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Mr. PoAGE. At this time, we will call Mr. Rogers, because I think his testimony will fit right in here with this testimony.

Mr. Rogers? STATEMENT OF R. BAXTER WILSON, PRESIDENT, MISSISSIPPI

POWER & LIGHT CO.; AS PRESENTED BY ALEX ROGERS, VICE PRESIDENT AND TREASURER, MISSISSIPPI POWER & LIGHT CO., JACKSON, MISS.

Mr. Rogers. Mr. Chairman and members of the committee, my name is Alex Rogers, and I am vice president and treasurer of the Mississippi Power & Light Co. I am appearing on behalf of Mr. R. Baxter Wilson, president, Mississippi Power & Light Co.

I ask permission of the committee to file his complete statement, and with the permission of the committee I will summarize his statement.

Mr. Poage. Without objection, that permission will be granted.

Mr. ROGERS. Our company is an investor-owned electric utility serving directly more than 203,000 customers (of whom more than 50,000 are rural customers) in 45 counties in western Mississippi. Indirectly, we serve more than 87,500 additional customers through the Company's wholesale electric contracts with eight rural electric power associations and six municipalities.

We appear here today in opposition to the proposed legislation, H.R. 14837, with the strong conviction that a Federal Bank for rural electric systems as proposed is not necessary, would result in unregulated and unnecessary duplication of facilities and would remove congressional surveillance over the rural electrification program. We also have the firm conviction that adequate time has not been set aside to properly study the action which is recommended by this legislation.

This does not stem from any basic opposition to the rural electrification program. We are in accord with the original intent of Congress in providing funds for loans to furnish electric energy to customers in rural areas where it was not economically possible to receive power from investor-owned suppliers.

During 1965 we served eight rural electric cooperatives at fifty points of delivery, selling them nearly 456 million kilowatt-hours of electricity at an average rate of 7.07 mills per kilowatt-hour. Our contracts with rural electric association contain no limitations as to the use of the electric power we sell them. We have agreed to sell the rural electric cooperatives we serve all the electric power they may need to meet their customers' requirements. Five-year contracts are in effect with the cooperatives we serve, although we have offered contracts of ten years' duration.

H.R. 14837 proposes the Federal Government subscribe $750 million to the proposed bank.

In view of the fact that 98 percent of the farms of America have electricity available there is no need for this additional financing.

As shown by the figures of the United States Bureau of Census, the farm population of the United States is decreasing. In Mississippi the rural population declined from 1,670,971 in 1930 to 1,357,336 in 1960. Mississippi State University estimates that the State's 1965 rural population has declined further to a level of 1,190,595. In 1930, there were 317,000 farms in Mississippi. In 1963 this had dwindled

to 119,000 farms. In view of the tremendous decrease in the number of farms in the United States, less money should be required to maintain and furnish electric service to rural areas, which is the purpose for which the REA was created.

It is clear that the Congress of the United States in establishing the program intended that rural electric cooperatives should serve rural areas which are not receiving central station service and which could not be served economically otherwise. Despite this, many of them are serving large industrial Ioads. Contrary to the expressed intent of Congress, rural electric cooperatives are serving customers inside the corporate limits of cities and towns, which our Company has always been ready, willing and able to serve. In fact, in Mississippi one rural electric cooperative presently serves more than 250 customers within the corporate limits of the City of Jackson, Mississippi, a metropolitan city in excess of 175,000 population.

Utility operating margins of the 27 Mississippi rural cooperative borrowers in 1964 had an average return of 5.2 per cent on net plant. Net operating margins had an average reutrn of 9.3 per cent on equity. The average equity of this group was 39.8 per cent. The eight borrowers whom we serve had an average return of 5.3 per cent on net plant, while net operating margins had an average return of 11.9 per cent on equity. The average equity for these eight was 30.2 per cent.

Certainly, as a group the rural electric cooperatives are not in financial difficulty and their operating results are such that they could go into the open market and borrow money on the same basis as any other business. In fact, it would appear they are in a stronger borrowing position than many who must borrow private funds.

Certainly there is neither justification nor need for the appropriation of tax money for generating and transmission systems in the State of Mississippi.

We respectfully suggest that if the rural electric cooperatives are allowed to continue serving all types of electric power loads, are allowed to continue operating in municipalities and are encouraged to build generating and transmission system, then they should be required to finance their operations on the same basis as investor-owned companies. If the rural electric cooperatives, through their actions, assume a full electric utility status then there can be no basis for further appropriations by Congress because they, the rural electric cooperatives, should and can secure money for financing their operations on the same basis as the investor-owned electric utilities with whom they are in competition. In that case the amount of money provided by Congress for the rural electrification program could be substantially reduced rather than increased as is proposed by this legislation.

