EXHIBIT C

Power purchases by distributing cooperatives in Lower Peninsula of Michigan, fiscal year ending June 30, 1965

Source: 27th annual report of energy purchased by REA borrowers, Rural Electrification Administration U.S. Department of Agriculture.

The CHAIRMAN. Thank you very much for your statement, Mr. Campbell.

Mr. TEAGUE of California. I have one question, Mr. Chairman.
The CHAIRMAN. Mr. Teague.

Mr. TEAGUE of California. Does the Consumers Power Co. pay income tax?

Mr. CAMPBELL. Yes, sir.

Mr. TEAGUE of California. Approximately what amount?

Mr. CAMPBELL. Their Federal income tax rate is the same as all of the utilities, which is 48 percent.

Mr. TEAGUE of California. Thank you.

Mr. CALLAN. I have a question, Mr. Chairman.

The CHAIRMAN. Mr. Callan.

Mr. CALLAN. You have a public utility commission in Michigan? Mr. CAMPBELL. We have a Michigan State Public Service Commission, sir.

Mr. CALLAN. What is their jurisdiction?

Mr. CAMPBELL. They claim jurisdiction and assert jurisdiction they contacted all generation and transmission and distribution cooperatives as of December 24, 1964, asserting that they would now exercise jurisdiction.

Mr. CALLAN. They do have jurisdiction over transmission and generation rates?

Mr. CAMPBELL. As of December 24, 1964.

Mr. CALLAN. So that in the future, if you are going to have any generation and transmission cooperatives extend their service areas or transmission areas, they will have to have the approval of the Michigan commission; is that correct?

Mr. CAMPBELL. I would certainly hope so.

Mr. CALLAN. Mr. Chairman, I have a list here that I would like to include in the record. It is a list of those States which have commissions that have jurisdiction over cooperatives.

The CHAIRMAN. You may do so. Without objection, it will be made a part of the record at this point.

(The list referred to follows:)

Q. Which States presently regulate REA borrowers? In what manner and for what purposes?

A. The following chart furnishes this information with respect to electric cooperatives.

STATE COMMISSION JURISDICTION, RURAL ELECTRIC COOPERATIVES

1. 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.

Commission functions with respect to cooperative safety construction standards.

• 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. Dept. 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 *
Texas

South Dakota *

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 Electric 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 Commission issues certificates; no rate or security jurisdiction. VI. Commission jurisdiction to same extent as public utilities

In the followng states, cooperatives are subject to the same regulation as public utilities:

1 Except rates other than in territory where there are overlapping or conflicting certificates of convenience and necessity.

*Has Commission but it has no jurisdiction over electric utilities.

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.

Cooperative telephone borrowers are regulated in the same manner as commercial telephone companies except in the states of Idaho, Iowa, Montana, New Mexico, North Carolina and Tennessee where they are wholly or partially exempt by statute.

Mr. CALLAN. I do know that Michigan does have a commission and that the cooperatives are under the State jurisdiction, as are the public utilities.

Mr. CAMPBELL. That is right. I do want to repeat, however, in answer to your question, this jurisdiction was asserted as of December 24, 1964. Prior to that time, jurisdiction was not exercised.

Mr. CALLAN. So that in the future the cooperatives will be in the same jurisdiction that your company would be?

Mr. CAMPBELL. I would certainly hope so, and this would preclude certainly the action taken in granting these loans that are entirely unneeded and unnecessary; and, I might add if I may sir, that I spent one half a day with Mr. Norman Clapp, and his complete staff here in Washington last December 21, 1965, expressing concern over the action of the REA in approving these unnecessary loans. He had legal counsel with his, his policy people, the entire REA staff sat before his desk, along with two of my contemporaries, and they admitted that the operation of the generation and transmission cooperatives in Michigan had not been successful from 1950 through 1964. They admitted that they could have purchased this power from Consumers Power Co. at rates below what the generation and transmission cooperatives provided. We have knowledgeable engineers in our company, and although there had been great secrecy over the loans, we do not seek out this information; however, we are able to simulate what a new powerplant will cost and we challenged Mr. Clapp and his contemporaries in making this loan. We did not go there with the thought of reducing our rates.

We have two rates in Michigan: one for partial-purchase customers and one for total-purchase customers. There is no negotiation on these rates; they are filed with the Public Service Commission. They are considered fair and reasonable and are, approximately, rates that provide a 6-percent return to us. However, we were dismayed that Mr. Clapp and his staff were unwilling to even discuss the cost of these new powerplants, these two new plants in Michigan, when we contended that the costs of the expansion would only promulgate the high cost of power to the farmers in Michigan served by these cooperatives. These are captive customers of high-cost power, and this, sir, has thwarted the orderly industrial development of this entire section of Michigan which concerns us very much.

The CHAIRMAN. Did you say that you have a utility commission that is a regulatory agency in Michigan?

Mr. CAMPBELL. Yes.

The CHAIRMAN. What happens to the rates? Do you have one for the cooperatives and one for the customers?

Mr. CAMPBELL. These are wholesale rates. We provide the same. rate for a municipality that we do for the REA.