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may be made for generation and transmission facilities to "protect the security and effectiveness of REA-financed systems", it is not difficult to predict what will be accomplished by the Administrator-Governor should any one of these bills be enacted into law.
I spoke a moment ago of the possible impact of this legislation on tax resources. In the area of The Southern Company alone, if only ten per cent of our markets and revenues were diverted to cooperatives, based on 1965 figures, the annual loss in income tax revenues to state and federal governments would be in the order of $13.5 million. If such an encroachment be projected on a national basis, the loss in tax revenues would be in the range of some $400 million each year. Moreover, because the rates of cooperatives are not generally regulated, there could be a shift of industrial development from areas served by investor-owned companies to those served by cooperatives, thus resulting in the building up of one area at the expense of another by use of power subsidies. The members of this Committee are aware that complaints of such industrial shifts have already been raised in the U.S.
While the idea of private financing for cooperatives has been discussed in our country in general terms for sometime, HR 14837 was not introduced in the Congress until May 3, 1966, and was not available for study by us until some days thereafter. On behalf of our 110,000 stockholders, 14,000 employees and our 1,750,000 customers, I am seriously concerned lest a matter of such vast importance and such far-reaching consequences be pressed to enactment before either the Congress or the public are fully apprised of its likely consequences. Mark you, these bills could result in a transfer of the electric utility industry from the private to the public sector of our economy-not immediately but over the years. I firmly believe that neither this Committee, nor the Congress nor the Administration desire such a result. Therefore, I urge that the most thorough and sifting examination be given these bills and that they not be approved by your Committee. Thank you for permitting me to express my views and concern.
Mr. BRANCH. Mr. Chairman, my name is Harllee Branch, Jr. I reside in Atlanta, Ga. I am president of the Southern Co. which, through its four operating subsidiaries; namely, the Alabama, Georgia, Gulf, and Mississippi Power Cos., supplies electric power to nearly 2 million farms, residential, commercial, and industrial customers in most of the State of Georgia, four-fifths of the State of Alabama, the southeastern quadrant of Mississippi, and the so-called panhandle section of northwest Florida.
I appear today to express by serious concern over the adverse impact which H.R. 14837 and similar bills being considered by this committee would have not only on the investors, employees, and customers of our system companies and of other investor-owned electric companies, but also the mischievous consequences which would flow to the entire national economy, of which our industry is a significant part. I should point out that we have no quarrel-no quarrel with true rural electrification and no quarrel with REA distribution cooperatives, so long as they fulfill the functions and adhere to the conditions. originally prescribed for them by the Congress.
As a personal footnote it may interest you to know that as a young lawyer in the thirties I assisted counsel for the Rural Electrification Administration in drafting the Georgia Rural Electrification Act, one of the first and, I believe, one of the most liberal State statutes designed to promote rural electrification ever enacted in our country. That statute is the basic act under which rural electric cooperatives were established and have prospered in my State.
My objection to H.R. 14837 and the other bills now pending before this committee can be stated quite simply as follows:
First, these bills will not bring electric power to a single customer not already being served or capable of being served, either by a tax
paying, investor-owned electric company or a cooperative or other publicly financed power organization.
Second, these bills will not remedy any power shortage in the United States, for there is no power shortage in this Nation. As has been pointed out, more than 98 percent of all U.S. farms are now electrified, and our Nation enjoys a substantial power surplus. The United States has always been the world's most abundantly electrified nation. I think that should be borne in mind, particularly in light of some questions which have been asked in the course of this hearing. We should not overlook the extent to which electricity has been made available to customers in every nook and cranny of the United States. It is not strange that rural areas were without service in the 1930's considering that the industry was practically brandnew then, centralstation power having become available only a few years ahead of the turn of the century. Some people try to make it appear that electric companies deliberately sought to frustrate the desire of farmers and rural residents for electricity in the 1920's and 1930's. That is not true. It was just a case of developing power markets, a natural and logical sequence in the light of economic realities. In the thirties, many men who had witnessed the first central-station electric power in the world were still in their prime. The industry was just beginning to achieve national maturity.
Third, these bills will not eliminate governmental subsidies and tax exemptions in favor of cooperatives or other so-called public power groups or reduce their dependence on tax financing, as has been claimed by some proponents. On the contrary, the bills will greatly expand and enlarge that dependence.
