Cost to the Federal Government for 600,000 kw of firm capacity and 4 billion kwh

a year

FULTON STEAM PLANT

Fixed charges, generating plant:

Amortization and replacements.

Average interest (21⁄2 percent), unpaid balance..

Allowance for insurance..

Fixed operation and maintenance, including overheads_

Cost to the Federal Government for 600,000 kw of firm capacity and 4 billion kwh a year-Continued

Average interest (31⁄2 percent) on bonds..

9 percent return on equity capital..

Fixed operation and maintenance, insurance, and overheads..

To sponsors, for standby.

Total..

Energy charge:

Base charge..

Labor escalation_.

Fuel escalation_

Total_____

TVA transmission costs:

Amortization_.

260, 000

$91,000,000 is $140 per kilowatt 650,000 kilowatt capability; $140 per kilowatt is estimated average cost for 6 units needed at Fulton before middle of 25-year period under study; also average cost, adjusted to present construction cost levels, experienced in building present TVA plants.

Investment in additional TVA transmission facilities approximately $6,500,000 in either case. Shorter distance from State line than from Fulton is offset by high costs of river crossing. Investment to transmit Dixon-Yates power amortized over 25-year contract.

Coal cost, including transportation and handling, estimated at 19 cents per million B. t. u. for Fulton, 191⁄2 for Dixon-Yates plant. The difference is the minimum that must be expected because of longer transportation distances. TVA payments in lieu of State and local taxes are based on revenues. Construction of the Fulton plant or the release of 600,000 kilowatts of TVA's commit

ment to AEC by AEC's purchase of alternative power would make the 600,000 kilowatts available for sale by TVA to meet growing non-Federal loads. The revenue from such loads will average 44 mills per kilowatt-hour of which TVA will pay 5 percent in lieu of State and local taxes.

The Treasury Department's statistics indicate that more than 25 percent of the interest it pays on the Federal debt comes back into the Treasury as income taxes.

The Dixon-Yates estimate of the principal State and local taxes on their company (ad valorem and income) is $1,823,000. Other taxes, including sales tax, would bring the total well over $2 million. Since these would be reimbursed, the Government would be paying two sets of State and local taxes.

Insurance companies, the indicated bondholders in this case, pay income taxes of somewhat less than 61⁄2 percent on their interest income. The excess of this alternative, over 25 years, is such that the Federal Government (or those to whom it sells the power) would be paying for equal Fulton capacity three times overand still the Government would not own the capacity at the end of the 25-year contract.

ITEM 19

Item 19 is another memo to the files by James L. Grahl under date of March 19, 1954, entitled "Additional Discussions of Dixon-Yates Power Proposal to AEC." It reads:

"March 11, 1954: Pilcher and I were called to a meeting with Messrs. Belcher, Wenzell, McCandless, Warner, and Donnelly at which we circulated the March 11 draft AEC-TVA analysis and answered numerous questions as to the basis of comparison and how the various figures were derived. I stressed the fact that Sapirie (AEC) was satisfied that the analysis and its conclusions were valid, and that he had stated to us that he had given the benefit of the doubt to the private utilities (i. e., against TVA) in respect to several cost items where TVA had a case for assuming lower TVA costs or higher private utility costs than are used in the analysis. I identified and explained these items and the dollar amounts involved. Messrs. Belcher, McCandless, and Wenzell agreed that the analysis seemed reasonable and fair. Mr. Belcher decided that the next step to be taken was to suggest to AEC that, prior to Commission consideration, AEC staff should inform the Dixon-Yates representatives of the outcome of the analysis and that the Bureau was concerned about the large cost differential, and ask the Dixon-Yates representatives to review the draft analysis and indicate to AEC staff their reactions to it, particularly on the questions of (1) whether it fairly represents the Dixon-Yates proposal, and (2) whether they could revise their proposal to come closer to TVA costs.

"Mr. McCandless phoned our office later to say that he had talked with Cook (AEC) and Cook had agreed that a check with the utility people would be a good idea.

"March 12, 1954: Cook informed McCandless that he had met with Messrs. Seal and Canady, given them copies of the analysis and asked

them to comment as to whether it fairly represented their proposal, and whether they could revise their proposal so as to bring down their costs. They said they would respond Monday (March 15). Cook said he would let the Bureau know what their response was.

"March 16, 1954: Received mimeographed copies of draft joint analysis from Leo Meyer, with understanding that we would return our two typewritten copies.

"March 17, 1954: McCandless told me that Wenzell had one of the typewritten copies of the analysis and could be found in the Director's conference room. I delivered the mimeographed draft to Mr. Wenzel in the Director's conference room, in exchange for his typewritten draft. Mr. Wenzell introduced me to several others whose names I did not catch."

ITEM 20

This item comprises copies of five travel vouchers of Wenzell.

