Rural electric coop's were formed all over the country and rural people were able to have the blessing and benefits of electric power for the first time. These rural electric coop's have, for the most part, grown strong, and through loans from the government have been able to bring the benefits of electric power to their rural areas. Most, if not all, of the power companies have fought rural electrification from its very beginning. Their primary criticism was the low interest loans made available by the Government. These same cooperatives having reached a position of strength and stability, are now in a position to begin to stand on their own feet and go to public money market for much of their financing, as provided in HR 14000 and HR 14837. These bills provide for a system of supplemental financing for rural electric cooperatives that will lift much of the burden from the Congress and the U.S. Treasury. But, who are the chief opponents of this method of financing to let the cooperatives carry this load. From what I hear and read in the press, it is the same power companies, who have always complained that these coops, using low interest rate loans from the government, are competing with in areas where prior to passage of the Rural Electrification Act, they refused to furnish electric power. The same sort of objections and criticisms were heard from the money lenders at the time of passage of the Federal Land Bank Act and the Farm Credit Administration Act. Who now can say the Farm Credit system has not been eminently successful and has permitted farmers to build a strong self supporting financing program that is not a drain, in any sense of the word, on the Federal Government. The rural electric cooperatives are simply asking, through this legislation, for an opportunity to do the same thing. I wish to thank the Committee for the opportunity to make this statement. STATEMENT OF HENRY M. ARMFIELD, ASHEBORO, NORTH CAROLINA Mr. Chairman and Gentlemen of the Committee: My name is Henry M. Armfield. I am in the banking business in Asheboro, North Carolina, which is also the headquarters of Randolph Electric Membership Corporation, an REA borrower. Also serving in our area is Carolina Power and Light Company, a company in which I own stock. I have watched with a great deal of pride and satisfaction the growth and development of our home county of Randolph. I know that Randolph EMC has played an important role in that development. The cooperative has been a major sponsor of the Northern Piedmont Area Development Association and the Sandhills Area Development Association, both of which have been instrumental in promoting the industrial and agricultural growth of the area served by the co-op. The co-op's manager, Mr. Alton Wall, recently served as president of the Northern Piedmont. Association. I appear here in support of HR 14000 and HR 14048. As a banker, I admire the wisdom of the cooperatives for seeking ways to bring non-government financing into their program. It makes good sense for them to have sources of capital available to them without stifling restrictions. Capital should be available that is limited only by the adherence to sound banking principles. I understand that the present REA funds are limited and these are available only with restrictions that could hamper the orderly growth of the co-ops or jeopardize their ability to continue to give fine electric service at reasonable rates. For instance, I am aware that Randolph EMC will, by 1974, need an additional $21⁄2 million in capital funds if it is to adequately meet the rapid increase in farm automation and industrialization already taking place in our area. Without a source of adequate capital, there is a danger that this growth will be slowed. As a person interested in seeing our area developed to its fullest, I urge your favorable consideration of these two bills. STATEMENT OF ELI SEAWELL, DIRECTOR OF THE GRAHAM PRODUCTION CREDIT ASSOCIATION, BENNETT, NORTH CAROLINA Mr. Chairman and Gentlemen of the Committee: My name is Eli Seawell, and I am a farmer in the Pleasant Grove Township in the southeast corner of Randolph County. I presently operate the farm on which I was reared, and have spent my entire life farming and in farm-related work. I am a member of the Board of Directors of the Graham Production Credit Association, and a former director of the State ASC Program. Since 1939, I have been a member of Randolph Electric Membership Corporation, which is a REA-financed Cooperative, serving a five-county area in the central part of the state. I was active in its formation, and have maintained a keen interest in the operation of the Cooperative throughout the years. I have knowledge of the Supplemental Financing Plan, proposed by NRECA, which is based on a study made by NRECA and Kuhn-Loeb. I am happy to note that the bill, which is now under consideration of this committee, contemplates a banking system patterned after the Federal Land Banks and other farm credit institutions. I would like to state that I wholeheartedly support the establishment of such a bank, and would urge that provision be made for the transition from government to borrower control, upon the retirement of the majority of the Federal funds. I appreciate very much the opportunity to make this statement. STATEMENT OF J. C. BROWN, JR., EXECUTIVE MANAGER, TARHEEL ELECTRIC MEMBERSHIP