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Show 5. The Federal agency responsible for market- ing power generated in connection with such river basin programs should have authority to construct transmission lines in order to prevent monopolization of the power, should give prefer- ence to municipalities, cooperatives, and other agencies not operated for profit as distributors of the power, and should generally assure the lowest possible rates to consumers, particularly those in the residential and rural classifications. These principles are neither public ownership nor private ownership principles, but are typical of the mixed system of public and private opera- tion which has characterized the power industry in America for more than a generation. It is the system which has given force to regulation of pri- vate power corporations operating under public franchises by enabling citizens of cities, counties, or other governmental units to choose at any time that organization of power supply which they be- lieve will give them the greatest assurance of low- cost power for residential, agricultural, and devel- opmental purposes. In a sense it offers the pos- sibility of actual or potential competition to stim- ulate what would otherwise be publicly sanc- tioned monopolies in an essentially public business which is of vital importance to every community and region. The Federal power marketing policy, with its provision for transmission lines and its preference to public bodies and cooperatives, serves to assure the economic feasibility of this essential local au- tonomy in the field of electric service. In this age of far-flung interconnected power systems, capable of providing wholesale power supply at a lower cost than small independent generating sta- tions, municipalities desiring to obtain their power supply on a public basis are severely handicapped economically unless they can obtain their power at costs comparable with those of a well-run in- terconnected system. Thus the TVA was able to offer such small cities as Tupelo, Miss., or such rural systems as that in Alcorn County, Miss., wholesale power supply at rates comparable with those at which firm power was being interchanged between neighboring interconnected private sys- tems in the region. Import of Federal Policy Several comments by individuals in no way associated with the development of Federal power policy are significant as to the import of Federal power policy. Vice President Leverett S. Lyon of the Brook- ings Institution, taking part in a 1937 American Society of Civil Engineers symposium on power costs, attributed the introduction of the TVA "yardstick" policy to the lack of any satisfactory cost basis for fixing rates under regulation. After paying tribute to the competitive system as a means of assuring people the lowest possible costs, he asserted that in the field of power, because it is a natural monopoly, the competitive method of price determination will not apply. He pointed out that since a monopoly cannot be trusted to create prices in the public interest, social regula- tion of rates has been established in every State. He continued: "Since the commissions which have been given this responsibility have no com- petitive tests, they have groped none too happily in an effort to relate costs to prices." "It is the raising of such issues of costs as these," he concluded, "which has introduced the now much discussed 'yardstick' as a proposed method of determining what prices should be." At the same meeting, Prof. B. Alden Thresher of the Massachusetts Institute of Technology defi- nitely related the direction taken in the broaden- ing of the Federal power policy to the inadequacy of regulation. He suggested that the accepted scheme of regulation in the United States is, by its very nature, static and ill-adapted to the eco- nomic and technical changes characteristic of the power industry. He said: It is more accurate, therefore, to regard the Fed- eral power program, whatever its merits or defects, as a response to a long-standing maladjust- ment. * * * The machinery of State regula- tion is often said to have "broken down." More strictly speaking, it has always lagged behind the situation with which it strove to grapple. This was true even in the days of local power units, because of the rapid rate of technical change. It is doubly true now that regional interconnections extend over areas beyond the jurisdiction of regulative authori- ties. 223 |