"LINESVILLE, PA., July 18, 1966. We "DEAR SIR: Thought you would like to know what the REA does for us. have the following things that are run by your REA: "1. Stove; "2. Refrigerator; "3. Freezer; "4. Sweeper; "5. Washer and dryer; "6. Yard light; "7. Shower in the basement; "8. Bathroom; "9. Two hot water heaters at barn and house; "10. Three fans in barn and two in house; "11. Controls on furnace; "12. Two deep well pumps, one at house and one at barn; "13. Gutter cleaner at barn; "14. Silo unloader; "15. New hay elevator and bale carrier (two new heavy motors in hay mow); "16. Bulk tank; "17. Milking machine; "18. Fogger fly equipment; not to mention small household appliances such as irons, coffee pots, roaster, skillets, two radios, T.V., etc. and so many lights in the barn, milk house and the house. We have small electric heaters for milk house and house. "Now you see REA is really our hired man. ice we have had these many years. Thank you for the wonderful serv "Mrs. CLAUDE M. SMITH." Mrs. Smith's letter also shows us how the rural electrification program has benefited all Americans, not just those served by an REA financed cooperative. Rural electrification has made mechanized farming possible and economic. This in turn has been a major reason why we can now boast an economy of abundance, freedom from famine, and comparatively lower food costs. The rural electrics must increase the generation, transmission, and service facilities to meet these growing power needs. The rural electrics in this respect are no different from the commercial companies. However, a new financing mechanism must be provided so that it will be possible to meet these growing power needs. The rural electrics will need an estimated $8 billion in new equipment and facilities in the next fifteen years. I cosponsored S. 3720 because it will provide for the future needs of the rural electrics. The Federal government cannot realistically be expected to provide this $8 billion through the existing two percent loan program. New credit sources must be developed. The bill would do this through the Rural Electric Bank, which in addition to Federal contributions would sell stock to cooperatives and borrow money on the open market. This bill meets many of the objections of those opposed to the rural electrification. It will move away from the two percent money wherever possible and rural electrics will pay an interest rate more closely approximating that prevailing in the open market. The bill also provides the machinery whereby the rural electrics will eventually become independent of Federal control and Federal financing. If the needs of rural America are to be met, there must be a firm commitment to rural electrification and telephone system development. S. 3720 would make this commitment. I want to assure the subcommittee of strong support for this legislation and express the hope that we will be able to point to this supplemental financing legislation as one of the accomplishments of the Second Session of the 89th Congress. STATEMENT OF HON. EDMUND S. MUSKIE, A U.S. SENATOR FROM THE STATE OF MAINE Mr. Chairman: I welcome this opportunity to express my support of S. 3337, a bill which would amend the Rural Electrification Act, to facilitate the extension and improvement of rural electric and telephone service, and to strengthen and stabilize rural electrification and telephone systems by supplementation of the existing sources of Federal financing as provided by titles I and II of the Rural Electrification Act, to furnish additional sources of capital funds. This bill is timely, and it is necessary. For the past several years the capital needs of our rural cooperative systems have grown faster than the REA funds authorized by Congress can meet. In 1964 the NRECA, at the request of rural cooperatives throughout the country, undertook studies to determine the best possible ways of meeting these increased financial needs. S. 3337 is the result of these extensive studies which produced two major conclusions: that many rural electric systems must continue to have long-term, two percent capital available to them in order to survive at the same time that other rural electric systems can afford to pay a higher interest rate in order to obtain badly needed growth capital. The establishment of a Federal Electric Bank, provided for in Title IV of S. 3337, will make the needed capital available to those REA cooperatives in rapid growth areas, but will also continue to provide the long-term, two percent loans to those co-ops which still must have them to survive. S. 3337 also provides for the establishment of a Federal Telephone Bank, similar to the Federal Electric Bank. These banks are not a revolutionary idea. They would be similar to the highly successful credit institutions of the Farm Credit Administration. Both Banks will have government help during their beginning years, but will have REA staff in REA localities from their inception. Mr. Chairman, one of the most noteworthy aspects of S. 3337 is that it is designed to help pave the way for the eventual financial independence of the entire REA system. The structure of the Federal Electric Bank encourages the rural electric systems to buy back the Federal share of stock as soon as they are financially able by stipulating that the control and operation of the Bank shall be turned over to these systems as soon as the Federal share is less than fifty percent. Furthermore, the loan rates of this Bank will be geared to the two types of rural electric systems which will borrow from it. It will