STATEMENT OF NOEL LEE, JR., PRESIDENT, EDGECOMBE-MARTIN Mr. Chairman, this statement is being presented by authorization of the board of directors of this corporation. We believe that this statement also represents the views of far more than a majority of our members. This cooperative began furnishing electric service to rural service to rural people in Edgecombe and Martin counties on April 17, 1937. The initial construction was 32 miles of lines to serve sixty-six members. Since that time the cooperative has grown to more than 1000 miles of distribution lines serving over 5000 consumer-members. Our substation capacity has grown to 13,530 KW at five substations. During the past ten years the cost of additions to our plant amounted to more than one and one half million dollars. Due to the ever increasing use of electricity by our member-consumers, whose demands for electricity are doubling approximately every six to eight years, our need for additions to our plant in the next ten years will be much greater than our needs were during the past ten years. In order to meet the demands for adequate and dependable electric service, we must, as soon as possible, construct our sixth substation. In the near future it will be necessary for us to construct three more substations. We must, also, rephase many miles of line, increase our conductor sizes, and provide for larger distribution transformers for hundreds of services. We will change hundreds of services from 2-wire to 3-wire. We must be in a position to furnish several hundred security lights during the next few years. The needs enumerated above must be met, in order to meet the requirements in the eight counties in which we now serve resulting from industrial growth, agricultural revolution and in order to serve the new residences that are being and will be constructed in our service area. The cost of construction that will be required will be much greater than the cost of our existing facilities. We have no reason to believe that the necessary capital requirements will be made available by the Rural Electrification Administration. Capital derived from our daily operations is wholly inadequate to meet our needs for capital requirements. Obtaining funds from the private money market is the only other known source. Without the passage of legislation similar to H.R. 1400, funds from the private money market are not available and will not be available. Passage of this or similar legislation is absolutely essential for the continued operation of this and many of the other cooperatives throughout the nation. Provisions in H.R. 1400 will allow the REA to continue to make 2% loans when such interest rate is imperative for the survival of the cooperatives involved. Other provisions would enable the cooperatives to retire all government funds in the bank and to ultimately own and control the bank, thus relieving the government of any responsibility for continuing to make loans to electric cooperatives. Thanking you for the opportunity of presenting this statement. Respectfully submitted on this 23d day of March 1967. STATEMENT OF J. E. ROBINSON, MANAGER, SNAPPING SHOALS ELECTRIC MEMBERSHIP CORP., COVINGTON, GA. Mr. Chairman and Gentlemen of the Committee, my name is J. E. Robinson. I am manager of the Snapping Shoals Electric Membership Corporation of Covington, Georgia. Our membership is composed of 8,412 farmers, business men, laborers, factory workers, small merchants and industries in the rural areas of Newton, Rockdale, Henry, DeKalb, Butts, Jasper, Walton and Morgan Counties. I am also chairman of the Power Committeee of the Georgia Electric Membership Corporation, an organization which represents all forty-one of the Rural Electric Distribution Cooperatives of Georgia. The primary function of our committee is to see that all of the rural electrics in Georgia have an adequate low cost source of power. As chairman of this committee, I represent about 353,693 member-owners who depend upon the 41 Rural Electric Cooperatives for all of their electric power requirements. The power requirements of Snapping Shoals Electric Membership Corporation will increase fivefold by 1982. We now purchase about 65,000,000 kwh from the Georgia Power Company and the Southeastern Power Administration with a demand of 15,000 kw. Fifteen years hence conservative estimates show that we will purchase 340,000,000 kwh with a demand of 75,000 kw. Kilowatt-hours purchased for our Cooperative alone in 1982 will almost exceed the entire amount (369,528,624 kwh) purchased by all 41 Georgia Cooperatives in 1950. By 1982 purchases of all Cooperatives in Georgia should exceed 14,000,000,000 kwh. Membership of our Cooperative will increase from 8,400 to 15,000 by 1982 and from 354,00 to at least 500,000 for the 41 Rural Electric Cooperatives in Georgia. This, of course, will require construction of many miles of distribution facilities just to serve new consumer-members within our area. Our Cooperatives capital fund requirements from outside sources will exceed $5,000,000 for the next 