It has been brought to our attention that investor-owned power companies oppose the supplemental financing provisions for rural electric cooperatives. It is stated that they fear that the electric cooperatives will achieve a permanent status by making such a Bank available.

This is exactly what should happen. There is no logic in wanting to force the electric cooperatives out of the electric business. Certainly in Virginia there is no cause for such concern. Territories have been certificated to all power suppliers, including rural electric cooperatives. One power supplier cannot compete with another for new customers. We hold, therefore, that the electric cooperatives should be accorded every opportunity to strengthen themselves in keeping with sound business principles.

While the President of the Virginia Electric and Power Company has in recent years suggested to the electric cooperatives that they consider "unification" with his company, none of our cooperatives is of a mind to unify with the investor-owned power companies. Our cooperatives prefer to increase their capability of rendering adequate and dependable service at as low a cost as possible within the territory assigned them.

While we in Virginia would welcome the support of the investor-owned power companies in the establishment of an Electric Bank, we do not consider it any of their concern, as long as we are not competing unfairly or conducting our business in an improper manner.

All of us who believe in our free enterprise system must endorse the two major concepts underlying this Electric Bank proposal. The first concept is the opportunity for certain cooperatives to pay a higher rate of interest. The second is the eventual freedom of many of the electric cooperatives from the need for Federal loans.

In view of the reasons here stated, we trust that this Committee will in its wisdom, report to the House of Representatives H.R. 14000 with such refinements as you think necessary to strengthen the ability of the electric cooperatives to fulfill their mission of rendering adequate and dependable electric service to their more than 5 million consumer-members at as low a cost as possible.

(The following statements were also submitted to the committee:) STATEMENT BY HON. WILLIAM PROXMIRE, A U.S. SENATOR FROM THE STATE OF WISCONSIN

Mr. Chairman and members of the House Committee on Agriculture, I urge you to favorably consider a sound program of supplemental financing for our Nation's rural electric and rural telephone systems. With the help of Federal loans, they have been doing an outstanding job of providing the farmers and others who live in rural America with modern, low-cost electric and telephone service.

I am very familiar with the benefits of the rural electrification program, for my home state of Wisconsin has played a leading role in its development. Even before the Rural Electrification Administration was established in 1935, Governor Philip La Follette had attacked the problem of electrifying all of Wisconsin with every available resource the state could muster.

However, before the terrific obstacles to bringing central station electricity to our farms could be overcome, it took the capital resources of the Federal government, made available through the REA program, and the leadership resources of our rural people and those of us who are concerned with their wellbeing, to really spread the benefits of universal electric service throughout the rural areas.

The first REA-financed lines in Wisconsin were energized on May 8, 1937, by the Richland Cooperative Electric Association of Richland Center, and the Columbus Rural Electric Co-op of Columbus. They were rapidly followed by 28 more rural electric cooperatives, including the largest REA-financed generation and transmission co-op, Dairyland Power of La Crosse, as our farmers realized that their long-time dream of obtaining central station electric service could indeed come true.

During World War II, virtually all construction of rural electric lines was halted by a shortage of materials. By 1945, a tremendous backlog of demand for rural electric service had developed. But it could not be filled because there was a bottleneck of aluminum conductor. Not only in Wisconsin, but through

out the entire country, rural electric systems were stymied in their efforts to reach thousands of waiting, would-be consumers because the rural electrics couldn't get conductor.

Mr. Chairman, our statewide association of rural electric co-ops, Wisconsin Electric Cooperative, was approached by REA and officials of the National Rural Electric Co-op Association to break the bottleneck which was stalling all progress in rural electrification. I am proud to say Wisconsin broke that bottleneck once and for all time. Rural electric construction was able to move forward and make the record of which we are all so proud!

Today-right now-another bottleneck faces the more than 1000 rural electric systems now 100 percent dependent on REA for capital funds. Testimony in this session of the Congress before the Appropriations Committees of both Houses indicates that 612 million dollars is necessary to meet the rural electrics' capital requirements for fiscal 1967. Every year from now on, the capital needs will be increasing as our rural areas grow with the Nation in economic development and agricultural efficiency.

Because of the extraordinary demands on the Federal budget for 1967, the amount requested by the Administration for REA electric loans was only about one-third of the actual need. The House has raised that figure to 365 million dollars, but that is still only slightly more than one-half of the capital which the rural electrics will require in the coming fiscal year.

