ML19308E021

Forwards Public Utils Fortnightly 671123 Article Coordination & Small Electric Power Sys by DC Cook

ML19308E021
Person / Time
Site:	Crystal River
Issue date:	03/20/1968
From:	Perez A FLORIDA POWER CORP.
To:	Price H US ATOMIC ENERGY COMMISSION (AEC)
References
NUDOCS 8003200754
Download: ML19308E021 (10)

Text

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March 20,1968 j/

Regulat:rf C"ppi Fi'a Cy.

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... ; y Mr. Harold L. Price Director of Regulation U. S. Atomic Energy Commission Washington, D. C.

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Dear Mr. Price:

I am enclosing a copy of our Annual Report for 1967 which I believe you may find interesting.

L e A of o /s h Ie When Roy Snapp and I visited briefly with you last September, you and I were discussing the role of the municipalities and other small distribution systems in the nuclear plant picture. I am enclosing a copy of an article which appeared in the Public Utilities Fortnightly for Novem-ber 23,1967. The article was written by Mr. Dcnald C. Cook and it covers the subject quite well. The portion entitled "The Proper Role of the Small System", on Pages 26 and 27, explains the point which I was trying to make in your office.

I hope that this article proves interesting to you and that it answers some of the questions which you asked of me when we visited with you.

Hope that next time I am in Washington I can drop by your office to say hello and renew acquaintances.

Sincerely, A. P. Perez President APP:bg Encl.

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FORTNIGHTLY Co-orc,a. nation anc. the Sma:.:.

E:.ectric Power System J

J What is a viable size for an electric utility system under p? This resent and foreseeable technical and economic operatmg conditions author has given special attention to the problem of the small electric power system in seeking to co-ordinate its ope.ations with other larger systems.

By DONALD C. COOK I x recent times the term "co-ordination" has large and small systems in power supply arrange-Leen used in connection with the electric ments and in competitive situations. However, power industry more often and with less the commission indicated its belief that the re-understanding than almost any other. It has port was not the appropriate medium to recon-been the subject of numerous talks, hearings, re-cile conflicting views on such issues of public ports, and-most recently-the Federal Power policy. It described them as root problems in a Commission's proposed Electric Power Reliabil-democracy and, presumably for this reason, not 1

ity Act of 1967. The r61e to be played by the only did not face them then but has.not faced 4

,small power system in the co-ordination efforts them since.

of the industry has been a particular subject of But these issues have an immediate and im-much discussion, much bad thinking, and not a portant effect on co-ordination among power little controversy.

systems not under common ownership and con.

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In the introduction to its 1964 National Power trol. Accordingly, they must be faced if co-Survey Report, the FPC stated that it was aware ordination is to involve utility systems from each of what it called the "many controversial areas of the different segments of the industry and, of pu!": policy" in power-such as the varia-particularly so, if the systems involved vary tions in taxes, financing, and earning require-greatly in size.

ments of different systems; the suggestion that public power programs are needed as " yard.

Development of the Electric Industry sticks" to supplement regulation of investor.

-(g.m of these so-called root problems of I

owned systems; and the relationships between

..Y.L public policy have their origins in the dim i,

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past when the industry was in a much earlier Electric Power System and about one-half day's

< tate of development. In seme instances they go

_ production for the Tennessee Valley Authority.

back to the time when the country was served Further, only 20 power systems-of which two primarily by small isolated utilities. But with the are federal systems-had annual energy require-vast growth of power consumption and the de-ments in excess of 10 billion kilowatt-hours. This velopment, in most areas, of substantial power represents a generating capacity, on the same systems-even though not of optimum size-the load factor, of about 2 million kilowatts.

basic reasons for many of these policies are n The significance of this is more readily ap-wnger valid. Unfortunately-the rules and mores preciated when it is realized that many generat-of a society tend to lag behind-often far be-ing units being installed today are in the 600.000-hind-its social, technological, and economic de-to 800,000-kilowatt class and that TVA and the velopment and become wholly unjustifiable con-AEP System, among others are committed to straints on its growth and progress.

