Summary of combined financial position for all Indiana Rural Electric Membership Corporations for the year ended Dec. 31, 1965-Continued

Electric operating revenues_.

Other electric revenues__

Total electric revenues_.

Summary of combined earnings for all Indiana Rural Electric Membership Corporations for the year ended Dec. 31, 1965

[Compiled from reports on file with the Public Service Commission of Indiana]

Year ended

Dec. 31, 1965 $30, 956, 995

335, 847

31, 292, 842

Operating revenues, kilowatt-hour sales and purchases and average number of consumers for all Indiana rural electric membership corporations for the year ended December 31, 1965. (Compiled from reports on file with the Public Service Commission of Indiana.)

Financial analysis, all Indiana REMC's, for year 1965

Comparison of kilowatt-hour cost for distribution delivery of energy to 16 REMCs from Indiana statewide's proposed G. & T. system and from Public Service Indiana under its rate REMC-X

Cost of power presently available from Public Service Indiana for distribution delivery (rate REMC-X)....

8.00

Difference

2.43

Estimated killowatt-hour requirement for year 1969 of 16 REMCS participating in $71,375,000 loan__

789, 000, 000

Increased cost of power from Indiana statewide in 1969-789,000,000 kilowatt-hours times 2.43 mills___

$1, 917, 000

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

Gentlemen, my name is Frank Griffith. I am President of Iowa Public Service Company with general offices in Sioux City, Iowa. I am submitting this statement on behalf of my own Company, but may I point out to you that there are six investor-owned Iowa utility companies which serve approximately 772,000 electric customers in Iowa and surrounding states. They employ 7,000 people and have approximately 97,500 stockholders. The companies which I refer to, in addition to my own, are the Interstate Power Company, Iowa Electric Light and Power Company, Iowa-Illinois Gas and Electric Company, Iowa Power and Light Company, and Iowa Southern Utilities Company.

The area which is served by these companies consists of some of the most fertile and productive farmland in the entire world. The farmers in this area are certainly among the finest and most capable in the world, and these companies serve 85,000 rural customers. My own Company serves approximately 10,000 farm customers.

In their service areas, these six companies serve 24 cities of more than 10,000 people (or 5,000 meters) and more than 1,200 cities and towns of less than 10,000 people.

My Company, as well as the other companies that I have referred to, is a member of regional power pools utilizing the latest technological developments, including installation of larger and larger, more efficient generating units, nuclear generating units, and 345-volt transmission lines. We are dedicated to provide the best possible electric service at the lowest possible rates consistent with good service, and we pay our full share of local, state and federal taxes. Of every dollar of revenue which we receive, 21.5 cents is used to pay these taxes. In 1965 the amounts paid for taxes by these companies were as follows:

$33,730,000 Federal income taxes (which is 10.9 cents per revenue dollar); $1,544,000 in State income taxes; $31,234,000 in general taxes.

The technical aspects of H.R. 1400 and related bills have been presented by very competent industry representatives. I would like to present our view with regard to whether H.R. 1400 or any bill is necessary.

Let us first examine the availability of electric service to Iowa farms. To the best of my knowledge, there is not a single farm in Iowa that has requested service from our companies and does not now have service. The number of farms in Iowa is decreasing as smaller farms are combined into larger operating units. Under the laws of the State of Iowa, any new electric customer would ordinarily be served by the utility with closest facilities. I seek to point out here that there is indeed no need for vast funds to be appropriated by Congress for service to new farm customers.

Let us now examine the question of facilities for load growth. I was not in the utility business when REA was formed. To discuss the excellent job REC's have done in helping to electrify America's farms would be only to recite history. But I submit that any successful industry which is thirty years old no longer needs subsidization and tax shelter at a time when America's farms are 99.8% electrified.

A large portion of industry in our service area is agriculturally oriented. By this I mean these industries use grains and livestock produced on the farms or that these industries produce machinery, feed, fertilizers, chemicals, or equipment used on the farms.