This situation has existed for several years now, and the backlog of unfilled applications at REA is growing. These fiscal facts point up the vital need for supplemental sources of capital. It is becoming increasingly apparent that 100 percent Federal financing is becoming more and more difficult to obtain (from resources of the Federal government which are not committed elsewhere). Since the Government apparently cannot continue to meet all of the growing capital requirements of the rural electric systems, which are serving some 22 million of our population scattered over 75 to 80 percent of the land area of the continental United States, I feel that the Congress must enact legislation which will enable these systems to obtain supplemental capital from other

sources.

Mr. Chairman, the bills before this Committee are designed to accomplish this purpose. In my opinion, they embody a sound approach not only to providing a source of supplemental capital for the rural electric systems, but also to enabling them to move toward financial independence from the Federal government.

The concept of banks for rural electric cooperatives and for rural telephone systems is founded on the long experience of the Farm Credit Administration in tapping the private money markets for capital loan funds. Behind these bills lies two years of expert study of ways and means of meeting the growth capital needs of the rural electric systems without destroying the basic elements of the existing rural electrification program and its outstanding record of service to rural America.

In Wisconsin, as in many of the other states, we still have a number of thinly-populated rural areas whose rural electric co-ops require low-interest Federal loans. For this reason, I support the continuance of the present 2 percent interest rate loan program to enable these REA borrowers to fulfill their responsibilities of providing full area coverage service to all rural consumers wanting electricity at rates they can afford to pay.

Mr. Chairman, I also support the proposed new approach to supplement the present program with higher-interest loans which will furnish a bridge to what will eventually be a bank owned and operated by its rural electric borrowers without any financial assistance from the Federal government. I feel that this proposal, made by the borrowers and beneficiaries of the REA program in order to become self-sufficient-while at the same time discharging their responsibilities to rural consumers who cannot get electric service in any other way-is a sound, businesslike way of breaking the present capital bottleneck.

REA has loaned a total of nearly one quarter of a billion dollars to finance rural electrification in Wisconsin. This money has been used by our 30 rural electric cooperatives to build 33,000 miles of line to furnish electricity to over 105,000 rural consumers. When you consider that these rural electrics serve an average of 3.2 consumers and realize only 538 dollars in annual revenue per mile of line-as compared with 23.1 consumers and 4,828 dollars in revenue per mile for the Class A and B commercial utilities in Wisconsin-it is obvious why the rural electric systems cannot move directly from the present REA 2 percent

interest loans to paying the full cost of financing in the private money market. The intermediate bank loan program provided in the bills you are considering will enable the rural electrics to bridge the gap between 2 percent and full costof-money financing without sacrificing the type and quality of service they are now furnishing to Wisconsin's farmers.

Mr. Chairman and members of this Committee, I am sure you are all well aware of the great role that dairying and cheesemaking play in the agricultural economy of Wisconsin. In America's Dairyland as well as in the other dairying areas of the United States, our present high-quality Grade A milk could not be produced without adequate electric power to provide the "muscle" for efficient, sanitary handling of this important and highly-perishable commodity. Wisconsin farmers could not stay in the darying business at all if it weren't for the universal availablity of an adequate and low-cost supply of electricity. Not too long ago, electrically-powered bulk milk cooling tanks dramatically improved the farm-to-market handling of milk, which previously went to market in cans and was handled over and over again before reaching the pasteurizing machines. And bulk cooling is only the beginning.

At a recent dairy school, dairy experts saw a wall-mounted "electrobrain" automatic washing device for rinsing, washing and sanitizing pipelines, thus bringing a new degree of push-button sanitation to the dairy farm. High standards of lighting are becoming commonplace in the dairy barns of our state. Larger vacuum pumps and motors for 2-inch vacuum lines used in mechanical milking operations are being installed. Under-the-cow illumination for lighting the udders; liquid manure handling; refinements in push-botton feed handling; electric fly killing; and electrically-heated milking parlors are just a few examples of why the rural electric load grows and grows, doubling every eight to ten years.

Some critics claim that the rural electrification program has already accomplished its purpose, but not one single dairy farmer in Wisconsin is satisfied that he has the last word in modern dairying operations. To stay competitive, to meet the high standards of quality milk production, he must adopt every new advance the dairy business finds. And that generally involves the use of more and more electric power.

