past from appropriations made by Congress. Therefore, the need for additional financing is evident. With the passing of H.R. 1400, the extra financing will be assured. We earnestly ask that this committee approve this bill and subsequently extend your support and influence to see it approved in the House and Senate. STATEMENT OF JAMES S. OGARD, GENERAL MANAGER, RED RIVER VALLEY I would like to submit the following statement in support of the Supplemental Financing Bill (H.R. 1400). This is a bill which will eventually permit the rural electric cooperatives to be self-financing and will assure them capital for expansion which they will need. The capital needs of the rural electric distribution cooperatives are growing each year as their loads increase on an average of 7 percent each year. There is a need for capital for bringing service to all in rural areas who request service under our area coverage policy and there is a need for capital to heavy up the present system which proves more inadequate each year as the needs of our consumers grow. The needs of the rural electric cooperatives for an adequate and dependable supply of electric power makes is mandatory that financing be found for the building of generation plants of a size necessary to fulfill the needs of the cooperatives in the future. The generation cooperative from which we secure all of our power recently received a loan for a 200 thousand kilowatt plant and the power from this plant will prove to be inadequate in less than ten years. We have one item which has become an absolute necessity for the development of our rural areas is electric service at reasonable rates. We have not yet been able to reach the goal of parity of rates with urban areas but we do have confidence that we will be able to achieve this goal if our systems are allowed to grow and become financially sound. It is apparent that the government cannot expect to supply all of the needs of the rural electric cooperatives and studies have shown that the most practical source of supplemental capital is the private money market. I would urge your consideration and approval of Supplemental Financing for rural electric systems which is vital to their future and to the future of our rural areas. STATEMENT OF L. H. BRAKEL, JR., ASSISTANT MANAGER, RED RIVER VALLEY COOPERATIVE POWER ASSOCIATION, HALSTAD, MINN. There is a definite need for supplemental financing of rural electric systems. The cooperatives serve only a very small portion of our nation's consumers who are distributed over a vast area of the entire country. In some areas rural electric cooperatives have a consumer destiny of less than one per mile. Think of the cost to serve this consumer as compared to a mile of line in an urban area which could possibly serve fifteen city blocks with ten to twelve consumers per block. In certain areas cooperatives were formed nearly thirty years ago with one thought in mind: "Light the Rural Area." The lines were engineered and designed to carry as little as 100 kilowatts per month to each consumer. Now that same consumer is using an average of over 1,000 kilowatts per month and still his electricity is delivered from the original power line. Not only is this distribution system now obsolete but it has reached a point of deterioration when replacement is necessary at an escalated price of, at least, 300 percent of original cost. However, there are many other facets that must be considered before the distribution lines can be replaced. Where is the additional power coming from? Who is going to build the generating plants? The high voltage transmission lines? The necessary substations? All of these items will be beyond the reach of rural electric cooperatives if they are cut off from their present source of funds. Availability of electric power in rural areas must be maintained at par with urban areas. To maintain this parity the electric cooperatives will need adequate funds to purchase additional power, build generating plants, transmission lines, and continue to uprate their distribution systems. I urge you to support the Supplemental Financing Bill (H.R. 1400) so that rural electric cooperatives will eventually become self-financing and be assured that they will have the capital necessary for future expansion. STATEMENT OF GLEN SUTTON, DIRECTOR, NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION, REPRESENTING THE RURAL ELECTRIC COOPERATIVES OF THE STATE OF CALIFORNIA In California we have four widely separated, active rural electric cooperatives and one cooperative struggling to get started. Each of these cooperatives serves an area in which the density of consumers per mile of electric line is small. Each cooperative is located in an area that was rejected by the existing power companies. Of the four energized cooperatives, two are located in the extreme north end of the state and two are in the extreme south end of California. All four were built when farming or ranching in the areas was a major occupation. All four were built with a minimum investment in order to be feasible at all and still provide electric service. The population increase in the State of California is spreading to the rural areas and the cooperatives are now benefitting by an influx of new members. As people escape the smog, crime and corruption of the cities, these areas will greatly expand. New consumer members will enhance the economic well being of the cooperatives. However, these cooperatives will need a dependable source of capital in order to supply the needs of the present as well as the new members. As the electricity usage increases, new transformers, larger size conductors, and other new facilities will be needed. It is doubtful, at present, that any of the four co-ops could presently afford higher costs of money that the Supplemental Financing Bills propose; however, each of the cooperatives prefers to pay its own way as soon as it is able. If those cooperatives which are able to afford higher interest charges do have a source of Supplemental Credit, the demands on the treasury would be limited to the still growing organizations. The power companies in California have long and loudly complained of the lower interest rate which these cooperatives have received. Since these small cooperatives offer no competition whatsoever to the giants of the power monopoly, we would hope that they would encourage the passage of legislation to establish a new credit source for these small power suppliers. Supplemental financing looks to the