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Does this honorable committee believe that creating an unregulated bank for competition in an industry that helps pay their wages through taxation is what helping your country means? I am sure that each of you believes that, to be a strong nation, our industries should be treated fairly and justly. This belief will not be attained if any bill is established as the law of the land where I have to pay a double cost per kilowatt-hour. My fellow employees, friends and relatives are very disturbed by the ever-increasing tax deductions on the workingman's check to support all the giveaway programs emanating assistance from Federal and State capitals. There is no need for G. & T. or powerplant construction by public systems. An industrious Iowa is not suffering because of lack of generation capacity. Just give our industry under the free enterprise system a fair, competitive chance, and I and many thousands of your constituents will not become wards of the Government. Why destroy your jobs and mine by destroying incentive?

With the Government looking for ways to increase its tax revenue to fight the Vietnam war and to pursue its social welfare policies, it could well look to the tax potential of Government-subsidized electric systems. It is estimated that between 1954 and 1965 the Government could have realized at least $3.6 billion if the electricity sold by governmental agencies had been sold by taxpaying, investor-owned utilities.

In addition to the tax revenue which the Government has lost, we are discriminating against a large majority of our electric users by requiring them to subsidize through taxes the users of power from governmental agencies. This economic discrimination is as great as any that exists today. This REA bank will perpetrate this tax squeeze and unjust discrimination.

Thank you.

Mr. Chairman, I would like to ask your permission to explain a little bit on why we are exceptionally disturbed in the State of Iowa. We have heard testimony by the Secretary of Agriculture and all the people from the REA, and we feel sincerely that we have justification for our disturbance in this electrical industry.

I have with me at the present time a map furnished by the Commerce Commission of the State of Iowa, with six investor utility companies colored in blocks to show you the saturation of the private investor companies in the State of Iowa, with generation produced by municipals, REA, and the Bureau of Reclamation. And we sincerely feel that expanding this into a Federal bank is unjustified.

Mr. Chairman, we have 85 municipals in the State of Iowa generating a total of 317,585 kilowatts.

We also have REA systems generating 347,585 kilowatts, and a private utility industry generating 1,856,535. And superimposed onto our great State is the Bureau of Reclamation. The expansion of the Bureau of Reclamation and I was on the first experiment performed at Linton, Iowa, when the 115,000-kilovolt line was brought in by the Bureau of Reclamation. Our company was gracious enough with the Government to perform tests so that the line was correct. We find now that there are 330-kilovolt lines coming into the Bureau of Reclamation. And if this committee would care to look at this map you will

see just about every county in the State is covered by a private utility. There are duplications by public systems all over the State. And the franchise elections that we are having in the State of Iowa are coming to be hotbeds of feudalism, because there is a movement by the Federal Bureau of Reclamation to do things in our State that we feel the Government does not and would not allow.

We had an election in Alton, Iowa. And this added another business system, which makes it 86.

Now, the Secretary of Agriculture testified that to have efficiency you have to have big units. And I agree with him about a hundred percent. Technological advances in big generating uses are necessary to bring the rates down so that the people can have economical electricity.

The movement that is on in Iowa is in reverse. They are talking people into going to municipals. Municipals are inefficient, they are a waste of the taxpayers' money.

But in the ultimate end—and I am talking about taxpayers in the towns, not the State of Iowa as a whole, or the utility private industry itself-sooner or later these inefficient units are going to be replaced by big equipment.

Who is going to replace these units?

I will tell you who is going to replace them. The formation of an agency joined into a power district system. And we have on record that people have been selected to head up these committees so that these agencies can be formed.

There is an agency in the northwest section of my State that has joined together in a municipal system to eventually go into a large cooperative. We know where their power is going to eventually come from, the Bureau of Reclamation. These people in the small towns aren't going to be able to invest all of this money as money that is on the free market.

I have attended meetings in some of these franchise election towns. I have heard testimony given by the advocates of municipal systems, et cetera. And I shudder to think that my private State of Iowa will someday become a public power district because of all of this free money.