Mr. Chairman, as our farms increase in size, they must have larger supplies of electric energy. In the early days of rural electrification, much of the electricity was used in the farm home to furnish light and power to operate home appliances. Today, the big demand for electricity is coming from larger and more varied farm uses. This trend is certain to accelerate as the years go by. The capital needed by our rural electric systems in order to keep pace with this growing electrical load is tremendous. The present credit bottleneck must be broken.

Wisconsin joins its neighboring states and those throughout the land in asking you to approve this constructive legislation, which will assure the rural electrics access to adequate supplemental capital to keep the power flowing to our farms and other rural establishments. It can well be the most outstanding law in its economic and social implications enacted during this session of Congress.

STATEMENT OF HON. J. W. TRIMBLE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ARKANSAS

Mr. Chairman and members of the committee, I have been studying the arguments on both sides of the issue involved in the consideration of H.R. 14000.

The rural electrification program is one of the best programs we have in our country today. It is one designed to help our people help themselves in getting the electricity which they need in rural areas. There are nearly a thousand consumer-owned rural electric systems in the country today, serving 20 million people in the rural areas of 46 States. The use of electricity in rural areas is doubling every 10 years.

In order to keep up with the steady growth of the rural areas and to make the needed electricity available, additional financing is needed in addition to the REA loans under the program in effect for the past several years. Under H.R. 14000, a Federal Bank for Rural Electric Systems is proposed, one similar to the Farm Credit System.

The rural electric cooperative organizations have been doing wonderful work in bringing electric service to our rural areas. I do not want to do anything to disrupt the fine public relations of these great organizations. In the light of the

study which I have made of the problem, I believe this is a good piece of legislation, and I support its passage.

STATEMENT OF SANTIAGO POLANCO-ABREU, RESIDENT COMMISSIONER OF

PUERTO RICO

Mr. Chairman and Members of the Committee, I am pleased to have been offered an opportunity to submit testimony on H.R. 14000 and H.R. 14837, the Rural Electrification Amendments of 1966.

RURAL ELECTRIFICATION

At the outset, I would like to show what the Federal rural electrification program has meant to the Commonwealth of Puerto Rico. In 1941, the Government of Puerto Rico created, as part of its "Operation Bootstrap" economic development program, the Puerto Rico Water Resources Authority. This agency's chief function was the construction and operation of the Island's electric power system. It is discharging its duty well. Power lines now stretch throughout the Island, from the modern buildings of San Juan to the smallest homes in the remotest mountains, and the output of electrical energy on the Island has increased tremendously. This fine progress might not have been possible without the Federal assistance provided under the Rural Electrification Act. The Water Resources Authority in Puerto Rico has thus far borrowed from the R.E.A., $74,040,000 and, at this date, has had a loan approved for an additional $2,000,000. These figures demonstrate how integral the Federal program has been in bringing electrical power to rural dwellers in Puerto Rico. For the people of Puerto Rico, whose homes and shops are now lighted by the electrical energy thus provided, I extend warm thanks to the Committee for its instrumental role in developing and improving the rural electrification program throughout the years.

H.R. 14,000 and H.R. 14837 represent, to me, another progressive step by the Committee to insure the rapid electrification of rural areas by providing a ready source of needed Federal funds. Accordingly, the aims of these bills have my wholehearted support.

I would, however, like to point out a serious problem for Puerto Rico in H.R. 14837. To explain this problem, I take the liberty of quoting from a letter which I received from the Executive Director of the Puerto Rico Water Resources Authority:

"Section 410(a) of H.R. 14837 authorizes the Governor of the electric bank to make loans for the purpose of constructing, improving, and expanding electric generating plants and electric transmission and distribution lines or systems. The same section further on states as requisites to the obtaining of such loans the fact that these facilities be used in reciprocal power or energy arrangements between the borrower and one or more other electric suppliers. ***' (line 21, page 17). These reciprocal power or energy arrangements between electrical systems have proven very useful in the United States, where they are commonly used. Although such limitative requirement will have no serious effect on the operations of R.E.A. borrowers located on Continental United States, it will, on the other hand, exclude P.R.W.R.A., as a potential borrower to finance the construction, improvement, expansion, acquisition, and operation of electric generating plants and electric transmission and distribution lines or systems for the only reason that we are the only system serving the Island.

