Who Gets Niagara?

When U.S. private power companies opened the annual meeting of their Edison Electric Institute in Cleveland last week, they drew their battle lines for the next big test of Government v. private power. The question at issue: will Government agencies or private companies develop the electric power now being wasted at Niagara Falls? If the Government wins, said Niagara Mohawk Power's President Earle J. Machold, socialization of the whole power industry "is merely a toss of the coin . . . [This] stifling of private enterprise can only lead to a totalitarian form of government."

In the early days of TVA and Bonneville, when private power companies were failing to meet the nation's new power needs, such a cry would have carried little conviction. But in 1952, when the industry is spending $1 billion to boost its output, Utilityman Machold had a case. At Niagara the Government cannot claim, as it did at TVA and Bonneville, that power development is only the offshoot of irrigation and flood-control projects. There, its only purpose in proposing to spend $400 million of public funds is to make power and compete with private companies.

War Declared. The battle flared up in February 1950, when a treaty was signed with Canada that divided use of Niagara's water and about 3,000,000 potential kilowatts of power. The Canadians started a hydro plant, which will begin generating 300,000 kilowatts by 1954 and 500,000 by 1955. The U.S. is hardly out of the blueprint stage, because New York Democrat Herbert H. Lehman inserted a tricky clause into the treaty: only Congress may determine who is to develop

Niagara "for the public use and benefit." The Administration's public power bloc contends that this freezes out private utilities because they cannot operate for the public's benefit.

Congress listened to bitter arguments from the three competitors: the Federal Government, New York State, and New York's private utilities. The Lehman-Roosevelt (Jr.) bill advocated building the reservoir, intake tunnels or canals, and generating plant with public funds. The Ives-Cole bill would permit New York to build the project, then sell the power to the private and public utilities.

But it was the Federal Government's case that private power feared most. Senator Lehman and friends argued that the Government would: 1) develop power for two mills per kilowatt, which is basement-low in the U.S., and sell it for less than private power; 2) see that the Falls' beauty was not marred, a provision of the U.S.-Canada treaty; 3) make the project pay for itself in 50 years. Furthermore, the U.S. Corps of Engineers would build the plant.

Private Power Fires. The private power companies were slow to organize a rebuttal. But when Niagara Mohawk did join with four other major utilities* to back the Capehart-Miller bill, which would let them do the job, they presented some impressive arguments. Their know-how and existing facilities in the area, they said, would keep the project millions below the Government cost, and finish the first phase three years ahead of the Government. Private rates would be slightly higher than the Government's, but only because the companies would pay $23 million a year in municipal, state and federal taxes. The Government's lower power rates would simply be subsidized by taxpayers. The Government's argument about preserving the natural beauty of the Falls did not stand up, because either public or private power would have to build the same number of installations, and both, under the treaty, would have to divert the bulk of the water flow at night so as not to spoil the Falls' beauty.

Said New York's Democratic Representative William E. Miller: "Army engineers construct nothing . . . They supervise . . . and they would probably have the people who are now employed by Niagara Mohawk to construct [the project] anyway." As a clincher, private powermen said they would impartially serve all customers, while the federal development would give more favorable contracts to cooperative and municipally operated utilities, at present servicing only 3% of the state's electric customers.

While the fight goes on and Congress postpones a decision, the U.S. is losing $17 million in power a year as water to make 1,132,000 kilowatts goes out to sea every 24 hours.

* Consolidated Edison, Central Hudson Gas & Electric, New York State Electric & Gas, Rochester Gas & Electric. With Niagara Mohawk, the five serve 90% of the New York State area and nearly one-third of its population.

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