program completely, not just the 2% financing. They have known in the past and still know that without 2% money, co-ops cannot survive to-day. There are many co-ops that can afford to pay higher interest. They want to with your help. This is why we are proposing a bank for rural electrics so that we can become less and less dependent on Congress in the future years.

Now I would like to point out to you some facts in my own state-the state which has that distinguished Senator, George D. Aiken, one of the great champions of rural electrification. I received a note from a member recently stating he would like an explanation of why members of Washington Electric Cooperative had to pay more for 250 KWH per month than they did on the I.O.U. lines. So I did a little research. Here are the facts I came up with in comparing our cooperative with an investor-owned utility. Their lateset figures that I had available were for 1964, and they are compared to our figures for 1965 giving them an even better advantage.

Their income for 1964 was $15,222,216; they had 66.978 customers making a total income per average consumer of $227.27 per year. The Co-op had an average income per member of $145.00 per year theirs being $82.27 more per year per consumer. So now let's look at the income per mile comparison. They have a total of 5,7231⁄2 miles making a total income for them per mile of $2,659.00 compared with the cooperative's income per mile of $584.00, or $2,075.00 greater income per mile for I.O.U. over the cooperative. My reasons for pointing this out to you is to show why I insist there is a great need for reasonable financing if the rural electrics are to survive. Further—with the board's approval I applied for a loan for the Washington Electric Cooperative in early January of 1966, and as of today, to the best of my knowledge, this loan has not been approved by REA. This has curtailed many of our summer programs such as right-of-way clearing and new extensions at a time when we would normally be doing this work because of our short summer season.

I feel if it is possible to establish a bank for rural electrics that many of these problems would be solved. The cooperatives that could afford to pay the higher interest rates could borrow from this bank and the smaller co-ops with low density would have funds available at 2% when they were needed.

Thank you.

STATEMENT OF G. W. EVANS, PRESIDENT, Kansas GAS AND ELECTRIC COMPANY, WICHITA, KANS.

Pursuant to information supplied to us, we are hereby filing a statement in opposition to S. 3337. If at any time the Sub-committee concludes to permit personal appearances, we request an opportunity to appear and supplement this statement with more detail at that time.

A word of background information may be helpful to the Sub-committee. Both the Rural Electric Cooperatives and the Investor-owned Electric Utilities in Kansas are subject to the rules and regulations of the State Corporation Commission of Kansas. These two groups have worked together in substantial harmony with the Commission, to the end that all electric requirements in the State of Kansas have been met. All of this has been accomplished under the National Electrification Act of 1936.

We are mindful that the electric industry is one of constant expansion. New money is always needed for replacements and growth to meet the everincreasing demands of the consuming public. This applies to both the investorowned companies, and to Rural Electric Cooperatives with equal force. The legitimate needs of marginal cooperatives for these purposes should be supplied, as it has been in the past, under the provisions of the Rural Electrification Act of 1936. We have never appeared in opposition to an R.E.A. appropriation under the 1936 Act.

The highlights of our views on the proposed Electric Bank legislation can be summarized briefly as follows:

(1) Two percent money under the 1936 Act should be continued and limited to marginal Rural Electric Cooperatives.

(2) Electric service is now available to substantially all possible customers in rural territory; and great sums of money, as proposed in this legislation, are not needed to meet the requirements of new electric service or growth in existing electric customers in rural territory now served by the Rural Electric Coopera-tives.

Before enacting any legislation, a careful and in depth study should be made of the real money requirements of R.E.C.'s. Any legislation should be tailored to meet that need only; rather than broaden the scope of the R.E.A. activities over and above that provided for in the present R.E.A. law.

(3) Any new law should limit and confine the proposed financing to strictly rural territory as defined in the present R.E.A. law. The size of towns which

could be served would thus be limited to a population of 1,500.

(4) The Bill should require the borrowing entity to pay income and other taxes on the same basis as corporations.

(5) The chief executive officer ought not to be the R.E.A. administrator. The head of the Farm Credit Administration is suggested.

(6) The last sentence of Section 405 (j) should be deleted. Rather, it should authorize attacks before Federal and State Regulatory Bodies and in the Courtsby any interested party. Such attack ought not to be limited merely to fraud and arbitrary or capricious action; but also include "abuse of discretion".

(7) An amendment should prevail repealing the "preference clause" in all Federal enabling acts (such as 16 (U.S.C. 825s) involving the disposition of Federally generated public power.

(8) We believe Congress should control, as it has in the past, all government subsidized financing. The proposed legislation would effectively destroy all Congressional control.

(9) This proposed legislation has some support on the theory that the burden of Rural Electric Cooperatives' financing would be shifted from the Federal Government to the commercial money market. Actually, the Bill would not effectively shift the burden of financing to the free money market. It would destroy Congressional control, but retain the burden. The result would be to. postpone indefinitely, and probably preclude, actual free money market financing. What has been said of S. 3337 is in a large measure true of S. 3720.

STATEMENT OF EARL EWALD, PRESIDENT, NORTHERN STATES POWER Co.,
MINNEAPOLIS, MINN.