several units, each having capacities of the order The small power system of today provides a of 1.1 million kilowatts. One of these latter e

ready example. In the early days of the industry, units, base-loaded at an 85 per cent annual use e

7 individual communities and, in some cases, even factor, will produce over 8 billion kilowatt-hours e

parts of communities, were served by small. iso-per year. The point, of course, is that while small lated plants. 31ost of these plants were gradually systems account for the vast majority of power replaced by central generating stations supplying supply entities, they produce only a very small i

small systems. These, % turn, were later inter-portion of our energy requirements.

connected to form larg.- systems and, in many How does this relate to co-ordination? Co-cases, came under common ownership. The con-ordination can be defined as any joint action solidation of some of these systems culminated taken by two er more power systems, each of m our modern holding companies having one or which is a separate entity, to achieve desirable and more subsidiaries, the physical properties of useful objectives which they cannot readily ob-which, taken together, constitute integrated sys-tain independentiv. Basica11v, these objectives fall tems' I

into two general categories, reliability and econ-1 This evolution in system size provided the omy, both of which are primary goals of a dy-

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basis for obtaining economies of scale and for in-naniic power industry.

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creased reliability of service. In many instances, however, small systems-including hundreds of Reliability and Co-ordination

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small municipal systems-continue to exist as an uneconomic and ekpensive anachronism.

T E*r US first consider reliability, its relation to

.LJ co-ordination. and the r61e of the small sys-o put the problem of the small system in tem. There has been much talk in the last two Tproper perspective, we need to consider both years about reliability-stimulated particularly by 4

. their number and their impact on the country's the Northeast power interruption and the subse-lx)wer supply. FPC's 1964 report discloses that.

quent interruption to a portion of the PJ31 at the end of 1962, there were 3,617 power System.

g systems in the United States exclusive of Alaska It is interesting that while the FPC's 1964 re-and Hawaii. Of this total.1,300 were engaged port discussed the economies of scale at great in generation and transmission, while 2.317 were length, the subject of reliability was barcly men-j%

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engaged only in distribution. Of the total 3,190.

tioned. Fortunately it is now receiving its right-or over 4 per cent, had annual energy require-ful attention by FPC. But, unfortunately, the e

ments of less than 100 million kilowatt-hours.

concept of reliability is being used-and, in my This amounts to approximately the annual out-view, misused-as a vehicle for an attempt to se-

,9 put of a 20,000-kilowatt generator operating at cure a disproportionate share of economies of ii a 57 per cent lo'ad factor. It is about three-scale for all systems however small, and regard-quarters of a day's production for the American less of the equities. I say misused and regardicss 20 PUBUC UTIUTIES FORTNIGHTLY-NOVEMBER 23,199

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of the equisics because the attempt is being made separate entities making up the power industry in without regard to whether reliability is, in fact, the United States, coupled with their interde-being advanced or hindered, without. regard to pendence as a result of interconnection. Inci-whether the contributions made by the small sys-dentally, this muhiplicity of entities is unparalleled tems are commensurate with the benefits they in any other country in the world today.

l would receive, and without regard to the basic These factors, taken together, have had an ever-j and relevant issues of public policy involved.

increasing impact on overall bulk power system j

Reliability is neither a new problem nor a new performance; and they have created a need for i.ud. Neither is it a new objective of.he power further and continuing development of organiza-T i

industry. Those who are familiar with the in-tional mechanisms to assure utmost reliability 4

j dustry and its operations are aware of the efforts while permitting the realization of economies of j

made over the years to meet ever-higher stand-large-scale operations by separate and numer-ards of reliability through improvements in ous power systems.

equipment, provisions for back-up facilities, and Happily, we can start with the fact that the the extension of interconnections. This search for technology and know-how necessary to assure reliability, while having its roots in a high sense against cascading and 'resuhing widespread in-i-

of responsibility to the consumer, was also a re-terruptions have all long since been available.

