in the upper Missouri Basin they ask Congress to approve the High Cow Creek and Fort Benton Dam and the third power house at Grand Coulee Dam.

Still another resolution urged the Secretary of the Interior to implement the Montana preference clause of the Hungry Horse project so as to make its benefits applicable to all rural electric systems throughout Montana by means of require ments contracts with Montana Rural Electric Co-operatives.

Several revisions in the by-laws were voted by the delegates, including one that will increase the number of directors, from which officers will be elected at a meeting within 45 days of the convention.

MAU President S. T. McFarland, Conrad, presided at all business sessions of the rural electrics' convention.

[From the People's Voice, Oct. 8, 1965]

Alternative financing ...

MIDWEST RURAL ELECTRICS SAY "No" To NRECA

Word received Tuesday night from Jamestown is that delegates to the North Dakota-South Dakota-Minnesota regional meeting of National Rural Electric Co-op Association, earlier that day turned down the NRECA proposal on future financing of rural electrics.

(For more details on proposal, see Voice of September 17.)

Delegates held fast for the federal government continuing to be the sole source of loan funds for "heavying-up" and expansion, in spite of blandishments by NRECA spokesmen and REA Administrator Norman Clapp that they should recommend to the Congress that alternative methods of financing through private investment sources be written into the REA Act.

Heavy pressure is being exerted on all regions of NRECA by the Johnson Administration to go along with the alternative financing plan proposed by NRECA. Our word is that at one stage in the Jamestown hassle, Administrator Clapp threatened to resign unless delegates from the three states got in line. They didn't, he hasn't. More details next week.-HLB.

[From the People's Voice, Aug. 27, 1965]

Eye Bank for Co-operatives as Model...

"MONEY PLANS" TO BE PUT BEFORE RURAL ELECTRICS

WASHINGTON, D.C.-Electric co-op leaders this fall will study ways to free themselves eventually from dependence on Congress and the White House.

Clyde Ellis, manager of National Rural Electric Co-operative Association, stated plainly August 5 that the co-ops will still need federal loans at 2% interest in the foreseeable future. Eventually, by beginning now to organize supplemental financing, they have a chance to become independent, he said.

Besides the 35-year, 2% loans from Rural Electrification Administration, NRECA's directors have proposed:

Intermediate REA loans at the government's average cost of borrowing money, made for 50 years, and without some of the restrictions now imposed on co-op borrowers, and A bank with up to $500 million in initial government capital that would become borrower-owned as the co-ops pay the money back.

REGIONAL MEETINGS TO CONSIDER PROPOSAL

NRECA's 10 regional meetings this fall will consider the supplemental financing plan in detail, and REA Administrator Norman Clapp will add his comments. The first of these meetings is in Anchorage, Alaska, September 9-10.

For the electric co-ops, Ellis said, these proposals are "second in importance only to passage of the Rural Electrification Act of 1936."

"Since the late 1940s, through several administrations and many Congresses, we've had difficulty securing adequate loan funds," he said. "It has always been an uphill fight."

For example, electric co-ops said they'll need to borrow $475 million this year. REA asked for $390 million. The President cut this to $285 million, plus part of

a $65 million contingency. The House had voted $350 million and the Senate, $380 million. If they split the difference, as often happens, co-ops will need this year $110 million they won't get until next year, maybe.

Every seven years the co-ops double their need for power. Ellis said three independent studies show the co-ops will need $700 million in new capital each year by 1980. "We don't think it's likely Congress will authorize such large sums."

The co-ops will need 2% loans for many years, Ellis stated. In answer to newsmen's prodding, Ellis said, "We can't predict the end. When it will be depends to a great extent on what happens in rural America during the next several decades."

If co-op members agree to seek supplemental financing, the next job will be to sell it to the Johnson administration and to Congress.

A healthy co-op that met specific criteria could switch to longer-term, higherinterest federal loans without some of the restrictions Congress has imposed. Or Congress might force it to do so.

