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Show schedule. It has never been conceived that in this operation the Federal Government was merely selling water on a commercial basis. The weight of this tradition, then, precludes us from treating irrigation water as a vendible commod- ity. This position is also strongly supported by the national interest in meeting expanding food requirements at reasonable prices, as more fully discussed in chapter 11. Restricting attention, then, to clearly vendible products, the principal alternative pricing issues are: 1. Should they be sold below cost in order to promote regional or industrial development, the deficiency being covered from general Federal revenues? 2. Should they be sold at cost, including opera- tion and maintenance, replacement, and interest on the investment? 3. Should they be sold at cost, as defined above, plus local taxes or a payment in lieu of taxes? 4. Should the cost include local taxes, plus an equivalent of the Federal taxes that would be paid if these products were supplied by private business? 5. Should they be sold at the highest price obtainable in a given market-i. e., at the pre- vailing rate for alternative sources? A case can be made for promotional pricing- i. e., selling below cost-in special circumstances in order to expand agricultural output, develop new industries, redress the agricultural-industrial balance within an area, or aid backward or de- pressed areas. Here it may be desirable to sell power, water, or other services from multiple- purpose projects at less than cost. But these cir- cumstances are fairly rare, and usually temporary. Pricing below cost is a form of subsidy and one in which the amount and effect of the subsidy are not clearly denned. Hence, as a general policy, this method commands little support. The sale of vendible products at full cost, in- cluding operation, maintenance, replacement, and interest on the investment, is the present prac- tice of most government enterprise. It com- mands general confidence and support, as an irreducible minimum appropriate for public services of this character. It returns 100 percent of the capital outlay incurred to provide the serv- ice with interest. There are few cases of ob- viously vendible products where its use would seriously limit consumption or have other un- satisfactory social effects. It is only where the products are not necessarily vendible that prob- lems of such social consequences must be con- sidered. In the pricing of power from multiple-purpose projects, a special problem arises from the pres- ence of private suppliers. To what extent should the Government's price policy be affected by the policies of these concerns? The public output of a project might be salable if the rates were set at, or slightly below, the private rates, and a substantial net revenue might be realized. This would facilitate reimbursement for the project as a whole. At the same time, the charge of "un- fair competition" levied against public power would be met. But consumers of electricity would be denied any direct benefit from cheap public power in the form of reduced rates. The Government would be in the indefensible position of building a power plant with public funds, and then denying the public the full fruits of the investment. In the public interest power rates should be set so as to cover all costs, and return the investment al- located to power with interest, as is the present practice. In addition to all costs, prices of vendible prod- ucts should include payments in lieu of State and local taxes. The amount of such payments should be determined by negotiation between Federal and State authorities and generally should not exceed the taxes formerly paid by properties taken over by the Federal Government. This policy is predicated on the social necessity of maintaining intact local and State services which otherwise might be weakened through losses of tax revenues. (The Commission has given con- sideration to the proposal that State and local taxes applicable to similar services, when pro- vided by private enterprise, should be levied on Federal enterprise. Because the whole problem of Federal-State taxation currently is under study 77 |
