1. Increase rates to a level that would void any hope of parity with urban and city areas. 2. Reduce capital investment, which in a short period of time, contribute to sub par continuity, quality and capacity of service to the member owners. 3. Break a long standing contractual committment for the revolvement of invested capital back to member-owners, while they are still alive. We sincerely feel, that we can do a better balanced job for our memberowners and fulfill our responsibilities to the general public by supplementing internally generated funds with open market borrowed capital, that can be made available through the proposed Rural Electric Credit System. The burden placed upon the federal treasury, indicates that the Congress will not provide the new capital needed through the existing 2% loan program to keep pace with demand for new capital needed in the program. We have not felt that total and complete dependence upon the federal treasury was our objective and with maturity, every effort would be made to stand on our own two feet. Our efforts over the past twelve (12) years should lend credence to this statement. We support continuance of the 2% loan program for those systems who because of no territorial protection, excessive and restrictive wholesale power contracts and/or marginal territory, have not been able to build reasonable and justifiable equity position. Under such conditions, systems and memberowners with the least ability to pay would be additionally and discriminatively over burdened if forced to open market borrowed capital costs. Such over burden would be reflected in excessive rates, inadequate service and little or no hope of capital revolvement to the member-owners. For those systems having territorial protection, fair and reasonable competitive wholesale power supply and a service area that supports density and growth, all of which are essential to and contribute to an ability to pay, we support the utilization of the open market borrowing concept. The creation of a Rural Electric Credit System and a Bank for Rural Electric Cooperatives has the potential to provide the most acceptable vehicle to move from dependence upon the federal treasury and into the open market for our future needs. This system, patterned after the facilities of the Farm Credit System, has a basis of experience that has proven its worth, merit and wisdom. We essentially support HR1400 Committee Print #1, but feel that there are features that can nullify and unreasonably impair the constructive purposes of the legislation. The right of court review, should at minimum be modified, so as to prevent deliberate and unreasonable harassment and delay of generation and transmission loans. The limitation of 4000 connections of non-rural areas on a cumulative basis for loans is unrealistic in light of current day conditions and should be seriously reviewed for modification. We feel in essence, that this legislation is an honorable, defensible and realistic approach to the future financing of this program. This legislation does provide the vehicle to our future needs and fulfillment of our responsibility to the public that the critics of this program have voiced for years. It should be found acceptable and should receive the support of those same critics unless they accept nothing less than complete anhilation of this program. We respectfully ask your support for this legislation and the favorable vote of your Committee and recommendation for passage. STATEMENT OF ERWIN L. NELSON, MANAGER, PRICE ELECTRIC Supplemental financing for the continuation of rural electrification is imperative. The needs of our electric cooperative located in the northern part of Wisconsin are indicative of this necessity. During the past 27 years, our cooperative has borrowed and invested $2,675,000.00 to build an electric system to bring electric service to over 4,000 scattered rural users. Conservative projections indicate that we will need to borrow an additional $1,928,000.00 within the foreseeable future to increase the capacity of our electric system to keep pace with the growing electrical needs of our member consumers and to continue toward fulfilling our obligation to provide complete area coverage. We will have reached this amount in new loans by 1980 if our growth rate continues at the same rate that it has in the past. We anticipate that this growth rate will increase. Today, 70% of the people in the United States live on 1% of our land. Our cities are starved for space, while our countryside is starved for jobs. We are becoming more cognizant of the ills caused by this heavy urbanization and a trend toward greater use of our rural areas to help cope with population problems is a must. This trend will increase our needs for growth capital for necessary expansion. Parity in electric rates and service is a goal in rural electrification. This has been accomplished in some areas, however, in most it has not. Where it has been accomplished, the borrower is in a position to pay a higher rate of interest for his debt capital. Where it has not been accomplished, increased interest could upset the progress made so far and create a situation whereby rural electric service will be poorer and the rates for service forever higher than in more densely populated areas. Rural electrification has contributed