,706,000, or less than the amount of estimated taxes. The additional costs exclude the costs associated with TVA transmission lines required to deliver energy from the points of interconnection of the sponsors' system to TVA's substation at Memphis.

Consideration of the revised proposal by Dixon-Yates should not overlook the following:

(a) The AEC presently has a firm contract with TVA for supply of power.

(b) Reliability and continuity of power supply to the AEC must be protected.

(c) The entire difference in cost between the sponsors' revised proposal and the TVA contract is accounted for by taxes.

(d) AEC would expect the Bureau of the Budget to obtain the concurrence of TVA to all provisions of the proposal, and any subsequent definitive contracts relating to TVA.

(e) The proposal provides that the power factor at point of delivery shall be maintained by TVA at no lower than 93 percent. To maintain this power factor, it may be necessary for TVA to provide reactive kilovoltamperes in the Memphis area or a penalty maybe applied in the form of increased demand charges.

With the understanding that arrangements would be made through the Bureau of the Budget for TVA to enter into a 25-year contract with AEC to take the power provided for under this proposal subject to all provisions including cancellation, the AEC could enter into a contract with the sponsors to provide TVA with 600 thousand watts

needed for its load growth on a basis of replacement. However, it is our position that any costs involved to AEC over and above the cost of power under our present contract to Paducah should be borne by TVA. Otherwise, the TVA would be further subsidized through an operating expense appropriation

to the AEC.

We feel that higher executive authority or Congress should make this determination. In making such determination, the following information is pertinent:

(a) By utilizing private utilities, the United States would save a capital outlay of at least $100 million, the cost estimated by TVA for the construction of equivalent capacity at the Fulton site.

(b) Excluding all taxes and TVA transmission, the sponsors proposal is estimated to cost annually $613,000 less than the Paducah contract.

(c) Including taxes, the estimated annual cost is $1,706,000 greater than the Paducah contract. This is accounted for entirely by taxes of which $820,000 would be returned to the Federal Government. The remaining $886,000 represents State and local income and ad valorem taxes, leaving a balance of $613,000 of the estimated annual taxes totaling $2,319,000 that can be included within the sponsors' proposal without exceeding the estimated anual cost under the Paducah contract.

(d) The estimates of plant, operating, and other costs that are the basis of the revised proposal have been reviewed by representatives of the FPC and they believe them to be fair and reasonable.

(e) AEC would request the Federal Power Commission to formally indicate that the estimated costs are realistic, that cost allocations between capacity and energy are in accordance with their practice of approving rates for resale in interstate commerce, and that the rate terms and conditions are fair and reasonable to the Government.

We believe that we have explored the subject proposal to the extent practicable at this time. Higher authority will now presumably determine what course of action is in the best interest of the Government. Sincerely yours,

LEWIS L. STRAUSS, Chairman of Atomic Energy Commission.

Mr. HOLIFIELD. In this particular letter Mr. Straus objects to the fact that they are called upon to pay the taxes of the Dixon-Yates Co. This is dated April

15.

Here again is talk of replacement. Then he goes on:

However, it is our position that in cases involving AEC over and above the cost of power under our present contract to Paducah should be borne by TVA. Otherwise TVA would be further subsidized through operating expenses appropriation to AEC.

In other words, while opposing the principle of the AEC having to pay the taxes of the Dixon-Yates proposal, he brings out that it would be subsidization. Of course it is subsidization, whoever pays those taxes outside of the people who own the plant, the Dixon-Yates people. Of course, if they get the Government to pay it, it is subsidization, regardless of whether the AEC pays it or whether it comes out of the general fund. This cannot be denied.

Mr. HOLIFIELD. Taxes enter into the cost of power supplied by every private utility in the United States, to my knowledge, with the exception of Dixon-Yates. Here is an instance where a private utility company, Dixon-Yates is relieved of its obligation to pay taxes.

Mr. JONAS of North Carolina. No. The tax does not go into the contract.

Mr. HOLIFIELD. That is the point. It is relieved of its obligation to pay taxes to the Government, and every other private utility in the United States has to pay taxes.

Mr. JONAS of North Carolina. But if Dixon-Yates paid them the cost of the power would be increased.

Mr. HOLIFIELD. That is exactly right; and that is why it is relieved. Mr. JONAS of North Carolina. And if TVA paid them

Mr. HOLIFIELD. That is why this relief from taxes was put in so they could get down to a near competitive position with TVA.

