The farm population in Oklahoma has decreased from 43 per cent in 1935 to approximately 16 per cent at the present time. In 1970, according to a recent study issued by Oklahoma State University, only about 13 per cent of the population of Oklahoma will live on farms. According to a United States Department of Agriculture Bulletin of 1964, 97.5 per cent of all farms in Oklahoma were receiving central station electric service. The purpose for which the rural electric cooperative corporations were organized is virtually completed in Oklahoma.

The Oklahoma Gas and Electric Company not only has an obligation to serve its territory with an adequate and dependable supply of electricity, but has the continuing obligation to be always preparing for the future so that we will always have available an ample supply of electric power when and where it is needed in our service area. This we have done, and will continue to do.

Our Company has served for many years and still continues to serve some REA cooperatives with wholesale power requirements. We are willing and able to supply the wholesale power requirements of any cooperative in our service territory at a very reasonable rate. We are attaching a study (Table 3) showing that our Company had a lower wholesale rate for the distribution cooperatives than did either Southwestern Power Administration, KAMO Electric Cooperative, Inc., or Western Farmers Electric Cooperative.

In Oklahoma there are rural electric cooperative corporations serving customers and expanding their facilities inside the city limits of the largest cities of the State. The purposes and objectives of the Rural Electrification Act did not contemplate this type of business.

We believe that the proposals contained in these bills you are now considering are wholly unnecessary, that they remove many necessary limitations in the present Rural Electrification Act, and that in general they would make the most far-reaching changes in Federal public power policy that have ever been proposed to the Congress.

The provision in the latest version of the bill allowing a cooperative to acquire other systems to the extent of 5000 connections could provide the means for acquisition by any cooperative of the electric system for a city of over 15,000 population. This is more than 10 times the limitation of size of communities of 1500 population provided in the original Rural Electrification Act.

The provision allowing cooperative borrowing to finance electric generating plants not to exceed 5 per cent of the total generating capacity in the country would allow a 400 per cent expansion of cooperative generating facilities.

The creation and unleashing of a new multi-billion dollar competitive power program as proposed could seriously weaken and undermine the ability of the investor-owned, taxpaying, and regulated electric companies to obtain their necessary financial requirements in the regular money market. Every need for electric service in Oklahoma and in Arkansas is being met now, and can be met in the future without the proposed Federal Electric Bank. There is no need whatever for the federally subsidized financing program proposed in S. 3720 and S. 3337. We sincerely urge that this Committee not approve these proposals.

TABLE 1-Revenue per dollar of investment of electric distribution cooperatives, calendar year 1964

Source: Data from 1964 Annual Statistical Report of Rural Electrification Borrowers. (U.S. Dept. of Agric. Rural Electrification Administration-REA Bulletin 1-1.)

TABLE 1A.-Revenue per dollar of investment of privately owned class A and B electric utilities in the United States, 1963 and 1964

Source: Data from 1964 Statistics of Electric Utilities in the United States-Privately Owned. (Federal Power Commission-FPC S-175.)

TABLE 2.-Revenue per dollar of investment, Oklahoma REA distribution cooperatives and others, 1964

TABLE 3.—Analysis of rates to REA cooperatives, fiscal year ended June 30, 1965

Source: "27th Annual Report of Energy Purchased by REA Borrowers."

STATEMENT OF DONALD F. KIGAR, PRESIDENT, DETROIT EDISON CO., DETROIT, MICH.

Mr. Chairman and Members of the Subcommittee, my name is Donald F. Kigar and I am President of The Detroit Edison Company, with which I have been associated for more than 40 years.

During my career in the field of energy and power, I have observed with pride the vigorous development of the electric power industry in the United States in both the private and public sectors. As of July 1, 1966, the generating capacity of the total electric power industry in the contiguous United States was 241.5 million kilowatts, almost as much as the next five leading nations combined.

According to the Interim Electric Power Survey of the Edison Electric Institute, published in July 1966, new electric generating capacity installed during the first six months of the year and on order for the future totaled 89 million kilowatts. This is an increase of 21.3 million kilowatts upon the comparable figure a year ago and 8.5 million kilowatts more than shown as of April 1, 1966, in the EEI'S 39th Semi-Annual Electric Power Survey. Just since the first of the year, 68 units

with a combined capacity of 5.8 million kilowatts have been placed in commercial operation. It is also significant that 54.3 per cent of the new 1966 generation equipment and that on order or under construction is in units of 500,000 kilowatts or larger.

I cite these figures to illustrate the great and dynamic strength of our nation's electric power industry. About 75 percent of the capacity is on the systems of the investor-owned, tax-paying electric companies. One percent is in REA cooperatives and about 24 percent in government-owned systems.

There are no voids in our nation's electric power program and certainly no foreseeable insufficiency that would justify such a drastic departure from the purposes and limitations of the original REA Act of 1936.

Today more than 98 percent of the farms in our nation receive central station electric service and the original purpose of the Rural Electrification Act of 1936 has been virtually accomplished.

It is said by proponents of S. 3720 and other similar bills that the REA co-ops require a large infusion of new capital to serve today's customers and those of tomorrow. This can only mean a desire to invest heavily in generation and transmission facilities on REA systems since funds appropriated by the Congress under present law can meet further distribution and miscellaneous requirements.

The REA has for some years evidenced a broad ambition to go into power generation in a large way-an ambition that has been restrained again and again by congressional action. If the Electric Bank is created, the REA will escape from the budgetary control traditionally exercised by the Congress and be enabled to embark upon a career of wasteful expenditure and duplication of electric generation facilities now in being or planned by the investor-owned companies and major electric energy producers of the federal government. Such a move would upset the carefully developed balance in the field of electric energy. The tail would begin to wag the dog-in fact to whip it.