Fourth, these bills will not help to balance the Federal budget or help reduce deficit financing, but in a very real sense will increase that imbalance and add to those deficits.
Fifth, what these bills will do and I speak in complete sincerityis effectively eliminate congressional control over the Rural Electrification Administration and its lending policies and create a Federal bank of unprecedented scope and resources, not to finance rural electrification, but electric service to every type of electric consumer, industrial and commercial, as well as residential, in direct competition with the investor-owned, taxpaying, governmentally regulated electric companies. It will endanger billions of dollars of private savings invested in those companies and the livelihood and pension benefits of hundreds of thousands of Americans employed by them; and impair the fiscal position of towns, counties, and States, where taxes paid by these companies are a major source of public revenue.
As previously pointed out, the investor-owned electric industry represents a significant and a vital segment of the national economy. Our companies alone have invested nearly $2 billion in power facilities in the Southeast in the two decades since World War II. No other single organization, public or private, has poured as much capital into productive resources in our four State service area. Every dollar of this investment has been supplied by private citizens out of their individual earnings and savings.
Let there be no mistake about it, gentlemen, any legislation that endangers the viability and survival of this investor-owned industry will directly and adversely affect the millions of citizens who are in
vestors, employees, and customers of these companies. And some day, I hope before it is too late, those millions of citizens will want to know why such legislation was enacted.
Earlier witnesses have pointed out specific ways in which the proposed legislation poses a real threat to this industry, and the extent to which it will increase, rather than diminish the reliance on Government subsidies and Government financing. Actually, what is being sought here, regardless of the good intentions of the sponsors, is the perpetuation and enlargement of existing subsidies, with greater freedom from congressional restraints so that public power groups can expand their operations into every category of the electric power business in direct competition with the duplication of investor-owned services and facilities.
I do not believe that anyone in our industry would oppose real private financing for cooperatives and other public power groups, provided such financing was on the same basis and subject to the same tax, regulatory and other public burdens as are imposed upon our companies. This legislation does not do that. And in my opinion, any amendments truly aimed in that direction would be quickly condemned and unremittingly opposed by many who clamor for the passage of
The testimony thus far presented in these hearings underscores the accuracy of that statement.
Mind you, I am talking about amendments of the sort that would really take these organizations off the taxpayers' back and make those of their customers who are not truly rural and farm customers, in the sense intended by the Congress, bear the same tax burdens as the 80 percent of Americans served by investor-owned companies.
It is my conviction, and I would judge from some testimony presented here, that this conviction is even shared by some devoted cooperative members, that if this legislation should pass, launching public power groups into even greater subsidized competition with investor-owned companies and with virtual freedom from congressional controls, there will come a day when the great body of American voters will demand that these organizations be stripped of their unwarranted subsidies and preferences.
Unfortunately, such a demand may come too late, because these consequences will be gradual and therefore hardly visible on the surface. The demands may come too late to avoid the loss of savings invested in our companies, and even too late to prevent tragic consequences to the national economy. When it comes, however, as I think it surely will, it may result in removing the subsidies which the Congress originally intended to make available to real farm and rural consumers having no central-station electric service available to them. In my opinion some subsidy to that limited class of customers was probably essential and ought not to be endangered by a reckless extension of the subsidies to power consumers generally.
I spoke a moment ago of the possible impact of this legislation on tax resources in the area served by our companies. If only 10 percent of our market and revenues should be diverted to cooperatives, based on 1965 figures, the annual loss in income tax revenue alone, to State and Federal Governments, would be in the order of $13.5 million. That is
$13.5 million of tax loss in a single category of taxation each year. If such an encroachment should be projected on a national basis, the loss in tax revenues would be in excess of $400 million a year.
So, gentlemen, on behalf of our 110,000 stockholders residing in every State represented in the Congress and on behalf of our 14,000 employees, and our 1,750,000 customers, I express serious concern that legislation of such vast importance and such farreaching consequences should be pressed to enactment before either the Congress or the public are fully apprized of its likely consequences.
