Mr. BELCHER. I think that was agreed to by the National Association, that there were cooperatives that could afford to pay more and were willing to pay more than 2 percent, that is, those in good financial condition.

Now, if it was absolutely necessary for a co-op to have 2 percent in order to expand their service or to take care of their responsibilities to their customers and they could not afford to pay more than 2 percent, then you would not object under the present program to their receiving 2 percent money, would you?

Mr. HARRIS. On the premises you have stipulated, I would not.

Mr. BELCHER. What I mean is, that if they needed 2 percent money, some of the smaller cooperatives, to extend service to expand service, to take care of their present customers, that you would not object to those co-ops getting that 2 percent money under the present program if they actually needed it.

Mr. HARRIS. Yes, sir; I think that is implicit in the prepared testimony that I presented.

Mr. BELCHER. And if they are willing to pay it, according to the testimony yesterday, they could go ahead and pay a larger amount of interest-a larger rate of interest-in order to take care of their expansion; that is your theory?

Mr. HARRIS. Yes, sir.

Mr. BELCHER. I presume that you are predicating this testimony on the theory that the co-ops actually are serving rural customers.

Mr. HARRIS. Yes, sir. I have said that, in my opinion, this Government-financed movement should hold to the traditional concept of rural electrification.

Mr. BELCHER. In other words, if it were held to the present concept of 1,500 people and so forth, you do not object to the co-op getting 2 percent money if it is actually needed?

Mr. HARRIS. Yes, sir; that is a pretty good generalization, but that is it. That is what I said.

Mr. BELCHER. Do you think the other power companies that you have talked to would be pretty much in agreement with your statement?

Mr. HARRIS. Mr. Belcher, each will have to speak for himself. I am here as one individual, representing my one company because I work for them. But I think that would-it would be a fair statement to be said within our industry, that while all of us feel that many co-ops are able to pay a higher rate of interest, and that the Government subsidy is beyond what the factual situation would justify, the important thing is not so much precise computation of what the interest rate is, but to avoid this being extended into a broad and uncontrolled public power system.

Mr. BELCHER. Then, I understand it is your contention that all this can be done under the present program, and it would not be necessary to set up a bank and remove the restrictions on the present program as provided for in this bill?

Mr. HARRIS. Yes, sir, and if you set up a bank with what I have suggested you do with it, you have not changed the program, you just have a different mechanism to handle the making of the loans.

Mr. BELCHER. Would you be in accord with a National Electric Bank that would actually help, owned by the cooperatives, that would

be set up for the purpose of financing the present idea of cooperatives? Mr. HARRIS. Mr. Belcher, as indicated on page 7 of my testimony, I prefer that the Administrator arrange to subordinate his mortgage to permit free market financing. I think the program will move out into the free market quickly in that fashion and I think you will get out a level of cost that the co-ops, on average, could bear today. Obviously, by putting the second on pages 8, 9, and 10, I spell out the terms on which I would be agreeable to the bank mechanism.

Mr. BELCHER. I think a lot of us agree with the idea of an electric bank for the purpose of financing REA cooperatives, so that eventually they can own that bank and control it and operate it themselves free from the Government. But do you think that this bill actually establishes that kind of a bank, or does this go way beyond that?

Mr. HARRIS. Mr. Belcher, I think certainly the Administrator and Mr. Anderson of the association clearly told you that this legislation is designed to get away from the restrictions of acquisitions of generation and transmission systems. This is the prime purpose of the legislation.

Mr. BELCHER. Is that what you are objecting to, and not the method of financing?

Mr. HARRIS. Yes, sir. The broadening of the program is my principal objection.

Mr. BURTON of Utah. Will the gentleman yield?

Mr. BELCHER. Yes.

Mr. BURTON of Utah. Before you get too far off your earlier line of questioning I would like to refresh your memory.

As you recall, I questioned one of the REA witnesses, I think Mr. Katzin. And as I recall his testimony, he said there were nearly a thousand REA's, and that their study revealed that 247 of them needed Government-financed 2-percent money, which indicates to me that nearly three-fourths of them don't.

Mr. OLSON. Will you yield?

Mr. BURTON of Utah. Mr. Belcher has the floor.
Mr. BELCHER. I yield.

