Department of Agriculture Appropriations, 1966, 89th Congress 1st Session. Hearings before Senate Appropriations Committee, Pt. 2, p. 410. Department of Agriculture Appropriations, 1967, 89th Congress 2nd Session. Hearings before House Appropriations Committee, Pt. 5, p. 555-61. REA statements and rebuttal Department of Agriculture Appropriations, 1967, 89th Congress 2nd Session. Hearings before House Appropriations Committee, Pt. 5, p. 160-1. LOUISIANA ELECTRIC CO-OP. (LA. 30) Cooperative statements and rebuttal Department of Agriculture Appropriations, 1965, 88th Congress 2nd Session. Hearings before Senate Appropriations Committee, Pt. 2, p. 375-91, 417-18, 426-27. Department of Agriculture Appropriations, 1966, 89th Congress 1st Session. Hearings before House Appropriations Committee, Pt. 5, p. 492-4; hearings before Senate Appropriations Committee, Pt. 2, p. 302-8, 411-24, 429. Department of Agriculture Appropriations, 1967, 89th Congress 2nd Session. Hearings before House Appropriations Committee, Pt. 5, p. 564-7. REA statements and rebuttal Department of Agriculture Appropriations, 1966, 89th Congress 1st Session. Hearings before Senate Appropriations Committee, Pt. 2, p. 526–38. Department of Agriculture Appropriations, 1967, 89th Congress 2nd Session. Hearings before House Appropriations Committee, Pt. 5, p. 362-4. SOUTH MISSISSIPPI ELECTRIC POWER ASSN. (MISS. 53) Cooperative statements and rebuttal Food and Agriculture Act of 1962, H.R. 10010, 87th Congress 2nd Session. The following table briefly illustrates the cost objectives of these G&T loans: 1 Average power cost to members if power was continued to be purchased from the alternative power suppliers in the area rather than installing the generation or transmission facilities as provided for in the loan. 2 Power cost to members for normal load factor requirements. With the addition of large high-load factor load to be served the overall cost is estimated to be 3.98 mills per kilowatt-hour. Present average cost of power (1965) to distribution cooperatives in Kentucky from private suppliers not including the cost of necessary transmission and substation facilities needed to deliver power to cooperatives' load centers. The 7.97 mills per kilowatt-hour is the average cost to the regular distribution members of ColoradoUte. In addition, Ute will furnish power to the Arkansas Valley G. & T. cooperative at a cost estimated at 5.65 mills per kilowatt-hour. The Indiana loan listed in the table above has been under constant and sustained attack by Public Service Company of Indiana whose president is scheduled as one of the opposition witnesses to appear before this Committee. The public-spirited character of this company and its management was demonstrated last month when it cut off power supply to Southeastern Indiana Rural Electric Membership Corporation on a flimsy pretext. Service was restored after court proceedings were instituted. Alabama Electric Cooperative has had almost 25 years of operating experience, and has survived despite its constant harassment by Mr. Bouldin's company. The following is a revealing summary of the experience of the Alabama cooperative with respect to their wholesale power supply. The Facts The first loan to Alabama Electric Cooperative was made on September 23, 1941. In the year ended June 30, 1941, Alabama Power Company sold nine Alabama electric cooperatives 36,744,013 kilowatt hours of electric energy for $435,954.71 at an average price of 11.3 mills per kwh. TVA was then delivering power in Alabama for 6.3 mills per kwh. In the year ended June 30, 1965, the company sold thirteen Alabama Electric cooperatives 446,808,341 kwh of energy for $2,708,612, at an average price of 6 mills per kwh. In 1941, Alabama Power Co. made wholesale sales to 25 other utilities, of 1,245,167,000 kwh for $6,708,749 at an average price of 5.4 mills per kwh, less than half the average price charged the nine cooperatives in that year (11.3 mills per kwh). In 1964, Alabama Power Company made wholesale sales for resale to 87 other utilities, of 2,136,576,000 kwh for $12,473,453 at an average price of 5.8 mills per kwh. Since the Alabama Electric Cooperative system came into operation, the Alabama Power Company has reduced its wholesale rates to those cooperatives to which it still sells power. Today the wholesale price of power from the Company to its rural electric customers and the cost of power to Alabama Electric Cooperative members are comparable, after taking into account the cost factors and differences previously described. (Note: It is anticipated that the cost of power produced by Alabama Electric Cooperative will be further reduced when it is permitted to construct its new generating plant, the loan for which was approved in November, 1961. Since that time, because of the tactics of the Alabama Power Company, the Alabama Electric