Mr. MORRISON. I have a few questions I want to ask. First of all, I want to compliment you for a very excellent statement. I would like to ask you You said it was to clarify your statement. necessary to get this generation and transmission plant, because your rates were being raised. Is that true? Mr. ROEMER. Yes, sir. We were called into a conference by the power companies and told that we should anticipate this. They had a graph showing just how the rates were going to go up the next 5, 10, 15 years. Some of us who serve on boards of the cooperatives asked questions as to why these rates were going to increase steadily. We were told it was primarily because of the increase in fuel costs in Louisiana. Gentlemen, as you know, Louisiana has plenty of natural gas. Some of us were familiar with the gas business. And we could not understand the basis for their cost projections. We were really told: "Well, this is how it is; take it or leave it. The price is going up. So, we met and engaged engineers and determined it was feasible for us to build our own transmission and generation facilities. Mr. MORRISON. Then, you were granted a loan? Mr. ROEMER. Yes, sir. Mr. MORRISON. By the REA? Mr. ROEMER. Yes, sir. Mr. MORRISON. And likewise the private companies opposed it in court? Mr. ROEMER. Yes, sir. Mr. MORRISON. And the court decided in your favor? Mr. ROEMER. Yes, sir; so far, sir. Mr. MORRISON. Is it not a fact that REA loans for generation and transmission to supply rural electricity are not uncommon in the United States, like maybe some private companies would have you believe? Are not approximately 20 generation and transmission plants throughout the United States owned by REA co-ops, are there not? Mr. ROEMER. As I understand it, there are over 30. Mr. MORRISON. Over 30? Mr. ROEMER. Yes, sir. Mr. MORRISON. I think that there is a cooperative generation and transmission plant in Ohio where the power company owns one-half interest and the REA owns the other one-half interest. If the generation and transmission cooperatives were so bad as some of the private power companies say, why would they go together and use the same plant with the cooperative? Mr. ROEMER. I understand that there is one in Ohio, yes, sir; also one in Kentucky. It is possible and practical, engineeringwise in the utility business, for such pooling arrangement, and joint efforts to serve a common cause. It has proved quite satisfactory. It is my understanding that this was part of the intent of congressional committees last year, when they attempted to direct this ype of an arrangement in the Southwest Power Administration. The effort there was for SPA, a Federal agency, to contract with the utilities to wheel some of the Federal hydropower, to tie together the generation and transmission facilities for better and more economical distribution of this power, not only to the rural areas but to some of the towns and municipalities. Mr. MORRISON. Mr. Chairman, at this point I would like to put into the record various REA cooperatives that own generation and transmission plants throughout the United States. (The information follows:) Hon. JAMES H. MORRISON, House of Representatives. U.S. DEPARTMENT OF AGRICULTURE, DEAR MR. MORRISON: As you requested in our recent conversation, we are sending you a list of the principal power-type borrowers of the Rural Electrification Administration. You will note there are three types of these borrowers: Those that generate only; Those that transmit only; and Those that do both. REA has made loans to 35 federated cooperatives, including the Louisiana Electric Cooperative, for the purpose of doing both. They are located in 20 states. For easy identification we have checked these in red pencil. There are two federated cooperatives engaged only in the generation of power. They are located in Colorado and Kansas. Six are engaged exclusively in the transmission of power and, as the list indicates, are located in Oklahoma, Iowa (2), Minnesota, Nebraska and South Dakota. In summary, then, there are 43 federated cooperatives in 22 states which have received loans to generate and/or transmit power. There are two power-type borrowers in Nebraska, both public power districts. One of these, as shown in the list, is primarily concerned with generation, the other primarily with transmission. They serve the same 26 REA-financed systems. The two remaining borrowers in our report are a state agency, the Lower Colorado River Authority, and a commercial power company, the MontanaDakotas Utilities. The latter became a borrower through assumption of the debt of the Dakotas Electric Cooperative which had borrowed from REA with the understanding that the company would build and operate the generation and transmission system, and buy it at a later date if it so desired. The company has since exercised that option by assuming the indebtedness and is owner of the system. The reason for this arrangement, made in 1949, was the urgent need of distribution cooperatives in portions of North and South Dakota for an interim power supply while waiting for completion of certain Bureau of Reclamation projects. The option feature enabled the cooperatives to avoid the higher cost of power from their plant, as compared with the cost of Bureau power, after the Bureau power became available. It was an arrangement mutually beneficial to both parties. Sincerely your, NORMAN M. CLAPP, Administrator. [Enclosure] Loans approved to principal active power-type borrowers by Rural Electrification Administration Loans approved to principal active power-type borrowers by Rural Electrification Administration-Continued United Power Association, Elk River, Minn.. M. & A. Electric Power Cooperative, Poplar Northeast Missouri Electric Power Cooperative, Central Electric Power Cooperative, Jefferson N. W. Electric Power Cooperative, Inc., Cameron, Mo.. Associated Electric Cooperative, Inc., Springfield, Mo.. The Central Nebraska Public Power & Irriga- Loup River Public Power District, Columbus, Nebraska Electric Generation & Transmission Central Power Electric Cooperative, Inc., Minot, Basin Electric Power Cooperative, Bismarck, Montana-Dakotas Utilities, Minneapolis, Minn.. Central Electric Power Cooperative, Inc., Cayce, East River Electric Power Cooperative, Inc., Rushmore Electric Power