$13.5 million of tax loss in a single category of taxation each year. If such an encroachment should be projected on a national basis, the loss in tax revenues would be in excess of $400 million a year.

So, gentlemen, on behalf of our 110,000 stockholders residing in every State represented in the Congress and on behalf of our 14,000 employees, and our 1,750,000 customers, I express serious concern that legislation of such vast importance and such farreaching consequences should be pressed to enactment before either the Congress or the public are fully apprized of its likely consequences.

May I digress a moment, Mr. Chairman, to say how tremendously impressed I was this morning with the testimony of the gentleman who opposed this legislation in behalf of a labor organization. I do not know his name. You will recall his urging that somewhere, sometime, we stop to examine the direction in which this country is going, lest in unwarranted governmental generosity we ultimately destroy the very foundations of the country. I tell you from my long experience in undertaking to induce private investment in electric utility facilities that there is a serious concern already in the money market regarding the magnitude and direction of Government competition. I say to you, in all honesty and sincerity, that these bills, regardless of the intention of their sponsors could result, in a transfer of the electric utility industry from private to governmental sectors in this countrynot immediately, of course, but over the years. I do not believe that either this committee or the Congress or the administration desires any such result.

Therefore, I urge that the most thorough and searching examination be given these bills, and that they not be approved by your committee. I suggest that a vote for this legislation will seriously endanger the future of investor-owned electric companies, whereas a vote against this legislation will not hurt rural electric cooperatives in the fulfillment of any of their legitimate and useful functions.

Thank you, gentlemen, for permitting me to present this statement. The CHAIRMAN. Thank you very much.

Mr. Callan?

Mr. CALLAN. How many REA cooperatives are there in your area competing with you?

Mr. BRANCH. Competing with us-I do not know what you mean by "competing"?

Mr. CALLAN. Are there cooperatives that are in competition with you in your area? Do you have area integrity in your area or not? Mr. BRANCH. Well, in my own State of Georgia, for example, we have sought from the beginning a program of cooperation with the rural electric cooperatives, and have contracts which provide, that a customer being served by a co-op or who is nearer to the facilities of a cooperative will not be served, sought, or solicited by our Georgia Power Co. Similarly, the cooperatives have agreed they will not seek to take a customer of ours under the same conditions. These restrictions are under attack certain authorities in the Federal Government today, seeking to eliminate them.

In most of our area, I am sure a accurate answer would be that there is no present competition between our companies and the distribution cooperatives as such. However, I must quickly add that in the State

of Alabama, millions of dollars in generating and transmission loans have been allocated to a super co-op, the Alabama Electric Cooperative, to build generating and transmission facilities, which in every instance, would be duplicative of the taxpaying facilities of our company in that State. A contest is still pending over that.

Similarly, in Mississippi, two G, and T, loans, have been granted to create a generating and transmission system duplicative of the facilities of our own company and another neighboring but nonassociated investor-owned company. The second loan was granted, even while the first was being contested before regulatory authorities and in the courts. The testimony in both Alabama and Mississippi cases shows that to build co-op facilities will not bring power to either the co-op or their rural consumers as cheaply as they are now buying power from our system companies.

Mr. CALLAN. How long will

Mr. BRANCH. If this legislation passes, the co-ops will undertake to sell power from these federally financed plants wherever there is an opportunity to sell it and to whatever kind of customer regardless of the ability of the sales or the size of the load. For in this legislation, they are seeking to establish their right to serve any and all types of customers and to solicit any and all kinds of loads.

Mr. CALLAN. You have integrity of territory down there, other than that?

Mr. BRANCH. With the single exception of Mississippi, there is in our four-State area, no such thing as a clear-cut territorial delineation between our companies and the co-ops.

Mr. CALLAN. Are there any projected lines?

Mr. BRANCH. What do you mean by "projected lines"? The projected lines of the Alabama and Mississippi super co-ops would parallel our transmission and distribution. Facilities; whereas the existing facilities, of the purely distribution cooperatives do not. The supercooperatives, the G. & T. cooperatives, in whose behalf over 60 percent of the current appropriations for REA are being utilized, will parallel-will compete with our facilities. They have admitted that-and when they do compete, the investors whose confidence is essential to the financing of our service will surely become wary, resulting either in the unavailability of private funds for our purposes or an increase in financing costs-either of which will be detrimental to the majority of the residents of the four-State area we serve. The CHAIRMAN. We will have to recess pretty soon.

Mr. BRANCH. That was quite a question and required some time. The CHAIRMAN. We thank you very much for your statement and for your appearance here today.

