REA LEGISLATION WEDNESDAY, JUNE 8, 1966 HOUSE OF REPRESENTATIVES, The committee met, pursuant to recess, at 10:15 a.m., in room 1301, Longworth House Office Building, Washington, D.C., the Honorable Harold D. Cooley (chairman) presiding. Present: Representatives Cooley, Poage, Gathings, Abernethy, Jones of Missouri, Hagen of California, Stubblefield, Purcell, Olson, O'Neal, Stalbaum, Redlin, Bandstra, Greigg, Callan, Dague, Belcher, Teague of California, Quie, Findley, Dole, Walker of Mississippi, and Hansen of Idaho, and Resident Commissioner Polanco-Abreu. Also present: Jane C. Wojcik, staff; Hyde Murray, assistant clerk; Fowler C. West, staff; and Francis LeMay, consultant. The CHAIRMAN. The committee will please be in order. We will now hear Mr. Clapp answer the remaining questions. STATEMENT OF NORMAN M. CLAPP, ADMINISTRATOR, RURAL ELECTRIFICATION ADMINISTRATION; ACCOMPANIED BY LOUIS GORRIN, DIRECTOR, AND LOUIS A. ROLAND, DEPUTY DIRECTOR, RURAL ELECTRIFICATION DIVISION, OFFICE OF GENERAL COUNSEL, USDA; DAVID ASKEGAARD, REA PROGRAM ANALYST; EDWARD F. WILSON, DEPUTY ASSISTANT ADMINISTRATOR, ELECTRIC PROGRAM, REA; AND CHARLES U. SAMENOW, LEGISLATIVE CONSULTANT, REA Mr. CLAPP. Mr. Chairman and members of the committee, I have with me the remaining questions which we did not get to yesterday with the answers that have been prepared for them. I believe that copies of these questions and answers have been made available to the committee. The CHAIRMAN. You may submit the questions and the answers for the record. Mr. CLAPP. Do you want me take them orally, Mr. Chairman ? The CHAIRMAN. Just as you desire. Mr. CLAPP. I will read the prepared answers since you have them before you. [Reading:] Question. Approximately how many of the present REA borrowers could, in your opinion, afford to pay more than 2 percent interest on their loans? Answer. We estimate that from 25 to 30 percent of the electric borrowers. and a smaller percentage of telephone borrowers, could presently afford to borrow from the banks consistently with achieving program objectives. Question. Under H.R. 14837 what are the differences between the provisions establishing the electric bank and the provisions establishing the telephone bank? Answer. The purpose for which loans may be made are, of course, different. Otherwise, the provisions establishing the two banks are essentially the same except that the annual investment of the Government in class A stock is established at $50 million per year for 15 years, while the annual investment of the Government in class A stock of the telephone bank is established at $20 million per year for 15 years. In addition, the electric bank has provision for class D stock to be available for sale to electric consumers of borrowers or of organizations eligible to borrow; the telephone bank has no such class D stock. The CHAIRMAN. Let me interrupt you there for one question. Why could we not operate both banks as one bank? What is the purpose of having two banks? Mr. CLAPP. I think, Mr. Chairman, it boils down to the question of your ultimate objectives. If it is the desire of the Congress to convert these banks ultimately to borrower or ownership, then I think there are very good reasons for starting out with two separate banks. First of all, these banks serve two different industries. The CHAIRMAN. I know that, but I do not see why you should have to have two different banks to run each account. Mr. POAGE. Would you yield there? The CHAIRMAN. Yes. Mr. POAGE. May I suggest that, as I see it, and certainly H.R. 14000 envisions it, there is substantially the same difference between the elec tric bank and the telephone bank, as there is between the land bank and the intermediate credit banks. You could have one bank, of course, in the Farmers Credit Administration and one bank could serve all of the farm credit purposes, but instead we have three different sets of banks, because they serve different types of customers and they serve different types of objectives, and their objectives are different. And as Mr. Clapp has pointed out, when the banks are completely customer oriented, the customers will be different. Way back there a long time ago, in the farmer credit days, it was decided to let the people who are buying the land own their banks, let the people who are handling the cattle and that sort of thing own their bank; let the people who are in the cooperative business own their bank; and so we started out in the Farm Credit Administration thusly. Frankly, these bills are copied after that which has been established in the Farm Credit Association. Mr. CLAPP. I think that you have stated it exactly, Mr. Poage. I think we realize, too, that these two programs are of unequal size and the pattern of the borrower representation on these boards presents a question that poses some problem in this legislation. It would be further complicated if you tried to mix telephone and electric borrowers' representation. The CHAIRMAN. Please go ahead. Mr. CLAPP (reading): Question. At present, what is the total amount of money represented by all "notes, bonds, obligations, and property" delivered or assigned to the Administrator under the proposed section 301 (1) of H.R. 14837? Answer. As of April 30, 1966, the total was $3,460,059,919. Question. Same for undisbursed balances of electrification loans under proposed section 301(2) of H.R. 14837? Answer. As of April 30, 1966, the total was $864,478,301. Question. What is the present annual rate of all collections of both principal and interest under proposed section 301 (3) of H.R. 14837? Answer. The current estimates of total collections of principal and interest to be received from borrowers during fiscal year 1966 are as follows: Electric program, $212.2 million. Telephone program, $40 million. Question. Which States do not authorize firms, associations, or public bodies to acquire stock of the electric bank? (Section 405 (g) of H.R. 