to a totally borrower-owned entity. I can foresee the same pattern prevailing for the rural electric and rural telephone systems. My personal preference of the two bills as submitted is H.R. 14837. Nevertheless, it is my opinion that the rural electric and rural telephone systems will continue to prosper and meet their service needs under the terms of either of the two proposals. Sincerely, DAVID A. HAMIL. STATEMENT OF PHILIP PARKER, MANAGER, VALLEY ELECTRIC ASSOCIATION Mr. Chairman and gentlemen of the committee, my name is Philip Parker. I am Manager of the Valley Electric Association of Las Vegas, Nevada. I appreciate the opportunity of submitting a statement regarding the legislation which this Committee is considering. Valley Electric Association is a rural electric cooperative which serves 676 consumers over 798 miles of line, or an average of 0.85 consumers per mile compared to 26 per mile for Class A and B commercial utilities of Nevada. Until last summer, Valley Electric operated as the Amargosa Valley Cooperative. When Amargosa merged with its neighboring co-op, White Mountain Power Cooperative 225 miles to the north which served less than a 100, the new name was adopted for the combined organizations. The Valley Electric service area is approximately 9000 square miles. The Amargosa co-op was started only 5 years ago by the farmers and ranchers of the southwestern desert area of Nevada. For 15 years they had tried to get service from the commercial utilities without success. And when the people of the area decided to form their own electric cooperative to serve themselves, the commercial utilities opposed them with spite lines and through legal action. This delayed the progress of the cooperative by several years. Valley Electric is a dramatic example of the value of the REA program. Had it not been for the availability of 2 per cent loans through REA, I believe the people of the area would still be without electricity. Yet despite the very low density of the population, the cooperative is proving financially feasible, and we are meeting our repayments to REA on time. Further, the consumers of the cooperative are increasing their use of electricity rapidly, and it is necessary to heavy-up our lines and to build extensions to meet our obligations as a supplier of electricity in this thinly-settled desert country. Just recently we had to build 80 miles of line to bring service to 18 consumer-members under our area coverage responsibility. I am sure that it is apparent to the members of this distinguished Committee that sparsely-settled areas such as ours could not now be enjoying the blessings of modern electric service without 2 per cent loans from REA, and that 2 per cent funds will be required for some time to come. There is presently a shortage of 2 per cent money. I believe that the proposed legislation as supported by our National Rural Electric Cooperative Association will help preserve 2 per cent funds for systems that must have them to stay in business. This will be accomplished by opening up additional sources of capital for systems that have the financial ability to pay higher interest rates. Moreover, the proposed Federal Bank for Rural Electric Systems will be able to supply the increasing amounts of capital that rural electrics will require in the years ahead. I am hopeful that someday even systems such as the Valley Electric will be able to obtain financing through such a bank. As I see it, lack of adequate growth capital is a shadow darkening the future of the rural electrification program. I believe the concept in the legislation you are considering will remove this shadow and permit the program to continue to progress. I fully endorse the position of NRECA in regard to the legislation. RESOLUTION ADOPTED BY THE EXECUTIVE COMMITTEE OF THE WASHINGTON STATE GRANGE According to a letter from A. Lars Nelson, Master of the Washington State Grange, the following resolution was adopted by the Executive Committee of the State Grange on May 3, 1966. "It was moved by Silvers and seconded by Bozarth that we approve in principle the major points in the NRECA plan to (1) continue REA 2% loans for those systems not yet strong enough to use more expensive capital and (2) the creation of a Federal Bank for Rural Electrification systems patterned after the Farm Credit structure and not in conflict therewith, with eventual ownership to be obtained by the participating Rural Electrification Systems. Carried." JERRY L. ANDERSON, Acting General Manager, National Rural Electric Cooperative Association. RESOLUTION OF the Board of Directors of the UMATILLA ELECTRIC COOPERATIVE ASSOCIATION CERTIFICATE I, Harry Proudfoot, Secretary of Umatilla Electric Cooperative Association of Hermiston, Oregon, do hereby certify that the following is a true and correct excerpt from the Minutes of a meeting of the Board of Directors of said corporation, duly called and held on May 17, 1966, at which a quorum was present and voting and that said Resolution was duly made and has not been amended, altered or repealed: "RESOLUTION “Whereas the need for capital funds to provide electric service in rural areas is rapidly increasing; and "Whereas these requirements are exceeding amounts which it is possible to secure by means of Federal appropriations for purposes of the Rural Electrification