development. New agricultural development programs must be started and the existing ones enlarged. Many of these problems, however, are not of easy solution. Improvements in farm practices create unemployment and we cannot proceed on the programs at a faster pace than job opportunities develop in other sectors of the economy or are created by government projects. The lack of funds has been and still is a major handicap. The resources which must be assigned to these programs have to compete with other equally pressing needs of the government. We believe that the land authority has brought about considerable improvements in the economic and social conditions prevailing in the farms in Puerto Rico, and we look forward to the future with confidence. Thank you very much. Mr. RODRIGUEZ. Thank you, Mr. Chairman. Mr. O'BRIEN. Thank you, sir, for a very fine statement. You have devoted about half of your statement to the very dreary picture you had before 1940. I am sure that is a bleak picture, indeed. Naturally, the question occurs to the minds of the members of this committee in turning the wheel, Have you turned it too far the other direction? Right now, as you know, on the mainland there is a great deal of concern about expropriation in other places. I would like to ask just two questions. Have some of these small holdings found their way directly or indirectly back from the small holder to the big corporations again? Mr. RODRIGUEZ. No, sir; not to my knowledge, and I would doubt it very much. Mr. O'BRIEN. Then you say there are still some corporations in violation of the 500-acre law. Mr. RODRIGUEZ. Right. Mr. O'BRIEN. Are they not in a somewhat difficult position? Let us assume we have a corporation with several thousand acres. They have hanging over them, literally, the sword. They do not know when it is going to fall. We have heard from other witnesses the urgent need for stepping up the sugar production. Would there not be a tendency on the part of some of those large holders who have not yet been affected by the land law to pull in their horns, if I may put it that way, and not produce what could be produced because tomorrow the land may no longer be theirs? Mr. RODRIGUEZ. This is a debatable question. I will give you my honest answer. If the expropriation that took place in Puerto Rico in the decade between 1940 and 1950 had taken place at other places that you expressed concern about, I think they would be gravely concerned, and rightfully so. As it happened in Puerto Rico, the story is totally different and I think you might want to know a little bit about that. Mr. O'BRIEN. I think so, because in this record if that question is not answered, some Members of Congress are going to be asking it, at least in their own minds. Mr. RODRIGUEZ. All right. The Puerto Rican government, in 1941 in approving the land law, was putting into effect a policy of the Congress of the United States with reference to land tenure in Puerto Rico and expressed as far back as 1900, and ratified again in 1937. We started proceedings against a number of corporations-I think there were about 17 of them, corporations and partnerships, that were ination of the 500-acre law. When the proceedings were recorded in court, negotiations were started out of court between the land authority and the holders of this land who knew they had to give up their land because of the decision of the Supreme Court of the United States in 1940 upholding the 500-acre limitation and the right of the Puerto Rican government to proceed. The negotiations started and actually of the total eight holdings that the land authority took over, not one of them went to court. We had an estimate made of the value of the lands, they had their own estimate, negotiations were entered into and in all of the cases, but two, we came to agreement and we paid them for cash. And in the other two cases, a third arbitrator was appointed by agreement between the two parties and his decision was finally accepted by both parties and not one of these corporations or partnerships went to the courts, because of dissatisfaction of the value that had been arrived at. Mr. O'BRIEN. Then it would be fair to say that this was done in an orderly manner with due regard to the rights of private property and not a la Castro. Mr. RODRIGUEZ. Absolutely, so, sir. And then, going back to your question, I would point out that some of the better agricultural practices in sugarcane fields in Puerto Rico today and some of the better yields are to be found in large corporations that know they are in violation of the 500-acre law. So, apparently, they are not so afraid as to retard their systems that they should institute. Mr. O'BRIEN. They are looking at the soil and not up at that sword then, I mentioned, Mr. RODRIGUEZ, Apparently. Mr. O'BRIEN. Thank you very much. Mr. Aspinall? Mr. ASPINALL, Mr. Chairman, I wish to thank Mr. Rodriguez for the contribution which he has made. We could question you for a long time if we had the opportunity and the time to do so, but we do not this morning. Will you be available if we need you in Washington to answer certain questions about the