You see, gentlemen, you can't compete--ladies and gentlemen, pardon me you can't compete with 2-percent money and tax exemptions all over the place. I think it is becoming more and more difficult to operate and have a high standard of living because of heavy taxation on property, personal property, income tax, social security and everything else that is coming under-and I am not the only one that feels that way. Sooner or later in the State of Iowa we will go down under, and so will our companies.

And in conclusion I can say this, that my dad always taught me to help myself first and stand on my two flat feet. And I say this, if the REA's and the REC's—and they have done a tremendous job if all of this money that I have heard proponents talk about of the REA's and REC's in my State, if there is so much money in it, why should the taxpayer pour billions and billions of dollars year after year into building systems? And we are not against the REC's or the REA's, we still think they are a good organization, they are doing a tremendous job. We sincerely believe this, too, that a bank established by the Congress would be fine, but it should be set up under the same set of rules that our industry has to abide by. Why not keep it on the same level, get the money at the same prices that our companies have to pay, that I have to pay when I want to buy something. And when I go to buy my home or buy a new home, I just have to take it on a free market.

And I want to thank you very much, Mr. Chairman.
The CHAIRMAN. Thank you, too.

Mr. TEAGUE of California. I want to compliment Mr. Bernoski, Mr. Lantau, and Mr. Connley for their statements which have brought bebefore the committee a new aspect which, frankly, hadn't occurred to me. I think it is highly helpful to us.

I might also say this, that for some reason well known to themselves, most of the unions in my congressional district aren't very enthusiastic about their incumbent Congressman. If you were to care to advise your colleagues in IBEW in the Ventura and Santa Barbara area in California that I am with you 100 percent, I would be grateful.

Mr. CALLAN. Mr. Chairman?
The CHAIRMAN. Mr. Callan?

Mr. CALLAN. Nebraska has been brought up here several times. And I think most people know that this is the only State in the Union that is a hundred percent public power. I don't want to get into a discussion of pros and cons with these gentlemen. However, I would like to check a couple of these statements.

One is the rates between Omaha and Council Bluffs and some other Iowa points, and also the wages that are paid. And I would like to have an opportunity to check these rates and then put them in the record, Mr. Chairman.

The CHAIRMAN. Without objection, you may do so. Mr. Olson. Mr. Connley, you are complaining about the unorganized aspect of public power districts and municipals. Aren't you confusing the issue before us? Nothing precludes the organization of cooperatives. You are not directing what you say specifically to this bill, are you—is there anything that precludes the organization of and bargaining with the rural cooperatives?

Mr. CONNLEY. Congressman Olson, it has been our experience that when you go to organize a group of cooperatives there are several things that keep you from this. There are laws, I understand, and to keep you—you can go in and organize a group of people, but then when you have them organized, what you are going to do with them is another thing. Now, if these people want to recognize you, this is well and good, they will recognize you. But if they decide not to recognize you, then they refuse to recognize you.

Mr. Olson. Isn't this the same anyplace else? There is nothing different here; is there?

Mr. CONNLEY. Yes, sir. We can take our case before the NLRB and require that an election be held on a private utility company's property, and if the majority of the employees so desire, that property will be organized, and they have to bargain with us collectively.

Mr. Olson. Can't you do that with a cooperative?

Mr. CONNLEY. With the REA's and the municipals and the public power districts; no, sir. Now, in the State of Nebraska we have some organizations out there, but these people refuse, with the exception of the Omaha Public Power District, to bargain with our people.

Now, they will bargain with you individually, but collectively; no.

Mr. Olson. Let me say that I am not interested in going beyond the REA's. You say that you cannot--you do not have the same right and opportunity to organize the REA's as you do the private utilities?

Mr. CONNLEY. We have REC's in the State of Iowa that are organized. But the problem here is that this new system of power that is being set up in the State of Iowa comes from three parts. We have the Bureau of Reclamation, we have contracts with them.

Mr. Olson. But, sir, I respect fully say that I want to stay on the subject, and I don't want to get involved in the public power districts or the Bureau of Reclamation or any governmental entity, but I want to stay strictly on the REA's with which this legislation deals. Is there a difference in your opportunities to bargain with the REA's in exactly the same manner as you have with the public utilities?

