for their capital needs. The electric cooperatives in Kansas average 1.7 members per mile. We urge and endorse a supplemental financing plan along the lines adopted by the electric cooperatives at the last annual meeting of our national association.

RESOLUTION

Whereas electric cooperatives are today operating under the legislative program designed in the thirties and modified most recently under the Pace Act of 22 years ago; and

Whereas vast changes have taken place during the last 20 years bringing substantial differences in the financing needs of rural electric systems; and Whereas the outdated 1944 amendment did not anticipate the needs of the 'sixties. Current appropriations are proving inadequate to meet capital needs of the cooperatives. This results in an ever-widening gap between annual appropriations and a swelling backlog of need for funds. A more-pressing challenge has arisen as the result of wartime materials restrictions and labor shortages of the 'forties and 'fifties. Poles and materials produced under these conditions have proved shorter-lived than was estimated. Installation of these items was rushed by the co-ops as a contribution to the war effort and to accomplish area coverage. Today, replacement of these units along the thousands of miles of cooperative lines, ahead of scheduled depreciation, represents a mammoth task demanding vast additional capital over and above predicted normal maintenance. This burden is increased by higher costs of today; and Whereas the total number of farms has decreased, but the size of remaining farms has increased. These modern farms register greater demand for quality and quantity of service and more often need three-phase power. These larger farm units are located along the length and breadth of the rural systems and require greater investment in facilities, adding to the need for additional capital; and

Whereas the electric cooperatives recognize that the federal budegt is pressed for defense and emergency program financing. The co-ops have thus undertaken on their own initiative and effort to explore avenues of supplemental financing to meet these and other pressing needs. The resulting plan embodied in HR 14,000 now before Congress, is endorsed by every electric cooperative in the state of Missouri. It urgenly needs your support if rural people are to be provided with service on a parity with that delivered to urban consumers. The plan is patterned after the well-tested and proved Farm Credit System that has so successfully met the need for agricultural capital. The plan offers an opportunity to supplement annual appropriations of the federal budget. The plan makes possible an orderly transition to meet changing conditions: Now, therefore, be it

Resolved, That by the means at our disposal, we endeavor to call the urgency of prompt action on passage of HR 14,000 to the attention of the Agriculture Committee of the U.S. House of Representatives and that every effort be made to cooperate in providing the Committee with information and support to assure the passage of this legislation.

This resolution unanimously adopted by the Executive Committee of the Association of the 41 Missouri electric cooperatives at its meeting May 31. 1966, Jefferson City, Missouri.

(Signed) LLOYD E. YARBROUGH,

Chairman.

RESOLUTION OF THE CASS COUNTY ELECTRIC COOPERATIVE, INC., KINDRED, N. DAK. Whereas there has been a growing concern among the rural electric cooperatives as to the availability of sufficient funds for full development of the rural electric program; and

Whereas the members of the National Rural Electric Cooperative Association representing 96 percent of the cooperatives and power districts which borrow funds from REA, in session in the year 1964, did by resolution instruct the NRECA to undertake studies to determine how the rural electrics could best solve what was rapidly becoming a critical shortage of capital; and

Whereas several years of deep and thorough study have produced the results which have led to the development of a very practical and vigorous plan, which has now been introduced as a Senate bill; and

Whereas this plan does not violate the present principal of two percent interest to those borrowers having need of the two percent interest because of— (1) Sparsely settled areas;

(2) Significantly higher rates;

(3) Area service not achieved;

(4) Little financial strength existing; and

Whereas some borrowers can pay more to gain access to adequate growth capital, but individually they are unable to attract such capital; and

Whereas the proposed bank plan will provide its capital from the following

sources:

(1) Investment by the Federal Government;

(2) Investment by borrowers;

(3) Funds from open market borrowing;

(4) Funds from bank earnings; and

Whereas the criteria for eligibility of low interest funds would include these factors:

(1) Percent of member or owner equity;

(2) Extent of area coverage;

(3) Degree of territorial protection;

(4) Security and adequacy of power supply;

(5) Parity of rates and service;

(6) Condition of electric plant; and adequacy of storm damage and contingency reserves.

Therefore be it

RESOLVED by the duly elected board of directors of Cass County Electric Cooperative, Inc., Kindred, North Dakota, That by virtue of this resolution, the North Dakota Congressional delegation be asked to review this impending legislation, and in view of the previous stated important factors, be encouraged to lend their support; be it further

Resolved, That this resolution be signed by each director of Cass County Electric Cooperative, Inc., and copies forwarded to Honorable Milton R. Young, United States Senator, Honorable Quentin N. Burdick, United States Senator, Honorable Mark Andrews, United States Representative, Honorable Rolland Redlin, United States Representative, Mr. Norman M. Clapp, REA Administrator, Mr. Jerry Anderson, NRECA Acting Manager.

Dated in Kindred, North Dakota, this 23rd day of May, 1966.

STATEMENT OF M. S. LUTHRINGER, PRESIDENT OF CENTRAL ILLINOIS PUBLIC

SERVICE Co.

I am grateful for the opportunity to submit testimony to the committee on these most important legislative proposals.

Our company serves a basically rural area of some 20,000 square miles in central and southern Illinois. We are proud of the role we have had as pioneers in the electrification of rural Illinois. Early experimental programs conducted by our company in cooperation with the University of Illinois, served as guidelines for future rural electrification. Our company renders service to 532 communities. Of these. 463 or 85%, are populated by less than 1,500 persons. In fact, 392 or about 65%, have less than 500 population. Of the 532 communities on our system, 279 had no electric service before we extended it to them, and $3 had only part-time service.