program? Mr. RODRIGUEZ. If given any reasonable amount of knowledge that they intend, 1 week, I shall be very glad to come up to Washington. Mr. ASPINALL. You shall have all the notice required. What kind of a company is it you are president of? Is that a private utility, a private company, private corporation or is that a public company? Mr. RODRIGUEZ. This is a private corporation and we own a small oil refinery near San Juan, We process about 18,000 barrels of Venezuelan crude oil, supply a large part of the requirements for fuel of the water resources authority, and then supply some light products to the home markets and some to the States. Mr. ASPINALL. As a business entrepreneur do you see anything questionable about the practice that you followed in your land authority organization? Mr. RODRIGUEZ. Not at all, sir. Mr. ASPINALL. Thank you very much. Mr. O'BRIEN. Mr. Wharton? Mr. WHARTON, No questions. Mr. O'BRIEN. Mr. Ullman? Mr. ULLMAN. I have a lot of questions, but with the understanding we will proceed into this matter further in Washington, I will not ask them here. Mr. O'BRIEN. Mr. Westland? Mr. O'BRIEN. Thank you very much indeed, sir. [Applause.] Mr. O'BRIEN. Our final witness this morning will be Mr. Sol Descartes, administrator, Water Resources Authority, Commonwealth of Puerto Rico. I would like to apologize to the gentleman for shifting his time around. You may proceed, sir. STATEMENT OF S. L. DESCARTES, EXECUTIVE DIRECTOR, PUERTO RICAN WATER RESOURCES AUTHORITY, PUERTO RICO Mr. DESCARTES. Honorable Chairman, honorable members of the subcommittee, with your permission, I would like to file a statement and a series of accompanying tables and a map of the electric system in Puerto Rico. Mr. O'BRIEN. Without objection, they will be made a part of the record later. Mr. DESCARTES. I am S. L. Descartes, executive director of the Puerto Rico Water Resources Authority. My profession is economist and I have worked in the teaching of economics and research in agricultural economics at the University of Puerto Rico. I have been a member of the planning board, treasurer and secretary of the treasury of the Commonwealth of Puerto Rico from 1949 to 1955 and since May 1955, executive director of the Puerto Rico Water Resources Authority. I have considered desirable, as a background, to explain hydroelectric power, irrigation, and reclamation developments in southwestern Puerto Rico. I will begin by giving a brief description of the Puerto Rico Water Resources Authority and electric power service in Puerto Rico. The Puerto Rico Water Resources Authority is a public corporation created by an act of May 2, 1941, of the Legislature of Puerto Rico, later reenacted and amended. The Governor of Puerto Rico, the secretary of public works and the secretary of agriculture, acting as a board constitute the governing board of the authority. As stated in the law, the authority was created for the purpose of conserving, developing, and utilizing, and aiding in the conservation, development, and utilization of water and energy resources of Puerto Rico, for the purpose of making available to the inhabitants of the island, in the widest economic manner, the benefits thereof, and by this means to promote the general welfare and increase commerce and prosperity. At the present time, the authority is essentially the only producer and distributor of electric power in the island. There is a small municipal electric system in Cayey mostly retailing wholesale power generated by the authority. The outlying island of Vieques is served by the Puerto Rico Aqueduct and Sewer Authority and the small island of Culebra through a municipally owned diesel plant. The authority's operations date back to 1908, when the legislature authorized, through a service created in the department of public works, the construction and operation of the south coast irrigation district and the development of related hydroelectric power. The south coast irrigation service, which irrigates 30,400 acres, was placed in operation in 1915. Hydroelectric power operations commenced that same year with the completion of the 560 kilowatt Carite hydroelectric plant. At that time, the irrigation service offered to sell excess power to existing private electric companies. The companies rejected the offer as they did not consider it attractive from an economic standpoint. There was a widespread demand for low cost electric service in other areas and responsive to public clamor the government created the utilization of the water resources in 1925, as an agency of the department of public works, to undertake the development of potential water resources for generation and to distribute low cost electric power. The law imposed a tax of one-tenth of 1 percent on the assessable value of all taxable property in Puerto Rico to provide funds to finance the construction of hydroelectric power projects. During the depression ridden years of the thirties the utilization of the water resources received Federal funds under various work relief and Puerto Rico Reconstruction Administration's programs amounting over the years to around $8,600,000. With the