51onse to competitive influences. These have in-The challenge lies, therefore, in implementation g

cluded the need for high-quality service to con-of the available concepts through responsible and i

sumers in order to win a larger. share of the committed endeavor. This is the verv essence of energy market and to attract and retain, as cus-co-ordination for reliability.

tomers, industries which, because of their use of highly complex technological processes, were in-E can wholeheartedly subscribe to the princi-creasingly sensitive to any power interruption.

ple of regional co-ordination through group action as a mechanism for achieving maximum i

Factors Bearing on Power Sysrem bulk power system reliability. But anyone who Performance has had any experience with group negotiations U NDER these Circumstances, one might wellof any kind understands, as a basic priLCiple, that ask why the present emphasis on co-ordina-there is a geometric progression of obstacles and tion to assure reliability. There are two basic limitations as the number of participants in-reasons. One is the impact on reliability of con-creases. The power industry is no exception to I

tinuing growth of power demands and the re-this principle. Committee sizes grow, the range sponse by the industry to meet these demands and scope of their assignments expand, parochial with ever-larger generating units, concentrations interests intrude, negotiations become intermi-of generating plant, and extra-high-voltage trans-nable, and results are often negligible. I would mission. The other relates to the large number of suggest, as a second basic priaciple, that commit-i 1

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j s-1 Donald C. Cook is president of the American Electric Power Com-

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pony, Inc. He is no stronger to the Washington scene, having served i

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1 as a commissioner on the Securities and Exchange Commission and as pd j

chairman of that group under on oppointment by President Truman.

Mr. Cook is a graduate of the University of Michigan (AB, '32 and h.~

f MBA, '35) as well as the George Washington University Low School 3

(JD, '39 and LLM, '41).

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.I tees rapidly lose their effectiveness as the objec-possible highly qualified technical working groups tives of their members become more varied and in manageabic numbers capable of doing the job

- at hand with both the skill and speed required by diverse.- These reasons alone require that re.

the nature and importance of the matters in-gional co-ordination areas be kept to a reasonable volved.

size, that the number of participants be kept to the essential minimum, and that the scotc and

-Bulk system reliability and assurance against objcctive of the cudcaror be kept cicarly focused v.idespread interruption is not, and cannot be. a on the basic issue of bulk system reliability.

responsibility of the small system. The small sys-tem has neither the physical facilities nor the is m mmd, the. dustry's experts techm. cal resources to have any kind ot an im-m th.

Wmtmaking up the FPC's Advisory Comm.ttee pact in this area. And to the extent that the small.

i on Reliabih.ty or Electric ?"Ik Power Suppiv-system is. dependent upon the serv. ice mtegrity ot a group drawn from all egments of the m.

a large system to which it is connected, 5t us dustry-recommended th

! co-ordination really w. no differcut positson from any other groups include only th,

s whose plan-snajor customer, group of customers, community, mng and operations havt

,' ct on the or scrrice area of the large system. I am not er suppiv.

reliabih.tv of the area's orcra..'

nvare of any. formed person who beh. eves that m

M.ith due deference to the chairman and other the sm:}ll system, with a demand of a few thou-members of the FPC, I beh. eve that this recom-sand kilowatts, has a greater interest

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a mendation has a much more solid foundation m greater effect on, or greater abih.ty to help solve experience and informed j. dgment than the con-a problem of reliability, than, say, a smgle.

m-u trary premise embodied.m FPC.s proposed bill.

dustrial customer with a load of 100,000 kilo-1 L

For the purpose of this article, I have defined watts-of which there are many.

'I small systems not having a major effect on re-The argument that regional co-ordination ac-

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Il liability as those producing less than one billion tivities should include group representation from kilowatt-hours annually and the larger systems as small systems is similarly without any sound

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those producing in e. cea of that figure. This basis in either logic or experience. If the pur-definition is intentionally overiv conservative-Pose of regional co-ordination is assurance of witness that the AEP System is currently pro-bulk system reliability, representation should be J

ducing about 55 billion and the TVA system over limited, without regard to institutional status, to S0 billion kilowatt-hours annually. 'Thus the those systems which can make a contribution to problem of assuring reliability rests not on all the achievement of reliability. And this means

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of the 3,617 power systems in the country but, the systems having or installing the facilities rather, on some 136 larger systems-or less than that affect the integrity of the bulk power supply.