CO-OPS LIMITED BY PRESENT RESTRICTIONS

Present restrictions, Ellis said, forbid a co-op's borrowing from REA to serve any customer who's now served. If a private utility and a co-op want to swap some customers so as to consolidate their territories, with the co-op's paying money to boot, it can't borrow from REA.

Also, he said, a co-op can't buy a generator larger than its projected need for power in 10 years. This keeps co-op generating plants small, Ellis said, and the co-ops out of power-pooling arrangements.

The bank would be patterned largely after the 13 banks for co-operatives, Ellis said.

PROPOSAL BY ELLIS BRINGS STRONG OPPOSITION FROM FARMERS UNION DENVER, COLO.-The leaders of the National Farmers Union strongly oppose the proposal of Clyde Ellis, general manager of the National Rural Electric Cooperative Association, to resort to private, high-interest financing of loans for rural electric facilities.

In wires to President Johnson, Vice President Humphrey, Agriculture Secretary Freeman, REA Administrator Clapp and Ellis, the NFU executive committee said that the Union is "unalterably opposed to any change in financing the rural electric program" which has revolutionized farm and rural life.

Noting that any change would strangle the REA program, the farm leaders said the "Farmers Union urges that the 2 per cent loan program be retained and expanded for the recapitalization of rural America."

Full text of the wires sent August 11 follows:

"Executive Committee of the National Farmers Union is unalterably opposed to any change in financing the rural electric program.

"We urgently request the Johnson Administration and the Congress to approve $650 million for fiscal year 1967 for electric loans and the continued support for 35-year financing of this program.

"The Rural Electric Program is the most cherished of all the farm programs because it has revolutionized life on the farm and in the rural areas. Electricity on the farm is also a vital economic tool that has improved farmers' efficiency, improved the quality of food, and reduced its cost for all the Nation.

"Increasing the cost of electricity through higher interest-type financing plans will not only cut the farmers' already dwindling profits, but it will increase the cost of food for their consumers.

"We were always opposed to these financing schemes when the Benson crowd teamed with the power companies to try to dominate the REA co-ops. We are just as opposed to them now.

"REA co-ops have only 3.2 consumers per mile and received $460 in annual revenue per mile, compared with 33.2 consumers and $7,164 in annual revenue per mile for the power companies.

"To impose financing plans and criteria of the power companies on rural electric systems can only result in much higher retail rates by total domination by the power companies of the wholesale power supply for REA co-ops.

"Rather than strangling the REA program by these alternative financing schemes, the Farmers Union urges that the 2 per cent loan program be retained and expanded for the recapitalization of rural America."

[From the People's Voice, Sept. 3, 1965]

In Anchorage, Alaska, September 8-10 ...

RURAL ELECTRIC FINANCING WILL BE HOT ISSUE AT REGIONAL MEET

Recent recommendations by National Rural Electric Co-operative Association that the historic method of financing rural electric co-op service expansion via two per cent federal money be supplemented with money from other sources, will be a most controversial subject at the NRECA regional meeting September 8-10, at Anchorage, Alaska, according to numerous reports reaching the Voice. The Anchorage meeting, which will be attended by delegates from Montana and other northwest states' rural electrics, is the first of 10 regional meetings throughout the nation where the financing proposal will be given consideration.

First publicly announced on August 5 by NRECA Manager Clyde Ellis, the proposed financing revisions, as reported in last week's Voice, would, in addition to retaining the 35-year, 2 per cent federal loan program, provide:

Intermediate REA loans at the government's average cost of borrowing money, made for 50 years, and without some of the restrictions now imposed on co-op borrowers, and

A bank with up to $500 million in initial government capital that would become borrower-owned as the co-ops pay the money back.

In discussing the proposals, Mr. Ellis pointed out that "since the late 1940s ... we've had difficulty securing adequate loan funds . . . It has always been an uphill fight." And he notes that although the fight gets tougher all the time, the need for funds is also skyrocketing, and that every seven years the co-ops double their need for power, and by 1980 will need $700 million in new capital each year which "we don't think it's likely Congress will authorize" in "such large sums."