greatly to the welfare of our nation by providing electric service in rural areas so that our rural population can continue to farm and produce food and fiber for use by our urban population at reasonable costs. A continuation of rural electrification is of utmost importance to help maintain our present farm population, and to place us in a better position to utilize our rural areas in coping with our countries population growth. Thus far the Federal Government through REA has been willing to meet most of our capital needs through 2% REA loans, however, with the strain on the U.S. Treasury for other needs, the required amounts are not forthcoming and lest electric systems such as ours should whither and die, other sources for growth capital are urgently needed. We are looking to Congress to adapt enabling legislation for the establishment of a rural electric credit system which will enable us to borrow from other sources including private capital to help fulfill these growing needs. STATEMENT OF ELVIN LANGFORD, PRESIDENT, BOARD OF DIRECTORS, INTER-COUNTY RURAL ELECTRIC COOPERATIVE CORP., DANVILLE, KY. We submit to you and your committee this statement of our feeling regarding the dire need of your support and passage of House Bill 1400, and also your consideration for passage of Senate Bill 626. As President of our Board of Directors of Inter-County Rural Electric Cooperative Corporation at Danville, Kentucky, representing nearly 10,000 rural electric members, we would hope that you will give these bills serious consideration for passage and would also hope that the committee will not permit destructive legislative amendments which would restrict financing regulations for future needs of both distribution cooperatives and generating and transmission cooperatives. We are not only for this finance bill that affects all America but in Kentucky alone, for example, it would affect approximately 267,000 members, and figuring four to the family means about one third of the total population of our state. As far as our cooperative is concerned, in the next ten years we will grow from 9472 members presently to an estimated 11,686 members, from a kilowatt hours need of 47,820,000 presently to a more than double 98,656,000 kilowatt hours, and with a plant investment of $6,000,000.00 presently to $9,300,000.00. We are sure in many areas that the need will be greater than our listed example and since rural America is and always will be the foundation of our economy, we cannot impress on you too much the dire need of this legislation. Again, we would hope that your efforts and consideration for passage immediately would be deeply appreciated by all of rural America. STATEMENT OF HERMAN PEYTON, VICE PRESIDENT, BOARD OF DIRECTORS, INTERCOUNTY RURAL ELECTRIC COOPERATIVE CORP., DANVILLE, KY. We submit to you and your committee this statement of our feeling regarding the dire need of your support and passage of House Bill 1400, and also your consideration for passage of Senate Bill 626. As Vice-President of our Board of Directors of Inter-County Rural Electric Cooperative Corporation at Danville, Kentucky, representing nearly 10,000 rural electric members, we would hope that you will give these bills serious consideration for passage and would also hope that the committee will not permit destructive legislative amendments which would restrict financing regulations for future needs of both distribution cooperatives and generating and transmission cooperatives. We are not only for this finance bill that affects all America but in Kentucky alone, for example, it would affect approximately 267,000 members, and figuring four to the family means about one third of the total population of our state. As far as our cooperative is concerned, in the next ten years we will grow from 9,472 members presently to an estimated 11,686 members, from a kilowatt hours need of 47,820,000 presently to a more than double 98,656,000 kilowatt hours, and with a plant investment of $6,000,000.00 presently to $9,300,000.00. We are sure in many areas that the need will be greater than our listed example and since rural America is and always will be the foundation of our economy, we cannot impress on you too much the dire need of this legislation. Again, we would hope that your efforts and consideration for passage immediately would be deeply appreciated by all of rural America. STATEMENT OF CECIL EXUM VIVERETTE, GENERAL MANAGER, BLUE RIDGE ELECTRIC MEMBERSHIP CORP., LENOIR, N.C. Mr. Chairman and members of the committee, my name is Cecil Exum Viverette. I am General Manager of Blue Ridge Electric Membership Corporation, Lenoir, North Carolina. I am also President of Tarheel Electric Membership Association, Raleigh, North Carolina, the trade association of thirty-two electric membership corporations in North Carolina. I am here to urge your support and passage of a supplemental financing bill for rural electric cooperatives substantially as provided for in H.R. 1400, 1401, 1402, 3122, 3314, and 6026. Mr. Chairman, I can best speak of the needs of one rural electric cooperativeBlue Ridge Electric Membership Corporation. I have been its General Manager since 1948. Blue Ridge Electric Membership Corporation was organized in 1936 and serves in eight mountain counties in the northwest corner of North Carolina. These