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STATEMENT OF HAROLD W. EATON BEFORE THE HOUSE AGRICULTURE COMMITTEE IN SUPPORT OF LEGISLATION TO PROVIDE SUPPLEMENTAL FINANCING FOR RURAL ELECTRIFICATION

We are required by the State Regulatory Commission of Indiana to serve all consumers that make application to us for service. To do this job, a large amount of capital will be needed each year for many years ahead. Under no circumstances could we expect to receive enough revenue from our members to accomplish this job. We also know that we cannot expect the Congress to continue to appropriate the increasing amounts of capital that will be necessary to do this job.

I believe all the electric cooperatives are looking forward to the time when they will have ample funds available from loan sources at a fair interest rate with a time-repayment period that will allow us to continue to serve all the territory and furnish a service that members are entitled to. Our only alternative with this problem is to establish a source of funds which will eventually be under our controls and from which we believe we can continue to borrow growth capital with which we can grow and expand in an orderly fashion.

Below is a table showing the number of new members that will be connected to the lines each year, the amount of funds that will be needed to connect the new members and the amount of funds that will be needed to increase capacity to take care of the new members along with the increased use by the present members.

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STATEMENT OF ERNEST C. WOOD, MANAGER, FARMERS' ELECTRIC COOPERATIVE Mr. Chairman, my name is Ernest C. Wood. I am Manager of Farmers' Electric Cooperative, Chillicothe, Missouri.

Farmers' is a distribution-type REA borrower, having 3,442 miles of electric distribution lines and providing electric service to 8,495 rural consumers in Central Northwest Missouri. The Cooperative has REA approved loans aggregating $8,872,651.19. First facilities were constructed in 1939.

The service area of the Cooperative is predominantly agricultural, widely diversified to dairying and crop and livestock production. There has been a continuing trend to fewer, but bigger operating farm units.

Correspondingly, electrical usage has increased tremendously, over the last ten years, from 2,266 KWH per connected consumer in 1955 to 6,398 KWH in 1965, an increase of nearly 200 percent over the 10-year period. It is expected that future usage will increase at a proportionately greater rate than in the past. A large percentage of rural power consumption is devoted directly to production of food and fiber.

Accelerating usage necessitates increasing capital requirement. Larger transformers, conductor, control and protective equipment and other items must be installed. Lines must be converted to three-phase and/or heavied-up. This total

problem, plus new service installations, poses a probable greater capital requirement than in the past.

Additionally, Farmers' Electric, being one of eight member-owners of NW Electric Power Cooperative-a generation and transmission cooperative at Cameron, Missouri, is directly concerned with the problem of power supply of the future and the continuing need for capital funds to build additional generating and transmission capacity.

The apparent future need for increasing capital funds dictates the necessity for the Supplemental Financing for rural electrics, substantially as incorporated in the Poage Bill (H.R. 14000), and in the reasonably comparable Administration Bill.

Already, the accelerating capital fund needs of the rural electrics are pyramiding well beyond the available level of loan fund authorizations approved by the Congress. Assuming a continued $365-million level of Congressional authorizations, it would appear that there will exist an accumulated back-log of loan fund requests approximating $350-million as of June 30, 1967.

It is expected that the Federal bank for electric cooperatives, as proposed in H.R. 14000, will provide the capital requirements of the REC's above and beyond the present level of Congressional authorizations.

It is expected that, as the capacity of the proposed bank increases, and, as an increasing number of REC's can afford the higher-than-two-percent rate of interest to be charged by the bank, the level of annual Congressional authorizations can be diminished, and eventually discontinued.

Cooperatively, the proposed Federal bank will permit the REC's to share with the Congress in providing for their future capital needs, with eventual complete self-sufficiency.

Mr. Chairman, we urge favorable consideration, and approval by the Congress, of the proposed Supplemental Financing. Expediency is urgent, in that the increasing back-log of loan requests will present an ever-increasing situation for the Federal bank to cope with, at such time that it might become functional.