ASSOCIATION, RALEIGH, N.C. Mr. Chairman and Gentlemen of the Committee: My name is J. C. Brown. I am Executive Manager of Tarheel Electric Membership Association, whose membership is made up of the 32 electric cooperatives headquartered in North Carolina and one out-of-state cooperative which serves far western North Carolina. These corporations operate more than 45,000 miles of line from which they serve 228,000 households, businesses, and institutions. These 33 cooperatives and Tarheel Electric are also members of the National Rural Electric Cooperative Association, whose spokesmen will discuss in depth the legislation under consideration. Tarheel Electric Membership Association would like to be recorded as supporting fully the supplemental financing plan which was based upon a lengthy study by N.R.E.C.A. and Kuhn-Loeb and presented to our membership upon a number of occasions, including our mid-year directors meeting at Durham in August of 1965, our regional meeting of the national association at Raleigh in the fall of 1965, at a meeting of managers and others at the International Inn in Washington in December, 1965, and at the February national meeting of N.R.E.C.A., which was attended by approximately 200 North Carolina co-op directors and managers. In addition, the N.C. Farm Bureau Federation in its annual convention at Raleigh last fall adopted the following resolution: "We support the rural electric cooperatives in their efforts to find new sources of supplemental private financing, necessary to meet the rapidly increasing demand for electric power. We also recognize that many rural electric cooperatives continue to serve thinly populated areas and therefore are not yet able to provide electric service at rates on a parity with those of urban people. For these electric systems, we urge the Congress to continue to make available REA loans at a rate as low as practical." The N.C. State Grange at its convention, also held in Raleigh last fall, and the National Grange at its convention in Topeka, Kansas, adopted strong resolutions giving full support to the rural electric cooperatives in their efforts to develop sources of supplemental financing. I don't believe any proposition has ever been presented to the Congress that has been more thoroughly studied, understood and supported by a large segment of the population than this one, which is represented by HR 14000 and HR 14048. We specifically support these measures. We also are in general agreement with the Administration Bill (HR 14837), however, we feel it would be improved by the incorporation of certain features which will be discussed by representatives of N.R.E.C.A. We appreciate the opportunity to present our views on these bills. STATEMENT OF ROBERT W. SCOTT, LT. GOVERNOR OF NORTH CAROLINA Mr. Chairman and Gentlemen of the Committee: My name is Bob Scott. I am presently serving as Lieutenant Governor of North Carolina. Prior to my election to this office in 1964, I was Master of the North Carolina State Grange and as such was closely associated with the rural electric cooperatives of North Carolina and most concerned about their problems. I think we have unquestionable evidence that the people of North Carolina want to preserve and encourage the development of our rural electric cooperatives. In 1963, the General Assembly overwhelmingly rejected a proposal of our General Statutes Commission that they could be sold without a vote of the membership. This proposal and others were issues in practically every statewide race in 1964. I'm happy to say that the 1965 General Assembly did much to resolve a basic problem. It adopted a fair law which protects the rights of existing power suppliers when annexed by towns, and it provides for the assignment of exclusive territories outside of towns. This was legislation agreed to by our power companies and cooperatives. It gives our state the opportunity to prevent wasteful duplication of power facilities. It assures every power supplier protection which it needs to make its investments and provide reliable service. The legislation will serve the people of our state only if these power suppliers are able to obtain capital on reasonable terms. If they can't do this-whether they are stock corporations or electric cooperatives or towns-the areas they serve will suffer. The investment they have already made will be endangered, and what appears to be wise public policy against duplication of facilities becomes a wall against progress. I am most impressed with the thoroughness and unselfishness with which the nation's rural electric cooperatives, through their national association, undertook to solve their financing problems. I am acquainted with the Kuhn-Loeb Study, and the resulting recommendations of the National Rural Electric Cooperative Association which have been incorporated into HR 14000 and HR 14048. These bills recognize that many systems serving thinly-settled rural areas will need 2 per cent financing for some time to come. They also provide that as these systems become more capable of paying interest rates reflecting the cost of money to the government, they shall do so. The most attractive feature is that they provide for eventual ownership and control of their own bank by the cooperatives, much as the Production Credit Associations have gained control of their own capital after initial, adequate investment by the Federal government. I