"I think the limitative effect of this section could be neutralized by adding the words 'where possible' after the word 'utilized' in line 20, page 17, of H.R. 14837, so that it will read: “* * *, these facilities shall be utilized, where possible, in reciprocal power or energy arrangements between the borrower and one or more other electric suppliers and shall ***'"

I am confident that the Committee does not desire to exclude the Puerto Rico Water Resources Authority from the programs contemplated by these bills simply because it is the only electrical system on the Island.

In addition, I would like to say that, although the Puerto Rican Water Resources Authority has been one of the largest customers of the R.E.A., under Section 404 (c) of H.R. 14000, Puerto Rico is not included in any of the five areas from which members of the Bank Board are to be elected. If the Committee accepts the designation scheme of H.R. 14000, I hope it will see fit to include Puerto Rico in Area 2.

RURAL TELEPHONE PROVISIONS

My comments with respect to the telephone provisions will be directed primarily to Section 610 of H.R. 14000 and H.R. 14837, which outlines the lending power of the proposed telephone bank.

Both bills limit the authority of the Governor of the telephone bank to make loans by restricting the class of borrowers to "corporations which have received a loan or loan commitment pursuant to" Section 201 of the 1949 Act. The effect of this language, with respect to Puerto Rico, will be a continuation of the exclusion of the Puerto Rico Communications Authority from the Federal rural telephone program.

In 1942, the Government of Puerto Rico established the Communications Authority to improve and expand the telephone and telegraph systems throughout the Island. In 1953 this Authority was authorized by the Legislature of Puerto Rico to commence a rural telephone program to bring public pay-station telephone sets to all sectors of the rural areas. Over the last 13 years, the Legislature has appropriated $1,595,000 for this program and the Authority has established 466 telephone pay stations in the rural areas.

Taking into consideration its strict, financial limitations, the Authority has done a commendable job. But, as is obvious from the figures cited above, much work remains to be done. When it is realized that approximately 85 percent of Puerto Rico's 3,500 square miles is rural, and approximately 58 percent of Puerto Rico's 2.7 million citizens are rural inhabitants, the inadequacy of the present 466 telephones becomes manifest.

Recognizing the need to accelerate this program, last year the Authority investigated the possibility of a loan from the Rural Electrification Administration. It was, however, informed that under provisions of Section 201 of the 1949 Act, the R.E.A. was precluded from loaning money to "public bodies." Although no such limitation applies to the electrification program, and although the statute is susceptible of a contrary interpretation, the R.E.A. believed that the legislative history of the 1949 Act clearly indicated a Congressional desire to exclude public bodies from telephone loans.

I have investigated the legislative history to determine the basis of this exclusion, which, at least in Puerto Rico, has the effect of entirely eliminating the Federal rural telephone program. It appears that the Senate of the 81st Congress amended the House-passed bill to delete a reference in the bill to "public bodies" in the list of those persons and agencies eligible to obtain loans. This action was agreed to by the House in conference and was explained on the Senate floor by Senators Hill and Holland. Those gentlemen stated that, with perhaps one exception, all telephone systems throughout the country were privately owned and, in the words of Senator Hill,

"We know that municipalities operate light and water service, but they have not gone into the telephone business, and I do not know why they should go into it, or why we should invite them to." (95 Cong. Rec. 13864)

I am sure that these gentlemen, at that time, did not realize that there was such a public body in the telephone business in existence in Puerto Rico. Nor do I think they would have disputed the fact that in an island as underdeveloped as Puerto Rico was in 1942, and as underdeveloped in most rural areas as Puerto Rico is in 1966, it is sometimes necessary to inject the authority, energy, and finances of the Government into what is normally the private sector of the economy.

I believe that it would be in accord with the purposes of the Federal rural telephone program to amend the 1949 Act and the bills before this Committee to authorize loans to the Communications Authority in Puerto Rico. The General Manager of this agency has written to me as follows:

"The basic policy contained in Public Law 423, 81st Congress, that adequate telephone service be made generally available in rural areas, is in perfect harmony with the basic policy of our rural telephone program. Our program is the only means by which telephone service can be provided to rural areas of Puerto Rico. It is reasonable to believe that this program could be accelerated considerably if R.E.A. loans can be used for its financing."

The Department of Commerce informs me that Puerto Rico is one of three areas in the United States where a public body runs a telephone system. One county in Nevada, and some municipalities in Alaska (which are excluded, anyhow, since they service non-rural areas), are the other two. Thus, Puerto Rico's