Additionally, delay to the REC's, in securing needed capital funds, may well interfere with, and handicap rural producers in the efficient production and processing of their agricultural products.

STATEMENT OF JAMES C. STEPHENSON, MANAGER, SCOTT, NEW MADRID, MISS., ELECTRIC COOPERATIVE

I am the manager of the R.E.A. Cooperative in Sikeston, Missouri, representing approximately 40,000 people in Scott, New Madrid, Mississippi, Stoddard and Cape Girardeau Counties in the southeast corner of Missouri.

We have 2,450 miles of distribution line with approximately 11,000 connected consumer members. This area is mostly cotton land, now being converted to other types of farming crops such as beans, corn and wheat.

The conversion was brought on by mechanization of the farms and loss in population, which has a definite effect on the solidarity of life expectancy of an electric cooperative in the area.

We are not in trouble financially, but we do not want to ever face that situation. We want to prepare now for the future.

Our four county area Cooperative has a central office and a branch office set up at additional expense to give better service to the members. With our arrangement of handling the collection, construction, maintenance and all other phases of the operation, we combat many problems and always solve them.

With our farm background Board of Directors dedicated to community service, the business is guided by reasonable, successful business trained farmers who own farms and understand what electricity means to their neighbors.

The Missouri Electric Cooperatives now find the new construction days are about over, except for new houses on existing farms scattered over the area where some type of service was there. The other new installations, new commercial accounts and such new lines to build as hooking up grain elevators, irrigation pumps, road widening projects, etc., keep construction crews busy all the time. We do not have large unserved areas left, which is true, but we do have any amount of small construction jobs calling for work that takes new capital and new materials and labor.

Building heavy lines, feeder lines to carry additional loads where weaker lines exist, requires thousands of dollars each year to keep up with our increase in consumption in growth areas.

Pole replacement, rotten poles now 29 years old, require attention and money spent to find them and change out the bad ones. Heaving up lines and transformers, running 220 volt lines in where we had 110 volt for air-conditioners and ranges and clothes dryers, runs into a large expenditure of capital investment

each year.

More and more customers now demand 3 phase service for 3 phase motors. This requires a lot of money each year to build to them and provide service expected in the trade.

Hot line work, work with equipment to prevent deenergizing the rural lines, is now expected and runs cost up by slowing down the production on this dangerous type of labor.

The proposed "Supplemental Type of Financing" is designed to provide us loan funds when needed for expansion and capital investment into the property that we can not raise out of our margins or revenue. A high capital investment ratio to low income is common in this business and is normally financed by Bonds that are never paid off. Our principal payments that we are willing to pay to a new Electric Bank will make it sound from the beginning by the nature of the repayment plan.

Our new Financing Plan will put us in a more honorable position, where in the past we have had charges against us saying we exist on subsidies from the U.S. Government.

This will be a joint effort of our cooperatives and Congress to get us out of the borrowed money at 2% in a reasonable length of time. The cooperatives will obtain an increasing proportion of their own financing on the open market at going rates of interest. Each cooperative will invest in the stock of the Bank and also allow members of their cooperatives to invest in Bank stock.

The proposed Electric Bank Bills are patterned after the Farm Credit System, which has been very successful in the past.

The annual, ever widening gap between the demands for G. and T. loan funds and loan funds for individual cooperative systems, applied against the appropriation made by Congress, cause a backlog of applications close to 100 million dollars per year. This year, we had applications for 612 million of loan funds to supply the needs of all the electric cooperatives and only had 365 million available. Something needs to be done about this backlog and another means of obtaining loans seems to be the answer.

In Missouri, the new Associated Electric Cooperatives Organization (A.E.C.), which could serve as an example for other states, has helped the big utilities tie in and intergrate high voltage lines to Government lines and cooperative lines in partnerships for the mutual benefit of all three facilities. No harm has been done to either party involved in this exchange of seasonal power flowing both ways from one system to another.

"Supplemental Financing" for Electric Cooperatives should be welcomed by private power companies. Additional sources of power in an ever expanding economy cannot, and have not been built fast enough in many areas of our country in the past.