15 years. These funds would be used for construction of new lines to serve new members and to increase our capacity to meet the ever increasing demands of our existing consumer-owners. It is difficult to imagine the funds that will be required for all 41 Rural Electrics of Georgia, but a conservative estimate shows about $300,000,000 for the next 15 years. National requirements for this period will exceed $8,500,000,000! Since the beginning of REA in 1935 Georgia Cooperatives have borrowed about $165,000,000 for construction of systems to serve rural people. So you can see we will have to do in the next fifteen years about what we did in the first thirty-two years of our existence. It is not an easy job and far from completed as many of our opponents claim. Currently our wholesale power costs from the Georgia Power Company are within the limits which most Cooperatives can survive. Cost of purchased power continues to represent the largest single item of expense. As a percentage of gross revenue cost of power has risen from about 27% in 1953 to about 40% in 1967. By 1982, at present rates, cost of wholesale power will take fifty cents of every dollar of gross revenue for our Cooperative. As chairman of the Georgia Electric Membership Power Committee and as manager of Snapping Shoals Electric Membership Corporation, I am much concerned with the availability of adequate power at low cost. We now have no assurance that our rates will remain the same or be increased. Our State Public Service Commission is weak and understaffed and exercises very little control over wholesale electric rates. Our access to funds for generation and transmission from REA and the closeness of the TVA have been the only two things which have prevented our power supply costs from increasing. An increase of 1 mill per kwh would cause about one-half of Georgia's Rural Electrics to operate at a net loss. Funds for generation and transmission even though severely limited by the restrictions of H.R. 1400 are needed for electric cooperatives in order that they might have some measure of control over their wholesale power cost. With little or no controls our wholesale rates would certainly go up, when actually they should go down because of the new and improved methods of generation and transmission. Rural Electric's continuing ability to supply low cost electricity to their member-owners is essential to the welfare of all people of the United States both urban and rural. Much has been said, and done, in the last few years about poverty. Large scale movement of entire families from rural areas has increased the urban poverty problems many, many times. According to the Department of Agriculture this movement of whole families has ceased and in the future will consist of the young people, the very ones who, with proper training and guidance could stay on the land and prevent our future food and fibre shortages. You may be sure that an adequate low cost supply of electricity will do much toward keeping these people in the rural areas by making farming more profitable and providing jobs in industries located on Cooperative lines. We do not believe it fair to the American people to have to continue unlimited financial support of our program. It is time for the rural electrics to become independent of the Federal Treasury for their capital fund requirements. The record shows that our program has a remarkable record of payment of principal and interest to REA. Our Cooperative has paid principal in advance of $176,000 and has a cushion of credit of $126,000 with REA. This bill, HR 1400, now before your committee is the best answer for a gradual removal of our needs from the Federal Treasury. We urge you to support this bill which will help the nearly 1000 Rural Electrics of our country continue to play their part in making our rural areas easier for people to live and work in. STATEMENT OF MAURICE JOHNSON, MANAGER, EDGAR ELECTRIC COOPERATIVE ASSOCIATION This statement is submitted on behalf of the 3900 Member-Owners and the Board of Directors of the Edgar Electric Cooperative Association of which I am Manager. I have served as Manager of the Edgar Electric Cooperative Association since 1954. The principal office of the Edgar Electric Cooperative Association is Post Office Box 190, Paris, Illinois. The Association was organized and is functioning for the sole purpose of providing Central Station Electric Service to the Rural Areas. The Association serves approximately 1250 square miles of area situated in the central and eastern part of the state of Illinois. The Association serves its 3900 Member-Owners, which are predominately engaged in farming, through a network of 1360 miles of distribution line and five substations. Our Association has not experienced a dynamic growth in members or in the area of electrical consumption of our Members, however, our Association has enjoyed a continuous and steady rate of growth of approximately 75 new electrical service connections and an 8% increase in electricity required by our Members each