5 per cent of the total power supply entities in the United States-which produced more than Inn vation and Progress 90 per cent of the total kilowatt-hours in 1962, coME now to the' second broad objective of l

the year for which such statist':s are given in power system co-ordination; namely, economy.

the FPC's power survey.

The record of the pewer industry in furnishing Responsibility of the bmall System for its product to the consumer at steadily decreas-Reliability ing prices is well-known, ahhough I am not so sure that it is similarly well-known generally.

I n there be any real question as to whether The fact is that the record of the electric utility l

participation in regional co-ordination by industry for progressively lowering costs and these 136 largest systems would not provide a reducing rates is unique among all segments of more realistic, more practical, and more work.

ab!e arrangement than participation by all or any our economy. The industry record is all the substantial portion of the remaining 3,481 sys-more, outstanding since it has been achieved de.

f tems? And the approach suggested would make spite steady increases in all elements making up I

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i PUttlC UTluTits foRTNIGHitY-NOVEMBER 23,190 22 i

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_a its costs, including taxes, labor, fuel, equipment,

• larger size, knows that the economies of scale are and capital.

bought at a price which is never fully reflected in This trend of decreasing price per kilowatt.

the incremental costs of the newest facility. That hour is largely due to the continued technological price includes, among other things, the existing innovation and progress fostered by the power heavy investment in the transmission that under-industry, including, particularly, the use of ever-lies the new high-voltage system and which is larger generating units and plants and ever-necessary to the effective and reliable perform-higher transmission voltages to achieve the ance of that system. h also includes the cost of economies of scale. The resulting lower costs the other existing older facilities and the higher have permitted lower rates, made possible in.

installed genera <on reserves necessary to meet the creased utilization, and provided additional op-unforeseen or2 age rates of new and untried I

portunities to build new facilities embodying the generation technology. These expenditures have most advanced technology and the perpetuation been and will continue to be very 'arge. They of the cycle of ever-lower costs.

are absolutely necessary if long-term economies are to be realized without detracting from over-It is important to note here that this innova-tion and progress have been initiated and pur.

all system reliability.

sued primarily by the large power systems at con-IIE basic stimulus to the large investor-owned g

. siderable risk and great expense. The resulting long-range economies have not come free. They power system for lowering the costs of energy to its consumers has largely been the. natural have all entailed large investments in money, tech-result of a free and vigorous economy in which nical skill, and managerial initiative. They have lwcu paid for in varying proportions by the the power industry has played a significant rate customers and the share owners of the large as a major competitor for an increased share of the energy market. The industry's aggressive-systems.

ness in conceiving and promoting utilization of electricity, including promotion of the all-electric I

J NvoNE who has been associated hith the de-relopment of transmission at extra-high volt-home, in pursuing improvements in design and age <. generation with large conventional units efficiency, and in achieving capital and operat-

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. grating at supercritical pressures and high ing economics, have all contributed to lower t

. tonperatures, and with nuclear units of even costs, to a continued downward trend in energy I

1 23 bO'Emilit 23. Ivo/-Pu6uC UTILITIES FOimiiOHitY

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cost, and to uninterrupted growth. The benefits i 11. Unfortunately, however, it completely of competition cannot be stressed too much. And failed to carry out the mandate of g 30. In I predict that as mu-h competition as there has l 30 Congress directed the commission to make

- i been, there will be even more of it.

