Loans approved to principal active power-type borrowers by Rural Electrification Administration Continued

Mr. MORRISON. The point that I am trying to make here is that in Louisiana the REA generation and transmission plants, as compared to that in Ohio, are different-they are decidedly different in Louisiana. In Ohio, the private power company and the REA went into a marriage there. So that, what is bad in Louisiana evidently is good in Ohio. Is that right?

Mr. ROEMER. That is my understanding, sir.

Mr. MORRISON. As to this line that you were talking about in the Southwest Power Administration, if the private companies built it instead of the Government, would they have allowed the REA co-ops in Louisiana to use that line?

Mr. ROEMER. No, sir. In the proposed contractual arrangement with the Southwestern Power Administration, we have been precluded from the use of this line, and are precluded from the use of the standby power from SPA dams. One of the benefits to the Southwest Power Administration was the exchange of power from our facilities to their facilities to be used as pumpback storage, to make their dams more feasible, and, hence, more productive. This has been omitted from the contract.

Mr. MORRISON. In other words, you maintain that since you have gotten this $56 million from the REA to build this generation and transmission plant to keep your REA customers-because you said when you went to renew the contract with the private companies at their generating plants, they stated they would continue to raise the rates, and the only way that you could use that line then is for the REA to borrow the money and build that line; is that not true?

Mr. ROEMER. Mr. Morrison, the line that we are referring to was in the budget of the Southwest Power Administration to link the hydrodams in Arkansas into the Southwest Power grid. We were to build a line to connect with the SPA system to obtain standby power. Included in our $56 million loan, granted in September 1964 were funds to build a tieline connecting us with the SPA grid.

Mr. MORRISON. And if the tie-in line were built in conjunction with your generation and transmission plant, then that would serve as a standby, so to speak, with the Southwest Power Administration. If the power companies, the private power companies, built the line, you would not be able to use it?

Mr. ROEMER. We would be precluded from its use.

Mr. Morrison, let me correct what might be misunderstood, sir. The REA was not to build this line. The REA was to loan this money to the cooperative in Louisiana and it would build the line and repay the money.

Mr. MORRISON. In other words, every nickel that you borrowed you would have to repay?

Mr. ROEMER. Correct. The REA was not building the line: they did not guarantee to build the line. It was made up of the member cooperatives.

Mr. MORRISON. There has been quite a bit of criticism by private power companies of the generating plants in one form or another that are financed by Government money. I noticed in my district in Louisiana, which is the Sixth District, that there is a tremendous powerline going through the center of it. It is my understanding that

that powerline is being built at a tremendous cost. I think that it will carry a larger load of electricity than any other powerline in the country. It looks that way. It goes up to Tupelo, Miss., and to get TVA power for private companies. Do you know anything about

that?

Mr. ROEMER. I understand-the best answer would be that I do not know anything about that; that is out of my area. But it is my understanding that this is a TVA tie-in line with the utility companies in south Louisiana and southeast Texas.

Mr. MORRISON. I took the time to check into it, and I found the same thing. Will that powerline, since it is carrying public power from TVA, be a public utility or "common carrier" line, so to speak, where all of the cooperatives will be able to use it?

Mr. ROEMER. No, sir; we cannot tie into it.

Mr. MORRISON. In other words, there is this tremendous powerline, as large as any, I believe, that has ever been constructed in the United States, that is going to bring TVA power into Louisiana for these private companies, and then the REA co-ops cannot tie into that TVA powerline and buy their share of the public power? In other words, it is not a public utility where the REA-financed co-ops could use current from it?

Mr. ROEMER. It does not have a common-carrier status, and we cannot obtain any wheeling arrangement with the utility.

Mr. MORRISON. You spoke a few moments ago, in your testimony, about a private power company borrowing money from the REĂ. Would you name that company?

Mr. ROEMER. Yes, sir. I believe it is in the testimony, Congressman Morrison. It is the Central Louisiana Electric Co.

Mr. MORRISON. And you said that they were the third largest? Mr. ROEMER. Borrower of REA funds in the State of Louisiana; yes, sir.

Mr. MORRISON. How many borrowers are there, approximately? Mr. ROEMER. There are about 17 in the State, in total.

Mr. MORRISON. Do you mean to say that there are 14 cooperatives that borrow less than this one private company does?

Mr. ROEMER. Yes, sir.

Mr. Bonner corrected me on that. We may have a difference in semantics here. As I understood your question, they are the third. Mr. MORRISON. And if there are 17 they are No. 3, if my arithmetic is correct.

Mr. ROEMER. I would agree with that.

Mr. MORRISON. Just like you stated in your testimony, the power companies try to get the largest audience on the radio when they broadcast a football game. They use this large captive audience to say how terrible it is to use this Government money and how terrible it is that the taxpayers here are having to foot the bill. They explain that on the networks. Then, as you testify, they say that out of one side of their mouth, and out of the other side they are up here borrowing that "terrible money" that they talk about over the networks on the air. How do you reconcile that, and how do you think they could reconcile it?

