bank would have to have Government capitalization at about $500 million.

I think, gentlemen, with those brief remarks I shall close and invite your questions.

Senator TALMADGE. Senator Ellender?

Senator ELLENDER. I have noticed you have the National Telephone Cooperative Association and then the National REA Telephone Association. Is there any conflict between the two?

Mr. PETERSON. There is no conflict.

The National Telephone Cooperative Association is made up only of the cooperative type borrowers, whereas our association is made up of both.

Senator ELLENDER. Of both?

Mr. PETERSON. Both cooperative and commercial, but mainly the commercial type.

Senator ELLENDER. Are you all in the same territory, or what? Or are you separate?

Mr. PETERSON. No, we are separate organizations.

Senator ELLENDER. I understand. Do you have the same territory? Mr. PETERSON. Yes.

Senator ELLENDER. Are you in the same territory?

Mr. PETERSON. Yes, sir: that is right.

Senator ELLENDER. I am just wondering why the two separate associations.

Mr. PETERSON. Well, I think there is a historic reason for that, Senator Ellender. You may recall, both you and Senator Holland, that in the hearings of 1949, in this very committee room, there was much agitation about this telephone amendment. One of the organizations, which has testified here today, testified at that time in opposition to it. Today, we are very thankful that the United States Independent Telephone Association is supporting this wholeheartedly. I trust that gives you the answer to why there are two.

Senator TALMADGE. Senator Holland?

Senator HOLLAND. No quetsions.

Senator TALMADGE. Thank you very much. Mr. Peterson, for your valuable contribution.

We shall go off the record.

(Discussion was had outside the record.)

Senator TALMADGE. Mr. Harmon is recognized for any rebuttal testimony he may have.

Mr. HARMON. I have no rebuttal testimony Mr. Chairman, however, I would like to amend my statement to concur in the remarks of the other two telephone witnesses regarding CATV.

Senator TALMADGE. Your statement will be so amended.

Thank you very much, gentlemen. This completes the hearings which we had scheduled and announced. We have 35 or 40 additional witnesses who have requested to be heard. Their testimony will be cumulative in scope. We have advised them that if and when additional hearings will be held, they will have an opportunity to appear. I would urge that any of them who see fit to do so, file statements for the record. We, of course, have requested substantial additional data, and I think that it would be wise to leave the record open for

perhaps 2 weeks, until September 2, to give everyone an opportunity to file any statement as they may see fit to file and to file additional substantive data that this committee has requested.

Senator ELLENDER. Mr. Chairman, in that connection, may I suggest that our staff notify those that have not been heard and let them know specifically?

Senator TALMADGE. I think that is a very fine suggestion. We will communicate with them and tell them that the record will be open until September 2 for the purpose of receiving statements filed, and in the event that hearings are further scheduled, they will be given an opportunity to appear personally.

Does that agree with you?

Senator HOLLAND. Yes, sir.

Senator TALMADGE. With that, the subcommittee stands in adjourn

ment.

Senator HOLLAND. I want to congratulate the chairman for his fine conduction of the hearing.

Senator TALMADGE. I want to congratulate you and my chairman, because if it had not been for the two of you and Senator Cooper, I would have been alone.

We stand adjourned.

(Whereupon, at 12 noon, the subcommittee stood in adjournment.) (Statements filed for the record are as follows:)

STATEMENT OF HON. JOSEPH S. CLARK, A U.S. SENATOR FROM THE STATE OF

PENNSYLVANIA

Mr. Chairman, the rural electrification program has made it possible for families and businesses in rural America to enjoy the benefits of modern technology. In many countries there is a vast cultural and technological gap between rural and urban areas. We are fortunate indeed that this is not the case here in the United States. But if rural areas are to continue to enjoy the benefits of labor-saving devices, the rural electrification and telephone program must be expanded.

Before the passage of the Rural Electrification Act in 1936, only slightly over ten percent of the farms in the United States had electricity. Today, over ninety-eight percent have electricity. In Pennsylvania the pattern was similar Only twenty-four percent of the farms had electric service in 1935, while now over ninety-eight percent have it.

The rural electric cooperatives have been responsible for much of this increase. Although virtually all farms in the United States have electric power, the work of the Rural Electrification Administration and the rural electric cooperatives is far from finished. The power needs of rural areas will grow just as fast as those of the urban and suburban areas.

Nationally, the average monthly consumption of electricity by REA customers was 242 kilowatt-hours. By 1965 this had risen to 481 kilowatt-hours and the demand continues to rise. In Pennsylvania the power needs of the rural electrics have been increasing just as fast. Average monthly consumption rose from 263 kilowatt-hours in 1954 to 435 kilowatt-hours in 1964.

Recently Mrs. Claude M. Smith, Linesville, Pennsylvania, sent me a list of the machines and appliances used in her home and in the operation of the Smith family farm. Mrs. Smith says that all this has been made possible by the rural electrification program. The farm is served by the Northwestern Rural Electric Cooperative Association, the first REA financed cooperative in Pennsylvania. I would like Mrs. Smith's letter included in my testimony because it indicates why the supplemental financing legislation now before this committee is so vital.

“LINESVILLE, Pa., July 18, 1965.

"DEAR SIB: Thought you would like to know what the REA does for us. We 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;

"S. 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 bay

mow):

16. Bulk tank:

"17. Milking machine;

18. Fogger fy 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. Thank you for the wonderful service we have had these many years.

"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 economie. 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 loanshave 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