ITEM 21

This is a packet of some 19 long-distance phone calls to Wenzell and from Wenzell at the Bureau of the Budget, to others. One ticket indicates Hughes phoned Wenzell at 3:52 p. m. on January 14, 1954, to New York. This must have been when Hughes asked Wenzell to return to work on the Dixon-Yates matter. Wenzell phoned Worth 4-4010 in New York City on March 1, 1954, at 5:36 p. m. and at the bottom of the slip is written: "Wenzell, consultant to Director." The same day Wenzell phoned Seal in New York City, Digby 4-4400. The slip was originally signed in ink "Donnelly" but his name is stricken and "Wenzell" written in pencil above it.

Almost all the telephone calls are in 1954, but the slips reveal that in 1953 on May 28 Wenzell placed a call to "Bos" telephone "Lib 2-29060" to "Booth", that on September 17 and again on September 23, Hughes phoned Wenzell at Worth 4-4000 in New York. The last two on the back are marked as re his work "as consultant."

In 1954 there were these 2 calls, 1 on the 14th by Hughes to Wenzell above-mentioned and another on January 29 by Hughes to Wenzell at Worth 4-4000.

In 1954 in February, there were a total of five calls. All were by Hughes to Wenzell at Worth 4-4000, one on the 10th, one on the 15th, two on the 19th, and the last one on the 26th.

In 1954 in March there were a total of seven calls. Hughes called Wenzell at Worth 4-4000 three times, once on the 3d at 5:30 p. m., again on the 5th at 4:15 p. m. and last on the 22d at 4:10 p. m. McCandless phoned Wenzell at the same number twice, once on the 10th and again on the 25th. And Wenzell, as above stated, called Seal at Digby 4-4400 on March 1 at 2:29 p. m. and his own office (Worth 4-4010) the same day at 5:36 p. m.

In 1954 in April there were two calls, both by McCandless to Wenzell at Worth 4-4000 in New York, one on the 2d and the other on the 10th. This last call indicates rather positively that Wenzell's employment at Budget continued to April 10, 1954, as Wenzell testified and, after giving several other dates, Hughes finally testified on December 5, 1955.

ITEM 22

Item 22 consists of excerpts from Mr. Donnelly's weekly activity reports. These show that Donnelly spent hours with Wenzell from May 18 to September 25, 1953, getting for him detailed information as to power produced and sold by TVA. For instance, June 15-19, 1953, Wenzell "Requested names of utility companies who have sold or purchased or interchanged power with TVA over last 5 years, also amount to or from each company and sale price." And Donnelly records June 22-26, 1953, he "met with J. Clark, budget officer and Mr. Kampmeier, Assistant Chief of Power Division of TVA, on some questions which Mr. Wenzell asked me to take up with them." Wenzell was instructed to work secretly (p. 1247 et seq.) so he must have had to send Donnelly to the TVA people to ask his questions. Significantly, during the critical Dixon-Yates negotiation period (January 14 to April 10, 1954) Donnelly records many conferences. with Wenzell (item 22, pp. 2-3). January 18-22, 1954, Donnelly says Wenzell requested further information from TVA for him and he sent it to Wenzell's New York City address. And he sent "more power material" January 25-30, 1954. On February 8, 1954, Donnelly met "at Wenzell's request" with Edgar Dixon and Canady of Middle South. Conferences with Wenzell are noted, February 8-12, March 1-5, and March 8-12, 1954. The March 8-12 note states:

"Met in Belcher's office on March 9 at 4:30-6:00 p. m. with Belcher, Wenzell, McCandless, Warner, Pilcher, and Grahl in reference to joint analysis by AEC and TVA staff comparing TVA power costs to AEC with those proposed by Middle South Utility. (Analysis showed difference of $8 million per year, or $208 million over 25 years of proposed contract-Middle South High.)"

In its entirety, item 22 reads:

EXCERPTED FROM MR. DONNELLY'S WEEKLY ACTIVITY REPORTS"

May 18-22, 1953: "Met 4 times with and gave TVA material to Mr. A. Wenzell, of First Boston Corp. (list of 20 items as per memorandum I gave you)."

May 25-29, 1953: "Met with Mr. Wenzell twice on TVA and gave him further information requested such as information in last Presidential approval of allocation of costs of multipurpose dams and copy of TVA contracts with AEC at Paducah and Oak Ridge.'

June 1-5, 1953: "Had three conferences with Mr. Wenzell. (He desired more information on TVA accounts and kilowatt-hours used.)" June 8-12, 1953: "Received power operating statement from TVA on a 12-month basis ending April 30, 1953 (for Mr. Wenzell). "Met with Wenzell, Pilcher, and Oeltjen on TVA and Cumberland power projects."

June 15-19, 1953: "Had a 2-hour conference with Mr. Wenzell on June 19 in reference to the 26 various contracts which Alcoa has had with TVA. Also requested names of utility companies who have sold or purchased or interchanged power with TVA over last 5 years, also amount to or from each company and sale price."

June 22-26, 1953: "Met with J. Clark, budget officer, and Mr. Kampmeier, Assistant Chief of Power Division of TVA, on some questions which Mr. Wenzell asked me to take up with them.

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