assuring that future sources of capital are available for the growth of the program. The Vermont rural electric companies certainly do a job no one else was willing to do-even now they average only four consumers per mile of line. With such marginal operations, it becomes apparent that their future growth is intimately bound up with the creation of a Federal Electric Bank. The thinness of their operation can also be seen in the fact that although the net investment in our three Vermont systems since their inception, some 25 years ago, has been $6.5 million, their members have accumulated only $416,000 equity in them to this date. Their support of a Federal Electric Bank proposal is not occasioned by the expectation that they would immediately be borrowers from such a bank at three or four or even five per cent rates of interest; however, to the extent that systems now borrowing money from the Rural Electrification Administration at the conventional two per cent, 35-year terms could turn to the Federal Electric Bank for a source of growth capital, systems such as ours in Vermont, and elsewhere, where they are of only marginal feasibility, would have better access to such two per cent funds as Congress makes available to them. As I see it, with the two rates of interest provided for in this legislation, coupled with the existing REA loan terms, the variety of rural electric systems we have throughout the United States could pay whichever interest rate they could best afford, while being assured of adequate future sources of capital. In closing, I would respectfully urge the Committee to see the proposal encompassed by the Poage, Mills, and Schisler bills as a "rural renewal" program. Rural electrification is one of the most viable and unifying forces in rural America today. It has been responsible for raising the level of farm electrification from 11 per cent in 1935 to over 98 per cent today; and in so doing, it has created a $14 billion a year market for electric appliances and machinery. This legislation would do much to provide the necessary path to eventual independence for many of the systems which have, over the past thirty years, amply justified the faith which the Congress placed in them. Given the opportunity through passage of this legislation, I am confident that they will again acquit themselves with great credit. RESOLUTION No. 4 OF THE OAKDALE COOPERATIVE ELECTRICAL ASSOCIATION, OAKDALE, WIS. SUPPLEMENTAL REA FINANCING Whereas, the rural electric systems, in order to provide adequate and reliable service for their members, need increasing quantities of growth capital, estimated to total $92-billion in the next 15 years; and Whereas, in recent years the amounts of loan funds budgeted by the Administration and authorized by the Congress have not kept up with the growing requirements, causing a critical build-up of applications backlog; and Whereas, the loan fund shortage is an immediate problem affecting the future prospects of every rural electric system that needs to build additional capacity to keep up with the rising electric power needs of their consumers; and Whereas, many, if not most rural electric systems in Wisconsin and other states, if they are to make progres toward meeting program objectives, are still not financially strong enough, either to operate successfully without the REA 2 percent, 35-year loans or to go individually to the private money market for the capital they need ; Now, therefore, be it resolved that we urge the Administration and the Congress in the interests of a sound and ultimately financially independent rural electrification program to help us alleviate the rural electric loan fund shortage now upon us and provide for increasing capital for future growth by adopting a Supplemental Financing Program substantially in accordance with the proposal set forth in the NRECA report of January, 1966, entitled Supplemental Financing Program for Rural Electrification which would: (1) Continue the traditional 2 percent, 35-year REA loan program with adequate funding for those systems requiring such loans to meet program objectives; (2) Establish a Federal Bank for Rural Electric Systems which initially will be in USDA and will operate with Federal government assistance but which, as the systems grow in maturity and invest more of their own funds in the Bank, will shift from government to borrower ownership and control; (3) Provide loans with sufficient flexibility of interest rates, amortization requirements and maturities to enable systems to achieve program objectives; Be it further resolved that we urge the Administration and the Congress to make available to REA during fiscal years 1966 and 1967 sufficient funds to dispose of the accumulated loan applications and those yet to be received by REA, in order that the rural electric systems may move steadily onward with construction programs so vital to rural consumers and in order that the Bank may initate operations on an orderly basis without gigantic loan demands exceeding its capabilities in the early years of its operation. STATEMENT OF L. REID HARRIS, MANAGER, CENTRAL ELECTRIC MEMBERSHIP CORP., SANFORD, N.C. Mr. Chairman and gentlemen of the committee, my name is Reid Harris. I am Manager of Central Electric Membership Corporation serving 3,500 consumermembers in parts of five piedmont counties of North Carolina. We now serve an average of four members per mile of line. Central Electric Membership Corporation would like to be recorded as supporting fully the supplemental