There is room for all of us, both public and private stockholder owned electrical suppliers for an ever increasing use of electricity in the home and on the farm. We urge the adoption of H.R. 14000 in its entirety.

STATEMENT OF JACK H. NEEDY, MANAGER, CO-MO ELECTRIC COOPERATIVE, INC. We would like to take this opportunity of filing a statement on behalf of our Cooperative and authorized by our Board of Directors, namely:

James W. Morton, President, Route No. 3, Boonville, Missouri.
Robert M. Neely, Jr., Vice President, Route 2, Lincoln, Missouri.
Earl Steele, Secretary & Treasurer, Syracuse, Missouri.
Herman Wirths, Blackwater, Missouri.

William B. Vogel, California, Missouri.

C. C. Koerner, Routes No. 1, Barnett, Missouri.
Ewing King, Route No. 1, Boonville, Missouri.
Bruce Cook, Route 4, California, Missouri.
Nelson, H. Wilson, Gravois Mills, Missouri.

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These directors represent our approximate 11,000 consumers in the rural areas of Cooper, Moniteau, Morgan, Camden, Benton and Cole counties.

After the Pace Act was passed assuring the Cooperatives of 2% interest money for a period of 35 years providing the Cooperatives would agree to the area coverage program, we did not realize we would have future difficulties obtaining This Cooperative has, therefore, complied with the the necessary loan funds. area coverage program and as far as we know, no person or established resident who is or has desired electric service has been deprived of obtaining such service. Even though we are losing some of the small farms in our area, we are still connecting additional services to new homes outside of the urban areas and primarily because we are serving a large portion of the Lake of Ozarks, we are connecting from 300 to 500 additional consumers each year which, of course, requires quite a lot of additional capital. For the same reason and because of the rapidly increasing consumption of electricity by both the new and old consumers, we are continuously being required to heavy up our system in all areas by the rephasing of original lines, the installation of heavier poles and heavier conductors. There are also consistent requests for three phase service instead of single phase service which also requires additional conversion and construction. We have been making loan applications from the extent of some $700,000 or This is necessary to meet $800,000 to a million dollars about every two years.

the above requirements for additional capital needed.

Our system is already reaching an age where we are in the program of changing out bad poles and this will continue at a more rapid rate as time goes by.

Along with these additional capital requirements, because of the pressure of the enemies of the program, loan fund appropriations are being drastically cut each year in accordance with our requirements and less than one-half enough money is being appropriated to take care of our needs.

In order to alleviate this situation, a supplemental financing system has been worked out after careful and lengthy consideration and is being presented to the Congress as H.R. 14000, the Poage Bill. We personally feel this should not have been necessary but in view of existing situations and since evidently supplemental financing is the only answer, we are asking that you give your support and assistance in any way possible to the passage of this bill.

STATEMENT OF J. C. HUNDLEY, EXECUTIVE MANAGER, TENNESSEE RURAL ELECTRIC COOPERATIVE ASSOCIATION

Mr. Chairman and Members of the Committee:

My name is J. C. Hundley. I am Executive Manager of the Tennessee Rural These electric coElectric Cooperative Association, which is the service organization of 100 per cent of the rural electric systems operating in Tennessee. operatives serve electrically around 300,000 families and rural businesses, or about 14 million farm and rural people.

It is our understanding that you have three Bills before your Committee dealing with a supplemental self-financing plan for financing the loans to rural They are H.R. 14837 (the Administration proposal), electric cooperatives. H.R. 14000 (by Rep. W. R. Poage) and an identical bill, H.R. 14048 (by Rep. W. R. Mills).