, studies of the ind ry for the purpose of ree-ommending "the,,pe and size of geographically Regulation of the Industry and economically integrated public utility sys-tems, which, having regard for the nature and Te!E timeworn thesis that gournment or gov.

character of the locality served, can best promote j

l rnment-financed agencies provide a " yard-stick" for measuring the reasonableness of r'ates and harmonize the interests of the public, the in-

' and services of investor-owned systems, has long vestor, and the consumer." Further, the act ex-l since been disavowed and discredited by those Pressly recognizes that the appropriate size of in-l who are informed and objective. A properly cali.

tegrated systems is to be determined in fight of j

.brated yardstick with all costs accounted for w'.ll the current state of the art and contemplates in-l, show most of the large systems in this country in creasingly larger systems as warranted by ad-l ~

a very favorable light. And it is simply not in vancing technology.

accordance with the facts to suggest, as some-D these studies and recommendations been times it is suggested, that regulatory bodies are m de, the industry would have been far incapable of properly regulating the utility in-al ng n the road to integration today, and the

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Problem of co-ordination to achieve reliability Those of us who have both regulated and -been I ng since substantially solved.

regulated know the vast powers available to reg.

Is it now too late? I do not think so. I have ulators and the case with which they may be ex.

n other occasions stated the belief that ulti-ercised. Therefore, we also know this assertion to be a libel of able and hard-working public mately 12 to 15 fully integrated systems, each under a single management, would eventually be servants.

In the power industry, as already indicated, brought into being in this country. This develop-size is essential to dynamic growth, technological must may be a long time coming-perhaps as

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progress, low costs, and low rates. I have also long as twenty-five to fifty years-but it could described the industry's growth from small iso.

and certainly should occur much sooner. And it will come much sooner if the requirements of sawl plants to large integrated systems, and have i 30 are implemented by some government cuggeted how this development laid the basis for both economies of scale and advances in reliabil.

agency or if the industry is enabled to do the in-tegration job itself.

ity, Nevertheless, taking the industry as a whole. ve The systems I envision would each be fully in-continue to limp along with a multiplicity of smali tegrated, operated under one management, and systems interconnected in an effort to achieve doing the completc fob of generation, trans-some economies but not integrated to achieve re-missien, and distribution. This is the ' road to liability. The result necessarily is not the strength low costs, high efficiency, and low rates. It is that comes from integration but, rather, the also the road to improved regulatSn. I know weakness that results from interdependence with-from experience that it is much easier to regulate out it.

a small number of large companies th.n a large And this is a situation that need not ever have number of small ones.

developed, becan : the' concept of power system integration was incorporated in the Public Util.

Perpetuating the Small System ity lloiding Company Act of 1535 and was to be T.ut neither advocating nor prophesying the achieved through it. The Securities and Ex-

.L abandonment of the pluralistic structure of change Commission, which administers the act, power supply in the United States. The exist-completed the job of breaking up the noninte-en'ce of both federal and state public power sys-grated utility systems under the requirements of

_tems represents a continuing expression of public

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PUBuC UtluTIEs FQRTNIGHTLY-NovEMSER 23, 1967 24 7

policy. The same is true of the co-operatives, vantages of pooling, which to a considerable ex-4 which will no doubt continue to fill in the tent have enabled investor-owned systems to interstices between the larger mtegrated systems.

hold their own in the face of the below-cost capi-The small municipal system will also continue tal, the tax advantages, and the preference status to exist in substantial numbers. It is one thing given to the public power systenis. To require to demonstrate that such a system is uneconomic:

that a disproportionate share of the economies of it is quite another to say that 'a community can.

size now be gratuitously given to the small public not conduct an uneconomic operation if it wants power systems, which can contribute little if to and if the customers are willing to put up anything in return, wo 1d further enhance their with it, position at the expense of the larger investor-IIbt, while we must fully accept the right of owned systems.

any group of citizens to decide that it wants to The result, theref' ore, instead of maintaining

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continue with its own small power system, I be-ine pluralistic balance in the power industry, lieve-and I believe strongly-that governmen-would be to alter it significantly to the detri-tal effort and encouragement to perpetuate the ment of the investor-owned segment. This prob-continued existence of obsolete and uneconomic tem is further aggravated by the fact that small systems by requiring, under the guise of whereas the investor-owned segment is closely promoting co-ordination, that the larger systems regulated with regard to rates, services, and other establish some kind of preferred position for the matters,'the public power systems are, in many small systems is entirely unsound and unfair. It important respects, free from regulation.

