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, Hoover as if Glen Canyon were not on the river and using an over-all efficiency factor for power operation of 83 percent. The second calculation would be to adjust the energy actually generated at Hoover (which even without Glen Canyon on the River, actual operat- ing practice shows would probably be produced at an efficiency vary- ing from 70 to 78 percent) to an efficiency factor of 83 percent. The difference between these two answers would, for purposes of the allowance, be considered as the deficiency in firm energy. At the present time the operations of the power plant at Hoover are such as to create relatively low efficiency. This is so because the power allottees are to an extent utilizing the Hoover generators for peaking purposes. We do not believe it appropriate to compensate the allottees for that portion of the use of the Hoover plants which represents a type of operation dictated by their own convenience. The use of the 83 percent efficiency factor would help prevent this type of payment. The 83 percent efficiency factor is selected because that is the efficiency used in the computations to determine the amount of Hoover firm energy as defined in the "General Regulations for Generation and Sale of Power in Accordance with the Boulder Canyon Project Adjustment Act". The way is left open for the Secretary to determine how the allowance would be accomplished. For example, the Secretary might decide, if it can be worked out, to make a monetary payment therefor. If the incremental cost, which is to say the fuel re- placement cost of generating substitute energy, is less than the selling rate for power from the Upper Basin project, then the Upper Basin project is better off financially to compensate monetarily than it would be to compensate with kilowatt-hours. On the other hand, it might be simpler and better to compensate with kilowatt- hours. This could be accomplished through the interconnection of the two power systems. It may even be possible that the Hoover power allot tees would be willing to have a system of debits and credits on energy. In other words, in those years in which there is a deficiency, the power allottees might be willing to have that de- ficiency replaced in a subsequent year. Particularly to be noted is the fact that Glen Canyon reservoir will be available to store water through two flood seasons prior to the availability of the generators at Glen Canyon. If any deficiency is created during this period, it can be compensated only by dollars or by debits and credits, unless some other source of energy is available to the United States. Final decisions on the means of making the allowance is not possible at this time and will need to be based upon negotiations and on results of studies now under way in regard to possible electrical intertie. , i ~ , ,; In the event of an allowance for computed deficiency, the Hoover Power Contractors will continue to pay under the Hoover Dam Power Contracts in the same manner as if the amount of energy in- volved in the deficiency had been generated at Hoover. Paragraph 6 is simply a tie between the general principles and the operating criteria. 'I I :1 , , 6 ~I :", ..