Imperial Valley press., 1935-06-03
Hewes Outlines Power Development

delay its own installation, the pow
er company refused to make the adj
ditional cut in rates.
Mr. West, in his talk, referred to
this proposition of the district TO
construct the small hydro plants,
which, have Just mentioned, at a
cost of 100000. He said if this had
been done, these plants would now
be a total loss, which, of course,
would not be the case by any means.
However, the point is that he fail
ed to consider the fact that the re-
duction of 80 per cent in rates, pro-
posed by the district. would have
put back in the pockets of the
people of the valley over 100000 a
year, which, to date, even after al
lowing for the reduction the power
company has made, would have
amounted to nearly $1,000,000, or
two and one-half times the total
cost of the small hydro plants, and
i'll addition, during these years,
many more farmers would have
been, receiving power from the dis
trict lines than now do from the
power company. Does this look like
the plants would have been a loss?
Mr.. West admits that his company
opposed the installation of these
small plants and stated the COM
pany was justified in doing this.
OF course, the Southern Sierras was
justified; it didn't have to make
further reductions in rates. which
has meant an additional S1,000,000
in revenue to the company, and
they still have a monopoly of the
power business instead of the people
controlling it themselves.
Now the district is starting its
All-American canal power project
and has under construction the first
unit of the standby plant at Braw-
ley. AS soon as the plant is COM
pleted, which would have been be-
fore this except for the court suits
brought by the power company,
rates will be reduced 20 per cent to
consumers No doubt the power
company will meet the reduced
rates, but If it can do so, why has
it waited? Why didn't it reduce
| rates year ago when the plans of
the district were first announced
| and give the people the saving in
power bills which would have re-
suited? The answer is SO obvious,
it needs no comment. Now, just as
In the past, the power company will
reduce rates only when forced to do
so, and if permitted to continue it's
monopoly of the power business
will continue to charge all the traf-
fic will bear.
1 would Ike to just mention the
question of profit, which Mr.. West
referred to as return on investment,
in order to point out that there are
two methods of determining this in
yestment, one based on historical
cost, the other on reproduction cost
Historical cost refers to the actual
cost of the properties when pur-
chased or constructed reproduction
cost refers to the cost of reproduc-
ing the properties at the present
materials, labor, etc. AS matter
| of fact costs are now considerably
! higher than when most all of the
properties of the Southern SierraS
were installed SO that company con-
tends for the reproduction value in
determining rate of return. AS an
example; assume that the original
o. historical cost of the power
plants, lines, and other properties of
the Southern SierraS cost S20,000,-
900, but due to an increase in the
cost of materials and in labor it
would cost so per cent more to re-
produce these properties today. Ac-
cording to the law, the power COM
pany would be entitled to earn its
Tx per cent or 814 per cent on $780,,
100000, instead of the amount
actually invested of $20,000,000.
There are many other interesting
angles to this matter of return on
investment, but will not take the
time to discuss them tonight.
Mr.. West discussed at some length
in his talk at INLAND, the drainage
system in the valley, and voiced the
opinion that unless a large amount
of additional drainage was provided
Immediately, it would not take more
than Is years for the valley to go
back to a desert. No one denies
that additional drainage is neces-
sary, but with nearly a thousand
miles of drains already constructed,
we believe Mr.. West was perhaps
little too conservative in his esti-
mate of Is years for the valley to
revert to a desert.
Our board has recognized the
need for additional drainage, and
to this end has now on file with the
Reconstruction Finance Corporation
an application for loan of ap-
proximately $2,000000 with which
TO complete the drainage system.
This application also requests loan
to refinance the present outStand-
ing indebtedness of the district. But
there is a decided difference be-
tween drainage bonds and power
bonds and the application for the
power loan in no way conflicts or
interferes with the application for
the drainage loan. The security for
the power bonds will be the gross
receipts from the sale of All-Ameri-
can canal power and the bonds will
not be lien upon the land, while
the security for the drainage bonds
will have to be based on the land OF