Cooperative has not been able to proceed with the construction of this vitally needed plant). The Conclusions Contrary to the claims made by utility witnesses before this committee (1) This G&T cooperative has not destroyed or in any way adversely affected the wholesale business of the Alabama Power Company. On the contrary, the company's sales of energy to electric cooperatives have increased twelve-fold since the G&T cooperative came into the picture. (2) A substantial reduction, almost 50 percent, in the company rates to its cooperative customers has occurred despite the fact that its average charge for wholesale power increased by almost 71⁄2 percent in the same period. Therefore, it is crystal clear that the company's reduction in the wholesale rate to the electric cooperatives from 11.3 mills in 1941 to 6 mills in 1964 does not reflect a general trend of reduction of rates. (3) In 1964 Alabama Power Company's wholesale rate to the cooperatives had reached substantially the same level as the TVA rate of 1941. The two “yardsticks," TVA and the Alabama Electric Cooperative, brought about the substantial reduction in rates. (4) Alabama Power Company's purpose and design in their dealings with the Alabama electric cooperatives are best summarized in the remark of its general counsel when, in a discussion of power supply, he said to a cooperative official— "We are out to gut you." (See Hearings before Senate Appropriations Committee on H.R. 6754, 88th Congress, 1st Session, p. 317). The CHAIRMAN. Thank you very much, Mr. Anderson, Mr. Katzin, and Mr. Partridge. Mr. Stubblefield? Mr. STUBBLEFIELD. Mr. Chairman and members of the committee, I would like to call your attention to the fact that the State association from my State of Kentucky has filed a statement with the secretary of the committee in favor of the proposed legislation in the form of the Poage bill, H.R. 14000. I would call attention to the fact that they state their needs will be for the State of Kentucky doubled what is presently invested by 1980; and further call to the attention of some of the members of this committee that they are supporting this legislation which allows for increase in the interest rate up to 3 percent on the intermediate financing providing, however, there is a reduction in the restrictions formally imposed upon the 2 percent loan program. I am happy to acknowledge this statement from my home State. (The statement referred to above follows:) STATEMENT OF J. K. SMITH, GENERAL MANAGER, KENTUCKY RURAL ELECTRIC COOPERATIVE CORPORATION Mr. Chairman and Members of the Committee: The Kentucky Rural Electric Cooperative Corporation is the State Association of Rural Electrics representing rural electric cooperatives in Kentucky which serve approximately 265,000 users. We are pleased to have this opportunity to provide a statement in support of the concept embodied in the proposed legislation designed to amend the Rural Electrification Act of 1936, as amended, to facilitate the extension and improvement of rural electric service to the rural areas of the country. We support the supplemental financing proposal for the rural electrification program which is designed to furnish additional sources of capital funds to meet the growing needs of the rural electric systems. Since the beginning of the program in 1936 through March 31, 1966, total loan funds amounting to $355 million have been approved for the rural electric cooperatives of Kentucky. These are funds which have been necessary to meet our growth requirements. We estimate that we shall need an equal amount, or approximately $355 million, to meet our needs between now and 1980. We must have the assurance of an adequate loan program to meet the unique capital needs of the rural electric systems. STATEMENT OF KRECC TO HOUSE AGRICULTURE COMMITTEE This proposed supplemental financing program through establishment of a Federal Bank for Rural Electrics includes the basic fundamentals which we support, i.e. an intermediate interest rate of approximately three per cent (3%), refinancing provisions under the developmental rate, a financing program that is flexible and free from restrictions, and the long term assurance to the rural electric systems that they will own and operate their own banking institution. We recognize that some rural electric systems will have continued need for low interest rate loans similar to the present Rural Electrification Administration loan program. We support continuation of the present loan program of the Rural Electrification Administration to the extent necessary to meet these critical needs. We support the legislation as embodied in H.R. 14000. This legislation will enable the rural electric systems to grow and to carry out their obligations to their members in accordance with the fundamental concepts of the rural electrification program. RESOLUTION Whereas, we