priations because they realize that this assistance is necessary for rural America. But at the same time they have no alternative to which they may suggest that the subscribers turn for financing. And if we estab lish an electric bank where you can get up to not more than 4-percent rates, this will make a convenient alternative. A city Member of Congress who has to go back to his constituency when he has probably just voted for price supports--which I think are essential to the economy of agriculture—will find it less easy, it seems to me, to support REA 2-percent money even at the levels that we are supplying it now, because he has that alternative.

Now, this is an apprehension I have as a result of my experience of 6 years in the Congress supporting REA appropriations.

Mr. POAGE. I want to make it clear that I have known Mr. Reifel as a friend, and I don't want any implication otherwise. But I think that what you have just said, Ben, raises the question which then must be answered, do you think that there is assurance that if we don't do anything the Appropriations Committee will provide the larger fund for those who could pay something more as well as those who couldn't?

Mr. REIFEL. Well, as it was indicated yesterday, our Appropriations Committee has always met whatever request that has come before it, and this year, as you know, we have added to it.

Mr. POAGE. I know. But if they are going to continue to do that your fears that you have just expressed are ill founded, and there is no bother about it.

Mr. REIFEL. If I may, Mr. Chairman, in further answer to your question, all I am suggesting is that there should be come assurance that in these low-density areas such as we represent here at this table, that the 2-percent moneys are continued, so that we do not get disadvantaged in setting up this electric bank.

Mr. POAGE. Both bills clearly continue the availability of the 2percent money, subject to the action of the Appropirations Committee. And I am asking you, Is the Appropriations Committee going to continue it if we don't do anything? The whole crux of this thing lies in the attitude of the Appropriations Committee.

I am not talking about you as an individual; I am talking about the committee.

Mr. REIFEL. I appreciate that.

Mr. POAGE. If the committee will continue to provide all the money that everybody needs, then there is certainly no purpose in passing this bill, other than to get the co-ops to supply their own credit needs. I thought that was quite desirable but it is clear that many power companies prefer that the co-ops should continue to look to the Government just as do your constituents.

Mr. REIFEL. Yes. I think we have the problem, as I indicated here, that the witnesses whom I have introduced-one hasn't spoken yet, and he has with him Bob Ferrigan, who I forgot to mention-we appreciate that there is going to be some need for additional financing. And we are not opposed to that. But what we are concerned with is that in the interest of promoting the electric bank our needs can be lost sight of, and as a practical matter it will be easier to resist support of 2-percent funds in the amounts that we think will be necesary with

an electric bank unless there is some language that we can write into the bill-and whether this is possible, I don't know-that will insure that so long as we are in this low density situation, we can look forward to a dependable supply of this kind of money.

We are disadvantaged, as has been pointed out in the record yesterday, by Mr. Hauffe's testimony, because we were several years late in getting started under REA. And some of these more affluent cooperatives have had this period of growth which we haven't enjoyed.

We do find a considerable period here in which we are going to find ourselves in need of the continuing 2-percent, low-interest-rate funds. The CHAIRMAN. If you will permit me to interrupt, both bills provide for a continuation of the 2-percent interest rate, do they not? Mr. REIFEL. It is provided. But I think the language of either bill-the very establishment of the bank is going to make it easier for Members of Congress, and even our Appropriations Committee, to rationalize that you have got a bank set up to take care of REA financing and we may not be able to get the moneys, the amounts that we need.

The CHAIRMAN. Yes, I understand.

Mr. POAGE. Mr. Chairman, may I make this further observation, that this seems to me to be proof conclusive that there should be some proper middle ground between the extreme views of the representatives of power companes who say that if we provide a bank-if we enable the co-ops to borrow other than appropriated funds that we are going to ruin the $160 billion private power industry, that the co-ops are going to be able to take them all over with this $15 billion that might be available here under optimum circumstances.

And yet you gentleman come here and say that this bill is going to put you out of business because you are the poorest and the smallest and the weakest of the cooperatives.

On the one hand the power companies tell us that this thing is so big, and it is going to put out so much money, that it is just going to wipe them out of the picture, and you come here and tell us that the thing doesn't go far enough, it doesn't take care of anybody, it leaves the weakest ones stranded, and strangled, and ruined. It simply can't be as effective as they say and as important as you say. It seems to me that it proves rather conclusively that there is bound to be some actual practical ground in between these two extremes. And I believe these two bills pretty well set it out.