As we have earlier indicated to Chairman Cooley and all committe members, it is our belief that hearings are being held much too soon for our industry, or our company, to assess properly the impact of these proposals, or to prepare specific recommendations regarding their many ramifications. Proponents of H.R. 14000 and H.R. 14837 have for some two years been planning and refining the provisions contained therein. H.R. 14837 was introduced only a short time ago on May 3, 1966.

Because I represent some 29.000 investor-owners of Central Illinois Public Service Company, its 2,000 employees and more than 250.000 customers, it is my obligation to express our opposition to these proposals. Our preliminary studies of both H.R. 14000 and H.R. 14837, as written, indicate they could cause alarming changes in the basic structure of the federal-private power picture.

Our initial reaction is that the legislation, in its present form, departs drastically from a bill that would merely provide a new source of non-federal funds.

It had been thought by most people that the rural electric cooperatives were seeking to develop an alternative plan for financing their normal growth requirements. This, we understood, would be a plan that would relieve federal taxpayers of the burden of providing rural electric cooperatives with below-cost funds, now that practically all of rural America has central station electric service.

Instead, we find the proposals under consideration to be a supplementary, rather than an alternative, type of financing program that not only would add to the already heavy taxpayers' burden, but would deprive Congress of the necessary control and regulation it has heretofore exercised over the borrowing practices and expansion plans of cooperatives. It is understood that there would be a continuance of the present program of direct loans of federal funds to cooperatives at two per cent interest by the Rural Electrification Administration. Let me stress that we at Central Illinois Public Service Company are not op‐ posed to non-federal sources of funds being developed for rural electric cooperatives. Rather, we favor such a policy under proper safeguards and controls. We feel that any federal funds furnished in the future should be loaned at a rate of interest at least comparable to the rate paid by the treasury, should be appropriated under the terms of the REA Act, and within the framework of REA administration and congressional control.

It appears to us that this legislation would, for all intents and purposes, allow the cooperatives to compete openly with investor-owned, tax-paying utilities. There seem to be no guidelines established which would limit unnecessary expenditure of federal funds or needless duplication of facilities. It is our understanding that these proposals would, as written, permit Federal Electric Bank borrowers to use funds secured from the bank to acquire the properties of electric companies or municipal electric systems.

Under the provisions and purposes set forth by the REA Act and the criteria REA has adopted for loaning funds thereunder, we believe there is no need on the part of the rural electric cooperatives in Illinois, or anywhere else, for this tremendous amount of new supplementary funds. More than 99% of all the persons in rural areas are already receiving central station electric service.

Our own company serves at wholesale 16 of the 27 rural electric cooperatives in Illinois at 90 points of delivery at a cost considerably cheaper than they could provide it themselves. This has been conclusively proven in the case of Southern Illinois Power Cooperative, where a generating and transmission project was completed with REA funds in 1963 at a cost of about 25 million dollars.

Testimony before the Illinois Commerce Commission by the co-op's own expert, Mr. A. F. Hartung, consulting engineer and partner of the Burns and McConnell Engineering Company, indicated that this G & T cooperatives average delivered rate per kilowatt hour to its three member cooperatives over a ten-year period would be considerably higher than the rate offered these same member cooperatives by Central Illinois Public Service Company, and accepted by all other cooperatives served by our Company. Actual operation of this facility has borne out the predictions and estimates.

One cooperative in our state, from the beginning of its operation, generated its own requirements. Over the years, the cost of power to this cooperative was substantially more than if it had purchased power from our company.

If it is possible for these conditions to exist under the present program of REA administration and congressional control, what could some of the consequences be if Congress sees fit to pass the kind of legislation being considered today?

In the 30 years of REA, it has loaned a total of about 42 billion dollars. There would seem to be no need of Federal Electric Banks which could generate such gigantic amounts of supplementary non-federal funds unless rural electric cooperatives plan to take over customers and areas now served by others.

We would like to leave these parting thoughts concerning Illinois. Rural electric cooperatives in Illinois are not "underprivileged." Neither are they "nonprofit” organizations. Nor are they totally rural. They are sound financially, and are capable of borrowing necessary funds at current market rates of interest. The cooperatives of Illinois, in the 20 years from 1944 through 1964, accumulated $38.400.000 in profits, called "net margins". They showed investments at the end of 1964. other than utility plant, of more than $19,000,000. Some investment houses are soliciting rural electric cooperatives for the privilege of investing their surplus funds.

If our company could enjoy but two of the subsidies afforded rural electric cooperatives-two per cent money and exemption from Federal income tax-we

could have furnished free electric service to all 215,000 of our residential customers for 11 months of 1965-made no changes in our rates or charges to other classes of customers-and still have been slightly better off financially for the year.

It is our hope that the committee will postpone action on these far-reaching proposals until there has been sufficient time for adequate study, evaluation and discussion, to the end that more suitable legislation could be submitted that would provide rural electric cooperatives with an adequate source of non-federal funds, without materially injuring investor-owned utilities.

The CHAIRMAN. Now, does that complete all those we promised to hear this afternoon?

If it does, the committee will stand in recess until Tuesday morning at 10 o'clock.

(Whereupon, at 5:20 p.m., the committee was recessed, to reconvene at 10 a.m., Tuesday, June 7, 1966.)