counties are Caldwell, Wilkes, Alexander, Avery, Watauga, Ashe, Alleghany, and Surry. In those early years these counties were often spoken of as the "Lost Provinces." There was no electric power in 98% of the area, few roads and very little of anything else except its fine hardy stock of mountain people. Our electric cooperative had exceeding difficulty in every proving feasibility for its first Rural Electrification Administration loan. Not only had the private power companies turned their back on this area but even our State and Federal officials were very pessimistic. Except for a few individuals and the great support of Congressman Robert L. Doughton, much of whose Ninth Congressional District was in this area, were we able to get a charter to organize our Cooperative, and later a loan from REA. Today our Ninth Congressional District is ably represented by Congressman James T. Broyhill. Ours is one of the great success stories of the rural electrification program. Today we serve 22,500 consumer-members, which represent approximately 110.000 men, women, and children in this eight-county area. We are the only power supplier in two of these counties-Ashe and Alleghany (Mr. Bob Doughton's home county). We serve more than 99% of Watauga County. We have built high voltage transmission lines from the Piedmont area of our state up into these mountain counties. A great transformation has taken place and is now taking place. Where initially we provided electric service to the little mountain farms, today great industrial plants are operating and others are being built that require large amounts of electric power. This has required new and heavier power lines and the investment of large sums of money borrowed from REA. These industrial plants have provided more than eight thousand jobs in the past fifteen years and helped to transform this area from one of the bleakest in all of the Appalachian Region to one of the bright spots. Along with this industrialization has been a sharp rise in our farm income and production through mechanization. From 1954 through 1966 farm income increased in this eight-county area from $30,375,000 to $111,508,235. Farming is still the backbone of our economy. We are also experiencing rapid growth in seasonal homes and recreational facilities throughout our mountain area. Our Cooperative serves three winter resorts which did not exist five yeas ago. Our growth is well above that of the electric industry as a whole even though our rates, particularly those of our industrial consumers, are higher than those of the investor-owned power company from which we purchase the bulk of the electric power we sell. As a matter of record, we pay the power company the same rate for our purchased power as any commercial customer of the power company. Last year, 1966, our KWH sales increased 21.6% over 1965. This compares to 8.6% for the entire electric industry. Should this trend be sustained, our KWH sales would double in a little over three years. Experience has shown that when we double KWH sales we have to increase plant investment by approximately 50%. This would mean an additional investment of eight million dollars. In the first thirty years of our existence we have invested only a little over sixteen million dollars in plant; monies borrowed from REA. We try to plan for and anticipate our needs well in advance. Each two years we make an in-depth study in regard to our projected KWH sales and plant investments as well as pro forma operating statements for the next ten years. We made such a study last fall. We have been quite accurate in our projections in the past. This study took a more conservative approach than we experienced last year. We projected an annual KWH sales growth of 12.5%. This growth rate would require an investment of $14,393,225 in new plant facilities from January 1, 1966 to December 31, 1975. Our study showed that of this amount we would need to borrow $12,348,973. From 1936 through 1965 we had borrowed, and REA had advanced to us, $15,595,398 for plant facilities. In North Carolina the state utilities commission is at the present time assigning franchised territory to both the investor-owned utilities and the rural electric cooperatives in accordance with a 1965 legislative mandate. In general each power supplier is being assigned the territory they are now serving plus a portion of any undeveloped areas adjacent to its present service area. Gentlemen, you can readily see our concern. The ability of our electric cooperative to get adequate financing in the future is as important if not more important than the interest rate we pay. It is essential that we have a source of financing at reasonable interest rates in the years ahead to not only meet our utility responsibility within our franchised service area but to help the area of the state we serve to continue to grow and develop. Our Congressman. James T. Broyhill is familiar with our needs as well as the needs of the other electric cooperatives in his ninth Congressional District. He has often expressed to me his desire to see Congressional action that would meet the needs of the rural electric cooperatives and enable them to achieve nongovernment financing wherever this was possible. Our needs may not be typical of all REA borrowers. However, each borrower is a very important segment of