Mr. BELCHER. Will the gentleman yield?

Will the chairman give me the name of the witness who just testified?

The CHAIRMAN. Mr. Herriott of Sioux Valley Electric Association in Colman, S. Dak.

We will now hear from Mr. Arthur Jones of the Basin Electric Cooperative in Bismarck, N. Dak.

STATEMENT OF ARTHUR JONES, PRESIDENT, BASIN ELECTRIC COOPERATIVE, BISMARCK, N. DAK.

Mr. JONES. Mr. Chairman and members of the committee, my name is Arthur Jones, and I am from Britton, S. Dak. I appear before the committee today as president of the East River Electric Power Co

operative of Madison, S. Dak., which is an association of 22 rural electric distribution cooperatives.

East River is a G. & T. without generation, owned by the electrical distribution systems to provide themselves with transmission lines to bring to their areas power generated on the Missouri River by the Federal Government.

I also appear before the committee as president of Basin Electric Power Cooperative located at Bismarck, N. Dak., which is the regional power supply for seven G. & T.'s of which East River is one.

These G. & T.'s serve nine distribution cooperatives located in eight States, or about 11 percent of the total number of distribution cooperatives in the Nation.

Now, Mr. Chairman, it is my understanding that it is the request of the committee that we be as brief as possible. My testimony is long. I propose only to file it. I am trying to summarize it. And I had expected, also, to be in a position to summarize the testimony of the East River organization which I am also speaking for as its representative.

We completed the testimony which I was to present only yesterday, but it got lost somewhere en route today. And neither the testimony nor the emissary who was carrying it is here.

Mr. POAGE (presiding). It may be inserted when it comes.

Mr. JONES. I would like the privilege of filing that statement on behalf of the East River organization, and my main statement for the Basin Electric, which is in your hands.

Mr. POAGE. Without objection-and I hear none that will be allowed.

Mr. JONES. And I will move to brief this up.

And, Mr. Chairman, I simply am not in a position to cover the points that are covered in the main statement. So I will be exceedingly brief in trying to summarize this.

Basin Electric has in operation a 200,000-kilowatt generating plant in North Dakota. Testimony from both East River Electric and Basin Electric has been made available to the committee. I just corrected that a bit.

In these statements we attempt to describe for you the problems facing rural electric cooperatives in the Missouri Basin States. These systems have invested about $380 million in REA loan funds in rural electric facilities to serve a mere 1.7 consumers per mile of line. Some of our member cooperatives have less than one consumer per mile of line, and face very serious problems because of a declining farm population.

We are extremely apprehensive that the proposed supplemental programs being considered by this committee will not preserve the 2percent loan program at adequate levels to meet the needs of the cooperatives in our region, or those of the majority of the rural electric cooperatives in the Nation.

We believe that 2-percent loan funds in adequate amounts are vital to rural electrification in the great agricultural area of the Plains States.

The question our testimony raises is not whether the rural electric cooperatives are going to survive; they can pay higher interest rates on loans by increasing the rates charged rural people for electricity. It is the man at the end of the line, the farmer and rural resident, who will bear the cost of increased interest. We do not believe he should be asked to pay more for electric service.

The people in the Plains States are very grateful to Congress for its consistent support of the 2-percent REA loan program over the many years. Rural electric directors in our region were very appreciative of the House Appropriations Committee action which increased the Administration's request for 2-percent loan funds for the fiscal year 1966 from $220 million to $365 million. Congress has always done extremely well in recognizing the needs of the rural people, far better, I think, than those responsible for budgetmaking.

It is our belief that if Members of Congress will assure themselves in considering these financial plans that what they have done for rural people over the years will not be undone by a failure to provide adequate safeguards for financing of rural electricfication of 2 percent

interest.

Mr. Chairman, at this point I would like to inject one other thing, because just before we came to the table to offer testimony there was a question about whether or not-and it seemed to me there was a question in the mind of the committee as to whether or not it was possible for REA's to allow employees to organize.

I am happy to tell the committee that the Basin Electric, which has only recently organized a staff to staff this new steam plant of 200,000 kilowatts, has been organized, and it was my understanding that the contract with the electrical people up there worked out with our organization was submitted to some phase of the IBEW, went higher up than their own locals, and it was agreed upon, after some corrections.

And it was a happy day when we signed the contract by which this plant was organized under the IBEW.