There are so many demands today upon our nation's capital and productive energies that we can ill afford to waste resources. The investor-owned, tax-paying utilities represent one of the most important sectors of our national economy. The industry has more than $60 billion invested in power facilities and is adding between $4 and $5 billion annually. By 1980 the Edison Electric Institute predicts this will rise to some $12 billion a year.

Our operations are on a scale that can meet fully and economically the energy requirements of REA cooperatives. In 1964 the average wholesale price paid by cooperatives to the investor-owned companies was 7.5 mills per kilowatt hour, whereas the price cooperatives paid to G&T's was about 8.8 mills.

I mentioned that generating units today are trending to sizes upwards of 500,000 kilowatts. To justify the expense and capacity of such units, many customers must be served and the electric companies are evolving ever larger interconnected systems and power pools to utilize them fully. To achieve competitive wholesale prices for energy, the G&T's would have to turn to the proposed Flectric Bank to build units on a similar scale-and then seek customers and area additions to achieve an adequate use factor. Where could they turn except toward customers and areas now fully served by others?

The EEI Electric Power Survey shows that peak loads for the total industry through 1969 are estimated to increase at a 6.7 per cent annual rate of growth, maintaining reserve margins of about 20 per cent each year. The industry as presently constituted is fully prepared to do the job and requires no new, expanded program by REA. Insofar as distribution capital needs are concerned, the present 2 per cent REA lending program is sufficient, and under this program the Congress retains a very necessary control over the borrowing practices and expansion plans of rural cooperatives.

The Detroit Edison Company serves 7600 square miles in Southeastern Michigan. Our operations are in many ways typical of the investor-owned industry. At the close of 1965 we had a generating capability of 4.2 million kilowatts. We plan to meet customer requirements many years in advance. By the end of 1972 we will increase our capability by 76 per cent to some 7.4 million kilowatts. The four major units which we plan to add in that period range in size from 520,000 kilowatts to 750,000 kilowatts. The Consumers Power Company, with which we have a pooling and joint operation agreement, has similar plans for capacity expansion.

For some years before 1965 we provided the Thumb Electric Cooperative, the only co-op in our service area, with about half of its energy requirements. In February 1965 we signed an agreement with the Thumb Electric Cooperative

to provide 85 per cent of their power at about two-thirds of the cost that they would incur by self-generation. They maintain their two diesel plants as a matter of policy and to shave peaks. Obviously we could provide for their full requirements just as easily and to their benefit. Our operations are on such a scale that we can serve them most effectively. There is a most friendly relationship between us, and I think similar arrangements are the best way for rural cooperatives to meet their energy requirements economically. This is in the best interests of the farmer and our nation as a whole.

There is the additional advantage to the public that investor-owned companies pay local and federal taxes and pay the full cost on the money they borrow. They also pay fair dividends to millions of Americans who are shareholders. All these payments by the investor-owned companies help to support the national economy and the national purpose.

I regret to say that even the suggestion of the proposed Electric Bank is alarming to investors, as I know from personal experience as President of Detroit Edison. The Electric Bank cannot be interpreted as anything but a threat to the future of the investor-owned companies which serve the nation so faithfully and so well.

I thank this Committee for the opportunity to express my deep misgiving over the proposed Electric Bank, which is wholly contrary to the American system, to economic realities and to the control that the Congress must retain and vigilantly exercise over the ambitions of federal agencies.

STATEMENT OF C. A. LILLY, JR., PRESIDENT, GULF POWER Co., PENSACOLA, Fla.

Mr. Chairman, my name is Clyde A. Lilly, Jr. I reside in Pensacola, Florida. I am president of Gulf Power Company which supplies electric service in that area of Northwest Florida lying west of the Apalachicola River. I appreciate very much the opportunity of appearing before your committee. My appearance is in opposition to S. 3337 and related bills.

These bills if enacted would be very damaging to Gulf Power Company and to other investor-owned taxpaying electric utility companies. Because it was never intended that Government subsidized electric power cooperatives should compete with taxpaying electric power suppliers, committees of Congress have consistently opposed use of the basic 2% REA loans to finance steam plants and high voltage transmission lines which would duplicate existing adequate power supplies. The establishment of the Electric Bank under the legislation proposed does not eliminate the present REA program of 2% loans. It makes available to the cooperatives billions of dollars of additional funds free from Congressional controls. The Bank borrowers could serve municipalities and suburban areas irrespective of size and present service, while continuing free from control by such Federal regulatory agencies as the Federal Power Commission even though they may be in interstate commerce.

These suplemental financing bills tend to give the appearance that the cooperatives would be financing in the free market, but in fact, either bill under review by this Committee would materially increase Federal subsidies.

The Electric Bank as proposed would also make loans at interest rates below the cost of money to the Government just as REA presently does.

The electric supply facilities which the borrowers would duplicate or displace would be those of the strictly regulated investor-owned taxpaying electric power companies which serve some 80% of the nation's power requirements.

Our Company is not without experience in supplying power to rural areas nor in dealing with rural electric cooperatives. Approximately 40 years ago, years before the REA cooperatives were formed, the Company was extending electric service into and developing rural areas. As the REA cooperatives were formed the Company supplied their electric requirements at wholesale rates below the national average, and for over 25 years the Company and the cooperatives worked together to supply and develop the rural areas of Northwest Florida. As a result of these efforts of the Company and cooperatives, almost every person in Northwest Florida actually desiring electric service is supplied.

Several years ago with most of the persons in rural areas supplied with electric service, the REA controlled cooperatives began to deviate from the purposes for which they were created by Congress.

I would like to recite three occurrences in Northwest Florida which conflict with the intent which the late Speaker Sam Rayburn expressed in urging the

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