May I digress a moment, Mr. Chairman, to say how tremendously impressed I was this morning with the testimony of the gentleman who opposed this legislation in behalf of a labor organization. I do not know his name. You will recall his urging that somewhere, sometime, we stop to examine the direction in which this country is going, lest in unwarranted governmental generosity we ultimately destroy the very foundations of the country. I tell you from my long experience in undertaking to induce private investment in electric utility facilities that there is a serious concern already in the money market regarding the magnitude and direction of Government competition. I say to you, in all honesty and sincerity, that these bills, regardless of the intention of their sponsors could result, in a transfer of the electric utility industry from private to governmental sectors in this countrynot immediately, of course, but over the years. I do not believe that either this committee or the Congress or the administration desires any such result.
Therefore, I urge that the most thorough and searching examination be given these bills, and that they not be approved by your committee. I suggest that a vote for this legislation will seriously endanger the future of investor-owned electric companies, whereas a vote against this legislation will not hurt rural electric cooperatives in the fulfillment of any of their legitimate and useful functions.
Thank you, gentlemen, for permitting me to present this statement. The CHAIRMAN. Thank you very much.
Mr. CALLAN. How many REA cooperatives are there in your area competing with you?
Mr. BRANCH. Competing with us-I do not know what you mean by "competing"?
Mr. CALLAN. Are there cooperatives that are in competition with you in your area? Do you have area integrity in your area or not? Mr. BRANCH. Well, in my own State of Georgia, for example, we have sought from the beginning a program of cooperation with the rural electric cooperatives, and have contracts which provide, that a customer being served by a co-op or who is nearer to the facilities of a cooperative will not be served, sought, or solicited by our Georgia Power Co. Similarly, the cooperatives have agreed they will not seek to take a customer of ours under the same conditions. These restrictions are under attack certain authorities in the Federal Government today, seeking to eliminate them.
In most of our area, I am sure a accurate answer would be that there is no present competition between our companies and the distribution cooperatives as such. However, I must quickly add that in the State
of Alabama, millions of dollars in generating and transmission loans have been allocated to a super co-op, the Alabama Electric Cooperative, to build generating and transmission facilities, which in every instance, would be duplicative of the taxpaying facilities of our company in that State. A contest is still pending over that.
Similarly, in Mississippi, two G, and T, loans, have been granted to create a generating and transmission system duplicative of the facilities of our own company and another neighboring but nonassociated investor-owned company. The second loan was granted, even while the first was being contested before regulatory authorities and in the courts. The testimony in both Alabama and Mississippi cases shows that to build co-op facilities will not bring power to either the co-op or their rural consumers as cheaply as they are now buying power from our system companies.
Mr. CALLAN. How long will
Mr. BRANCH. If this legislation passes, the co-ops will undertake to sell power from these federally financed plants wherever there is an opportunity to sell it and to whatever kind of customer regardless of the ability of the sales or the size of the load. For in this legislation, they are seeking to establish their right to serve any and all types of customers and to solicit any and all kinds of loads.
Mr. CALLAN. You have integrity of territory down there, other than that?
Mr. BRANCH. With the single exception of Mississippi, there is in our four-State area, no such thing as a clear-cut territorial delineation between our companies and the co-ops.
Mr. CALLAN. Are there any projected lines?
Mr. BRANCH. What do you mean by "projected lines"? The projected lines of the Alabama and Mississippi super co-ops would parallel our transmission and distribution. Facilities; whereas the existing facilities, of the purely distribution cooperatives do not. The supercooperatives, the G. & T. cooperatives, in whose behalf over 60 percent of the current appropriations for REA are being utilized, will parallel-will compete with our facilities. They have admitted that-and when they do compete, the investors whose confidence is essential to the financing of our service will surely become wary, resulting either in the unavailability of private funds for our purposes or an increase in financing costs-either of which will be detrimental to the majority of the residents of the four-State area we serve. The CHAIRMAN. We will have to recess pretty soon.
Mr. BRANCH. That was quite a question and required some time. The CHAIRMAN. We thank you very much for your statement and for your appearance here today.
Mr. BRANCH. Thank you.
Mr. BANDSTRA. I ask unanimous consent to insert into the record at this point a statement by Earl E. Jarvis, a member of local 145 of the International Brotherhood of Electrical Workers.
The CHAIRMAN. That may be done, without objection, and it will be inserted in the record at this point.
(The prepared statement, dated May 28, 1966, of Earl E. Jarvis, above-mentioned, follows:)