year. Our present investment in plant to serve our members today is $3,400,000. This is our accumulated total of money invested in plant since we first energized our lines in 1939. In projecting our investment in plant, in additional substations, in heavying up our present distribution lines and new electric lines to meet the normal growth electrical demands of our Members, indicates that we will invest another $3,500,000 in new plant facilities in the next twenty years. In other words it is going to require more money for us to heavy up our facilities to adequately serve our Members the next twenty years than what it has cost us to completely build facilities to serve them these past twenty-eight years. We have a consumer density of less than 2.9 per mile of line. Our assessments to our Members for electricity is and has been comparable to that charged by Commercial Utility Companies serving adjoining areas. However, though, there is a great disparity in our gross income, we have a gross income of $470 per mile of line per year compared to their gross income of over twenty times this amount per mile of line per year. To overcome this operating income disparity our Members have contributed all rights-of-way for our electric lines, cleared the brush for the original construction of our lines, read their own meters and figure their own bills. Of course, since this is a high investment low turn-over type business adequate and low cost capital was a must, and our needs for more capital, as set forth above, is going to be greater in the future than it has been in the past. In serving such low density areas, such as ours, and assessing our Members for electricity at reasonable rates dictates that a great part of our future capital requirements are going to have to be financed by additional borrowing. Financial requirements of our Association set forth above did not take into consideration any of the devastating blows that nature may render to our physical plant that could possibly require doubling of our future financial requirements. Some of our neighboring Cooperatives experienced losses of $100,000 to $1,500,000 on systems no larger than ours due to an ice storm this past January. In addition, to being situated in the ice belt we also experience high winds, some reaching tornadic proportions, that play havoc with parts of our system at times and could possibly take in our entire system in one big blow. Come what may, we firmly believe that in the interest of our local, state and national well-being, our number one objective is to perpetuate our type of ownership and operation in providing such an essential service in the rural areas. The territory we serve was not lucrative enough to attract profit-oriented business thirty years ago and as a whole, it still isn't. For every dollar our Association has invested and will invest in facilities, our Member-Owners have, or will invest $4.50 in electrical wiring and equipment. The above investments are vital, if we are to maintain and pursue a course of economic growth and social improvement in our land. Not only, do these investments represent an improvement in the standard of living of our Member-Owners, but represents an improvement in the standard of living of people in all walks of life. Our Member-Owners, which are predominately farmers, must have an adequate and dependable source of electric power and utilize it to drive time-saving and quality-control equipment, if they are to meet the challenge facing them. Our Association must have an adequate and dependable source of capital, and at a reasonable cost, if it is to meet the challenge it faces. At this time and in the foreseeable future, we do not see how Congress can or will appropriate the amounts of money that will be needed by all Rural Electric Cooperatives. Congress now has and will have many financial, International and National Commitments, that will take precedence over our needs in the eyes of our taxpaying, voting public. Too, as our Association grows up we foresee the need of divorcing ourselves from our dependence on our Federal Government for our financial requirements. This last statement is in no way intended to play down the tremendous role that our Federal Government and far-sighted Congresses have played in our success, but we feel that for all concerned, the sooner we can establish a fund that is independent of political pressures and changing National Administrative Policies, the better off we will be in the future. At our 28th Annual Meeting of Members of the Edgar Electric Cooperative Association held February 11, 1967, our Member-Owners unanimously adopted a resolution in support of the principles embodied in the Supplemental Financing Program proposed by our National Rural Electric Cooperative Association. In our opinion, the establishment of the Federal Electric Bank will be in the public interest and will definitely be to the benefit of our Association and the Member-Owners it serves. In the long run it will enable the great majority of rural electric systems to provide