Administration; and "Whereas there are several proposals being advanced for a solution to this problem; and "Whereas the National Rural Electric Cooperative Association has made extensive studies in the field of finance for rural electric cooperatives and has made a proposal for Rural Electrification finance: Now, therefore, be it “Resolved, That the Umatilla Electric Cooperative Association does urge Congress to enact the Poage Bill or its equivalent to provide a supplemental source of finance for those rural electric cooperatives who are unable to obtain sufficient capital for their needs under the Rural Electrification Act." In witness whereof, I have hereunto set my hand and the seal of the Corporation on this 26th day of May, 1966. [SEAL] Secretary. STATEMENT OF HAROLD W. EATON, MANAGER, MORGAN COUNTY RURAL ELECTRIC MEMBERSHIP CORP. My name is Harold W. Eaton. I am Manager of the Morgan County Rural Electric Membership Corporation (REMC) of Martinsville, Indiana. I am a member of the NRECA Legislative Committee, representing Region 5 of the NRECA; and I also speak for a group of Rural Electric Cooperatives who are faced with a special problem. That is the continued need for large amounts of growth capital with which to extend service to the increasing number of new members that apply for service, and also to add capacity to improve service to the existing members and to the new members that are added to our system. The Rural Electric Cooperatives I refer to are all very close to a metropolitan area. They are in an area where the population is moving out of the city to farms that are being subdivided to make way for their new homes. As we say, the area is not expanding, it is exploding. These Rural Electric Cooperatives are adding from 300 to 1.000 new consumers each year. In most cases, the consumption of electric current is below the average; this is because the loads served are dwellings only, and therefore is less than the regular farm load served under normal conditions by an electric cooperative. This in turn reflects in lower earnings per member than the other electric cooperatives receive from their members. STATEMENT OF HAROLD W. EATON BEFORE THE HOUSE AGRICULTURE COMMITTEE IN We are required by the State Regulatory Commission of Indiana to serve all I believe all the electric cooperatives are looking forward to the time when Below is a table showing the number of new members that will be connected to STATEMENT OF ERNEST C. WOOD, MANAGER, FARMERS' ELECTRIC COOPERATIVE Farmers' is a distribution-type REA borrower, having 3,442 miles of electric The service area of the Cooperative is predominantly agricultural, widely Correspondingly, electrical usage has increased tremendously, over the last Accelerating usage necessitates increasing capital requirement. Larger trans- problem, plus new service installations, poses a probable greater capital requirement than in the past. Additionally, Farmers' Electric, being one of eight member-owners of NW Electric Power Cooperative-a generation and transmission cooperative at Cameron, Missouri, is directly concerned with the problem of power supply of the future and the continuing need for capital funds to build additional generating and transmission capacity. The apparent future need for increasing capital funds dictates the necessity for the Supplemental Financing for rural electrics, substantially as incorporated in the Poage Bill (H.R. 14000), and in the reasonably comparable Administration Bill. Already, the accelerating capital fund needs of the rural electrics are pyramiding well beyond the available level of loan fund authorizations approved by the Congress. Assuming a continued $365-million level of Congressional authorizations, it would appear that there will exist an accumulated back-log of loan fund requests approximating $350-million as of June 30, 1967. It is expected that the Federal bank for electric cooperatives, as proposed in H.R. 14000, will provide the capital requirements of the REC's above and beyond the present level of Congressional authorizations. It is expected that, as the capacity of the proposed bank increases, and, as an increasing number of REC's can afford the higher-than-two-percent rate of interest to be charged by the bank, the level of annual Congressional authorizations can be diminished, and eventually discontinued. Cooperatively, the proposed Federal bank will permit the REC's to share with the Congress in providing for their future capital needs, with eventual complete self-sufficiency. Mr. Chairman, we urge favorable consideration, and approval by the Congress, of the proposed Supplemental Financing. Expediency is urgent, in that the increasing back-log of loan requests will present an ever-increasing situation for the Federal bank to cope with, at such time that it might become functional. Additionally, delay to the REC's, in securing needed capital funds, may well interfere with, and handicap rural producers in the efficient production and processing of their agricultural products. STATEMENT OF JAMES C. STEPHENSON, MANAGER, SCOTT, NEW MADRID, MISS., ELECTRIC COOPERATIVE I am the manager of the R.E.A. Cooperative in Sikeston, Missouri, representing approximately 40,000 people in Scott, New Madrid, Mississippi, Stoddard and Cape Girardeau Counties in the southeast corner of Missouri. We have 