future when the Rural Electrification Administration can be phased out completely and even the Cooperatives in California can look to participation in a National Bank for Cooperatives. Your efforts in securing passage of the Supplemental Financing bills will be appreciated by the rural people in California. The people in the Siskiyou County area represented by the Salmon River Electric Cooperative are only a small number of the total rural residents in California who do not have electric service, and who are prevented from having power through the efforts of power companies. The need for rural electric cooperatives in California is a real one and the need for capital is just as real. In Support of Supplemental Financing for Rural Electric Cooperatives. STATEMENT OF BOARD OF DIRECTORS, JACKSON ELECTRIC MEMBERSHIP CORP. JEFFERSON, GA. TEN-YEAR PROJECTED GROWTH FOR JACKSON ELECTRIC MEMBERSHIP CORPORATION Item I-1. In December 31, 1965 this Cooperative was serving 19,770 active consumer-members. 2. Projections to December 31, 1975 indicate this Cooperative anticipates serving 38,000 plus consumer-members. Item II-1. In December 31, 1965 this Cooperative had a plant value of $9,330,000. 2. Projections to December 31, 1975 indicate this Cooperative's plant due to normal growth will be valued at $17,500,000 plus. Consistent with normal utility practices and operations it is obvious that to accomplish this growth will require several million dollars of outside capital. Even thought this represents only one Cooperative of some 1,000 such organizations, it does point out the vital need of growth capital for the rural electrification program. The Management of Jackson Electric Membership Corporation urges this Committee and all of Congress to act favorably on the federal credit system for rural electric cooperatives legislation. STATEMENT OF CHESTER WINGARD, MANAGER, CENTRAL ALABAMA ELECTRIC CO-OP, PRATTVILLE, ALA. I would like to urge all members of the Congress to support the supplemental financing Bill HR 1400 for rural electric systems in the 90th Congress. The Rural area which we began serving in 1939 is expected to have a population explosion and small industry development at a pace we have never experienced before. The tight money high interest rate policy has retarded the expansion of new homes but we anticipate the easing of credit which will enable prospective home owners to resume building at a much more rapid pace. Hammer Mill Paper Corporation recently put a large mill into operation and Union Camp has a mill in Prattville which is now being tested for operation. These two mills represent an expenditure of approximately one hundred million dollars. From reliable sources, we feel that the expansion of Union Camp will begin within a year. These two industries alone are creating many new jobs in our area and we must have adequate financing to add new substations, rebuild existing facilities and add new transformers and services in order to meet this load growth. Most of our service area is requiring additional facilities because of small industries and new homes construction. All of the land located in Autauga County along the Alabama River is in our service area. When the Alabama River is made navigable by the construction of locks and dams the land adjacent to the reservoirs will be devoted to recreational and industry. This development will bring about new and added facilities requiring large sums of money. For the past five years our new services and system improvements have required an average of $222,730.00. Recently our Engineer prepared a two year work plan, i.e., January 1, 1967 to December 31, 1968. According to this study we will be serving 682 more consumers at the end of 1968 than on January 1, 1967. The study estimated an average increase in kwh/month/consumers next two years 66 kwh. The estimated total cost of construction for 1967-68 is $931,338.00. We do not believe the Rural Electrification Administration will be in position to make loan funds available to us at the rate of one-half million dollars per year and at the same time meet the requests of almost 1,000 other borrowers in the United States, therefore, it is imperative that provisions be made whereby we can meet our load growth with adequate financing. STATEMENT OF DAIL GIBBS, MANAGER, ALABAMA RURAL ELECTRIC ASSOCIATION OF COOPERATIVES, MONTGOMERY, ALA. Mr. Chairman, and Gentlemen of the Committee, my name is Dail Gibbs. I am manager of the Alabama Rural Electric Association of Cooperatives, Montgomery, Alabama. The Alabama rural electric cooperatives serve over two hundred thousand families in Alabama, representing approximately three-quarters of a million people, which is approximately a fourth of the population of the state. The rural electric cooperatives have a strong feeling of responsibility to serve these people with a high quality of electric service with rates comparable to those enjoyed by people in the cities. This is a major task considering the fact that the rural electric cooperatives assume the responsibility of serving everyone in their respective areas, thereby serving only an average of five consumers per mile of line. The Alabama rural electric cooperatives hope to offset the loss of consumers in remote rural areas by continuing to serve the rural areas which they are helping to develop with industry and increased residential growth. To do this we must have an adequate source of capital. We believe that the position of our rural electric cooperatives is accurately expressed by the following resolution adopted at our annual meeting on January 6, 1967. RESOLUTION Whereas, In recent years, the capital needs of rural electric cooperatives to enable them to meet the rapidly growing power requirements of their consumers have been increasing at a far more rapid rate than is now being met by the Rural Electrification Administration, utilizing loan funds as authorized by the Congress from year to year, and Whereas, It is vital to the continued growth and progress, and even the preservation of the rural electrification program, that electric cooperatives have available an adequate supply of loan funds to meet their future capital needs, and Whereas, While some rural electric cooperatives can pay more than the established two (2) per cent interest rate on present REA loans in order to obtain growth capital, many others cannot, and Whereas, Legislation has been introduced in the Congress to establish a Federal Bank for Rural Electric Systems, patterned