that pole, and Jones bids $40, and then after the bids are in, and I have seen what his bid was, you think then it is really good for me to come in and offer you that same pole for $30.

Now, you don't do business that way.

Mr. BOULDIN. No. They are not comparable situations, either, Mr. Chairman.

Mr. POAGE. They may not be comparable, but they are just alike— they are the same thing anyhow.

Mr. BOULDIN. I don't think so.

Mr. POAGE. You are just asking that you look at the bid, you open the bids and look at them, and then you ask to have the right to change bid-that is all you are asking.

your

Mr. BOULDIN. No; I don't think so.

Mr. POAGE. That is just a "fair" advantage you want. But the advantage is there nevertheless. I just want to eliminate the "advantage" and just leave the "fair" without the advantage.

Mr. BOULDIN. I don't think this is a case of ordinary competitive bidding such as the chairman has described. We have here a case in which the loaning of public money is concerned, and that loan is a matter of vital concern to the electric company which it affects. And I think that there ought to be an open and above board public procedure in dealing with situations of that sort. And we don't have it. And I don't think that anything that has been said by he Administrator has ever excused that sort of secrecy in our Government.

Mr. POAGE. Now, I was trying to go along with you and let everybody lay their cards on the table when the game opened—let everybody lay their cards out there. But it develops that you want to see the co-ops' cards before you lay yours out.

Mr. BOULDIN. No.

Mr. POAGE. Yes; that is what you are asking.

Mr. BOULDIN. There would be no objection to somebody saying to an
electric company, "You have to make them an offer before
you have a
hearing." That is all right. But I would not say to the electric
company, "That has got to be your last offer, too, because if you don't.
do better than that, you won't ever have a chance to improve it." I
don't see that that helps anybody.

Mr. POAGE. That is what we do when you bid on a contract.
Mr. BOULDIN. As I say, I don't think-

Mr. POAGE. You make it the last offer-you don't let somebody see the other fellow's bid and then go in and lower it.

Mr. BOULDIN. I don't think they are comparable, Mr. Chairman.
Mr. POAGE. We are just in complete disagreement on that.
Mr. BOULDIN. If the G. and T. plant is not built everybody wins.
Mr. POAGE. If you buy the poles for $30 instead of $40 everybody
wins except the one that didn't get the bid.

Mr. BOULDIN. We don't agree

Mr. POAGE. You are not going to get a fair price on poles very long if you follow that practice.

Mr. BOULDIN. The two situations are not comparable. One of them is dealing with public money and public affairs, and one is private business.

Mr. POAGE. I know we give a whole lot of cost-plus contracts, and I am one of those that stood on the floor and offered an amendment to cut out all these cost-plus contracts.

I rather think we ought to have open and final competitive bidding where Government money is involved as well as where private money is involved.

Mr. BOULDIN. I do not quarrel with the concept of competitive bidding.

Mr. POAGE. I think you do, when it comes to power companies.

Well, we are just in complete disagreement on that. I am sorry we are not getting any closer, because I had thought we were about to get together on some of this.

Mr. JONES. It seems to me that the Administrator would have an obligation to inquire at least as to how much power that is available, to inquire the source of that power, as to whether it could be furnished, before he encourages the co-op to go into the expense of determining what a G. and T. would cost, and what the power would be. And I think the Administrator should be qualified to know that if he obtains an estimate or a bid from a power company, that they are able, willing to supply power in a specified amount at a specified rate, as to whether or not that rate was reasonable or whether it would likely result in a duplication and an increased investment on the part of the Government furnishing the money.

Now, I think that the gentleman has made a suggestion herewhether the wording is right or not-but I certainly think that the Administrator should determine in advance, before all this planning is done about increasing the supply of power, as to whether power is available at a reasonable rate, before he starts, because this duplication, in my opinion, has become excessive, and we have had duplication, and we have had an unnecessary amount of investment by the Government and the taxpayers-and it is my dollar-when we are doing that. And I would welcome an amendment-I don't know whether the amendment is written correctly or not, but at least you have brought up an item here that I think does deserve consideration. Now, if I might direct a question to the gentleman, I would liketo do that.

I am surprised that earlier someone hasn't brought up this point, about the use of 2-percent money being furnished to co-ops to provide for the financing of enterprises such as ski lifts, which would of course provide a source of revenue for the co-op, but which, in my opinion, the revenue is not sufficient to offset the difference in the interest that is paid on those facilities.

Would you care to comment on that, or are you too involved

Mr. BOULDIN. No, I would be glad to. I think you are absolutely right about that. I think Mr. Person did cover it in his testimony. Mr. Person, the president of EEI, took that up, Mr. Congressman, and he went into it in some detail. I believe he recommended the repeal of that type of loan, for the very reason that you just mentioned. Mr. JONES. Well, of course, I was here, I thought-was that the man from Edison Electric?

Mr. BOULDIN. Yes.

Mr. JONES. I thought I was here for most of the testimony, and I did not recall that particular item being brought up. I think that

is one of the things that we have got to look at. And I must say the same thing is carried on by some of our co-ops in getting into the merchandise and appliances field. And I know in my particular area that I am privileged to represent, I had two co-ops which were engaging in that, and at my insistence they did stop it, because I don't think that was one of the primary purposes of co-ops, to get into competion with private business that way.

This is one of the first times that I have participated in this debate here, and I am sorry that we don't have more members here. We have been here now for at least the chairman, the acting chairmanand of course he is a workhorse and doesn't care how many hours he puts in. But I think it is unfortunate we have a meeting here this afternoon with such a small attendance of members. We have at the present time seven people here. I think my time is as valuable as other members of this committee, and I am sorry we don't have more here to listen to you gentlemen; I am not trying to lecture anybody. But I think I would like to ask the chairman if these hearings, that the afternoon session will make some reference to the small number of members here, because I think it is an imposition on the people coming from out of town, and who expect to testify before a full committee, and then find such a small number here. I think there have been nine people here during the afternoon, and at times only two or three members.