Mr. OLSON. I think we cleared that up by a question that I asked, or the statement I made that was agreed to, summarizing that area of testimony. The point was clearly made and is part of the testimony that the 247 could not afford to pay anything more than 4 percent interest. In other words, there was no principal repayment involved at all. And one of the things that we must remember is that all the cooperatives have a large cost in the retirement of principal which the private utilities don't have at all.

So you can't make an accurate cost comparison in the sense of final cost to the customer without taking into consideration total costs, and in the case of the rural cooperatives, this includes principal retirement as well as interest costs.

Mr. BELCHER. I think that most any estimate would be pretty much a guess as to whether it would be 25 percent or 26 percent or 30 percent.

But the point I was trying to bring out is that regardless of the number of co-ops they still need 2-percent money to carry on their service to rural customers, and the program should be continued just like it is. And you have no objection, sir?

Mr. HARRIS. That is right.

Mr. Belcher, let me say this. I have made no such determination. It is a mammoth undertaking to do it. But there is no reason for the bidder to do it, to determine it on a co-op basis, on an area-by-area basis, and what the rate structure is and what the rates are.

I must make a comment in response to what Mr. Olson said. The consumers of the investor-owned utility do have to replace the plant, because the depreciation charge for the investment that is there is an essential ingredient of the rates, so that the consumer who uses it replaces it because the depreciation is built into his rate.

Now, with the co-ops, they have got a 30-year rate, and they have got about a 30-year plant, and their depreciation ought to very closely offset their capital payments back to the Administrator. There is no distinction between the two.

The CHAIRMAN. It is 10 minutes after 4 and we must move on to other business. I want to thank you again, Mr. Harris, for your appearance. I am delighted I introduced you as one of my close personal friends, because you have been an excellent witness. I want to compliment you on your testimony. And I hope you have a nice journey home.

We have three gentlemen here from Iowa, Mr. Lantau, Mr. Connley, and Mr. Bernoski. Will you gentlemen come up, please?

And then I want to call the two gentlemen from South Dakota, Mr. Herriott and Mr. Hanlon.

Just have a seat at the witness table. Who will be the speaker for your group, Mr. Lantau?

Mr. LANTAU. All three of us are going to speak separately, sir. Each one of us has about a two-page statement which we would like to present.

The CHAIRMAN. Go right ahead.

STATEMENT OF EARL LANTAU, LOCAL 109, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS, DAVENPORT, IOWA

Mr. LANTAU. I am Earl H. Lantau of Rural Route No. 3, Davenport, Iowa. I am employed by Local Union No. 109, International Brotherhood of Electrical Workers, as their business manager. We have a membership of 650 who are all employed by the Iowa Illinois Gas & Electric Co., of 206 East Second Street, Davenport, Iowa, in their Davenport-Illinois, Cedar Rapids, Iowa City, Fort Dodge, and Ottumwa districts.

My job as business manager of Local Union No. 109, International Brotherhood of Electrical Workers, is seeing that the 650 members continue to be employed by the Iowa Illinois Gas & Electric Co. under the best possible agreement. We have had such agreement for the last 22 years. I believe that by creating this Federal electric bank, rural electric cooperatives and Government power projects would be given funds to extend or expand their services into areas where private utilities are now functioning or would extend their services. If any of the bills proposing a Federal electric bank for rural electric system financing were to become law I have very serious doubts that I could continue to keep all of my membership employed by their present employer and expand it with the normal growth of the company.

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If these bills create funds which will allow expansion of Government power to the detriment of the private utility industry it would it my opinion do great harm to the union movement as such. At the present time of the 1,782 municipal electric systems in the United States, only 3 percent even recognize the union. Of the 1,057 REA cooperatives only 17 percent give union recognition. While in the investor-owned and business managed electric utilities, 92 percent are organized and of these the International Brotherhood of Electrical Workers represents 75 percent of the membership of all organized electrical utility workers.

I also believe that the rural electric cooperatives have substantially accomplished the goal for which they were originally established, i.e., to bring electric power to the areas where it was not available. It is now a matter of public record that over 98 percent of the United States has electric power. It is apparent that the business managed utilities can provide all the expanded electric service the country will need.