To conclude this summary, we want to urge the committee to again consider the social purposes served by the rural electric cooperatives. These rural systems have kept the covenant they have with Congress to provide area coverage at low rates. We fear that the present emphasis upon farmers paying higher interest costs through their electric rates runs counter to the need for economic equity for rural people which has long been recognized by the Congress.

We respectfully urge that if it should act upon supplemental financing for rural electric cooperatives, Congress will provide adequate safeguards to preserve the 2-percent-interest-rate loan program so necessary to the rural systems in the Plains States and the majority of the systems in the Nation.

Mr. Chairman, I thank you very much for the opportunity of presenting this statement before you. And as I said in the beginning, the statement is long. And there are points covered which I have not been able to cover. If there are questions that we could answer for you, we are at your service.

(The prepared statement referred to follows:)

65-357-66- -20

STATEMENT OF ARTHUR JONES, PRESIDENT BASIN ELECTRIC POWER
COOPERATIVE, BISMARCK, NORTH DAKOTA

My name is Arthur Jones and I am from Britton, South Dakota. I appear before the Committee today as a representative of Basin Electric Power Cooperative, an association of 106 rural electric cooperatives in the Missouri River Basin, about 11% of the number in the nation. Attached to my statement, which has been made available to members of the Committee, is a list of these member systems. In addition, there is attached a map showing the areas in which these cooperatives serve the rural consumers. These areas include parts of eight states-Montana, North Dakota, South Dakota, Minnesota, Iowa, Nebraska, Colorado, and Wyoming.

Basin Electric was incorporated in 1961 for the purpose of providing its members with wholesale power beyond their allocations of Federally generated hydro electric power in the Missouri River main stem dams. In 1962 Basin Electric received an REA loan for $36.6 million with which we constructed at 200,000 kilowatt generating plant on the lignite fields near Stanton, North Dakota. This is the largest lignite-burning generating plant in the Western Hemisphere and the largest REA-financed generating facility completed to date. The plant went into commercial operation January 10 of this year and is supplying part of the power requirements of our member cooperatives.

The Basin Electric unit will be loaded with member cooperative loads in three years. By that time, according to our engineering studies, we should have under construction a generating plant of 400,000 kilowatts capacity and several hundred miles of extra high voltage transmission in order to meet member power requirements. This second generating unit, to be built as an addition to the first unit, is a vital part of the power supply for the rural electric cooperatives of the Missouri River Basin. If they are to maintain their present rates, we will require a 2% 35-year REA loan with which to finance this facility. This need for low cost financing explains the apprehension of the rural electric cooperatives in the Missouri Basin that a fundamental change in rural electrification may result from a supplemental financing program failing to provide adequate safeguards for the still much needed 2% loan program.

The 106 member systems of Basin Electric serve about 265,000 farms, rural homes and businesses-or a population of about 1 million people. The 99 distribution cooperative members have more than $300 million in REA loan funds invested in their electric distribution facilities. Our member G & T cooperatives have invested approximately $45 million in transmission, substation and related facilities. So with the Basin Electric plant investment, our Class A membership presently has a total plant investment of about $380 million. These cooperatives own and operate about 160,000 miles of distribution lines and 2000 miles of 69 kv and 115 kv transmission.

These large investments in rural electrification in the Missouri River Basin have been made to serve a mere 1.7 consumers per mile of line. Some cooperatives now serve only 9 consumers per mile of line and are facing serious problems because of a declining farm population. In North Dakota, for example, annual gross receipts per mile of distribution line averages only $284. When compared to neighboring power companies' annual revenues averaging $8,600 per mile of line, the high cost of providing area coverage in such a sparsely settled area is pointedly demonstrated.

Low cost interest charges on loans to rural electric cooperatives is a key element in the long range power supply plan for most of the rural systems in the Missouri Basin. Through cooperation with those Federal agencies responsible for Federal or Federally-financed power programs-REA, the Army Corps of Engineers, and the U.S. Bureau of Reclamation-the Missouri Basin rural electric cooperatives have succeeded in coordinating the first large-scale thermal plant in the region with the Federal hydro system.

This coordination has resulted in very great economic benefits to both the Government and the Cooperative, and, we believe, illustrates the substantial benefits which emanate from the REA loan program administered in the best interests of the rural electric cooperatives.

For example, Basin Electric pays the Bureau of Reclamation $980,000 annually for rental of excess capacity in the Federal transmission system. This arrange