14837.) Answer. A question has been raised as to whether public bodies, public utility districts and public power districts in the States of Nebraska and Washington and other States may be able to acquire stock in the electric bank This of course goes to the fiscal powers of the public body concerned. Final determination would seem to depend, at least in part, on the arrangements pursuant to which the stock is made available or the purchase thereof required. The CHAIRMAN. What is a public power district? Mr. CLAPP. This is a subdivision of a State which is created by statute for the generating and marketing of electric power under the State law. The CHAIRMAN. Is that a private enterprise? Mr. CLAPP. This is a public enterprise. The CHAIRMAN. Is it REA financed? Mr. CLAPP. We finance rural electrification activities of public power districts, public utility districts, other public agencies engaged in rural electrification. The CHAIRMAN. Thank you, please proceed. Mr. CLAPP [reading]: Question. Which States presently regulate REA borrowers? In what manner and for what purposes? Mr. CLAPP. We submit, Mr. Chairman, a chart. This chart classifies the general arrangement of State regulation for REA-financed systems under seven headings. The first is a list of those States where rural electric cooperatives are exempt by legislative enactment. The second is those States where they have been exempted by judicial decision. The third group are those States where the exemption is accomplished by administrative practice. The fourth group is where there is no public service commission or similar regulatory body to take jurisdiction. Fifth is the group of States where there is a limited form of commission jurisdiction. The sixth group is those States where there is commission jurisdiction to the same extent as over public utilities. There is a seventh heading given in the table; this is for States where there are no rural electric cooperatives. There are four of these States. [Continues reading:] Answer. The following chart furnishes this information with respect to electric cooperatives. STATE COMMISSION JURISDICTION, RURAL ELECTRIC COOPERATIVES I. Exemption by legislative enactment.-In the following states there is express statutory exemption of electric cooperatives from jurisdiction by Public Service Commission or any similar regulatory body: 1 Alabama Department of Finance approves issuance of notes. 2 Commission functions with respect to cooperative safety construction standards. a Commission functions in cases of duplication. II. Exemption by judicial decision; Washington.-In Washington the State supreme court, in interpreting the controlling statutes, has held that electric cooperatives are not public utilities and not subject to commission jurisdiction since they serve their members only and do not serve the general public. See Inland Empire Rural Electric, Inc. v. Department of Public Service of Washington, et al., 199 Wash. 527, 98 P. (2d) 258 (1939). III. Exemption by administrative practice.-In Oregon, there has been no assumption of jurisdiction by Public Service Commissioner whose jurisdiction may, however, be invoked for allocation of territory. IV. No public service commission or similar regulatory body to take jurisdiction. Minnesota' South Dakota' Texas 4 Has Commission but it has no jurisdiction over electric utilities. V. Limited commission jurisdiction.—In the following States there is limited Commission jurisdiction, as indicated: Arkansas: Certificates of convenience and necessity; also jurisdiction over transfer of property in areas annexed to cities. Indiana: Commission must approve articles or amendments to articles describing territory of operation and rates. Illinois: Allocation of territory; no rate or securities jurisdiction. Iowa: Jurisdiction over transfer of property in areas annexed to cities and duplication of facilities. Kansas: Most of the Kansas cooperatives are under the Kansas Electrie Cooperative Act; these are under Commission jurisdiction as to certificates of convenience and necessity, construction permits and rates, but are exempt as to issuance of securities. Cooperatives under the Cooperative Societies Act are subject to complete Commission jurisdiction. Maine: Territory for service designated by Commission in case of cooperatives organized under General Incorporation Act. Cooperatives organized under Cooperative Enabling Act not public utilities but must obtain Commission approval to serve in territory of existing utility and Commission hears complaining applicants for membership. Mississippi: Certificates of convenience and necessity; rates within municipality also served by another power supplier. Nebraska: Safety construction standards. Power Review Board has jurisdiction to assign service areas, approve new generating facilities and certain transmission lines over 700 volts; and to settle rate disputes between power suppliers. Nevada Cooperatives serving non-members are subject to complete Public Service Commission jurisdiction. Cooperatives serving members only are subject only to certificate jurisdiction and to jurisdiction to assign territory by certificate upon a finding of duplication, and to order elimination of duplication. North Carolina State Rural Electric Authority approves formation of cooperatives and construction of lines on public property; and application for loans. Utilities Commision issues certificates; no rate or security jurisdiction. VI. Commission jurisdiction to same extent as public utilities.-In the following States, cooperatives are subject to the same regulation as public utilities: Except rates other than in territory where there are overlapping or conflicting certifi cates of convenience and necessity. VII. No rural electric cooperatives. Connecticut Hawaii Massachusetts Rhode Island Power company borrowers are regulated in the same manner as other power companies in the States in which they operate. |