Mr. CONNLEY. Yes, sir, I believe there is. I couldn't quote the law, I wouldn't read it to you, but

Mr. Olson. Would you furnish it for the committee?
Mr. CONNLEY. Yes, I will.
Mr. OLSON. Thank you.

The CHAIRMAN. There is no reason why they couldn't have an election in the REA plant. They might have some trouble in one of these 8,500 municipal plants, the city ordinance would prevent organized labor with its city employees. But aren't there some organized REA's in the country?

Mr. CONNLEY. Yes, we have some in Iowa.

The CHAIRMAN. Then what are you complaining about? You have a right to organize them if you can organize them.

Mr. Connley. What we are complaining about, sir, is that this new power system-we have no complaint, as we stated before about the REC's. We are not here complaining about the 2-percent money that the REC's contain. What we are saying, as this new system is set up which this bank would allow, this is what we are concerned about. Now, under this system that the bank would allow, as we see it, the areas where the municipals are can come in and join with the REC's and the Bureau and set up a public power district.

Now, we have a cooperative in the State of Iowa known as the Corn Belt. This is an affiliation of several cooperatives in the State. Now, just recently we had 14 municipals that afliliated wih Corn Belt. So now we have a situation where we have an affiliation of municipals and cooperatives in one group.

Now, it would be impossible to go in and organize these municipals. These in turn are getting power, bargaining with the Bureau. And this is the situation that is developing.

The CHAIRMAN. We appreciate your statement very much. And we are very glad to have you. But we must accommodate some other people. Thank you very much.

I recognize now a very distinguished Member of Congress and former distinguished member of this committee, Mr. Ben Reifel, of South Dakota.



Mr. REIFEL. Mr. Chairman and members of the committee, first I want to express my appreciation for letting us come ahead of schedule. We were scheduled to be with you tomorrow. But these gentlemen have come in from South Dakota and want to get back there as soon as they can. We certainly do appreciate your giving us this opportunity.

The CHAIRMAN. We will be very glad to hear you, sir.

Mr. REIFEL. It is a special pleasure for me to come before this distinguished committee, first for the reason that it was my privilege to serve on this committee during the 87th Congress, and, second, because I have had the honor to introduce to you two distinguished leaders of REA cooperatives in my State.

I do have two apprehensions, after listening to 2 days of testimony, with respect to the supplemental financing with regard to REA's.

One is a fear that after the bank is set up it is going to be a little more difficult for Members of the Congress to vote 2-percent funds. There will be a tendency to say that you have a bank to fund REA programs; and second, if the electric bank is set up and established, the possibility of administering it in such a manner as to make it difficult for those cooperatives in the State of South Dakota where we have a density of about one and a half per mile, and the lowinterest loans.

I will leave the discussion of that to the two witnesses that I will introduce.

These two gentlemen can speak much more knowledgeably than I as to the impact of this legislation in low-density areas such as in the Dakotas. They are not necessarily opposed to the idea of supplemental financing at higher interest rates for those co-ops who feel that they can live with this arrangement. Of more concern to them is the necessity that co-ops in our part of the country in particular, where they have an average of only one and a half consumers per mile of line, where they have an average cooperative income of less than $300 per year per mile of line, where we are losing an average of 1,100 farm families every year, should have a dependable source of 1-percent money with the loan criteria spelled out.

They do not feel, nor do I, that we should lodge this amount of power in the director of the electric bank.

Now, these two gentlemen are Mr. Arthur Jones, president of the Basin Electric Cooperative, Bismarck, N. Dak., who is a resident of Briton, S. Dak., and he will also speak for Mr. Virgil Hanlon, who is not able to be here, and he will represent him as far as the East River Electric Co-op is concerned.

The one who will speak first will be Mr. Virgil Herriott, manager of the Sioux Valley Empire Electric Association of Colman, S. Dak., a distribution cooperative.

Also present are Mr. Dale Gibbs, manager of the South Dakota Rural Electric Association, and three members of the board of the Sioux Valley Empire Electric Association.

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