I realize TVA does not pay taxes as such; I recognize that TVA in its delivery of energy to the AEC is delivering it from one Government agency to another for use in a defense plant, and it was only on the basis that it is being used for the defense needs that the Securities and Exchange Commission passed over the provisions of the Private Utilities Holding Act of 1935 and allowed the Ohio Valley Electric Corp. and Electric Energy, Inc., to fund their bonds on the basis of a 95 percent funding, when normal requirements of the SEC require that bonds sold to the public shall be sold on an approximate 40 percent capital investment equity on the part of the sponsors and a 60-percent funding on the part of the bonds sold the public. But because these particular plants were supplying all of their energy for defense purposes, because of the emergency need of the Government in the Korean

war and to furnish the Paducah plant and AEC further energy to make the weapons, the atomic and the hydrogen type of weapons which were needed to preserve the freedom of the free world, they were given special treatment; they were given temporary relief from the effects of the Private Utility Holding Company Act of 1935, but with this admonition, that they would come back later, the Securities and Exchange Commission would come back later and hold the hearings required by the Holding Company Act and at that time they would make the determination as to which one of these utility companies would be allowed to buy the bonds and control the fee title ownership of these companies in the future.

I maintain that this excuse or this reason which was used in the case of the Ohio Valley Electric Corp. and Electric Energy, Inc., for total use of energy in defense plants does not obtain in the Memphis area for either TVA or Dixon

Mr. HOLIFIELD. I yield.

Mr. JONAS of North Carolina. It is a fact, is it not, that the question of taxes is a question that enters into the cost of the power? Is that not one of the elements?

there will be purchased through the administrative device of the AEC acting as a power broker and using the 25-year contract privilege.

The power will be transferred by the AEC to the Tennessee Valley grid not for defense plants, not for the AEC, not

in replacement for 1 canceled kilowatt, but it will be for the new power which will be served to the TVA grid at a higher cost than the TVA could generate it itself. It will be served to them for the purpose of distribution to commercial, industrial, and residential users and not 1 kilowatt to AEC for defense needs or for other defense plants.

This is the rock upon which the barge of replacement founders, because you cannot justify in the name of national defense-and this is the only provision in the Atomic Energy Act which the President has to relieve AEC from the other contractual obligations which are used by AEC. The President can exempt the AEC if it is found that it is necessary on behalf of the national security and the defense needs of the Nation. This power of exemption is carried in the Atomic Energy Act of 1946, as amended, and it will be carried again in the new atomic energy bill. But the President cannot use that in this case, nor the Budget Bureau. The AEC has not tried to appeal to that section because they know they cannot sustain the need in this area on the basis of national defense.

They have tried to base their authority on section 12 (d) of the Atomic Energy Act, which provides only for new contract, modification of contracts, and alteration of contracts for the three existing atomic energy plants at Oak Ridge, Portsmouth, and Paducah; and it is upon that rock that the admonition of the President to negotiate and enter into this contract founders.

Mr. JONAS of North Carolina. Mr. Speaker, will the gentleman yield for a question?

Mr. HOLIFIELD. And at that point I want to go into the question of whether

Mr. JONAS of North Carolina. Before the gentleman leaves that point, will be permit me to ask a question?

Mr. HOLIFIELD. Just as soon as I read this from Mr. Hughes' letter of June 16, which was placed in the RECORD of July 7 and appears in the first column, paragraph 9 (b) on page 9480. Mr. Hughes states:

I have been asked by the President to instruct the Atomic Energy Commission to proceed with the negotiations of a definitive contract. Such instructions have been given this agency. The Commission and the TVA have also been instructed to work out the necessary interagency arrangements to assure the most favorable operation under the contract from the standpoint of the Govern

ment.

Any attempt on the part of the gentleman from California [Mr. PHILLIPS] and the gentleman from North Carolina [Mr. JONAS] to relieve the Atomic Energy Commission of the instructions to go ahead and negotiate a definitive contract will have my hearty support; but I say there will have to be an additional directive from the President telling them not to sign the contract. No one has said, that I know of and who knows the subject, that they have signed a contract. We all know that they are negotiating it. The Dixon-Yates people have not even appealed to the Securities and Exchange Commission to get approval of

their bonds. I do not know why they have not appealed to them. Maybe they are afraid they will not get the approval of the Securities and Exchange Commission.

I am going to look with a great deal of interest at the memoranda of approval, if it is issued by the Securities and Exchange Commission, because they are going to have to find a different reason for issuing approval of the 95 percent funding operation of the Dixon-Yates people than they found for the Ohio Valley Electric Corp. and the electric energy companies at Portsmouth and at Paducah. I now yield to the gentleman from North Carolina.

Mr. JONAS of North Carolina. I thank the gentleman from California for the statement he just made. It was my understanding, and he has now confirmed it, that this was not an order from the President to sign a contract that has already been worked out. It was a directive to negotiate a contract from the standpoint of the necessities of the Government.

Mr. HOLIFIELD. I read it. "For the best interests under the contract" but it might be to the best interests of the Government not to sign the contract. They are directed to negotiate; but there is other language not contained in this letter, which is contained in another letter that I shall get from my office and possibly introduce at a later date which is even clearer than this particular language that I happen to have at hand in the July 7 RECORD.