the members of the Board of Directors of the Kentucky Rural Electric Cooperative Corporation, the State Association of Rural Electric Cooperatives, being assembled in our regular meeting on this fifth day of April, 1966, in Louisville, Kentucky, and Whereas, hearings on rural electrification appropriations for fiscal year 1967 are being terminated before House and Senate Committees, and Whereas, the rural electric cooperatives in Kentucky, along with all rural electric systems throughout the nation, are vitally concerned that adequate funds to assure the continued growth and development of the rural electrification program be appropriated for fiscal year 1967. We further believe that the sum of $612-million as recommended by the National Rural Electric Cooperative Association for fiscal 1967 is realistic to carry the program through the present critical transitional period until the supplemental financing program can be established, and Whereas, we are equally concerned that these appropriations be made free from restrictive language that endangers the program, particularly the generation and transmission phase, and unnecessarily interferes with the authority of the Administrator of the Rural Electrification Administration as clearly set forth in the Rural Electrification Act, and Whereas, Congressman W. R. Poage of Texas has introduced H.R. 14000, a bill amending the Rural Electrification Act to provide for a supplemental financing program for the rural electrification program. This bill is one that can be enthusiastically supported by the rural electrification leaders, and Whereas, we understand that the Administration soon will also be sending to Congress legislation that will implement the supplemental financing program. Through discussions between the National Rural Electric Cooperative Association and the Budget Bureau, and other officials of the Administration, we understand that this proposed Administration legislation will be acceptable to the rural electrification leaders, and Whereas, this marks the first attempt to amend the Rural Electrification Act since 1949 when it was amended to provide for rural telephone loans. We realize that opening the Act for amendment involves a certain amount of risk, and Whereas, we are interested that the supplemental financing program as finally adopted provide adequate growth capital at equitable terms for the rural electrification program and that adequate funds be appropriated to REA to allow continued growth for rural electrification until the financing program is established: Therefore be it Resolved That the rural electric cooperatives of Kentucky wish to take this means of expressing our viewpoints on these matters and to request Kentucky's Congressional delegation to provide leadership and counsel in resolving these crucial issues. FINANCING RURAL ELECTRIFICATION A rural electric financing study has been made by the National Rural Electric Cooperative Association, an organization representing all rural electric systems. This comprehensive study includes an objective review of the long term capital requirements of the rural electric systems, an appraisal of rural electric systems' abilities to absorb higher loan costs and still meet their objectives, and the unique requirements of the overall program of rural electrification. We urge every rural electric leader to study the data in the financing report and to participate fully in the formulation of a final plan. It has been the feeling of the rural electrics in Kentucky for some time that this step is needed. By resolution of our membership in 1959, we requested that a study be made of our financing needs. The financing study offers for consideration three types of financing to meet the needs of the rural electric systems: (1) Retention of the present REA loan program as now operating. Many rural electrics must have financing under terms and conditions which apply to our loan program as it is operated at the present time. (2) Intermediate financing through the Rural Electrification Administration. There are rural electric cooperatives which can afford to pay a higher interest rate on their loans, but still need many of the other features that would be available under the intermediate financing plan. This would involve amending the Rural Electrification Act to provide for an interest rate based on the cost of money to the government with this cost averaged over a 20-year period, 50-year amortization, and elimination of restrictions now applied on present REA loans. (3) Supplementary capital through establishing arrangements for attracting non-government capital for meeting rural electrification loan needs. We have some systems which, by virtue of the economic conditions of the areas in which they serve, can meet their objectives through borrowing funds under the supplementary financing phase of this program. We