FARMERS UNION IS "UNALTERABLY OPPOSED"

Immediately after NRECA's supplemental financing proposal was released, the executive committee of National Farmers Union wired President Johnson, Vice President Humphrey, Agriculture Secretary Freeman, REA Administrator Clapp and Mr. Ellis that it "is unalterably opposed to any change in financing the rural electric program.

"Increasing the cost of electricity through higher interest-type financing plans," said NFU, "will not only cut the farmers' already dwindling profits, but it will increase the cost of food for their consumers."

Continuing, the NFU wire stated:

"REA co-ops have only 3.2 customers per mile and received $460 in annual revenue per mile, compared with 33.2 consumers and $7,164 in annual revenue per mile of line for the power companies.

"To impose financing plans and criteria of the power companies on rural electric systems can only result in much higher retail rates by total domination by the power companies of the wholesale power supply for REA co-ops.

"Rather than strangling the REA program by these alternative financing schemes, the Farmers Union urges that the 2 per cent loan program be retained and expanded for the recapitalization of rural America.”

ADDITIONAL OPPOSITION

Then, on August 23, the board of Mid-West Electric Consumers Association, Denver, representing rural electric and other public power associations throughout the midwest, and including mountain states such as Montana, also joined in opposition to NRECA's proposals.

In so doing, Mid-West pointed out that on June 29, 1965, they had passed a resolution "supporting the continuation of the REA 2 per cent loan program in amounts necessary to meet all the requirements of the nation's rural electric co-operatives."

That position was reaffirmed by Mid-West at its August 23 board meeting in Sioux Falls, So. Dakota, "after giving careful and extended consideration to the NRECA proposals... The board believes that the stated objective of the NRECA study of 'parity of rates' with the private power companies would cripple rural electric co-operatives' traditional objective of low-cost power."

IN EFFECT, "A COVENANT"

Continuing, Mid-West's memorandum points out that "the objective of electrifying rural America was accomplished under extremely difficult conditions through what was, in effect, a convenant between the rural electric co-operatives and the federal government. This covenant was, and continues to be: Low-cost financing by the federal government for any organization (private or consumerowned.-PV) accepting the responsibility of extending area coverage of central station electric service to rural areas.

"The difficult conditions under which rural electrification was accomplished have not changed; on the contrary, these have become more difficult as rural America continues year after year to lose tens of thousands of farms and residences. The overall economic condition of American agriculture relative to the American society generally remains one of disparity.

The memorandum continues:

"While the vast majority of our rural electric co-operatives have been successful even under these conditions, this by no means justifies imposing higher interest rates on the loan funds which make this program feasible.

TERRITORIAL PROTECTION LEGISLATION NEEDED

"Most states (including Montana-Editor) have yet to enact territorial integrity legislation giving at least some protection to their co-operatives' right to continue serving their present areas. The lack of such territorial protection is a major threat to the fiscal soundness of the co-operatives in all such states, as the NRECA financing study indicates.

Should the objective of rural electric be, as NRECA suggests, 'parity of rates' with the private power companies the primary aim of which is to produce profits for investors; or should it be an abundant supply of power at the lowest possible cost for rural consumers? Should the rural electric co-operatives continue to be able to provide a yardstick of electric rates for the nation?

"The Mid-West board believes that a program which seeks only 'parity of rates' with the private power companies will destroy the possibilities for achieving low cost power by most if not all of the rural electric co-operatives, and of furnishing a yardstick beneficial to consumers served by private power companies.

"Even with 2 per cent loan funds, the debt service requirements of the rural electric co-operatives are as great a proportion of their investments and a much greater proportion of their revenues than these same requirements for the power companies. The power companies, through their retail rates, are able to obtain substantial amounts of their new construction money directly from their consumers, and without recourse to borrowing. The rural electric cooperatives could not possibly use this device without drastically increasing their rates, as the NRECA study points out.