There is no doubt in my mind but that the Burch-Von Tresckow proposal, which the gentleman has put in his remarks and which I pass no comment on because I have not studied it, has been rejected. The gentleman will agree it has been rejected by the AEC. They have been ordered to go ahead and negotiate a definitive contract. If they do not intend to sign the contract why are they negotiating a definitive contract? I hope that the gentleman's modification of the generally accepted idea that the AEC is going to be forced against their testimony of 3 to 2, to do something which is unwise, awkward and unbusinesslike will be accepted by sustained Presidential action. I say with all kindness that the President is out on a limb. The President has gone beyond the power, in my opinion, of the executive branch in ordering an independent agency of the Government to do something which is not authorized under the law. This is the important thing. It is not whether the Tennessee Valley Authority builds the plant or whether the Dixon-Yates people build the plant, I may say to my friends who are interested on both sides, that the issue is not my primary concern. The reason I have talked on it is because the matter has been one of controversy and I have tried to give to the House to the best of my knowledge, the true facts.

The thing I am concerned with is this encroachment on the statutory power of an independent agency and I say with all due respect to the President-he is my President the same as he is your President-that if the President of the United States can be advised and then

if he follows that advice to direct an independent agency of the Government to do that which by law and by the testimony of witnesses when they come before the committees to obtain that law, if he can direct them to go beyond the provisions of the statute and do things foreign to their purposes and objectives, and completely foreign, without any benefit to them for the purposes upon which they were established by the Congress of the United States, then I say to you that the President can upset the legal statutes of every independent agency of Government. Not only can he go to the Atomic Energy Commission, in which I am deeply interested, having served on that Commission since its establishment in 1946-no, but he can go to the Federal Power Commission, he can go to the Federal Communications Commission and tell them to issue a TVA license notwithstanding certain provisions of the statute. He can go to the Interstate Commerce Commission, and he can tell the Interstate Commerce Commission to issue rate approvals not authorized by statute. This is the important issue that is going to face the Congress when the Atomic Energy Revision Act comes before it. At that time I expect to offer an amendment which I offered and which was very narrowly defeated, I will tell the gentleman, in committee, in executive session; but I intend to offer the same amendment again and the Congress will have the right then at that time to say whether section 12 (d) of the act means exactly what it says, or they will have the right to modify. Now, if the Congress says that they want to modify the act, that is one thing. It is the will of the Congress. They can modify these acts which authorized these independent agencies, but it is one thing for the Congress to consider and modify a basic statutory provision, and it is another thing for the President of the United States to direct that Commission to go beyond its statutory authorization.

Mr. JONES of Alabama. Mr. Speaker, will the gentleman yield?

Mr. HOLIFIELD. I yield to the gentleman from Alabama.

Mr. JONES of Alabama. Will the gentleman from California tell us whether or not the Atomic Energy Commission made any inquiry as to how much it would cost the Government to build their own steam plants in the immediate vicinity of where the energy will be used?

Mr. HOLIFIELD. I have no knowledge of any such survey. The Tennessee Valley Authority is a power agency created by the Congress and it has supplied on demand to the AEC all the electricity which the AEC has asked for from it.

Mr. JONES of Alabama. I believe that the Commission testified before your committee that those contractual relationships and the supplying of power by the TVA have been satisfactory arrangements during the life of their operation at Oak Ridge and the surrounding plants.

Mr. HOLIFIELD. So satisfactory that when the President's budget message said that they must negotiate on the basis of actual replacement, which

would involve the cancellation of existing AEC contracts, that the AEC has frequently said that it would not cancel one kilowatt of its present contracts, and the reason it will not cancel is because it is in the best interest of the Government for them to continue getting this power at a cheap price from the TVA. Therefore, the original idea of the President on replacement was thrown out the window. And, again I say this is not replacement, regardless of how many times the word "replacement" or "exchange" or "substitution" is used. It is not exchange, not substitution, not replacement. It is an additional power capacity which is being contracted for, not for defense needs, but for the commercial, industrial, and residential uses of the people in the Tennessee Valley area.

The SPEAKER pro tempore. The time of the gentleman from California has expired.

SENATE BILLS REFERRED Bills of the Senate of the following titles were taken from the Speaker's table and, under the rule, referred as follows:

S. 120. An act for the relief of Gerasimos Giannatos; to the Committee on the Judiciary.

S. 231. An act for the relief of Otmar Sprah; to the Committee on the Judiciary. S. 232. An act for the relief of Hugo Kern; to the Committee on the Judiciary.

S. 328. An act for the relief of Casimero Rivera Gutierrez, Teresa Gutierrez, Susana Rivera Gutierrez, Martha Aguilera Gutierrez, and Armando Casimero Gutierrez; to the Committee on the Judiciary.

S. 673. An act for the relief of Urho Paavo Patoski and his family; to the Committee on the Judiciary.