financing plan as recommended by our National Rural Electric Cooperative Association. The two bills, HR 14000 and HR 14048, incorporates the above plan. Our future financing has been a matter of great concern and has been discussed on many occasions. The N.R.E.C.A.'s supplemental financing plan has been studied by our board of directors, and a representative number of the board have heard the presentation of the plan at the N.R.E.C.A. regional meeting and also at the national meeting. I believe that your favorable consideration of these bills would greatly benefit the financing problem of Central Electric and the development of our area which is so dependent on area coverage of electric service. RESOLUTION ADOPTED BY BOARD OF DIRECTORS OF SOUTHERN MARYLAND ELECTRIC COOPEATIVE, INC., HUGHESVILLE, MD., AT REGULAR MEETING HELD MAY 17, 1966 Whereas, Southern Maryland Electric Cooperative is, and for many years has been, a borrower of the Rural Electrification Administration, and Whereas, the Rural Electrification program has been the means by which many thousands of Southern Marylanders have been provided with electric service who might otherwise not have it, and Whereas, the need for growth capital for continuing expansion and demands for service on our system and others countrywide, is far exceeding the amount of available REA loan funds, and must be provided by supplemental financing, and Whereas, this supplemental financing would be provided by the establishment of a Federal Bank for Rural Electric Systems under Bills already introduced in the Congress and designated as H.R. 14000, H.R. 14048, H.R. 15162 and S. 3337, Now, therefore, be it resolved, that this Cooperative support and work for the passage of this legislation, and Be it further resolved, that a copy of this resolution be sent to each of our Senators and Congressmen, and to the appropriate Senate and House Committees, requesting their support for the legislation. JOHN W. WILLIAMS, Jr., STATEMENT OF J. L. SHEARON, MANAGER, WAKE ELECTRIC MEMBERSHIP CORP., WAKE FOREST, N.C. THE NEED FOR THE REA FINANCING BILL The bills recently introduced by you and Congressman Poage proposed to provide supplemental financing for REA's rural electrification and telephone program are a direct result of a need shown by a study authorized by the nation's rural electric cooperatives over three years ago. The study indicates that the rural electric systems' needs will exceed $675 million annually. Congress is not providing adequate growth capital for the rural electric systems now. Most members of Congress continue to support the rural electrification program, but financial demands of other programs have caused the rural electric funds to come up short. 65-357-66-13 The backlog of REA loan applications at the end of June, 1966 will be 50% greater than in any recent year. Wake Electric's long range financial plan indicates capital requirements will increase 60% by 1975. Ours, like many other electric cooperatives, will continue to be dependent upon REA loans for some time for our capital needs. Some of us will continue to need 2% money until we are in position to pay the higher interest rates. The Poage Bill (HR 14000) and the Cooley Bill (HR 14837), amended to provide the lower rate of interest as provided in the Poage Bill, will, when passed, provide, we believe, adequate financing for our systems. STATEMENT OF J. L. SHEARON, ACTING MANAGER, PIEDMONT ELECTRIC THE NECESSITY FOR SUPPLEMENTAL FINANCING FOR RURAL ELECTRIC COOPERATIVES The economy of the rural population of the six county area in which Piedmont Electric Membership Corporation, Hillsboro, N.C., extends electric service has been greatly enhanced with the extension of cooperative electric service. The whole economy of rural people in this area, and throughout the nation, has been lifted to the heights with rural electrification. Rural people now have more interest in themselves, their community, their government, and world affairs. The needs for growth capital will increase over 50 per cent in the next ten years, as indicated by our system construction plans and financial forecast. The nation's rural electric systems, through their national association, have completed and approved a study which shows rural electric systems will need 9.5-billion dollars in new growth capital between 1965 and 1980. Some systems will continue to need 2% loans to keep good service and make new extensions in thinly populated and low income areas. The Bass-Cooper bill (S. 3337) and the Poage bill (H.R. 14000) will, if passed by the Congress, largely solve the financing needs for our rural electrics, which is not only important to the rural electrics and their members, but to the economy of the businessmen on main street and all businesses throughout this nation. STATEMENT OF WALTER HARRISON, GENERAL MANAGER, GEORGIA ELECTRIC MEMBERSHIP CORP., MILLEN, GA. Mr. Chairman and gentlemen of the committee, my name is Walter Harrison, General Manager, Georgia Electric Membership Corporation, Millen, Georiga, representing the 41 rural electric cooperatives of Georgia with a combined membership of near 350,000 as of this date. We were surprised to learn that The Southern Company, a holding company for Alabama Power Company, Georgia Power Company, Gulf Power Company and Mississippi Power Company would appear and testify before this Committee on the subject of Supplemental Financing for the electric co-ops. It is necessary that we continue to have growth capital if we are to serve the needs of our forty-one cooperatives and their member-consumers. Our investments in Electric Plant in Service before depreciation is as follows: 1965, $179,503,391. 