combined financial assistance of the government of Puerto Rico and of the Federal Government the utilization of the water resources had by 1941 developed a generating capacity of roughly 27,000 kilowatts. The public recognition and approval of the utilization of the water resources program brought about the creation in 1941 of the Puerto Rico Water Resources Authority to act as an autonomous public corporation self-sustaining and self-financing. Its aims were to take over the operation of the system developed by its predecessor and to continue the development of low cost power under a more effective organization. In 1942, as a measure to serve scarce oil imports due to the German submarine blocade, the Federal Government took over the electric system owned by a Canadian company, serving the northeastern section of Puerto Rico, and of a locally owned company in the western part of the island and placed their operation in the hands of the newly created authority. In 1944, these two electric systems were purchased after friendly negotiations. The integration of these systems with that of the authority increased the dependable generating capacity to 62,000 kilowatts, and the number of customers to 111,000. Between 1944 and 1959, the general economic development of Puerto Rico has required an accelerated expansion of the electric power system. At present, the water resources authority operates an electric system with about 400,000 kilowatts of dependable capacity, 393,000 customers, and electric power generation of an annual rate of 2 billion kilowatt-hours, and total assets of over $310 million. About 71,000 of our customers are small rural consumers served through a Commonwealth government aided rural electrification program, of these 18,000 financed by authority funds or by appropriations of the government of Puerto Rico, and about 53,000 financed through loans obtained from the Rural Electrification Administration, amounting now to $14,400,000. In addition, Rural Electrification generation and transmission loans outstanding amount to $10,900,000. The authority provides electric power at cost which includes the required investments in system expansion on a sound financial basis. On June 30, 1959, the outstanding revenue bond indebtedness, guaranteed exclusively by the authority's revenues, amounted to $183,738,000. Factors such as low average consumption per residential customer; the high proportion of small rural customers scattered over a wide and rugged territory; high costs of imported fuel oil; relatively small and high cost hydroelectric power; and the need for higher generating reserves due to our insular position, raise the cost of power in Puerto Rico. Allowing for this situation our electric power costs compare favorably with those of electric utilities in the United States. For example, the average cost per kilowatt-hour for residential service in fiscal year 1959 was 3.01 cents in Puerto Rico compared to 2.7 cents in the United States. The cost of residential service in Puerto Rico is generally lower than in the New England States, most of the Middle Atlantic States and Florida. An industrial cost slightly less than 1 cent per kilowatt-hour to heavy industrial users at present oil prices, is the lowest cost power served in the island, and also compares favorably with the above mentioned areas in the continent. This relatively low cost electric power contributes to a higher per capita consumption of electricity than in all countries of Latin America with the exception of Chile, but still considerably lower than the United States. May I add that we have now surpassed Chile. The authority has planned and constructed plants capable to meet the electric power demand over the years notwithstanding a very high rate of growth, average 17 percent in the last 4 fiscal years. Present planning and construction underway provide power capacity for expected growth. The availability of power at relatively low cost has been a significant factor in the general program of social and economic development in Puerto Rico. Our legal responsibility to provide energy resources at the lowest possible cost, combined with the desire to cooperate with the Federal Government in its program of peaceful uses of atomic energy, has culminated in presently advanced negotiations with the Atomic Energy Commission for the establishment of a 16,000 kilowatt integral superheat boiling water reactor. The same as all other public power systems in the United States, the water resources authority has been over most years of its history principally a hydroelectric power enterprise. Late in the forties, the further development of hydroelectric power became uneconomical and steam-electric generation grew to the point that last year it was over 86 percent of total power output. Increased labor costs, coupled to the fact that the best hydroelectric projects sites have already been developed, made the cost of new hydroelectric projects inadvisable. This united to the increased power demand made it imperative to install larger-sized units which lowered both the capital and the operating costs of steam-electric stations. |