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the benefits which come by reason of such consolidation from being translated into an overcharge on the consumer.”
By Hon. Walter L. Fisher, then Secretary of the Interior: “I do not think there should be any provisions in these grants against so-called combinations or monopolies, but do believe there should be no assignment of the grant without the permission of the Government. I think hydro-electric development is essentially monopolistic, and should be essentially monopolistic, in its character. That is why I think it should be effectively regulated. I think they should have the advantages of the control of the market and freedom from harrassing and vexatious competition if we are going to put them under the disadvantages of effective public regulation.” The Committee fully indorses the foregoing statements. There are three essentials of a sound water power policy: 1. Prompt development. 2. Prevention of unregulated monopoly. 3. Good service and fair charges to the consumer. The regulation of service and charge is usually a state or local function. It should be exercised by the Nation only 1n interstate industry and possibly when the failure of other agencies might result in abuses. There are three kinds of natural material resources in the conservation of which we are concerned : 1. Those resources which are not renewable and in which utilization, even though without any waste, necessarily destroys the store available for future generations. Such are coal, oil, gas, phosphates, etc. . Every particle of these resources which is utilized diminishes by so much what is left for our successors. 2. Those resources which are self-renewing, though at a comparatively slow rate, requiring considerable time for a complete renewal. In this class are included the forests, which may be entirely cut down, but which will reproduce themselves in time, although perhaps at the expense of serious loss in other ways in the meantime, as, for instance, by erosion. In the case of these resources any utilization diminishes the store available for our immediate successors, although distant future generations may be able to replace the loss. 3. Water power falls in a different class from either of the above, and seems to occupy a place by itself, having several peculiar characteristics. In the first place, while resources of the first two kinds, if not utilized, are stored and preserved for the use of future generations, water power, if not utilized, is immediately wasted with no good results to anybody. Nevertheless, new water flows day by day and year by year, and, speaking generally, the power is perpetual. It is like a free gift offered by the Creator to man, which flows by him in a continuous stream and may be had for the taking.
Water power presents a second peculiar characteristic in that its conservation is a double conservation. The utilization of water power for a purpose for which steam power, or some other form requiring the use of fuel, would be employed, is not only the utilization of a freely-given resource which would otherwise be wasted, but it involves the saving of a corresponding amount of one of the non-renewable resources. The use of water power to furnish motive power for street or steam railways, or for lighting, saves an equivalent amount of coal. The conservation of water power, therefore, is a double conservation, and it would seem, inasmuch as it involves the conservation of a non-renewable resource of a strictly limited supply, that it is of greater importance than that of any other of our physical resources.
But there is a third peculiarity of water power. It arises from the water flowing in a stream, but this stream affords other uses, as for irrigation, water supply, and navigation. For the proper conservation of the water in a stream, all these four uses must be considered. Its development for one purpose must, so far as possible, be consistent with its development for the others. All must be developed so as to be productive of the greatest total good. The four uses above referred to are inseparably connected, particularly the use of a river for water power and for purposes of navigation, in cases where both of these uses are economically practicable.
This difference between water power and the other natural resources leads necessarily to the conclusion that the fundamental principle to be kept in mind in the case of water power is one almost diametrically opposite to that which should be kept in mind in the consideration of the others. In conserving the non-renewable resources, restriction, economy, frugality, even parsimony, should be the governing principle. Waste should be eliminated to the utmost degree possible and use should be curtailed so far as this can reasonably be done. We all agree that conservation means wise use, and that use should be with a minimum of waste, with the maximum efficiency, and with due regard to the future.