believe that your favorable consideration of these bills would not hurt any power company, and would be of great benefit to the development of our rural areas which are highly dependent upon electric cooperatives for service. WEST CENTRAL ELECTRIC COOPERATIVE INC., Congressman HAROLD COOLEY, Higginsville, Mo., May 25, 1966. DEAR CONGRESSMAN COOLEY: The West-Central Electric Cooperative, with Headquarters at Higginsville, Missouri, submits to you the following statement on HR 14000-Rural Electric Supplemental Financing Plan. The West-Central Electric Cooperative, along with all of the Rural Electrics across our country, have for many years continued to build electric facilities to serve the unserved. Our task is by no means complete. We are constantly faced with the problem of heavying up our facilities to adequately handle the larger growing loads and replacing facilities, especially poles, which is a far greater job than ordinary maintenance. The need for a continued supply of capital for building and improvement is essential in order for us to survive. For years we have heard the cry of our utility competitors about 2% moneyunfair competition-government infiltration of the power business. The American people and our Congress have long ignored to a great extent these voices for they could see very plainly what the Rural Electrification program has accomplished. HR 14000, the Supplemental Financing Plan, is a joint effort by the Congress of the United States and the electric cooperatives to reduce the demand on Congress for REA appropriations. It is a way of financing our program without taking away the 2% money in total for there are many systems that must borrow their capital needs at 2% or otherwise go under. HR 14000 would allow the Rural Electrics to obtain an increasing proportion of their financing on the open market at going interest rates. The bill further is patterned after the Farm Credit System which has been so successful. Studies have been made by experts in the field which indicate that nearly $9.5 billion will be needed by the Rural Electrics in the next 15 years. The Rural Electrics realize full well that the Congress could not continue to provide sums of this proportion in the years to come, which explains almost in total the need for HR 14000. We join together with all of the Rural Electrics in requesting your most vital support for the Supplemental Financing Plan. Yours very truly, ALLAN SWANSON, Manager. STATEMENT OF L. C. CARPENTER, VICE PRESIDENT, MIDCONTINENT FARMERS ASSOCIATION, COLUMBIA, MISSOURI Mr. Chairman and Members of the Committee: My name is L. C. Carpenter, Vice President of the Midcontinent Farmers Association with headquarters at Columbia, Missouri. Although I have clarified this matter previously before your committee, I wish to again state that the Midcontinent Farmers Association includes all the members presently belonging to the Missouri Farmers Association as well as other members in surrounding states. I am happy to be able to appear here today in support of the supplemental financing proposals for REA now pending before your committee. May I state further that it is my personal privilege to own two farms on which REA supplies the electrical current. If you will pardon the personal reference, I feel compelled to think back to those days prior to REA when there was no electrical power on our farm (although the huge power company had a line not too far distant). There were no milking machines, although we operated a dairy, no electric lights, no power water systems-virtually none of the labor-saving devices for the farmer and certainly none for the housewife who without electrical current was destined to a life of drudgery and inconvenience. The REA electric programs established by the Rural Electrification Act of 1936 is regarded by farmers as one of the greatest pieces of legislation ever passed by the Congress to bring improved standards of living to millions of rural people to lessen the burdens of toil and labor, to bring the farm out of the backwoods and to the forefront, to help to improve productivity, and increase income and to make rural living a source of enjoyment by enabling farmers to enjoy the many electrical benefits that their city cousins have enjoyed for many years in the past. This was not an easy task to accomplish as it took ingenuity, cooperation, boldness and imagination on the part of farmers to form their own local cooperative groups and to join hands with the federal government in making this great program the success that it is today. REA today serves nearly 51⁄2 million rural customers. Many of them are located in sparsely populated areas and some even in extremely remote areas where few people would have even dreamed 25 years ago that they could be privileged to enjoy electric current. The Congress in its wisdom realized by the very nature of the project to supply electrical power for the rural areas, the REA cooperatives must have federal aid and special treatment if they were to be successful. Today the Missouri electrical cooperatives average 3 customers per mile with a monthly revenue of $388.00 from these 3 customers. Whereas, private utilities enjoy the privilege of 35 customers per mile of line with an average monthly revenue of $8,396.00 per mile. In terms of numbers of users in strictly rural areas, by virtue of the disappearance of the smaller family