1964, 169,255,181. 1963, 158,718,092. 1962, 145,267,456. 1961, 137,722,061. and the end is not in sight and will never be. Our KWH consumption runs thusly: 1964 (latest figure available), 2,383,273,938. 1960, 1,252,346,000. Our projected KWH consumption in 1980 will be 3,200,000,000. We have many cooperatives in Georgia that are in serious need of capital funds. Our annual appropriations on the part of the Congress is not in keeping with our normal growth and applications that are on hand for processing. We can only see one purpose in mind from those that oppose us, and that is to slowly starve the rural electrification program to death and then be able to take over the lines of the co-ops. We do not anticipate any need for funds whereby we would build generation and transmission within our State. This will not take place as long as the Power Companies are willing to treat fair with us ratewise and in matters of territorial integrity. Thus far we have been able to work out our problems across the Confernce table. We trust that this condition will continue to prevail, however, we need as a "bargaining tool" the right to generate and transmit power throughout our State. Without this we would be at the mercy of the private power companies. We would like to call to your attention some excerpts from the Annual Report of the Southern Company which shows their growth curves and their tremendous needs for growth capital, and that is all we are asking in this legislation that is now before you. We only seek ways and means of continuing to serve the areas that we have developed and have a utility responsibility to serve their total electric needs. In conclusion let me say "Thank You" for the opportunity of filing this statement and we solicit a continuance of your fine cooperation. THE SOUTHERN CO. ANNUAL REPORT Expenditures for New Construction: 1962, $136,000,000. 1963, $155,000,000. 1964, $191,000,000. 1965, $203,000,000. 1966, (we expect to spend $256,000,000). 1966-68, (we expect to spend nearly $700,000,000). Construction During 1964 the system companies invested $191 million in new generation, transmission and distribution facilities. Alabama Power Company completed its Logan Martin Dam on the Coosa River, below Gadsden. The plant's three hydroelectric generators have a combined capacity of approximately 130,000 kilowatts. This project is part of a 7-dam development of the 270-mile-long river, one of the most extensive river development programs ever undertaken by private capital. At Plant Jack McDonough, near Atlanta, Georgia Power Company placed a second 245,000-kilowatt unit in operation and that company also completed a third unit (125,000 kilowatts) at its Plant Mitchell, near Albany. About half of the year's $191 million of expenditures was made for additional power generating facilities; the balance was for transmission and distribution lines and substations. In 1965, another 625,000 kilowatts of generating capacity will be added, consisting of: A 250,000-kilowatt unit (the first) at the Greene County Steam Plant, near Demopolis, Alabama. This plant is jointly owned by the Alabama and Mississippi companies as tenants in common. The initial unit (also 250,000 kilowatts) at Georgia Power Company's Plant Harllee Branch, near Milledgeville; and A 125,000-kilowatt unit, also the first, at Gulf Power Company's Lansing Smith Steam Plant, near Panama City, Florida. Scheduled for completion in 1966 are Lock 3 Dam on the Coosa River, near Ragland, Alabama (73,000 kilowatts), and a second 250,000-kilowatt unit at the Greene County plant. The following year second units will be added at Plant Harllee Branch and at Lansing Smith Steam Plant (319,000 kilowatts and 180,000 kilowatts respectively) and Alabama Power Company will complete its Jordan Development No. 2 (225,000 kilowatts) on the Coosa River. The system's projected capital expenditures for the three-year period 1965 through 1967 amount to approximately $675 million. Financing Notwithstanding the record 1964 construction program more than half of the $191 million invested during the year by the system companies for construction of new electric facilities was generated internally, principally from retained earnings and such non-cash charges to income as depreciation, deferred income taxes, and investment tax credit. The remainder was obtained from the sale of long-term securities to underwriters at competitive bidding. STATEMENT OF HARRY L. GRAHAM, LEGISLATIVE REPRESENTATIVE, NATIONAL GRANGE The National Grange is pleased to appear before this Committee to support legislation to supplement the present Rural Electrification Administration loans program with additional capital for rural electrification and rural telephone systems through the creation of Federal Electric and Telephone Banks. This testimony is consistent with our previous position in support of the REA since its inception and support of its programs to provide adequate electric and telephone service to rural America at a reasonable cost. REA accomplishments are a matter of record. More than 20 million rural people have received electric service and 1.7 million rural subscribers have obtained modern dial service through their efforts. Yet, additional methods of financing are needed. It is estimated that $9.5 billion will be required to finance additional rural electric service in the next 15 years. |