My name is Earl Ewald. I am President of Northern States Power Company, a public utility, operating in the states of Minnesota, North Dakota, South Dakota, and Wisconsin.

I wish to make the following statement for the record in opposition to S. 3337, S. 3720; and any other similar bills that may be before this Committee.

I would first of all like to make clear the policy of Northern States Power Company insofar as REA cooperatives are concerned.

We recognize that the REA cooperatives were established by law to assist in the job of electrifying the farms and rural areas and they have done an outstanding job in this field.

Since the inception of REA, it has been the policy of our Company to cooperate with the REA program in our territory. Most of the distribution cooperatives have been customers of ours since the beginning of the program.

Although Northern States is ready, willing, and able to supply all of the power requirements of the REA cooperatives in our area, we recognize the existence of present G & T cooperatives and their natural desire to extend the REA program to the generation and transmission of power for their rural customers.

Northern States Power Company was instrumental in organizing the Upper Mississippi Valley Power Pool, in which six of 13 members are G & T cooperatives. Our Company was also active in organizing the Mid-Continent Area Power Planners (MAPP), a regional planning organization, composed of seven G & T's, 25 municipals, 14 investor-owned utilities, two public power districts, and a Canadian Crown group.

As a part of these pooling and planning activities, our Company has supported the G&T groups in their requests for REA funds to provide their proportionate share of the area's generation and transmission facilities under plans where all of the benefits of the 2-percent money accrued to them.

Our policy in respect to REA cooperatives has not changed. We support the KEA's in their efforts to obtain adequate capital to carry out the original purposes of the REA Act. We are not opposed to 2-percent money for these purposes. If the Congress in its judgment feels that it can no logner provide adequate amounts of 2-percent money for the legitimate requirements of the REA cooperatives, we 、 would support an alternate plan, if it retained the necessary controls of Congress..

The testimony of other opponents to these bills has explained in detail the reasons for our conclusion that the adoption of any of these bills would result in the loss of congressional control, which could have far-reaching adverse effect on the entire electrical industry as well as the entire tax structure of the United States. We believe that the majority of the members of REA cooperatives in our area are concerned only with an adequate source of capital for their legitimate needs and would also oppose these bills, if they fully understood what we consider to be the long-range implications.

We respectively suggest to this Committee that, because of the complex nature of these proposed bills and the potential effect on the electric industry and on the whole economy of our nation, a complete study should be made of the longrange needs of the REA cooperatives. This study should also include the develop ment of a sound comprehensive plan to finance these needs which recognizes the right and responsibilities of the REA, the other segments of the electric industry, and Congress.

STATEMENT OF CARL J. FORSBERG, CHAIRMAN OF THE BOARD, WISCONSIN POWER & LIGHT CO., MADISON, WIS.

The "Federal Electric Bank” bills as now proposed represent a revolutionary departure from the nation's "Rural Electrification" program and established business concept which is against the best public interest.

This legislation authorizes subsidized Government competition to the free enterprise American business system without any effective congressional control or restrictions except as to size. Therefore, its implications and precedence go beyond being confined to the electric utility business alone.

This legislation seeks to change the entire concept of the "Rural Electrification" program as has been carried out to bring the benefits of central station electric service to those rural areas not served.

REA would be a tax exempt, subsidized federal electric utility program in direct competition with and replacing the investor-owned, tax paying enterprise under this legislation. All types of electric users, whether now supplied or not, could be supplied with subsidized capital provided by the new "Federal Electric Bank" with a possible loaning capability of about $21 billion ($21,000,000,000)— one of the largest of such banks in the world.

Public Power advocates are using the "Rural Electrification" program to expand beyond the purposes it was set up to serve. Hidden in the complexity of these bills, they seek to use the REA program to further extend subsidized, tax exempt Federal Power, unrelated to rural electrification.

The bank proposal is an attempt to circumvent Congress and increase activities which Congress has criticized. These activities have involved 2 per cent loans for building unnecessary generating plants and transmission lines contrary to the original REA Act. The effect of these G&T loans for Federal-income-taxfree power installations is to duplicate or displace the facilities of investorowned electric power companies, which pay full taxes and the market cost of money.

The proposed bank does not represent a means of providing for market financing, because it would involve subsidies—including the loss of interest on government funds and the loss of needed tax revenues.

This proposal would not serve the purpose of reducing Federal expenditures as has been put forth, but on the contrary would increase the Federal burden. The taxpayers would pay by (a) continuation of present 2 per cent REA program, (b) providing $750 million to $1 billion of bank capital without interest or return and (c) paying for bank operating costs and deficient interest costs to supply subsidized loans. These loan funds, which could be used to purchase taxpaying electric utilities, would eliminate the taxes these purchased utilities now pay and would pay in the future.

Wisconsin Power and Light Company serves five co-operatives at 25 different locations. Our working relations with the co-operatives are very good.

In all the hearings held, no need has been presented to the Congress for the kind of revolutionary departure from the nation's "Rural Electrification" program which the proposed bank represents. It is clearly not in the public interest.

