and they will be enabled to do this only because we will have built up their demand for them and kept it supplied until that time.

This very great discrepancy in the situations of your principal customers for the falling water from Boulder Dam, of course requires that an allowance must be made for the difference in the capacity to absorb the new supply of power from that source.

As has been repeatedly pointed out the Boulder Dam project is chiefly a water project and our interest in that project is simply in securing for the community in which we serve, the assurance as to an additional supply of water which the community believes it will require. So far as the power is concerned, it is more costly now under the contract price proposed than the power which we are securing from the alternate source of steam plants. It holds out no promise of being cheaper in the future because the price must be kept commensurate with the competitive prices in the distributing territory. We are impelled therefore, to take Boulder Dam power only as an investment in good will in the community in which we serve; that is, to help out in the development of that community and to show our willingness to carry a part of the burden in that development.

It has been, and is, our position that all of the parties participating in the Boulder project should cooperate in the same spirit in which we are cooperating, and to the extent that a sacrifice is necessary, that that sacrifice should be equally made by all. We are asked, however, to make a sacrifice by accepting the same load-building period as the City of Los Angeles and other municipalities, regardless of the above discrepancies in the two situations. After the company has recovered from its idle equipment, it will still not be in as favorable a position to take on the additional load from Boulder Dam as will these municipalities for the reason that even at that time, it will have no vacuum in which to put the power supply from Boulder Dam, but must take care of it entirely out of growth of load in a restricted market. Hence, for us to accept, even after a period has been allowed to us for the reemployment of our idle equipment, the same terms as to load building, is to make a sacrifice which we can not justify except as an investment in good will and in the interests of harmony.

You have represented to us through Mr. Ely that the conclusion of these contracts is very urgent, and that they can only be concluded upon a basis of giving us the same load-building period as others, regardless of the discrepancies in the two situations. Because of our very great desire to be of assistance in the situation, we have come to the conclusion that we will accept this unfair treatment on the condition that we are given a sufficient period in which to recover from the shock of the severance of our former customers from us. We estimate this period at a minimum of three years, but are willing to provide that if we do recover within a less period, we shall begin to take Boulder Dam power as soon as the recovery has been effected. We make this concession only upon the condition that it be distinctly understood that it is an investment in good will and that you shall frankly explain that the company has acceded on that basis and on that basis alone. In short, that you shall explain that we are contracting on a less favorable basis than are the municipalities because of this difference in our situations. Since it is an investment in good will, we think we are entitled to have the public know that we have made a distinct sacrifice in order to join in this contract.

With the foregoing facts in mind, and upon the foregoing condition, we will agree to accept the same load-building period as the other contractees, subject to the condition that we shall not be required to take any power from Boulder Dam until three years have elapsed after the City of Los Angeles has first begun to take that power.

Yours very truly,

(Sgd.) JOHN B. MILLER,

Chairman.

150912-33- -35

V. NEGOTIATIONS CONCERNING THE

WATER CONTRACTS

37. Memorandum of the Commissioner of Reclamation on prices to be charged for water, January 10, 1930.

38. Preliminary agreement of February 21, 1930, among California claimants.

39. Letter of the Secretary, November 5, 1930, requesting cooperation of the State in effecting an allocation.

40. Seven party agreement for water allocation in California, August 18, 1931, approved by the State.

41. Decision of the Secretary on objections to the All-American

canal contract, November 4, 1931.

539