"The Mid-West board believes that there are great dangers involved in opening the REA Act to amendment. The Act, as it exists, has admirably and efficiently served the purpose of rural electrification. The opponents of REA would like nothing better than a chance at amending the Act.

WARNS AGAINST HASTY ACTION ON PROPOSAL

"The Mid-West board strongly urges that every rural electric co-operative examine the effect of higher interest rates upon its long-range operations and costs, particularly on the rates their consumers will need to pay. The board believes that these effects of the NRECA proposals require intensive study before action is taken by the NRECA proposals.

"The Mid-West board strongly urges rural electric co-operatives ask searching questions about these proposals and that it refer any questions to knowledgeable sources, including state-wide organizations and its Congressional delegation."

[From the People's Voice, Sept. 17, 1965]

In Telegram to Regional Co-op Meeting in Anchorage..

PRESIDENT URGES HIGHER INTEREST RATES ON RURAL ELECTRIC LOANS

(By Gretchen Billings)

With the full force of the President of the United States behind it, a resolution that would increase interest on federal loans to rural electric co-operatives was accepted at the Region IX meeting of the National Rural Electric Cooperative Association meeting in Anchorage, Alaska, last week. (For background, see Voice, Aug. 27 & Sept. 3).

The resolution which calls for changes in financing the rural electrification program was passed at the close of the first of 13 regional conventions where the issue will be considered.

Proposed by the Board of Directors of NRECA, the resolution was the main subject of discussion at the two-day meeting in Anchorage. It was promoted and supported by NRECA General Manager Clyde Ellis and his staff in presentations to the delegates and members, and by Norman Clapp, Rural Electrification Administrator. Immediately prior to the final vote on the resolution the lengthy telegram from President Johnson urged delegates to approve such a plan.

PRESSURE FROM THE TOP RESENTED

Bucking the imposing pressure of the administrative arm of government and their national organization was a small group from Montana and Alaska. The small minority opposition kept discussion alive for over an hour in the face of overwhelming odds and almost certain defeat which must have been obvious to them early in the convention.

In discussing the futility of fighting such a formidable force, the determined opposition group told your VOICE reporter they were not willing to accept the conclusion that in a people's program the decision would be forced on them from the top down. No matter how small it might be, they said, they must make their influence felt.

The concepts which the NRECA resolution "exhort the Congress and the Administration to recognize" and for which their "active support" is sought include:

1. Retention of the REA program, in its present form and including 2% financing at a level of not less than $400 million per year for those systems to which it is an essential factor in carrying out their program objectives.

2. An intermediate financing plan from an REA revolving fund, free of crippling restrictions now contained in the act . . . at an interest rate equal to the cost of money to the government, to some of those more mature systems which can meet such interest rates. (Estimated at 3-4 per cent).

3. An arrangement which will make it possible to bring private financing into the program at acceptable and practical terms.

On the REA financial picture President Johnson said, "In the view of many observers it is reasonable to expect that your requirements for new capital in the years ahead will exceed amounts that can be provided through the traditional REA loan program . . . I believe we must work on a solution before the time of crisis arrives".

DO IT YOURSELF OR HAVE IT DONE

General manager of NRECA, Clyde Ellis, outlined to the delegates the increasing difficulty to convince Congress of the ever-increasing financial needs of the rural electric program. "Our difficulties this year came at a time when we have one of the most friendly Congresses and one of the most sympathetic Presidents of any who have served during the life of our program", he said and then he asked, "What will the story be in the future, when either the President or Congress or both may be hostile, and our loan needs are far greater than they are now and the blacklog bigger"?

He said "coldly realistic facts of life" are that "some Congressmen who are our long-time friends have plainly told us they would go along with fighting for the two per cent for those systems that need it if on the increased amounts we would either pay the cost of money to the government or borrow the increased amounts from the money market".