STATEMENT OF ROBERT W. GREENLEAF, PRESIDENT, IOWA SOUTHERN UTILITIES CO., CENTERVILLE, IOWA

Gentlemen, my name is Robert W. Greenleaf. I am President of Iowa Southern Utilities Company with general offices in Centerville, Iowa. My Company serves 81,000 electric and 28,000 gas customers in Southern, Southeastern and South Central Iowa. The territorial area served by the the Company covers all or portions of 24 of the State's 99 counties. In this area, we serve 161 communities and 9,000 farm customers. The Company's transmission lines are interconnected with those of four other Iowa utilities and four rural electric cooperatives. Iowa Southern presently renders wholesale service at four points to one Iowa rural electric cooperative. The Company is a member of the Iowa Power Pool, consisting of five investor-owned utilities and one generation and transmission cooperative all working concertedly for more reliable and economical power supply to urban and rural electric customers.

The testimony I present to you today relates to the two Senate bills being considered by your Subcommittee in respect to the establishment of a federal electric bank. Numerous witnesses preceding me have testified regarding the technical and detailed aspects of these two bills and I will not take your time with more of that. My primary purpose is to sincerely and respectfully request that you consider the major harm to the taxpaying, investor-owned electric utility companies inherent in any statute containing the provisions proposed in these bills.

I am aware of the disadvantages of what may seem to be a totally negative approach to matters of this kind, even though such an approach may be fully warranted in dealing with proposals as thoroughly drastic and dangerous as these. Accordingly, I would suggest for your consideration the following specific points in the formulation of an amended bill:

1. Eliminate further 2% interest loans to those rural electric cooperatives which evidence the financial ability, determined pursuant to prescribed standards, to pay a higher rate for their loans for development and expansion facilities. 2. Eliminate loans to those rural electric cooperatives which have the indicated ability to finance their own growth and expansion through regular private financing channels.

3. Require objective and non-secret evaluation of a firm power supply offer by an investor-owned utility when such a proposal is being evaluated against a subsidized loan proposal to construct a cooperative generating plant or transmission lines.

4. Reduce the repayment period from 50 years to a shorter period for those cooperatives which are determined to have the ability to retire debts at a more rapid rate.

5. Require that rural electric cooperatives be taxed or that taxes lost be considered in evaluating loans for generation versus power purchase proposals.

These suggestions, and certainly there are many more that could be developed, are in my opinion entirely appropriate in light of the clear original intent of the REA Act and the present status of the program.

There is no need or justification for the granting of these huge sums of money for the benefit of the few at the expense of the majority. There is further no reason for the removal of full legislative control over the expenditures of taxsubsidized funds as proposed by the proponents of the subject bills. Now, in my opinion, is the time to put a halt to unnecessary spending of the taxpayers' money rather than enacting legislation that will provide a bonanza to finance large scale and widespread competition with the utility industry from the taxsubsidized rural electric cooperative program.

It is my understanding that testimony was presented to the Subcommittee on August 18, 1966 by a Legislative Representative of the National Grange, Mr. Harry L. Graham. It is further my understanding that this witness referred to alleged problems my Company has had in respect to voltage in the rural areas we serve. To my best knowledge, these statements were completely and totally incorrect. It may be of interest to your Subcommittee to now that the rural electric cooperative plant constructed in Southwesern Iowa has, since it was constructed, consistently charged the distribution cooperatives more for power than did my Company when we served these same cooperatives or than we have charged the cooperative we have continued to serve. Our annual reports to the Federal Power Commission indicate that we first assumed and supplied rural electric cooperative load in Southwestern Iowa in 1942,

70-671-66-33

Average cost of power to that group of cooperatives, now supplied by the rural electric cooperative plant built in that area in 1952, was from 13.0 mills to 14.7 mills per kilowatt-hour during the period we served them. According to Rural Electric Cooperative Annual Reports, Bulletin 111-2, the average cost of power to these same cooperatives from 1952 to present has ranged from 13.3 mills to 17.7 mills per kilowatt-hour. A summary tabulation of this data is attached as an exhibit to this testimony. This information, from official suorces, completely refutes the testimony of Mr. Graham. It also points out the glaring truth that the rural electric cooperative members in Southwestern Iowa incurred higher instead of lower costs when the federally subsidized rural electric cooperative plant was constructed to serve their load.

In conclusion, my Company has always worked closely to mutual advantage with the rural electric cooperatives in our area and will continue to do so. We think that cooperatives have filled a definite need in the farm electrification program. We regret that they have become a vehicle for those in and out of government who desire to expand the scope of federal power as evidenced by the bills your Subcommittee is considering. We respectfully suggest that a complete study of the future needs for funds for the rural electric program is called for by both prudence and responsibility, before further legislation is considered or enacted.

Summary of power supply costs of rural electric cooperatives in southwestern and southern Iowa

STATEMENT OF FRANK W. GRIFFITH, PRESIDENT, IOWA PUBLIC SERVICE, SIOUX

CITY, IOWA

Gentleman, my name is Frank Griffith, I am President of Iowa Public Service Company with general offices in Sioux City, Iowa. Today I speak on behalf of my company and Interstate Power Company, Iowa Electric Light & Power