is an economically ' unsound allocation of na-No full and fair discussion of this subject can tional resources, it is unfair to the larger sys-omit consideration of 1:2 effect o! taxes and cost l

tem's customers and share owners, and it is con -

of capital on the economic validity of co-ordina-trary to the public interest.

tion and pooling arrangements b: tween the small These ideas are not new. Indeed, it has long government-owned or government-financed sys-since been recognized that the future holds no tem and the large investor-owned system. Fed-place for small, isolated systems generating their ernl. state, and local taxes, in general, constitute own power. But merely because these systems the largest operating expense of an investor-have no future, it does not follow that through owned system. On the AEP System last year

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j forced arrangements made in the name of co-this amounted to approximately 20 cents out of ordination, they should have the right to receive each dollar of revenue. Municipals and co-all the economies of size of the larger systems operatives pay no federal income _ taxes, and without incurring the larger systems' full costs-states' and their subdivisions generally impose far Whenever swer pools are developed, whether higher taxes on investor-owned electric utilities large or small, it is essential that the benefits and than on other segments of the power industry.

costs be equitably distributed among the partici-

- pants. And there ought to be a willingness to

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face the fact that it is simply not possible to

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lool a system with, say, a 20.000-kilowatt peak Q

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j with a system having a 2 million-kilowatt peak Y

and maintain an3 kind of equity. In such in-o

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TOCIGOLDERS stances. to speak of co-ordination is mearingless shn all the benefits would inevitably flow one

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Factors That Need Consideration in D 't h h

}h Pooling Agreements

% g5 emirr tlERE must also be recognition that it is the er.

I economies of size, including the resulting ad-(jh il NOVEMBER 23,1967-PU5uC UTitmts FoRTNIGHitY 25

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As to the cost of capital, the municipal seg-tive system a part of the top incrcwn! uf bcuc-ments of the industry have the advantages of fits created solely by its efforts.

j tax-exempt securities and all-debt financing, while Such a participation in pooling or co-ordina-the co-operatives are able to obtain 2 per cent tion is particularly unfair to those consumers j

money from the federal government and also fi-who not only are paying their own share of the i

nance on an all-debt basis. On the other hand, social costs of our society but are also bearing investor-owned utilities are required, by regula-the burden of contributing to the share which tion, to maintain specified levels of equity capi-should be paid by others.

tal, ano their over ll cost of capital, determined

'lhis is not idle philosophizing. The impor-in the market place, may be three or more times tance of this concept of taking into consideration f

. higher.

full social costs as the basis for the selection and These facts, because of their direct impact on development of power programs has been recog-any evaluation of costs and benefits, are vital nized in many nations, including Sweden, France, considerations in any pooling agreement, par-and Great Britain. In the case of Great Britain, where power facilities have been entirely na-ticularly where it involves joint or common i-ownership of facilities.

tionalized, a gross rate of return (depreciation, i

interest, and net surplus) of 12.5 per cent

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{r is also important to distinguish between thebeen established as the rate which adequately re-apparent cost of a power supply facility and flects the need to regulate the allocation of re-I its end product, the kilowatt-hour, and the real sources to nationalized industries.

cost to the nation's economy.

This use of public funds at interest rates which The Proper R61e of the Sma!I system i

do not reflect the market cost of capital and this nxr,then,.is the proper ro.le of the small W system m today,s power economy.

freedom from taxes for one group of citizens as 3

i contrasted w. h another, necessarily result m a As earlier stated, I believe the small isolated I

it misallocation of our national resources and an system with small-scale generation is expensive ineqmtable distribution of the tax burden among and wasteful, represents an um.conomic anachro-our citizens. To the extent that the mum..cipal or nism. nd is wasteful of our national resources. I i

co-operative system pays no taxes or pays less g;

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than its fair share of taxes, or to the extent that i

encourage a -1 preserve such systems are un-it has ava.lable to it capital at costs less than sound and m.isguided.

those prevail.mg m the market place, it is par-The ownership by a small system of a small,