Mr. BRANCH. Thank you.

Mr. BANDSTRA. I ask unanimous consent to insert into the record at this point a statement by Earl E. Jarvis, a member of local 145 of the International Brotherhood of Electrical Workers.

The CHAIRMAN. That may be done, without objection, and it will be inserted in the record at this point.

(The prepared statement, dated May 28, 1966, of Earl E. Jarvis, above-mentioned, follows:)

MAY 28, 1966.

Hon. HAROLD COOLEY,

Chairman, Agriculture Committee,
House of Representatives,

U.S. Congress, Washington, D.C.

DEAR MR. COOLEY: As a member for 25 years of the International Brotherhood of Electrical Workers and a former steward of Local #145, I would like to make the following statement in support of the bills regarding supplemental financing for the nation's rural electric cooperatives.

It has recently become very clear that the profit utilities in this area have become very active in opposing any such legislation. I feel that a brief history of the development of electric cooperatives in Eastern Iowa and our relationships with neighboring profit utilities might be of interest to you.

In the late thirties, rural electric cooperatives were organized in Iowa, as well as the rest of the nation, to attempt to serve unserved rural establishments, but only after the private utilities were apparently not interested.

It was very clear then as it is now that the private utilities could receive a much larger return for their investor dollar in urban areas than in sparsely settled rural areas.

The rural electric Cooperative extended their lines to all of the unserved rural establishments on an area basis regardless of the distance or anticipated

revenue.

The rural electrics in Eastern Iowa as well as other sections of the country have not only brought progress and prosperity to their own consumer members, but have strengthened the nation's economy and helped the private utilities in many ways.

We have felt that our own relationships with the profit utilities adjoining our system were excellent.

We have interconnection agreements with four such utilities, which have operated to our mutual benefit.

We have joined with profit utilities and municipals in a long range planning group, Midwest Area Power Planners.

We have been in daily contact with profit utility operating personnel, and we have no problems. It therefore is very disillusioning to be subjected to the harassment and unfounded attacks which have begun not only locally but nationally.

Our belief is that a plan for supplemental financing for the nation's electric cooperatives, which your committee is now considering, is vital if rural electrification is to survive.

Very truly yours,

EARL E. JARVIS,

Member, Local 145, International Brotherhood of Electrical Workers. The CHAIRMAN. I understand that Mr. Joseph Birk and Mr. David Harrison desire to present statements.

STATEMENT OF JOSEPH BIRK, ATTORNEY FOR UNION ELECTRIC CO., ST. LOUIS, MO.

Mr. BIRK. Mr. Chairman and members of the committee, my name is Joseph Birk. I am attorney for the Union Electric Co. of St. Louis, Mo. I appear here today on behalf of Mr. Charles J. Dougherty, who is president of the Union Electric Co., who is unable to appear here today, and to make a statement in opposition to H.R. 14000 and H.R. 14837 and, in the interests of saving this committee's time and recognizing that there are a great number of witnesses who have to be heard, Mr. Dougherty has asked me to request the committee to accept his written statement regarding the subject bills and that such statement be incorporated in and made a part of the record of these proceedings.

The CHAIRMAN. Thank you very much. It will be made a part of the record at this point.

(The prepared statement of Charles J. Dougherty, above mentioned, follows:)

STATEMENT OF CHARLES J. DOUGHERTY, PRESIDENT, UNION ELECTRIC CO., ST. LOUIS, Mo.

Mr. Chairman and members of the Committee:

My name is Charles J. Dougherty. I am President of Union Electric Company of St. Louis, Missouri, and I make this statement today on behalf of that Company and its utility subsidiaries, Missouri Power and Light Company and Missouri Edison Company. Briefly, and for the reasons specified later, we urge this Committee to recommend that H.R. 14000 and H.R. 14837 DO NOT PASS.

Reduced to their simplest terms, these proposed Bills would create a new type of Federally-subsidized power program vastly different from the REA program as it has existed in the past.

At the outset, it should be understood that we do not gain-say the value of the contribution to our well being that has been made by the Rural Electrification Act of 1936. Regardless of one's motivation or interest, it must be admitted that the REA concept has served a fundamental and real purpose. By the same token, no one can deny that every purpose, every objective of the Rural Electrification Act of 1936 has been substantially fulfilled. The purpose of such legislation was to bring electric service to persons in rural areas who were not receiving central station service. To enable the accomplishment of this purpose, the borrowers of REA-mostly the rural electric cooperatives— were granted a subsidy in the cost of money. This subsidy was consideration for the bringing of electric service to rural areas. The subsidy afforded by 2% money proved to be a real incentive to the accomplishment of rural electrification. There is now no need, however, to perpetuate or to aggravate such subsidy. When the purpose has been accomplished, there is no need to maintain the starting mechanism.