farms, this problem of customers per mile of line has worsened. However, in terms of power utilization, the volume output is higher. Some people who are not informed on these matters have wondered why REA loan demands are far in excess of the amount of moneys which have been appropriated over the past several years. If you will pardon another personal reference, my wife and I had the distinct pleasure of being one of the first cooperators to have REA service extended to our farm home. We lived in a 6-room house without a single modern convenience. When we wired this house the first time, we had six drop cords, one in each room with one electrical outlet installed in the kitchen (with no electrical equipment to use in the outlet). The out buildings were not even wired, including the milking barn. As I recall the minimum monthly billing was in the vicinity of $3.50 per month. Although I still own that farm, but admittedly am not personally living on it today, all of the buildings are wired. The tenants who occupy this farm today enjoy running water, refrigeration, forced air heat, electric washers and dryers, radios and televisions, mechanical milkers, milk coolers and virtually all of the modern electrical equipment that the average farmer and his wife would use. Rather than the $3.50 minimum, the power utilization has increased until it is 15 to 20 times the billing that it was when electricity was first installed. This fact itself is indicative of the need for the building of heavier distribution lines and for the generation of additional power to meet the continuing expansion to meet the ever growing demand for electrical power. I would like to also call to the attention of the committee since the Grundy Electric Cooperative was one of the first in the nation, much of the original equipment has already been or will soon need to be replaced, including the poles themselves which at that time were not treated and in many instances not now large enough to carry the increasing number of wires needed to provide service. The original loans to the member cooperatives were made on a 35-year selfliquidating basis bearing 2% interest. In addition to these considerations, technical assistance was provided the local cooperatives, including advice and guidance in the management and operation to help to build a firm economic base. Over this 30-year period farmer-owned and managed REA cooperatives have successfully provided power to farmers and in some instances where circumstances required have generated current to supply the ultimate user, but the time has come when additional financing is needed. The 1967 budget proposal recommended only $220 million, a cut from last year of $145 million. The House of Representatives has restored this amount for this year to $365 million, and yet this amount is grossly inadequate to meet the growing demand. Let me pause here to make one fact crystal clear: Midcontinent Farmers Association wants to go on record here and now in strongly recommending that a substantial amount of 2% interest money appropriated annually by the federal government must be continued if a large number of cooperative associations are to be able to continue their operations and serve their patrons. On the other hand, we must be practical. With our unsettled conditions in Vietnam and elsewhere, a tremendous strain is being placed on the federal budget. The government's cost of money over the past few years has increased at a fantastic rate. In light of these circumstances, we strongly recommend the adoption of the proposed Supplemental Financing Plan for REA Cooperatives by the establishment of a Federal Electric Bank patterned somewhat after the original Farm Credit Act which provided for the Farm Credit Banks. Through this device rural electric cooperative associations can: (1) Make a start toward their own self-help program without total dependence upon the Federal Treasury. (2) In so doing they will be able to exercise more independence and greater control over their own business. (3) Rural electric distribution cooperatives, generation and transmission associations which are financially able to pay a higher interest rate and continue to render adequate service would be required to secure their financing through the Electric Bank. We obviously would favor the provisions of H.R. 14000 which establishes the bank rate at 3%. (4) It is of utmost importance that this Electric Bank be adequately capitalized. Again, we favor the provisions of H.R. 14000 which provides for a federal investment of $1 billion over a 15-year period compared to the other bill which limits government participation to $750 million over the same period. (5) We favor the provision of both bills which establishes an Electric Bank Board. However, we do believe that the provisions of H.R. 14000 probably is more practical wherein the major control of the Electric Bank would revert to the borrowing cooperatives when over 51% of the government's investment has been retired. (6) There are tremendous technological changes taking place almost hourly in the generation, transmission and distribution of electric power. REA must keep abreast of these changes, and, to do so, additional capital will be required. It is reliably estimated that over the next 15 years just to modernize and to build up the distribution facilities will require between $8 and $10 billion. According |