Cooperative, Inc., Brazos Electric Power Cooperative, Inc., Waco, South Texas Electric Cooperative, Inc., Victoria, The Lower Colorado River Authority, Austin, Dairyland Power Cooperative, LaCrosse, Wis. 35, 212, 649 439, 392 26, 245, 000 5,434, 482 12,985, 000 5,873, 874 10 39, 230,000 32 12, 521, 000 411, 907 3,550,000 20, 765, 003 16, 071, 000 39 26,044, 794 4 12 810, 631, 683 651, 352, 4181, 466, 851, 985 Mr. MORRISON. The point that I am trying to make here is that in Louisiana the REA generation and transmission plants, as compared to that in Ohio, are different-they are decidedly different in Louisiana. In Ohio, the private power company and the REA went into a marriage there. So that, what is bad in Louisiana evidently is good in Ohio. Is that right? Mr. ROEMER. That is my understanding, sir. Mr. MORRISON. As to this line that you were talking about in the Southwest Power Administration, if the private companies built it instead of the Government, would they have allowed the REA co-ops in Louisiana to use that line? Mr. ROEMER. No, sir. In the proposed contractual arrangement with the Southwestern Power Administration, we have been precluded from the use of this line, and are precluded from the use of the standby power from SPA dams. One of the benefits to the Southwest Power Administration was the exchange of power from our facilities to their facilities to be used as pumpback storage, to make their dams more feasible, and, hence, more productive. This has been omitted. from the contract. Mr. MORRISON. In other words, you maintain that since you have gotten this $56 million from the REA to build this generation and transmission plant to keep your REA customers because you said when you went to renew the contract with the private companies at their generating plants, they stated they would continue to raise the rates, and the only way that you could use that line then is for the REA to borrow the money and build that line; is that not true? Mr. ROEMER. Mr. Morrison, the line that we are referring to was in the budget of the Southwest Power Administration to link the hydrodams in Arkansas into the Southwest Power grid. We were to build a line to connect with the SPA system to obtain standby power. Included in our $56 million loan, granted in September 1964 were funds to build a tieline connecting us with the SPA grid. Mr. MORRISON. And if the tie-in line were built in conjunction with your generation and transmission plant, then that would serve as a standby, so to speak, with the Southwest Power Administration. If the power companies, the private power companies, built the line, you would not be able to use it? Mr. ROEMER. We would be precluded from its use. Mr. Morrison, let me correct what might be misunderstood, sir. The REA was not to build this line. The REA was to loan this money to the cooperative in Louisiana and it would build the line and repay the money. Mr. MORRISON. In other words, every nickel that you borrowed you would have to repay? Mr. ROEMER. Correct. The REA was not building the line; they did not guarantee to build the line. It was made up of the member cooperatives. Mr. MORRISON. There has been quite a bit of criticism by private power companies of the generating plants in one form or another that are financed by Government money. I noticed in my district in Louisiana, which is the Sixth District, that there is a tremendous powerline going through the center of it. It is my understanding that that powerline is being built at a tremendous cost. I think that it will carry a larger load of electricity than any other powerline in the country. It looks that way. It goes up to Tupelo, Miss., and to get TVA power for private companies. Do you know anything about that? Mr. ROEMER. I understand-the best answer would be that I do not know anything about that; that is out of my area. But it is my understanding that this is a TVA tie-in line with the utility companies in south Louisiana and southeast Texas. Mr. MORRISON. I took the time to check into it, and I found the same thing. Will that powerline, since it is carrying public power from TVA, be a public utility or "common carrier" line, so to speak, where all of the cooperatives will be able to use it? Mr. ROEMER. No, sir; we cannot tie into it. Mr. MORRISON. In other words, there is this tremendous powerline, as large as any, I believe, that has ever been constructed in the United States, that is going to bring TVA power into Louisiana for these private companies, and then the REA co-ops cannot tie into that TVA powerline and buy their share of the public power? In other words, it is not a public utility where the REA-financed co-ops could use current from it? Mr. ROEMER. It does not have a common-carrier status, and we cannot obtain any wheeling arrangement with the utility. Mr. MORRISON. You spoke a few moments ago, in your testimony, about a private power company borrowing money from the REĂ. Would you name that company? Mr. ROEMER. Yes, sir. I believe it is in the testimony, Congressman Morrison. It is the Central Louisiana Electric Co. Mr. MORRISON. And you said that they were the third largest? Mr. ROEMER. Borrower of REA funds in the State of Louisiana; yes, sir. Mr. MORRISON. How many borrowers are there, approximately? Mr. ROEMER. There are about 17 in the State, in total. Mr. MORRISON. Do you mean to say that there are 14 cooperatives that borrow less than this one private company does? Mr. ROEMER. Yes, sir. Mr. Bonner corrected me on that. We may have a difference in semantics here. As I understood your question, they are the third. Mr. MORRISON. And if there are 17 they are No. 3, if my arithmetic is correct. Mr. ROEMER. I would agree with that. Mr. MORRISON. Just like you stated in your testimony, the power companies try to get the largest audience on the radio when they broadcast a football game. They use this large captive audience to say how terrible it is to use this Government money and how terrible it is that the taxpayers here are having to foot the bill. They explain that on the networks. Then, as you testify, they say that out of one side of their mouth, and out of the other side they are up here borrowing that "terrible money" that they talk about over the networks on the air. How do you reconcile that, and how do you think they could reconcile it? |