(The prepared statement of R. Baxter Wilson reads in full as follows:)

STATEMENT OF R. BAXTER Wilson, PRESIDENT OF MISSISSIPPI POWER & Light Co.,

VICE PRESIDENT OF MIDDLE SOUTI UTILITIES, INC. The opportunity of appearing before your Committee is deeply appreciated. Mississippi Power & Light Company's General Offices are located in Jackson, Mississippi. Our Company is an investor-owned electric utility serving directly more than 203,000 customers (of whom more than 50,000 are rural customers) in 45 counties in western Mississippi. Indirectly, we serve more than 87,500

additional customers through the Company's wholesale electric contracts with eight Rural Electric Power Associations and six municipalities.

We appear here today in opposition to the proposed legislation, H.R. 14837, with the strong conviction that a Federal Bank for Rural Electric Systems as proposed is not necessary, would result in unregulated and unnecessary duplication of facilities and would remove Congressional surveillance over the rural electrification program. We also have the firm conviction that adequate time has not been set aside to properly study the action which is recommended by this legislation.

This does not stem from any basic opposition to the rural electrification pro gram. We are in accord with the original intent of Congress in providing funds for loans to furnish electric energy to customers in rural areas where it was not economically possible to receive power from investor owned suppliers.

These loans were at below cost interest rates and borrowers were virtually free from taxes.

In the Western Mississippi territory, where we are privileged to do business, Mississippi Power & Light Company has cooperated with the ten rural electrie cooperatives located in that area ever since the inception of REA.

During 1965 we served eight rural electric cooperatives at fifty points of delivery, selling them nearly 456 million kilowatt-hours of electricity at an average rate of 7.07 mills per kilowatthour. Our contracts with Rural Electric Associations contain no limitations as to the use of the electric power we sell them. We have agreed to sell the rural electric cooperatives we serve all the electric power they may need to meet their customer's requirements. Five-year contracts are in effect with the cooperatives we serve, although we have offered contracts of ten-year duration.

HR 14837 proposes the Federal Government subscribe seven hundred and fifty million dollars to the proposed bank. Loans could be granted for the purpose of furnishing or acquiring generating plants, transmission and distribution lines, and other facilities. In view of the fact that 98% of the farms of America have electricity available there is no need for this additional financing. The 2% money now available through the REA Administrator is not eliminated. This would still be available to any cooperatives who are not able to borrow in the open market. Many cooperatives, however, are in a position at this time to borrow money for their reasonable needs on the open market.

As shown by the figures of the United States Bureau of Census, the farm population of the United States is decreasing. In Mississippi the rural population de clined from 1,670,971 in 1930 to 1,357,336 in 1960. Mississippi State University estimates that the state's 1965 rural population has declined further to a level of 1,190,595. In 1930 there were 317,000 farms in Mississippi. In 1963 this had dwindled to 119,000 farms. In view of the tremendous decrease in the number of farms in the United States, less money should be required to maintain and furnish electric service to rural areas, which is the purpose for which the REA was created. In view of this, it is difficult to understand why the great sums of money which are included in HR 14837 are necessary if it is planned that REA stay within the confines of the intent of Congress.

It is clear that the Congress of the United States in establishing the program intended that rural electric cooperatives should serve rural areas which were not receiving central station service and which could not be served economically otherwise. Despite this, many of them are serving large industrial loads. Con. trary to the expressed intent of Congress, rural electric cooperatives are serving customers inside the corporate limits of cities and towns, which our Company has always been ready, willing and able to serve. In fact, in Mississippi one rural electric cooperative presently serves more than 250 customers within the corporate limits of the City of Jackson, Mississippi, a metropolitan city in excess of 175.000 population.

Utility operating margins of the 27 Mississippi rural cooperative borrowers in 1964 had an average return of 5.2% on net plant. Net operating margins had an average return of 9.3% on equity. The average equity of this group was 39.8%. The eight borrowers whom we serve had an average return of 5.3% on net plant, while net operating margins had an average return of 11.9% on equity. The average equity for these eight was 30.2%.

Certainly, as a group the rural electric cooperatives are not in financial difficulty and their operating results are such that they could go into the open market and borrow money on the same basis as any other business. In fact, it would appear they are in a stronger borrowing position than many who must borrow private funds.

We are opposed to the establishment of a Federal Bank for Rural Electric Systems since this would result in the taxpayers of the United States furnishing large sums of money to a privileged group who could use the money virtually as they pleased with the taxpayers of the United States paying the cost of the difference in interest rates. Certainly there is neither justification nor need for the appropriation of tax money for generating and transmission systems in the State of Mississippi.

We believe that if the rural electric cooperatives would operate within the original intent of the Congress when it established the Rural Electrification Administration and made funds available at low interest rates so that they could supply electricity in rural areas then this would be a proper and satisfactory situation.

But, if the rural electric cooperatives are to be permitted and encouraged to engage in the electric utility business on a full scale, competing with tax-paying businesses for all types of customers and electric power loads everywhere, then they should be governed by the same rules as the investor-owned electric companies.