These bills have many other objectionable features. There are no clear limitations on the requirements which will qualify a loan request. The Congress has given up any supervision of the basis for loans or the amount of them. The Government pays more for the money it furnishes than the borrowers pay the bank.

Speaking for my local union, I respectfully request this committee to consider the future of the union movement as it would be affected by greatly expanding Government power and Governmentsubsidized power projects in these bills.

Thank you.

The CHAIRMAN. Thank you very much for your statement, sir. The next witness.

STATEMENT OF JAMES M. CONNLEY, LOCAL 1248, INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS

Mr. CONNLEY. Mr. Chairman, I am James M. Connley, business manager for Local Union No. 1248, IBEW, and a delegate for System Council U-16 to the Iowa Utility Workers Conference. Council U-16 has a membership of 750. We are employed by the Iowa Electric Light & Power Co., which serves 51 counties in Iowa.

We, of organized labor in general, and the utility workers in particular, have through the years viewed with alarm the ever-increasing encroachment of Government sponsored and controlled public power projects upon the utility industry. We have found out through bitter experience that this type of governmental, or political subdivision, operations are not in the best interests of our country, as well as being destructive to organized labor.

In the State of Nebraska, where organized labor once enjoyed the rights of collective bargaining, we now find that this showplace of the Government-owned public power systems, cannot compete wagewise with private enterprise even though they enjoy privileges and tax exemptions unknown to the average citizen. Instead they feel that the worker, in lieu of adequate wages, must develop a sense of public service to be satisfied.

Organized utility workers in Nebraska are now second-class citizens since they cannot collectively bargain with their employer as

freemen can. Nebraska is not the only example but certainly will suffice.

In our own State of Iowa, as in many other States, we see emerging a new type of electric supply system. This new system would and is being financed by the Federal Government through REA. A good local example of this system was the awarding to the Basin Electric Cooperative of Bismarck, N. Dak., a loan of $36 million to build a 200,000-kilowatt lignite plant and transmission lines. The offer to build a plant and trade power with the Bureau of Reclamation (at a cost of nothing to the taxpayer) had been made by MAAPP-and that is the Midwest Association of Applied Power Plants-but was rejected. Now we have a condition where Basin Electric has a surplus, along with the Bureau, and are looking for customers. These new customers are the municipals, REC's, and existing customers of investor-owned utilities. Here is where we, as labor, are hurt. As the trend continues to take over private enterprise, we lose jobs, as well as the right to bargain collectively.

We have found that when people are informed of what public power is the very large majority are against it. We have found that, on the national average, investor-owned utilities wholesale power to municipals and REC's cheaper than they can produce it themselves even with 2-percent money and tax exemptions. We have found that there is not a scarcity of power and if there was, the free enterprise systems that have done so much for our country, are willing and able to economically take care of the need. We have found with rare exceptions, whenever utility labor must deal with political subdivisions or Government, we are denied rights given to labor in the free enterprise system.

The proposed bill H.R. 14837, and others of similar nature, would only increase the trend toward nationalization of the utility field. Because of this, the Iowa Utility Workers Conference is unable to support such a bill and, indeed, must use every recourse open to them to discourage its adoption.

The utility workers have the active support of labor groups throughout the State of Iowa. This support comes from all segments of organized labor. In my area alone, some of the labor groups supporting our views are the Fisher Governor employees (makers of valves), Lennox Furnace Co. Union, the Moulders Union, and the Carpenters Union, and from Knoxville the Garment Workers Union. From Algona, a small municipal utility town, we received full support from its organized labor of the Universal and Wiedenhoff plants of 300 employees. All of these, along with the Iowa State Federation of Labor, have adopted the attached resolution. Others are the Woodbury County Labor Councils (6,500 members), Black Hawk Labor Council (18,000 members), also the Northwest Iowa Labor Federation. These are but a very few of the many who have adopted this resolution. Because the original intent of the REA Act has been completed and it is no longer necessary for the people of the United States to subsidize another Federal program and since such a program as H.R. 14837 and other bills of similar nature would encourage the eventual takeover of the investor-owned utility companies, we of the Iowa Utility Workers Conference request that the proposed bill not be adopted, or recommended, by this committee.