This is particularly true when one recognizes that the subsidy from the government is necessarily financed by taxes. There are at least two reasons why such a tax-financed subsidy should be discontinued at the earliest reasonable opportunity, rather than enlarged:

1. There are many other demands on our taxes; and,

2. It is wasteful to expend tax monies on an undertaking which could be supported by voluntary investment.

Specifically with respect to the Bills which are the subject of this hearing, I believe that the foregoing remarks explain our belief that the subject Bills are founded on a misconception, namely, that some $8 to $9.5 billions of loans to rural electric systems will be required to "meet the public need" during the next 14 year period and that the supplementary financing program embodied in the proposed Bills is the proper means to achieve that end.

Actually, there is no need for such a subsidy. As a matter of fact, the creation of such a large subsidy would constitute a most serious challenge and affront to the American free enterprise system because it would put government-subsidized and government-guaranteed funds in direct, major competition with the voluntary investments of private citizens.

Many presentations in opposition to the proposed Bills have been offered today. We would not impose upon this Committee by repetition of the points made. Rather, we point out to the Committee three simple yet profound and basic reasons why the proposed Bills should not be enacted into law.

1. They are not needed;

2. Our governmental and our economic systems both function better when we permit citizens to invest their funds voluntarily rather than to conscript them in the form of taxes-especially when, as here, the objective can be achieved by voluntary investment; and,

3. They would constitue an abdication by the Congress of its power, authority and responsibility over the Federal Treasury.

The CHAIRMAN. Mr. Harrison.

STATEMENT OF DAVID HARRISON, GENERAL COUNSEL, MISSOURI POWER & LIGHT CO.

Mr. HARRISON. Mr. Chairman and members of the committee, my name is David Harrison. I am general counsel for the Missouri Power & Light Co., but in here authorized to speak for all of the presidents of the private companies operating in the State of Missouri, with the exception of Mr. Dougherty, some of whom have requested time to appear before this committee and have been granted that time, but, recognizing the number of witnesses against the amount of time available, they have agreed that they would not press the committee for their time allotted for all presentations and would like the record merely to reflect that they endorse and support the statements submitted by Mr. Dougherty, the president of the Union Electric Co. And those presidents are:

Robert Olson, president of the Kansas City Power & Light Co.;
Richard C. Green, president of the Missouri Public Service Co.;
D. W. Runquist, president of the St. Joseph Light & Power Co.;
J. T. Jones, president of the Empire District Electric Co.;
Charles Czeschin, president of the Arkansas-Missouri Power Co.;
Ray Call, president of the Missouri Utilities; and

Davis Benning, president of the Missouri Power & Light Co. and the Missouri Edison Co.

Thank you for the time.

The CHAIRMAN. Thank you very much. We are very glad to have that information.

Mr. HARRISON. I would like to point out this presentation, therefore, eliminates the need of this committee hearing witnesses numbered on your agenda, 21, 24, 30, and 40.

The CHAIRMAN. Mr. Stalbaum.

Mr. STALBAUM. I request permission to include in the record at this point my own statement.

The CHAIRMAN. Without objection, that permission is granted. (The prepared statement of Hon. Lynn E. Stalbaum, above referred to, follows:)

STATEMENT OF HON. LYNN E. STALBaum, a REPRESENTATIVE IN CONGRESS FROM THE STATE OF WISCONSIN

Mr. Chairman and distinguished colleagues on the House Committee on Agriculture: I wish to register my support of legislation to establish a supplemental source of financing for our rural electric and rural telephone systems, which are now totally dependent for their capital upon the present two percent loan program. The importance of supplemental financing is underscored by the fact that both our Chairman and Vice Chairman have introduced bills to provide the rural electric and rural telephone systems with a banking mechanism through which they can obtain access to supplemental capital from non-Federal sources. Similar bills have been introduced in the House by Representative Wilbur Mills of Arkansas, Chairman of the House Ways and Means Committee, and Representative Gale Schisler of Illinois. On the Senate side, 29 Senators are co-sponsoring an REA supplemental financing bill.

The introduction of these measures, and the early hearings scheduled on them by our Chairman, indicates the pressing need for insuring that our rural electric and telephone systems be permitted access to sufficient growth capital to continue to meet the growing needs of their rural consumer members.

You are all abundantly familiar with the outstanding achievements of the rural electrification program during its 31 years of existence, and I do not wish