recommend that this be a guaranteed loan program with the Rural Electrification Administration acting under the authority of Congress and being authorized to offer securities on the open money market to secure capital to meet rural electric loan requirements. We believe that these three steps of financing will serve the needs of all rural electric systems. Rural electric cooperatives are pledged to the concept of area coverage which requires the providing of adequate, dependable, low cost electric service to all users in the cooperative service area on an equal basis. For this reason the financing of the rural electric systems must be designed to meet the unique requirements of these systems. Therefore, be it resolved that the rural electric cooperatives of Kentucky go on record as supporting a financing program administered by the Rural Electrifica tion Administration embracing the principle of the three phases of financing as stated in this resolution for meeting our future program needs. The CHAIRMAN. We will place in the record at this point several statements which have been received, which will be made a part of the record, together with those submitted by the members of the committee. (The prepared statements of Alton P. Wall, J. B. Slack, Henry M. Armfield, Eli Seawell, J. C. Brown, Jr., Robert W. Scott, Allan Swanson, L. C. Carpenter, follows:) STATEMENT OF ALTON P. WALL, GENERAL MANAGER, RANDOLPH ELECTRIC MEMBERSHIP CORPORATION, ASHEBORO, NORTH CAROLINA Mr. Chairman and Gentlemen of the Committee: My name is Alton P. Wall, and I am the General Manager of Randolph Electric Membership Corporation, Asheboro, North Carolina. Randolph Electric serves rural areas in Randolph, Alamance, Moore, Montgomery, and Chatham Counties, which are located in the Central Piedmont area of North Carolina. At present, 10,246 services are in place, served from 1,942 miles of line. Randolph Electric is a member of the Tarheel Electric Membership Association and also a member of the National Rural Electric Cooperative Association, whose spokesmen will discuss in depth the legislation under consideration. Randolph Electric Membership Corporation would like to be recorded as supporting fully the Supplemental Financing Plan, which is based upon a lengthy study by the National Rural Electric Cooperative Association and Kuhn-Loeb. Certain members of the Board of this Corporation and myself participated in state, regional, and national meetings, in which these plans were discussed and adopted. We specifically support the provisions of H.R. 14,000 and H.R. 14,048, and we are in general agreement with the administration's plan (HR 14,837), However, we feel that it would be improved by incorporating certain features, which will be discussed by representatives of the National Rural Electric Cooperative Association. The Board and Management of Randolph Electric Membership Corporation urge upon you the necessity of finding supplemental financing for our cooperatives, because under the law passed in the 1965 General Assembly, our Cooperative is charged with the utility responsibility in the area it serves. Our area surrounds many towns in the Piedmont North Carolina, which exceeds the 2,500 limitation on the use of REA funds. Our headquarters county (Randolph) is the third fastest growing county in the state. As the cities expand their corporate limits over our service area, it is imperative that we have a source of funds, with which to meet our responsibility. I appreciate very much the opportunity to make this statement. STATEMENT OF J. B. SLACK, SEAGROVE, NORTH CAROLINA Mr. Chairman and Gentlemen of the Committee: My name is J. B. Slack of Seagrove, North Carolina. I was reared on a farm in central North Carolina during the horse and buggy and kerosene oil lamp days. During my days as a student in primary and high school, I could use only an oil lamp to study by. Not until I entered college in 1922, did I have the privilege of studying by electric light. During my entire life, I have either been on a farm or have worked directly with farm people. During the late 20's and early 30's, while working as a county agriculture agent, I tried diligently to interest the public utility serving the area where I worked to build lines into some of the more thickly populated areas of the county, but I was never successful. When the Rural Electrification Act was passed, I assisted the farmers in my county in forming a rural electric cooperative. The cooperative was formed and was granted a loan by the REA to build lines. When a contract was let by the cooperative for construction of lines, the public utility serving the area immediately started paralleling the coop lines. This was the same utility, who less than five years before had told me they would not, under any circumstances, consider building lines into some of these very same communities. |