We repeat, therefore, that in conserving the non-renewable and slowly renewable resources, the avoidance of waste, the maximum economy, and economical and restricted use, should be the guiding principles. In the case of water power, however, a point of view almost the opposite of this—within proper limits—would seem to be the true one. Here, instead of restriction, the greatest possible use should be advocated. That use should not be wasteful, nor is it consistent with sound principles of public and individual ecenomy, to have it used for extravagant or unnecessary purposes; but any proper use is better than no use at all, for every use, for an object that would otherwise be indulged in, conserves a non-renewable resource. In the one case, therefore, our guiding principle is restriction; in the other case, it is the encouragement of the greatest possible economical development. The power should be so utilized as to produce the greatest good to the greatest number. If these principles are sound, and we believe they are, they should distinctly affect our attitude as expressed in our own meetings, and as expressed by the representatives of the people in our legislatures, toward water power enterprises. There would seem to be no form of individual enterprise more worthy of encouragement, or which in the interest of true conservation should be made more tempting to the investment of capital than the development of water powers. Our laws and regulations governing the development of water power should properly be made so that an adequate rate of return to the investor might reasonably be anticipated. There seems to be an impression among some people that since water runs down hill, water power can be developed at very little cost and with very little risk. Such an impression is, in many cases, very far from the truth. There is, of course, a great difference in local topographical conditions. Sometimes a water power may be developed at slight expense, but in many cases, if not in most cases, and especially in the case of the largest water powers, a very large investment of capital is necessary for their utilization. Moreover, the risks attending this investment are often serious. Floods may destroy the works during construction, unforeseen contingencies of various other kinds may largely increase the cost, the flow of the stream may not prove to be what was anticipated, and this flow may be injuriously affected by the operations of man or the agencies of nature acting above the power site. The history of water power enterprise is not by any means a history of unbroken successful effort. It is strewn with wrecks, and there would seem to be no industrial field in which a sound engineering preliminary judgment, as well as careful construction and economical financing, are more necessary.
Conservation in itself, and rightly interpreted, would seem to be a movement in which an intelligent and publicspirited men might properly join; but the significance of the term has in same cases been extended to cover so many economic questions, so many government policies, some of which are open to grave doubt, and upon which serious differences of opinion may exist between the best informed authorities, that unless these questions are excluded, the conservation movement will appear to many to be one with which they cannot co-operate. Especially with reference to water power, that resource, the conservation of which not only conserves itself, but conserves another, and whose conservation is therefore of the utmost importance, is it necessary that we should, if possible, present a united front. If we admit that the great importance of encouraging in every legitimate and proper way and to the greatest legitimate and proper extent the development of water power, it remains to consider some of the dangers with which such development may be attended, and the attitude which the National Government and the states should take towards the subject. It is perfectly clear that in order to induce the investment of private capital in water power enterprises, three things are essential: 1. Definiteness in the contract entered into. 2. The prospect of a sufficiently attractive return, commensurate with the risk involved. 3. The protection of the courts in case of dispute. Without these three things the utilization of water powers by private capital cannot be brought about. It is generally admitted, and it has been decided by the courts, that the Federal Government has full power over the interests of navigation on navigable waters, control of rates of public service corporations engaged in interstate commerce, and, according to the decision in the “Minnesota Rate Case,” a certain amount of control also over rates for intrastate commerce when carried on by corporations doing also an interstate business. The Federal Government also has, of course, complete jurisdiction over the public lands. If, therefore, water powers are developed on navigable streams, or if the power site or the right of way for transmission lines lie in the public domain, the Federal Government may impose such restrictions and regulations as it deems best. At the outset we must bear in mind the radical distinction between public utility corporations and private individuals. The former are by law subject to public control as regards rates and service, and, therefore, a permit granting a right to such a corporation need not contain any stipulations as to the rates charged to consumers for the service rendered. Most of the states now have public service commissions and those that have not will undoubtedly provide them when the inhabitants thereof consider that the proper time has arrived. The public being thus safeguarded, there is no valid reason why a public service corporation doing an intrastate business solely should be subject to any added control, as to rates or service, than that of the state to which it is necessarily subject in any case. In the case of private concerns, however, there is no public control and the permit should contain all stipulations which may be considered necessary to preserve the interests of the public. Considering then in the first place the case of navigable streams, there are two special cases to be considered: 1. Where the Government builds dams to improve navigation. 2. Where the Government grants permits to individuals or corporations to build dams for the development of water power. If the Government builds dams to render a river navigable the water power developed is a by-product of the navigation works. If it allows others to build dams for water power purposes the improvement to navigation is a by-product of the power development. I. At Government dams in navigable streams it is most desirable in the interests of conservation that the surplus power beyond the needs of navigation should be utilized. Inasmuch, however, as the Government has built the dam, there can be no question that any permit or grant for the use of power should require the grantee to pay a reasonable compensation therefor to the Federal Government. It is true that the amount of such compensation may in some cases be passed on to the consumer, and represented by an increased rate for power. In other cases, where water power competes with steam, there will be no necessary increase in rate due to the Government charge. Nevertheless, this charge should be paid to the Federal Government and not to the consumer in the form of reduced rates, for the reason that the cost of the dam has been paid by all the people, and all the people should, therefore, receive the benefit of the value accruing therefrom.