2,450 miles of distribution line with approximately 11,000 connected consumer members. This area is mostly cotton land, now being converted to other types of farming crops such as beans, corn and wheat. The conversion was brought on by mechanization of the farms and loss in population, which has a definite effect on the solidarity of life expectancy of an electric cooperative in the area. We are not in trouble financially, but we do not want to ever face that situation. We want to prepare now for the future. Our four county area Cooperative has a central office and a branch office set up at additional expense to give better service to the members. With our arrangement of handling the collection, construction, maintenance and all other phases of the operation, we combat many problems and always solve them. With our farm background Board of Directors dedicated to community service, the business is guided by reasonable, successful business trained farmers who own farms and understand what electricity means to their neighbors. The Missouri Electric Cooperatives now find the new construction days are about over, except for new houses on existing farms scattered over the area where some type of service was there. The other new installations, new commercial accounts and such new lines to build as hooking up grain elevators, irrigation pumps, road widening projects, etc., keep construction crews busy all the time. We do not have large unserved areas left, which is true, but we do have any amount of small construction jobs calling for work that takes new capital and new materials and labor. Building heavy lines, feeder lines to carry additional loads where weaker lines exist, requires thousands of dollars each year to keep up with our increase in consumption in growth areas. Pole replacement, rotten poles now 29 years old, require attention and money spent to find them and change out the bad ones. Heaving up lines and transformers, running 220 volt lines in where we had 110 volt for air-conditioners and ranges and clothes dryers, runs into a large expenditure of capital investment each year. More and more customers now demand 3 phase service for 3 phase motors. This requires a lot of money each year to build to them and provide service expected in the trade. Hot line work, work with equipment to prevent deenergizing the rural lines, is now expected and runs cost up by slowing down the production on this dangerous type of labor. The proposed "Supplemental Type of Financing" is designed to provide us loan funds when needed for expansion and capital investment into the property that we can not raise out of our margins or revenue. A high capital investment ratio to low income is common in this business and is normally financed by Bonds that are never paid off. Our principal payments that we are willing to pay to a new Electric Bank will make it sound from the beginning by the nature of the repayment plan. Our new Financing Plan will put us in a more honorable position, where in the past we have had charges against us saying we exist on subsidies from the U.S. Government. This will be a joint effort of our cooperatives and Congress to get us out of the borrowed money at 2% in a reasonable length of time. The cooperatives will obtain an increasing proportion of their own financing on the open market at going rates of interest. Each cooperative will invest in the stock of the Bank and also allow members of their cooperatives to invest in Bank stock. The proposed Electric Bank Bills are patterned after the Farm Credit System, which has been very successful in the past. The annual, ever widening gap between the demands for G. and T. loan funds and loan funds for individual cooperative systems, applied against the appropriation made by Congress, cause a backlog of applications close to 100 million dollars per year. This year, we had applications for 612 million of loan funds to supply the needs of all the electric cooperatives and only had 365 million available. Something needs to be done about this backlog and another means of obtaining loans seems to be the answer. In Missouri, the new Associated Electric Cooperatives Organization (A.E.C.), which could serve as an example for other states, has helped the big utilities tie in and intergrate high voltage lines to Government lines and cooperative lines in partnerships for the mutual benefit of all three facilities. No harm has been done to either party involved in this exchange of seasonal power flowing both ways from one system to another. "Supplemental Financing" for Electric Cooperatives should be welcomed by private power companies. Additional sources of power in an ever expanding economy cannot, and have not been built fast enough in many areas of our country in the past. There is room for all of us, both public and private stockholder owned electrical suppliers for an ever increasing use of electricity in the home and on the farm. We urge the adoption of H.R. 14000 in its entirety. STATEMENT OF JACK H. NEEDY, MANAGER, CO-MO ELECTRIC COOPERATIVE, INC. We would like to take this opportunity of filing a statement on behalf of our Cooperative and authorized by our Board of Directors, namely: James W. Morton, President, Route No. 3, Boonville, Missouri. William B. Vogel, California, Missouri. C. C. Koerner, Routes No. 1, Barnett, Missouri. |