Justification of estimates.—In order to dispose of the power generated at the navigation and flood-control works of the Authority, to connect them into an integrated system, and to furnish power for the construction of projects in progress, it is necessary to construct a network of transmission lines throughout the area. In order to increase the distribution of electricity chiefly to rural consumers, the Authority has purchased and constructed distribution properties. These are being sold to cooperative associations and municipalities which repay the Authority over a period of years. The estimate for 1938 for these activities is slightly less than that for 1937. The following map shows the location of the transmission and distribution facilities now in service or under construction.

Transmission lines and substations, $4,700,000.-The individual lines to be constructed out of this estimate cannot be definitely determined for 1938 at this time due to uncertainties as to the outcome of litigation and pending negotiations. During 1937 a considerable amount of this work has been held up by litigation. Uncertainties as to the status of this litigation during 1938 still exists, but it is expected that the Authority will be enabled to expend approximately the same amount in 1938 as in 1937. A number of commitments have been entered into with prospective municipal and industrial customers, which will have to be consummated if conditions permit, and for which the estimate makes provision. It is only by taking power to new markets that the Authority can realize the revenues included in this Budget and at the same time carry out the program set forth in the Tennessee Valley Authority Act of 1933 as amended. This estimate also provides funds for the construction of additional lines and substations needed to interconnect the generating plants at the various dams. With such connections the integrated control of the Tennessee River system for flood control, navigation, and water-power development as directed by Congress becomes feasible.

Investment in distribution properties, $300,000.-This estimate provides for the construction or purchase of rural lines by the Authority for cooperative associations and municipalities, which pay for them over a period of 20 years or less. Some lines are financed by the Rural Electrification Administration, through which the Authority is reimbursed as soon as the construction is completed.

As of June 30, 1936, the investment of the Authority represented by outstanding obligations of the municipalities and associations was nearly $1,000,000. Properties purchased and operated by the Authority pending transfer to municipalities and associations amounted to over $1,000,000. About $1,000,000 more was represented by properties constructed or in process of construction, pending their transfer to municipalities and associations.

No allocation of the 1938 estimate by individual associations and municipalities is possible at this time. Construction of some projects will depend upon the construction of transmission lines to areas not now served. The lines to be financed by the Authority will be limited to areas in which it already has a considerable investment in distribution properties. Work in remaining areas, including that done for new cooperatives, will be financed, it is expected, by the Rural Electrification Administration.

General equipment and inventories, $100,000.--This is a clearing account to which new purchases of laboratory, construction, communication, and other general equipment for use in connection with electricity operation; and of materials and supplies for construction and operation of electrical facilities, are charged. Equipment depreciation and stores issues are charged to construction or operations, and credited to this account. The increase for 1938 is based on the rate of growth of the operating activities, which makes it necessary to keep a larger stock of line and substation materials on hand in order to meet emergencies, such as those caused by storms, and in order that extensions may be made to serve new customers with a minimum of delay.

Mr. LILIENTHAL. Closely allied with this question of transmission lines and, of course, the installation of generators, which have been discussed in Chairman Morgan's testimony, is, of course, the revenue situation last year, our estimates of next year, and the estimates for the coming years. Those are taken up in this budget justification beginning on page 31.

Mr. WOODRUM. We will come to that.

TRANSMISSION LINES AND SUBSTATIONS

Mr. WOODRUM. With reference to item (a), transmission lines and substations, $4,700,000, will you give us some information on that program?

Mr. LILIENTHAL. Initially a study was made of all the lines it was felt were necessary in order to carry forward the job of tying the dams together and meeting contractual commitments for power from various communities or industrials or associations, or private utilities. And it was found that a very large figure was called for, a figure of some 13 million dollars. That was a larger figure than the Budget could stand and that was whittled down to $6,000,000 and has since been, through the necessities of keeping the Budget in line, whittled down to $4,700,000.

Just how that portion of the lines which ought to be built will actually be expended, it is difficult to say, because there are several needs for every dollar available. But we have broken it down by

areas.

Mr. WOODRUM. I am just wondering, Mr. Lilienthal, if in order to get a chronological picture of this situation, it would not be a good idea for you to make a brief statement of what you have done up to date in the way of building these transmission lines, your commitments, and so forth, and give us the present situation; what you expect to do in the future, and so forth, in order that we may have in our hearings a chronological story.

Mr. LILIENTHAL. Through the fiscal year, with an estimate, of course, for the remaining months, but quite an accurate estimate, the following figures, I think, will supply the information you want.

A total of transmission investment, investment under this heading of transmission lines and substations of $11,350,546.

Mr. WOODRUM. From the beginning of the program?

Mr. LILIENTHAL. From the beginning of the program; yes.
Mr. WOODRUM. Through the fiscal year 1937.

Mr. LILIENTHAL. Yes.

Mr. WOODRUM. How many lines have you got and how many substations, and what do they do?

Mr. TABER. Does that include the 1937 appropriation, or does it not?

Mr. LILIENTHAL. That brings us to July 1 of this year.

Mr. TABER. Does it include the expenditure of the whole $4,500,000 that was allocated to you for that purpose for 1937?

Mr. LILIENTHAL. It does.

Mr. WOODRUM. Have you not been tied up in litigation on that a good deal?

Mr. LILIENTHAL. Yes, we have.

Mr. WOODRUM. Will you spend that money in 1937, or commit it? Mr. LILIENTHAL. Yes. The injunction did not prevent the construction of all lines that were in progress. It did prevent their use in some instances. But this contemplates the expenditure of commitment of the entire appropriation for that purpose.

Mr. WOODRUM. The 1937 appropriation?

Mr. LILIENTHAL. Yes.

Mr. WOODRUM. How many miles of transmission lines and how many substations have you, and where are they located?

Mr. LILIENTHAL. We have this in very considerable detail. I might summarize it and then put these two sheets in the record? Mr. WOODRUM. I suggest that you do that.

Mr. LILIENTHAL. In the table that is appended, we have a list of all the transmission lines constructed or installed or under construction or authorized by the Authority as of March 1, which is as near the end of the fiscal year as we can get.

Mr. WIGGLESWORTH. Does it show which were constructed and which were purchased?

Mr. LILIENTHAL. These are constructed. We can supply a separate statement showing the transmission lines acquired.

The total length of miles is 1,078.55 miles. The plant in service cost, as of March 1, $2,865,995.

The estimated total cost of additional work in progress-there are many of them partially constructed is $4,730,566.

The cost to March 1 of this additional work is $3,677,068.

Then with respect to substations, we will supply the total for the record.

The estimated total cost of substations under construction is $1,689,710.

The cost to March 1 was $1,093,928.

Many of the substations are physically completed. Some of them are not. The tables show the situation in that respect.

Mr. WIGGLESWORTH. They show how many and where they are? Mr. LILIENTHAL. Yes, it designates them.

For example, the table shows as to substations, in case you may want greater detail, Wilson Dam, Ala., and so forth; giving the town or the place where these are.