somewhat along the lines of the Farm Credit Systems, and Whereas, Said proposed legislation would enable the proposed Bank to make loan funds available to meet the growth needs of those rural electric systems which need and can utilize this type of financing, and would enable the REA to continue to be able to make two (2) per cent interest loans to those systems which cannot exist without such loans, and Whereas, Under the proposed legislation, rural electric cooperatives would pay back to the federal government, those funds required in the initial establishment of the Federal Bank for Rural Electric Systems, and ultimately obtain complete ownership and control of said Bank, which would then be financed independent of Congressional authorizations, and Whereas, Commercial power companies are putting forth a tremendous effort to block passage of this legislation, which is so necessary to the future well being of the rural electrification program: Now, therefore, be it Resolved by the Alabama Rural Electric Association of Cooperatives as follows: (1) That we enthusiastically and wholeheartedly support the establishment of a Federal Bank for Rural Electric Systems, as proposed by the National Rural Electric Cooperative Association, (2) That we urge our elected representatives in the Congress of the United States to support and work for passage of enabling legislation as hereinabove set our during the forthcoming session of the Congress. We urge this committee to report out a supplemental financing bill that will enable us to continue a high quality of service on a parity with that enjoyed by people in cities and towns. JOINT STATEMENT OF THE GENERATION AND TRANSMISSION COOPERATIVES AND PRIVATE POWER COMPANIES IN MINNESOTA The parties to this statement are all members of the Upper Mississippi Valley Power Pool and the Mid-Continent Area Power Planners. The primary objective of these organizations is a coordinated program of providing low-cost, dependable electric service to their respective consumers. The parties recognize that the fundamental principles which have made it possible to achieve the objective of these coordinated programs have been: a. The principle of local control and operation of electric power facilities with the management of each party retaining its local initiative and individual freedom and control. b. The principle that each party has a right and obligation, regardless of size or type of corporate organization, to own or otherwise provide for the facilities required to supply the electric power requirements of its consumers. c. The principle of "live and let live" to the end that a party will not seek out and attempt to serve existing customers or new customers located in incorporated areas served solely by another party. The parties recognize that the rural electric cooperatives will require capital financing beyond anticipated congressional appropriations, if they are to meet their obligations to their members and to the Pool. The parties support a supplemental financing program which will enable the rural electric cooperatives to borrow funds at terms and interest rates and for purposes that will permit them to meet their obligations. Such program will also provide the investor-owned companies with adequate protection for existing customers as well as for new customers located in incorporated areas served solely by another party. A judicial review procedure shall be included in the program to insure compliance with the intent of the parties. The parties have had a series of meetings to seek mutual understanding. For the purposes of our deliberations, we have jointly studied H.R. 1400, which is now before the Congress, and we believe the purposes of the Bill are acceptable to the undersigned with the changes in content necessary to carry out the foregoing principles. Such changes may be exemplified by the attached suggested modifications to H.R. 1400 which are not intended to be all inclusive. Cooperative Power Association, Roy Zook, General Manager "(h) The Electric Bank Board shall meet at such times and places as it may fix and determine, but shall hold at least four regularly scheduled meetings a year, and special meetings may be held on call in the manner specified in the bylaws of the electric bank. "(i) The Electric Bank Board shall make an annual report to the Secretary for transmittal to the Congress on the administration of this title IV and any other matters relating to the effectuation of the policies of title IV, including recommendation for legislation. "(j) Prior to approval of any loan for the construction of generating facilities which displace a wholesale power supply arrangement with a loan applicant existing at the time of the loan application, where service is still available from the supplier which is not a borrower from the Rural Electrification Administration or the rural electric bank (except for a loan for the expansion or improvement of an existing generating facility that was planned prior to the enactment of this section, or which is required to (1) provide energy to the customers of the generating facility existing at the time of the loan application and to customers financed under title I or IV of this Act which commence purchasing energy from the generating facility subsequent to the time of the loan application; or, (2) fulfill the power supply requirements of all consumers within the service area of a distribution system financed under title I or title IV of this Act which at the time of enactment of this section generated its own energy), the Electric Bank Board shall "(1) require the loan applicant to advertise for firm bids, to be submitted by a date certain, for the supply of the power and energy in the quantities, at the delivery points, and on the terms and conditions specified by the loan applicant which terms shall be reasonable and based upon sound engineering and to submit to the Electric Bank Board copies of all bids received; and "(2) determine first, after a public hearing held pursuant to notice at which all interested parties would be entitled to appear, offer complete and relevant evidence and examine witnesses of other parties, that the loan applicant has complied with (1) above, and second that the cost of the power and energy under the proposed loan is lower than the cost of power and energy under the lowest bid meeting all terms and conditions specified by the applicant, taking into consideration all relevant factors including the costs associated with transforma |