provide loans at an "intermediate" level with an interest rate geared to the cost of the money to the government. This will assist those systems which the NRECA study found still to be in need of long-term, low-interest rates. A higher "developmental" loan rate will reflect the ability of co-ops in rapid growth areas to pay for the cost of capital from various sources, including the open money market. Mr. Chairman, I believe that this bill is necessary if we are to provide for the growing needs of our vast rural areas. We cannot afford to overlook these needs, which have been estimated to amount to about $9.5 billion during the next fifteen years. And we have a responsibility to help our REA systems help themselves to eventual financial independence. S. 3337 provides for this independence, and it will encourage this growth. I commend this bill to your Committee, and urge its speedy adoption. STATEMENT OF HON. WILLIAM PROXMIRE OF WISCONSIN, A U.S. SENATOR FROM THE STATE OF WISCONSIN Mr. Chairman and members of the Subcommittee on Agricultural Credit and Rural Electrification. I share your interest in the sound and orderly progress of the REA electric and telephone loan programs, which have meant so much to the economic and social progress of our farmers and other rural Americans. During the 31 years since the rural electrification program was established, our Nation's 1,000 rural electric cooperatives-with the help of Federal loans— have virtually erased the vast difference in living and working conditions which once existed between the farmer and his city cousins. And just as the rural electric co-ops have brought light and power to rural America, so has the REA rural telephone program extended the benefits of modern telephone service to rural residents. Electricity and dial telephones are not luxury items in today's agriculture. They are essential tools which enable our farmers to produce the abundant supply of high-quality food and fiber needed by our own population and to aid the hungry people of the world. Since 1947, farm output per man hour has increased 185 percent as compared to an increase of 65 percent in the other sectors of the economy. This phenomenal increase in farm output could not have been accomplished without the availability of reasonably-priced electricity to power the many kinds of electrical equipment now found on our farms. Mr. Chairman, I am sure you are all aware of the great role that dairying and cheesemaking play in the agricultural economy of my home state of Wis consin. In America's Dairyland, as well as in the other dairy areas of the United States, our high-quality milk could not be produced without adequate electric power to provide the "muscle" for efficient, sanitary handling of this important and highly-perishable commodity. Not too long ago, electrically-powered bulk milk coolers dramatically improved the farm-to-market handling of milk, which previously went to market in cans and was handled over and over again before reaching the pasteurizing machines. And bulk milk cooling is only the beginning. At a recent dairy school, dairy experts saw a wall-mounted "electrobrain" automatic washing device for rinsing, washing and sanitizing pipelines, thus bringing an even higher degree of push-button sanitation to the dairy farm. High standards of lighting are becoming commonplace in the dairy barns of our state. Larger vacuum pumps and motors for 2-inch vacuum lines used in mechanical milking operations are now being installed. Under-the-cow illumination for lighting the udders; liquid manure handling; refinements in pushbutton feed handling; electric fly killing and electrically-heated milking parlors are just a few examples of why the rural electric load grows and grows, doubling every eight to ten years. Some critics claim that the rural electrification program has already accomplished its purpose, but not one dairy farmer in Wisconsin is satisfied that he has the last word in modern dairying. To stay competitive, to meet the high standards of quality milk production, he must adopt every new advance the dairy business finds. And that generally involves the use of more and more electric power. Wisconsin's 30 rural electric cooperatives have been experiencing a tremendous growth in the use of electricity by their over 100,000 consumer members. Whereas in 1948, the average rural electric consumer in the state used 166 kilowatt hours of electricity a month, he was using a monthly average of 663 kilowatt hours in 1965. In the early days of rural electrification, much of the electricity was used in the farm home to furnish light and power to operate household applicances. Today, the big demand for electricity is coming from larger and more varied farm uses. As our family farms increase in size, which is the national trend, they will require larger and larger supplies of electric energy. In order to keep pace with these growing power needs of their consumermembers, the rural electric cooperatives are investing ever-increasing amounts of capital in improved facilities to insure that dependable, adequate and lowcost electricity will continue to be available in rural America. The investment banking firm of Kuhn, Loeb and Company of New York City has estimated that the rural electric systems will require $9.5 billion for this purpose in the next 15 years. That figure is double the amount of money loaned under the REA electric program during its first 30 years. The need for heavy use of capital is not confined to the rural electric cooperatives. It is characteristic of the entire