We respectfully suggest that if the rural electric cooperatives are allowed to continue serving all types of electric power loads, are allowed to continue operating in municipalities and are encouraged to build generating and transmission systems, then they should be required to finance their operations on the same basis as investor-owned companies. If the rural electric cooperatives, through their actions, assume a full electric utility status then there can be no basis for further appropriations by Congress because they, the rural electric cooperatives, should and can secure money for financing their operations on the same basis as the investor-owned electric utilities with whom they are in competition. In that case the amount of money provided by Congress for the rural electrification program could be substantially reduced rather than increased as is proposed by this legislation.

We respectfully suggest that this legislation is not necessary, but in any event that more time be permitted all parties affected by this legislation to ascertain the need and the costs of such a program as is proposed. We also request that this Committee take no action until sufficient time has elapsed so that a full and careful study can be made of all the facts and information and data concerning the requirements and effects of the legislation be fully aired.

Again, we thank you for the privilege of appearing before your Committee.

Mr. Poage. We are delighted to have had you here to present this statement. Are there any questions?

If there are no questions, Mr. Rogers, we are very much obliged to you for being here.

Mr. Rogers. Mr. Andrus, president of the Middle South Utilities, Inc., the parent company of the Mississippi Power & Light Co., the Arkansas Power & Light Co., the Louisiana Power & Light Co., and the New Orleans Public Service, is unable to attend today, and I have a very brief statement of Mr. Andrus which I would like to file without comment, if I may, sir.

Mr. Poace. Without objection, it will be included in the record at this point.

(The statement of Gerald L. Andrus follows:)

STATEMENT OF GERALD L. ANDRUS, PRESIDENT OF MIDDLE SOUTI UTILITIES, INC.

Mr. Chairman, members of the committee, I am Gerald L. Andrus, President of Middle South Utilities, Inc.

Nothing I say will be a repetition of testimony of other witnesses for the investor-owner electric utility industry.

The four operating companies in the Middle South System serve over 1,017,000 electric customers in Arkansas, Louisiana and Mississippi.

For 1965 the Middle South System is paying the federal government taxes aggregating over $25,000,000 and is paying the governments of the three states where it operates taxes aggregating over $25,000,000.

The equity capital required to provide the service to the customers of the System has been supplied by over 34,000 Middle South stockholders, located in every state in the Union. The capital required to provide the service of the System, whether debt or equity has been raised on the credit of the Middle South operation, in the free market and under the competitive bidding rules of the Securities and Exchange Commission. That capital, aggregating $591,000.0%) since 1949 when Middle South was organized, has been forthcoming at reasonable rates, just as I believe the REAs, based upon their own operations, could raise their capital at reasonable rates in the free market if they would face up to the fact that they have grown up and are now adults.

The more than 1,017,000 customers of the Middle South System pay rates that of necessity include the tax costs and money costs of the Middle South System, and the 34,000 stockholders of Middle South have invested in an enterprise which must recover tax costs before any return on their investment can be earned. I think, therefore, that I may confidently speak in behalf of the economic interests of the approximately 1,050,000 citizens and voters who constitute customers of and investors in the Middle South System.

With that background, I am going to be brief. I don't want the brevity of my remarks, however, to be taken as an indication of a half-hearted interest in the subject before this committee.

I endorse wholeheartedly the testimony that has been given by witnesses on behalf of the investor-owned electric industry. I adopt as my own the testimony that has been given on behalf of Arkansas Power & Light Company and Mississippi Power & Light Company, which are operating companies in the Middle South System. Then, in the interest of sparing this Committee, I will add nothing to the testimony I have adopted and endorsed. But I do ask the Committee to accept my remarks as being sincere and emphatic in inverse proportion to their length.

Thank you for this opportunity to appear before you.

Mr. CALLAN. I request permission to insert a short statement into the record at this point.

Mr. Poage. Without objection it will be inserted into the record at this point.

Mr. ABERNETHY. If I may make inquiry of my colleague, what is the statement that he is inserting, is it in response to some statement that has been made?

I notice that you have filed a statement behind each one of the witnesses, and nobody knows what the contents of them are.

I presume they have reference to the operations of these utilities? Mr. CALLAN. That is correct.

Mr. ABERNETHY. I think that in all fairness they ought to be apprised of what is being inserted.

Mr. CALLAN. I can tell you.

Mr. ABERNETITY. I am not going to object, but I do not think it ought to be put in the record without telling us what is being said about these companies.

Mr. GATHINGS. I do not understand this procedure.
Mr. ABERNETHY. I do not, either.
Mr. CALLAN. I was trying to save time.
Mr. ABERNETHY. I know.

Mr. Poage. Any member can object to anything going into the record, and nothing can go into the record to which there has not been unanimous consent.

Is there unanimous consent to insert this statement by Mr. Callan?

Mr. ABERNETHY. Unless the company concerning whom the statements are made have an opportunity to reply to them, I will object. I think they ought to have that opportunity.

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