Is it equitable to provide for subsidized electric service to some industry while competing industries carry their full share of the tax burden? You see, the effect of this proposed legislation extends far beyond the electric business. It extends to every industry in our service area and creates subsidized competition for some industries. To be specific, one of our customers, Terra Chemicals International, is constructing a 25 million dollar anhydrous ammonia plant south of Sioux City. Terra will purchase its electric requirements from Iowa Public Service Company at rates regulated by the Iowa State Commerce Commission, and approximately 23 cents out of every dollar that they pay for their electric service will be used to discharge tax obligations imposed on my Company.

Right in the middle of our service area, near Fort Dodge, Iowa, Consumers Cooperative Association has just completed building a comparable ammonia plant, and they will purchase their electric energy from a Cooperative which, like other cooperatives, has no federal income tax obligation and at rates which

are not regulated. The anhydrous ammonia produced at each of these plants will be, for all practical purposes, identical and yet the production of the Consumers Cooperative Association plant will be subsidized through the operation of the REA system and hence creates subsidized competition to an industry paying its full share of the taxes.

In the field of labor, Congress has expressed itself firmly against unfair labor practices, as witness the ban on secondary boycotts. Congress has expressed itself firmly against unfair competition in industry through the enactment of the Clayton Anti-Trust Act and the Robinson-Patman Act. Yet, in the field of electric power, this unfairness does exist and, under the proposed legislation, would be expanded and encouraged in proportions heretofore unthought of. I submit that this is not proper and is not in the public interest.

There is considerable evidence that REC rates are not as low as the tax differential suggests they should be considering that approximately 211⁄2 percent of the operating revenue dollar received by the investor-owned utilities for whom I speak goes to discharge their tax obligations; and in Iowa, as in most states, REC rates are not regulated by any state regulatory body as are the rates of the investor-owned utilities. This is also true on the federal level where the REC's are exempt from the jurisdiction of the Federal Power Commission. The practical effect of this is that, given a particular potential customer, the REC can undercut the rate that the regulated utility must charge a particular customer. We have instances in the service area of my own Company where the Northwest Iowa Power Cooperative, which purchases all of its power from the Federal Government, has offered to sell to our customers at rates lower than they sell to their own member Cooperatives. Under the Iowa law, the Commission has the authority to authorize, after a hearing and due consideration to the preference of a customer, service from a utility other than the closest utility. It does not take too much imagination to realize that a potential customer is going to express a preference for service from a utility other than the closest utility if the service is abailable at a lower rate. If you consider the below-cost generation which the REC's, as preference customers, purchase from the federal power systems, the presently existing rate differential should be much greater.

Many REC people are dedicated to their jobs and have worked effectively to provide service to their customers. I have many good friends in the REC's and we have developed a mutual respect. I feel sure that they abhor the idea of a nationalized electric power system as much as I do. It is not our belief that it has been the intent of Congress to nationalize the power industry, and yet the use of federal generating plants, federal power transmission systems, and the operation of the so-called "preference clause" are giant steps in this direction.

My own Company and the other Iowa utilities have been and are ready, willing and capable of serving the needs of any and all rural customers in the State. If the rural electric cooperatives need additional generating capacity for their rural customers, we are ready, willing and capable of supplying those needs at rates regulated by the Iowa State Commerce Commission and by the Federal Power Commission.

There is no justification for this legislation based on deficiencies in our performance in the past or any lack of future capability on our part to serve the expanding potential of rural Iowa.

As you gentlemen are well aware, the Chairman of the Federal Power Commission indicated, when issuing the National Power Survey, that the utilities in this country have done a remarkable job of maintaining electric capacity ahead of the growth in electric requirements and an equally able job in anticipating and preparing for tomorrow's needs. This has historically been the responsibility of free enterprise utilities.

We stand ready to compete agressively for customers, but we believe very sincerely that all the participants in this ballgame should play by the same rules.

In summary then, it is our position that this is bad legislation in that it would permit the REC's to engage in unlimited borrowing to expand at a time when 99 percent of our nation's farms have been electrified. This can only result in unnecessary duplication of facilities and unfair competition not only between electric suppliers but by the industries which purchase their energy from the suppliers. It is undesirable legislation in that it would permit the REC's to

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