electric power industry. According to the Federal Power Commission's National Power Survey, issued in late 1964, the annual capital expenditures of all segments of the electric power industry represent over 10 percent of the total of such spending by all American industries. Its capital assets are more than 60 percent greater than those of its nearest rival. Currently, the commercial power companies are spending nearly $5 billion a year for additional, expanded and improved facilities. Robert T. Person, Past President of the Edison Electric Institute, has estimated that the investorowned electric utilities will spend about $12 billion in 1980 alone, a figure which is 17 times as much as the 1980 capital requirements of the rural electrics. It is obvious that the rural electric cooperatives will have to invest everincreasing amounts of capital in their systems in order to fulfill their utility responsibility in the rural areas they serve. It is equally obvious that the Federal government will not be able to provide all of the funds needed under the present REA 2 percent interest loan program. Mr. Chairman, I believe that the supplemental financing proposal embodied in S. 3720 offers a sound and workable solution to this problem. Its provisions are fair to the rural electric and rural telephone systems and to the Nation's taxpayers as well. By retaining the 2 percent REA loan program for those cooperatives which must have it in order to serve sparsely settled rural areas, we will insure that the farmers and other rural residents in those areas will continue to have adequate utility service. And by establishing Rural Electric and Rural Telephone Banks, we will enable the more financially mature cooperatives to obtain the growth capital they must have at interest rates which are geared to their ability to pay while still achieving the goals of the rural electrification and rural telephone programs. The concept of banks for rural electric and rural telephone systems is founded on the long experience of the Farm Credit Administation in tapping the private money market for capital loan funds needed by farmers and farm-related enterprises. Behind this bill lies more than two years of expert study of ways and means of meeting the growth capital needs of the rural electric cooperatives without destroying the basic objectives of the existing rural electrification program and its outstanding record of service to rural America. The proposed new approach contained in S. 3720 to supplement the present program with higher-interest loans will furnish the necessary bridge to what will eventually be banks owned and operated by their rural electric and telephone borrowers without any financial assistance from the Federal government. I feel that this proposal, made by the borrowers and beneficiaries of the REA program in order to become self-sufficient-while at the same time discharging their responsibilities to farmers and other rural consumers who cannot get utility service in any other way-is a sound, businesslike way of solving the problem presented by the growing capital needs of these rural systems. Mr. Chairman and members of the Subcommittee, the rural electric cooperatives of Wisconsin join those throughout the land in asking you to approve this constructive legislation. It can well be the most outstanding law in its economic and social implications enacted during this session of the Congress. Thank you. STATEMENT OF ROBERT G. ASHEIM, ADMINISTRATIVE VICE PRESIDENT, BLACK HILLS POWER AND LIGHT COMPANY, RAPID CITY, S.D. Black Hills Power and Light Company is an investor-owned electric utility serving the Black Hills area of South Dakota and Wyoming. The following testimony on behalf of the Company is to express opposition to the Federal Electric Bank Bills, S. 3337 and the draft bill proposed by the Department of Agriculture. At the outset, I want to remind you that Black Hills Power and Light Company has always cooperated with the REAs in an effort to solve controversial problems and provide for the orderly development of electric facilities. For example, the REAS and Black Hills Power and Light Company developed jointly an agreement whereby two generating units were installed in our existing generating plants to guarantee low cost electric energy for REA consumers. Recently a series of conferences by representatives of municipal electrics, REAS and investor-owned utilities held, at the request of South Dakota Governor Nils Boe, resolved territorial controversies. This compromise agreement, enacted into law by the South Dakota legislature, is beneficial to the citizens of our state and the entire electric industry. This fine relationship can be greatly endangered by the enactment into law of the proposed Federal Electric Bank. The need for a new method of financing is completely unnecessary at a time when virtually all rural people in the nation have central station service. The Federal Electric Bank proposal tends to change the concept of the REA program. It bypasses congressional authority and control and substitutes extremely vague guidelines with apparent unlimited authority granted to the REA Administrator-Governor. Criteria for authorization of loans is not specified in this proposed legislation and if enacted, can jeopardize existing facilities of existing power suppliers, including municipal electrics, REAS, investor-owned utilities and others. Because of its possible far-reaching effects on the total electric industry and other segments of the economy, further consideration of this proposal should be delayed until such time as studies and evaluations can be completed by all concerned. STATEMENT OF WALT BERNOSKI, SECRETARY, IOWA UTILITY WORKERS CONFERENCE; AND PRESIDENT, I.B.E.W. LOCAL UNION 880, SIOUX CITY, IOWA Mr. Chairman and Members of the Subcommittee on Agricultural Credit and Rural Electrification, my name is Walt Bernoski. I am the Secretary of the Iowa Utility Workers Conference representing approximately 6,000 electric and gas utility workers in the State of Iowa. I am also the President of Local Union 880 I.B.E.W., representing some 250 members. 