• ticularly inequitable, as a simple matter of fair-

'VC" 'I. Proportionate, share of a large generat-

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ness, to compel the tax-paying investor-owned system to give up to the municipal or co-opera-ing umt or plant on a large system is neither practical nor equitable. This is. rue not merely because the added complexities created for the 1

larger system more than outweigh the beefits ggy conferred on the smaller but because such owner-f Wi h

ship will never represent an equitable sharing of

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overall svstems costs. These costs include the e

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embeddeci costs of older, but still useful, prop-i (I'

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erty and the costs accumulated over the years of

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the expensive pioneering that culminated in the

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de elopment of the most modern.and efficient

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• Ronald 3. Edwards (chairman, The Electricity Coun.

and D. Clark Ichief planning engineer, Central Elee.

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%-- -b EIcetrisity Supply." p. 33.

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j to systems making no contribution to their crea-There is an obvious, practical, and equitable j

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mechanism available to enable it to share fairly-

.\\nd it seems patently unfair and improperly and without discrimination against other users discriminatory to require that such a small

--in the economies of the larger system, however system be given all the benefits of the new.

those economies have been obtained. By purchas-est and most efficient generating unit while all ing its power requirements from a' large system other customers of the larger system must pay the under an agreement monitored by ~the regulatory costs of all existing facilitics, including the costs agencies, the small system will automatically re-ni the less efficient generating units.

ceive its fair share of all of the economies of scale of the larger systems. And through periodic uts has been highlighted in connection with review the cost of energy to the small system T*recent efforts by small municipal and co-op-can be made to reflect the continuing technologi-erative systems to obtain participation in owner-cal p-egress in the power industry.

slup, under regulatory compulsion, m large nu-The electric co-operatives, which were estab-clear plants. It has been contended by some that, lished to do a special job, are obviously here to because the federal government has spent large stay as a permanent part of the power industry of amounts in developing the technology of nuclear the United States. We have long since recog-energy, the larger ystems should share the bene-nized and accepted this fact in the AEP System.

fits of their use of that technology with these However, we believe that any fair accommoda-small public power systems. It has also been con-tion between the co-operatives and the investor-tended that these benefits can only be shared by owned companies must be based on equality of compulsory participation m ownership.

regulation and parity of rights and obligations.

It is perhaps pertinent to note that, since these As to the small municipal systems, many of

I systems as entities paid no taxes, they ceu. inly which, despite their advantage of freedom from did not contribute to the cost, and to the extent taxes and of lower costs of financing, find them.

il that their customers paid taxes as citizens rather selves in incressingly difficult positions, I be-l than as utility customers, so too did the customers lieve their best solution will be found either in e

l of investor-owned systems. But of greater im-buying power rather than generating it or in I

portance, the argument overlooks the tact, first, joining larger systems, depending on the par-

o that all systems have the right to take advantage ticular circumstances.

of the tecimology which has been developed-And as for the small investor-owned systems, n.

indeed, government and government-financed their future lies in either merging with one an-1, systems are given a f' reference under certam cir-other or with larger systems to create the most cumstances-ard, second, that investor-ownel efficient and economical systems the state of the g.

utilities are permitted to earn only a fair return art permits.

r on the capital committed to their enterprises, and

,y

-l, u.navingrresultinTfrunrtehnological prog-rpar suggestion that ampulsory co-ordin Mon

, ress, however brought about, must be passed on

.L offers the solution to the ills of the small elec-3 to their customers, including customers which are tric power system is wholly unsound, because the

,4 government-owned and government-financed sys-l small system has nothing affirmative to bring to j

t e achievement of co-ordination. It is unfair h

tems.

te g,.

and discriminatory, and it is bad economics and Parity of Rights and Obligations bad engineering.

j he ons all this mean that the small system can There are other fair and equitabic solutions at obinin the economier of scale only by be-available. Regulatory bodies world do well to coming a part of ~a large systemFNot at all.

encourage and facilitate them.

O

~

sn 4m

47

. NovfMBER 23.1967-PUBUC UTIUTIEs FoRTNIGHitY 27

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