the electric industry, an industry that is growing and requiring enoromous sums of capital for expansion. I again urge you to support H.R. 1400 which will enable Blue Ridge Electric Membership Corporation and each of its sister systems to have a source of future financing to meet our growing needs for expansion capital thus enabling us to help rural America to continue to grow and develop. STATEMENT OF L. B. CHAMBERS, PRESIDENT, LITTLE OCMULGEE ELECTRIC MEMBERSHIP CORP., ALAMO, GA. The fantastic job of electrifying Rural America could not possibly have been done without ample financing. This is the secret of the success. To say that further ample financing is not needed, would be to say that future progress will be at a standstill; that rural electric cooperatives will not amply serve Rural America to meet their power needs. It is just as simple as that. Even though we have not built a generating plant nor a transmission line in Georgia, the fact that such was possible caused rural electric cooperatives to be able to negotiate a favorable wholesale rate for electricity. Remove this possibility and give the power companies a complete monopoly on generation and transmission of electric power, and millions of electric consumers throughout America will pay the price for the loss of such protection. Of all the money we collect from our consumers, over one-third goes for the wholesale cost of electric power. We do not believe it is good for America, rural electric cooperatives or the electric consumers for a company to have such monopolistic power. Therefore we urge your committee to approve the rural electric and telephone banks for supplemental financing of the program and to leave in tact in the bill the provisions for financing generation and transmission projects as proposed. STATEMENT OF ROBERT GREEN, PRESIDENT OF KENTUCKY RURAL ELECTRIC COOPERATIVE CORP., LOUISVILLE, KY. More than 20 years ago the rural electric cooperatives in Kentucky realized that if they were to accomplish their objectives, they must work together. Therefore, in 1943, the local distribution cooperatives in the state joined together to form the State Association of Rural Electrics. It is by working through this organization that we, as individual rural electric cooperatives, meet together, plan together, and work together to decide on the problems and issues facing our program. Twenty-four of Kentucky's 28 rural electric systems participate in this voluntary cooperative effort. As far back as 1959, the rural electrics in Kentucky, acting through their State Association, recognized the need to study our financing requirements for the future. In a membership meeting of the State Association, held in the Fall of 1959, we adopted a resolution setting forth our viewpoints concerning our financing needs. The legislation (H.R. 1400) now pending before this Committee of Congress embodies many of the concepts and ideas expressed in that resolution. At that time, we were aware that we could not expect Congressional appropriations to meet all our needs indefinitely. We are glad to see Congress considering this supplemental financing legislation because it will enable us to be assured of a dependable source of growth with sufficient flexibility to meet our needs. This legislation provides us with a transition plan for assuming a greater share of our fiscal responsibilities as sound business enterprises. We believe that the time has come for us to accept and work for an improved new financing plan. We think the proposals now being considered by this Committee, as set forth in House Bill H.R. 1400, are good. Speaking as president of the Kentucky Association of Rural Electrics representing 24 of the 28 rural electric systems in Kentucky and as an officer and director of a local rural electric system, I can assure you that we support this legislation. We believe that the proposals are fair and just. We sincerely hope you agree with our viewpoints and will give this measure favorable consideration. STATEMENT OF J. K. SMITH, GENERAL MANAGER, KENTUCKY RURAL ELECTRIC COOPERATIVE CORP., LOUISVILLE, KY. Today, as rural electric cooperatives, we face one of the greatest problems in our history. This problem is the result of our success. We have made a dependable source of power available at reasonable rates throughout the rural areas of this country, thereby creating living standards and conveniences which have induced the people to turn to the rural areas for a place to live, work and play. The demands for power by our members are growing at an unprecedented rate *** a fact that is also true throughout the total power industry. We are experiencing a migration of industry to the rural areas because these areas offer an abundant labor supply, adequate space, low-cost power, and all other assets essential to economical production and good living conditions. However, these new developments have brought us face to face with our problem✶✶✶ the needs for increasing amounts of capital to meet our increasing demands for power. The legislation being considered by this Committee is designed to provide us with the kind of financing we must have in order to meet our unique needs. (1) We serve primarily the rural areas * * * areas which are thinly populated. Our systems lack load diversity, thereby resulting in a low return on our |