Mr. ROEMER. I do not think that they are forced to reconcile it, Mr. Morrison. They accept the good and the bad and go along with it, and they use every means that they can to achieve their ends. I suppose that this is one form of free enterprise. At the same time, they burden us and belabor us with these charges and accusations, and if the shoe fits their foot, they do not have any restriction on wearing it. Mr. MORRISON. What I am saying is that the same REA money is involved and it costs the taxpayers the same; yet it is all right for them to borrow that money. Perhaps they shut their eyes and slip around and say, "We need some of that tainted money." That does not seem to be very consistent to me for them to feel that way, and by that I mean if they are going to say that it is wrong, which they do, for the co-ops to get loans, why do they turn around and do the same thing, if they condemn you for using that 2-percent money?

The CHAIRMAN. I do not think that he should answer that question. That is just an argument.

Mr. MORRISON. I will make the statement that to my way of thinking, I do not believe that is being very consistent.

The CHAIRMAN. All right.

Mr. ROEMER. I would like to say that it is not our intention, as testimony, to question their right to borrow these funds. We are concerned, frankly, with expanded and continued service to our rural people. We think that there is room for all of us in Louisiana, and we would like to have the opportunity to serve the areas which we have served in the past and would like to have some immunity from their policy of continuing to say things against us. We are not looking for a golden handout. We just want the opportunity to continue to survive.

Mr. MORRISON. I agree completely. I say this: I am in accord with the fact that the private power companies be eligible to borrow REA money, but the point that I am making is that they express their opinion thereon, and then they run up here and stand first in line even while they object to others receiving such aid.

The CHAIRMAN. Very well. We will have to proceed.

We thank you very much, Mr. Roemer.

The next witness is Mr. Birum G. Campbell, vice president of the Consumers Power Co., Jackson, Mich.

STATEMENT OF BIRUM G. CAMPBELL, VICE PRESIDENT,

CONSUMERS POWER CO., JACKSON, MICH.

Mr. CAMPBELL. Mr. Chairman and members of the committee, I am Birum G. Campbell, vice president of Consumers Power Co. which has its headquarters at Jackson, Mich.

Consumers Power Co. has been conducting a public utility business in Michigan since 1915. The company presently serves some 954,000 electric customers. All of the company's utility operations are confined to the State of Michigan. While much of its service area is devoted to manufacturing, other activities, such as agriculture and the tourist and resort business, rank high among the businesses served by the company. The company also sells electricity at wholesale to other electric systems within the State of Michigan, including a number of

investor-owned public utilities, municipally operated utilities, and rural electric operatives.

As the economic tempo in Michigan has quickened, we have kept pace by expanding and improving our system to provide dependable electric service at a reasonable cost. For instance, the company's installed generating capacity has increased nearly 100 percent in the last 10 years. A report recently issued by the Federal Power Commission ranked the company's steam electric generating system as the third most efficient among all systems in the United States in 1964 in terms of thermal efficientcy, that is, based on the amount of heat used to generate a net kilowatt-hour of electricity.

Our determination to operate efficiently is reflected in our charges to our customers and over the years our average revenue per kilowatthour of electricity sold to residential customers has regularly been below the national average for all similar companies. Early in 1965 the company voluntarily reduced several of its electric service rates, including a 19-percent reduction in electric space heating rates. July 1965 further voluntary reductions in rates went into effect, reducing the cost of electricity to our customers by approximately $3 million per year. We contemplate that we will continue to reduce our rates in the future as we are able to effect further economies in our production and sale of electrcity. All of our retail rates, as well as the terms and conditions of our electric service, our accounting procedures, our issuance of securities, and other matters, are thoroughly regulated by the State public service commission.

Since the 1920's the company has taken an active role in rural electrification and has received national recognition for its pioneering efforts in this field. One of the most noticeable of these efforts was the historic Mason-Dansville experimental farm line energized on February 4, 1927. The first rural electric line was a joint effort by Consumers Power Co. and Michigan State University to determine the economic feasibility of rural electrification. This 7-mile line made rural electric service available to 33 farms; however, only 12 of the farmers were willing to cooperate by wiring their buildings and signing contracts for service; the other 21 rejected the opportunity to take part in the project. In these earlier years, the farmers considered electricity as an unnecessary luxury.

Through the cooperation of a group of manufacturers, the homes of the 12 particpiating farmers were equipped with a variety of electrical appliances, each separately metered. As the months passed the meters gave proof that electricity, far from being expensive, was about the cheapest thing a farmer could buy. Farmers and educators came from every county, every State, and from many foreign countries to see the line and talk with the participating farmers and their wives. The gospel of electricity on the farm was spread further through a demonstration truck that Michigan State University, with financial assistance from Consumers Power Co. and another large Michigan utility, sent through rural districts to familiarize farm families with the latest in labor-saving appliances.

Since this historic beginning the company has remained a leader in the field of rural electrification. By 1936 when the REA act was passed by Congress, the company had already constructed some 7,056