All of these bills are a step in the right direction, with the ultimate future aim of arriving at the time when self-financing may become a reality for the rural electrics. For the present, however, some REA 2 percent loan money is absolutely essential for several of our Tennessee systems. For example, even with 2 percent REA loans one of our cooperatives is shown in the fiscal 1965 TVA report as having a net of $1,252. Another shows a red figure of $35,275. Several others show net margins, which would be reduced to red figures, if the interest rate were raised as some propose. Therefore, 2 percent REA loan money must be continued for those systems in need of it. These systems usually are those serving in the roughest imaginable country and where many poor people live. We do have a few systems who are in a financial position to pay the full interest cost of borrowed money by the government.

Our Statewide Association feels that each of these bills have many good points, but that H.R. 14000 (by Rep. W. R. Poage) is the best. We, therefore, request your full support of the provisions in H.R. 14000.

STATEMENT OF E. A. GEESEN, PRESIDENT, COLORADO RURAL ELECTRIC ASSOCIATION Mr. Chairman, members of the committee, the Colorado Rural Electric Association supports wholeheartedly H.R. 14000 to provide supplemental financing for Rural Electric Cooperatives. It is our feeling that such a financing plan is not only feasible, but also necessary if we are to continue to provide good electric service to Rural Americans.

We want to re-emphasize to the Committee the fact that Rural Electrification has provided to the United States one of the strongest farm economies to ever exist in the whole world. We see in other lands, people unable to grow enough food and fibre to support themselves. In our country it is just the reverse— American farmers are able to grow food and fibre in abundance. Much of the efficiency of the American farmer and rancher is due to the fact that he has good, cheap electric power to help him.

The symbol which we have adopted of “Willie Wiredhand” is indeed symbolic. Without good, cheap electricity, many, many more people would be needed to produce what we need in our nation in the way of food and fibre. The cost of what we produce would inevitably be higher than it is now and a greater share of the national effort and national wealth would have to be poured into agriculture. We in Colorado, as in many other states, have recently been hosts to several delegations of rural people from other parts of the world-principally South and Central America. These rural people from other lands have as one of their foremost goals the hope that they too can get electric power out to their farms. We have heard from group after group that they are aware of electricity's potential on the farm. Perhaps we at home tend to over look this, but those from foreign countries do not.

The goals of H.R. 14000 have been adequately outlined by the National Rural Electric Cooperative Association in testimony before you. We need not reiterate that testimony. However, we do want to respectfully point out that new wealth is created only from three sources: farming, mining, and fishing. Since Rural Electrification strongly supports farming nationally, and in our state mining also, we feel that the strength of Rural Electrification should be great enough to continue to support these wealth-inducing activities. Both farming and mining are basic to any economy. Our electric service to the 85,000 farm families in Colorado is vital to their survival and contribution of new wealth. Our electric service to the many mines in Colorado which are located in remote areas, is also a vital national service. Modern mining methods require the use of power, and we are most happy to serve this need in addition to the farm and ranch needs in Colorado.

It is our hope that this committee will see fit to support H.R. 14000 for the reasons given above, and for the reasons advanced by the National Rural Electric Cooperative Association.

STATEMENT OF A. C. HAUFFE, PRESIDENT, SOUTH DAKOTA RURAL ELECTRIC

ASSOCIATION

Mr. Chairman and gentlemen of the committee, my name is A. C. Hauffe. I am President of the South Dakota Rural Electric Association. The South Dakota Rural Electric Association serves the interests of 33 distribution cooperatives and three generation and transmission cooperatives who in turn serve approximately 77.000 rural families in South Dakota with central station electric service. I am filing this statement on their behalf.

We are primarily concerned about the availability of adequate 2% loan funds to meet the objectives of the rural electrification program by the cooperatives in South Dakota. We are concerned that the Supplemental Financing Plan under consideration by this committee does not become a substitute plan.

I would like to call the committee's attention to some points about the rural electrification progam in South Dakota which I believe will illustrate why we are concerned about the availability of 2% funds for future financial needs. Even though the Rural Electrification Administration was making loans to rural electric cooperatives over the nation as early as in 1936, the average age of the rural electric cooperative in South Dakota is 20 years. Most of them were started in the late forties and one as late as 1951, that one incidentally now being the second largest rural electric cooperative in our state. In other words, low-cost money,

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