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. T~XT OF COMMISSIONER DOMINY'SMEMORANDPM , ' The full text of t1Jie memorandum ofFloydE. Dominy} Oommis- sioner of Reclamati~n, to former ~ecretary of the InterlorSeaton under date of November 30, 1960, is as follows: " I U.S. DEPARTMliINT OF THE INTERIOR, , BUREAU OF RECLAMATION, Washington, D.O., November 30,1960. MEMORANDUM To: Secretary of the Interior. From: Commissioner of! Reclamation. .' Subject: Establishment!of average power rates for Colorado River storage project. and a1+alysis of .prpposal: 1:>Y private utilities to construct backbon'e .trans.. mission lines and wp.eel power to preference customers at designated delivery points-Colorado lUver storage project. . As the next step in a ~eries of critical determinations pertaining to the Colorado. River storage project, t:p.ere are submitted herewith'my recommendations covering average power rates to pe charged for power in the Colorado River storage project and analysis of the propbsal made by certain private utilities to construct'backbone transmission lines and:! wheel project power. Additional actions leading u:R .to marketing of power produced by the storage project cannot be taken on a firm basis until decisions have been reached on these two matters. By memorandum o{ May 3, 1960, I recommended to you, and under date- of May 17, 1960, the: Acting Secretary approved the area within which, and the general principles under which, the power from .the storage project would be marketed. At the sa;ne time, I also recommended and the Acting Secretary also approved a propf:lsed an~Federal transmission system to be u,sed as a yardstick against whiQh to measure the utilities' proposal as to costs and to be used to compute the p~yout if an all~Federal system is 'constructed. The marketing. principles, the markel/ing area, and the yardstick system have all been used in arriving at the variouSjresults as shown hereinafter. Attached is a copy of a report dated October 1960 from the regional director at Salt Lake City entitled II AnalysiS- of Proposal by' Priva~e Utilities To Wheel Power to Preference Customers," in which I concur, cover:ing in detail the types of analyses made and the results. FINANCIAL AND POWER RATE ANALYSIS-ALL FEDERAL SYSTEM The uFinancial arid Power Rate Analysis-Colorado River Storage Project and Participating Priojects-8eptember 1960l' has been prepared to determine an average firm power rate for the Colorado River storage project. The details of this analysis are Sh~' wn as attachment 7 in the appendix of the regional director's report. This analysi has been based upon present departmental policy pertaining to cost allocations, t e approval given May 17, 1960, pertaining to power gener~ ation, an all-Federf1jl transmission system, and upon the best cost estimates- obtainable today considering the status of the construction of the project. The analysis 'follows the inethods used by the Bureau in its .other power projects and in the financial and 4conomic analyses previously furnished to the Congress. The. background of the type of analysis used is discussed in chapter V beginning on page 27 of the regional director's report. This analysis shows that the payout requirements of the Colorado River Storage Project Act can be met by power revenues based on average rates of- 6 mills per kilowatt~.hour for firm energy. 2.5 mills per ikilowatt.hour for nonfirm energy. $15 per kilowatt~year for peaking capacity. Revenues from these average rates accomplish payout in a somewhat shorter time than might bci utilized in taking full advantage of the discretion permitted by the authorizing .a.1 ct. Consequently, an a" verage rate of 6 mills for firm energy is not the minimum which might be established initially. However, it is wise to use the above avetage rates becajJse the project at the present time is in the early construction 4tage and it provides a cushion to cover future contingencies. 6