70-671-66- -30 1 vu wling and ready to testify in person against the proposed legislation wideh would mente at Kila, bank and I request that, if additional hearings are held by this Subcourtuitter. I be given the opportunity to so testify. froday, with 2 bout 98 percent of all US, farms receiving central statim eletrie service the original weed has been all but extra usted. The economic context. 100, mus really changed: barely 6 percent of the total population now lives oz farus or derives the bulk of its livelihood from agricultural products, supared to approximately 25 percent just 30 years ago. Yet R.E.A. goes on, and from its "hot" in the Department of Agriculture, seeking new and expanding areas of activity. It has substantially accomplished its express goal of bringing the bezefits of eletrification to the nation's farms. It commands great economie and political power at the state and local level. Approximately 1,000 rural electric cooperatives are scattered throughout the country, with some 15.000 directors who are men of substance in their communities. The REA has a large constituency, some five million consumers of R.E.A.-subsidized power have a vested interest in its preservation and expansion. My observation of the tremendous number of BP.A, personnel lobbying in the House hearings only proves the point that R.E.A. is out to get all the taxpayers' money 2% or interest free as is possible to obtain. The R.E.A. buttressed by all these factors, as well as by increasing acceptance of the Federal Government's economic role, seems by now to have achieved permanent status as an agency of government. The B.E.A., for all practical purposes, has accomplished what it was established for. However, they are not satisfied to stay within their limits. The deviation of K.E.A. from the original purpose occurs in three main areas: 1. Serving customers in communities with more than 1500 population. 3. Building unnecessary generating plants and transmission lines. This deviation extends into two avenues that are detrimental to employees of investor-owned electric companies. They nullify a wage increase, negotiated with the investor-owned utilities, because of a greater tax payment to the government caused by its subsidizing an industry that should be self sufficient after 31 years of operation. Although by law certain public systems can be organized, it is very difficult to talk to people who head up the various types of public systems, The wages, working conditions, tax exemptions, interest rates, etc., give these public systems an unfair and absolutely unjustified competitive position in the Electric business, To establish a bank of this nature would only open the door to an uncontrolled bureaucratic form of government. Let these public systems pay all the same taxes, the same interest rates, and operate under the same regulations as are placed on the investor-owned companies. And let them pay the same wages, establish the same pension provisions, vacations, insurance, and all the other items that I am allowed by law to negotiate. And the most important factor that is so dear to free independent employees and employers, the right to be allowed to express yourself and negotiate with each other with the protection of the N.L.R.B. Statistics prove that a majority of the public systems only give token recognition to union organizing efforts. Union organized employees pay a higher tax from their pay checks to help subsidize an industry that is in a very favorable competitive position because their administrators oppose union activity through subversive methods. In reality, the government through an R.E.A. Banking Bill is forcing the investor-owned utility employee to destroy his own employment. I am sure that this Banking Bill will eventually destroy a tax paying, free enterprise system that was built by industrious, hard working people in the years since Thomas Edison's inventive mind created the light bulb. The drive to create a public power district system in the State of Iowa is under way and easy low interest, tax free money will speed this situation into being. There is no doubt in my mind. from my personal experience, that my job and the jobs of thousands of others of Local I.B.E.W. members are on the line for survival because of wasteful duplication of systems that have been adequate throughout all these years. Public systems are duplicating transmission lines in the State of Iowa that are unnecessary. In this connection, I call your attention to Exhibit “A” attached to my statement, which is a map from the Iowa State Commerce Commission showing the principal electric transmission lines and generating stations in the State of Iowa. In the western part of the State where my Local Union has jurisdiction. I have outlined in red the duplicating federal lines that are in existence now through part of our service area. The trend for Federal Bureau control is obvious. The pressures on small towns by so-called "friends of the small businessman" is also obvious. |