Mr. POAGE. The record will carry your statement, Mr. Jones, which the Chair will verify as being correct.

There are seven members of the committee present. The largest number that has been here this afternoon has been nine.

Mr. JONES. I know we have had nine. I think you started the committee with one other member here.

Mr. POAGE. That is correct. Mr. Callan was here on time, and he can now ask a question.

Mr. CALLAN. Thank you. Do you have a State regulatory body in Alabama?

Mr. BOULDIN. Yes, sir.

Mr. CALLAN. Do they regulate transmission and generation?

Mr. BOULDIN. They don't have any authority over the electric

co-ops.

Mr. CALLAN. How about rates?

Mr. BOULDIN. They don't have any jurisdiction over their rates. Mr. CALLAN. But they do yours?

Mr. BOULDIN. Yes, including our rates to the co-ops.

Mr. CALLAN. Is there any service area set up in Alabama?

Mr. BOULDIN. We don't have any division of territory by statute in Alabama. We have agreements with most of the cooperatives who we serve which in effect we each agree that we won't take the customers that the other one serves-that is in rural areas. Those contracts don't apply inside of municipal boundaries.

We don't have that contract unfortunately with several of the co-ops in Alabama, and that is where a good deal of the troubles come. Mr. CALLAN. Have they encroached on your territory?

Mr. BOULDIN. Yes, sir.

Mr. CALLAN. Have you encroached on theirs?

facilities must be paid by other taxpayers. As an indication of the magnitude of the burden to be cast on taxpayers by the loss in taxes alone, Edison Electric Institute has estimated that in the year 1964 with electric plant in service of about $4.5 billion, the co-ops paid $195,515,000 less federal and state taxes than investor-owned companies would have paid on the same amount of electric plant.

Gentlemen, we are not seeing ghosts when we speak of unlimited expansion of generation and transmission facilities under this bill. An example of the type of facilities which could and probably would be financed under this legislation is the so-called Yankee-Dixie project.

This project has been seriously advanced and widely publicized. It is being sponsored by many prominent advocates of co-op generation and transmission facilities. The project, as conceived by its sponsors, includes three huge power stations of two million kilowatts each, with connecting extra high voltage transmission lines and radial transmission lines extending from Maine to Florida and covering much of the eastern United States. A map taken from the brochure circulated by the Yankee-Dixie Association is attached to this statement and shows the extent of the proposed undertaking. It would cost over a billion dollars and would be built by an organization which would, of course, pay no federal income tax. This is only one of many such projects this bill would probably bring into being.

This proposed legislation is not what the public interest requires. The public interest requires legislation to curtail the waste of public funds and the loss of tax revenues already being caused by the unnecessary building of incometax-exempt generation and transmission facilities.

A primary and extremely urgently needed amendment would require that the Administrator hold a hearing-an open hearing-before making a loan for generation and transmission purposes. As this Committee doubtless knows, all applications for such loans are processed in secrecy.

Further, any action of the Administrator in granting a loan for such purposes should be subject to review by the courts in accordance with the Administrative Procedure Act. On a number of occasions arbitrary action of the Administrator has been allowed to remain unchallenged because of court decisions to the effect that the damaged investor-owned utility had no standing to raise a question as to the Administrator's action whether it be arbitrary, lawful, or otherwise.

A second area of amendment should require that loans for generation and transmission facilities should not be made when the resulting cost to the taxpayers is greater than the estimated saving to the customers to be served from such facilities. There is certainly no valid reason why taxpayers should pay more than co-op customers would save.

I respectfully submit for your consideration the following amendment to the Rural Electrification Act:

"When an electric energy supply is available from an alternate source, loans for electric generation or generation and transmission facilities shall not be made when the resulting cost to taxpayers is greater than the estimated savings to customers of such facilities. The annual resulting cost to the taxpayers shall be computed by the Administrator as the sum of (1) the difference in interest rate on the proposed loan and 6%1 multiplied by the amount of such loan, and (2) federal income taxes foregone. Federal income taxes foregone shall be calculated by multiplying the amount of the loan by that percentage the federal income tax paid by Classes A and B investor-owned electric utility companies bore to the net electric plant investment of such companies as shown by the latest reports filed by such companies with the Federal Power Commission. "Any determination required under this act to be made by the Administrator shall be made in accordance with the procedures and subject to review under the provisions of the Administrative Procedure Act."

The provisions of this bill would mark a radical departure from principles long established by the Congress, principles which have their foundations in elementary fairness and fiscal common sense. It makes no sense for a government dependent on taxes to foster unneeded enterprise which would destroy the government's tax revenues. It is unfair to take the taxes of one man to build electric facilities for another in the absence of some overriding public interest. It is wrong to destroy the tax-paying investment of citizens by subjecting that

16% is considered to be the minimum annual cost or worth to taxpayers of funds taken from them to build such facilities.

investment to income-tax-exempt competition in the absence of any impelling public interest.

The device of interest subsidy and tax exemption inherent in this bill would destroy any enterprise competing against it whether that enterprise be an electric utility, a newspaper, a steel, chemical, or any other tax-paying enterprise. This bill's radical departure from fundamental and established government policy would have profound economic repercussions which neither we nor this committee have had opportunity to explore.

Gentlemen, on behalf of our millions of investors whose savings have made possible the finest electric system on the face of the earth, and on behalf of all taxpayers, we invoke The Golden Rule. You would not have this done to you.