their members adequate electric service at a reasonable cost, without government assistance. On behalf of the 3900 Member-Owners and the Board of Directors of the Edgar Electric Cooperative Association, I respectfully urge the members of this Committee to take favorable action on the supplemental financing program for rural electric systems embodied in H.R. 1400. STATEMENT OF L. REID HARRIS, MANAGER, CENTRAL ELECTRIC MEMBERSHIP Corp., SANFORD, N.C. Mr. Chairman and Gentlemen of the Committee, my name is Reid Harris, and I am the General Manager of Central Electric Membership Corporation, Sanford, North Carolina. Central Electric services rural areas in five piedmont counties of North Carolina. We presently serve 3,560 consumer-members with an average density of 4.2 consumers per mile of line. Our need for growth capital for continuing expansion and demands for service on our system and others countrywide, is far exceeding the amount of regular REA loan funds available, and must be provided by supplemental financing. Central Electric would like to be recorded as supporting the Supplemental Financing Plan as incorporated in H.R. 1400. We believe that the passage of such a bill would provide adequate supplemental financing for our systems. Your prompt and favorable reporting of this bill will be appreciated. STATEMENT OF ARTHUR H. PEYTON, MANAGER, MCDONOUGH POWER COOPERATIVE, MACOMB, ILL. Congressman Poage, Chairman and gentlemen of the committee, I have been Manager of McDonough Power Cooperative for the past twenty years, serving approximately 10,000 residents, living in McDonough, Warren and adjacent counties in west-central Illinois. We serve 3,500 members over 1,300 miles of distribution line with 28 miles of transmission line. The area served is better than average farm land, which concentrates extensively on grain production and cattle feeding. The farms, over the past several years, have consolidated becoming larger which has resulted in loss of rural population, but has also increased in productivity due to the mechanization of equipment on farms. Our Cooperative is set up as a model rural electrification cooperative and is governed by a Board of nine directors, each director being a dedicated large farm operator with an average of experience of over thirty-nine years of farm operation. Two of these directors are the original directors and have served as a director for twenty-nine years and the other seven directors have served from two to twenty-two years or an average length of fifteen years each of service, dedicated to serve the Cooperative for the betterment of life of the rural members of this Cooperative. This Board has carefully managed its financial situations over the past many years, having made substantial advanced payments to REA ahead of due date of our notes and have maintained an adequate reserve to meet problems as they arise. This Cooperative has delayed, for several years, planned construction according to our long range system plan to meet future needs. We have used every conservative method and devised other plans available to use every section of line to the upmost capacity. We now face immediate need to build substations with transmission lines feeding them and the heavying up of our existing lines to provide adequate voltage for meeting the members demands. We need approximately $100,000 of new capital each year to meet the new loads as they develop. More electricity is used for confined livestock feeding and grain drying to improve the quality and increase the economic benefit to the residents of this section of rural Illinois. The increased capital is needed to increase the present members services to meet their new demands. New demands are increasing for the need of electric heat and air-conditioning in the homes. We need additional transmission lines to serve new substations because of the unavailability of transmission lines from our supply utilities to reach the load centers. We have maintained our rates at as near cost as possible during the many years of our operation and are still competitive with other suppliers in the area. Our present average member usage is 8,400 KWH per member per year. Ten years ago this figure was 6,000 KWH per member per year. Our membership in 1956 was 3,233 and our membership has grown in 1966 to 3,346. This is taking into consideration the many consolidations of farms and the loss of these original members we have built to in the early years of the Cooperative. This has resulted in us now having 246 idle services which are a detriment to the Cooperative because the capital investment was originally expended and now must be paid by the existing members. We now have seven substations with a capacity of 14,750 KVA and in order to meet our long range plan of the need of 3,000 KWH per month per member, we will need to increase these substations to a total of twelve which will supply 28,000 KVA of capacity. Our 1956 plant investment was $1,950,000 and at the beginning of 1967 it was $3,000,000. The long range plan which was made by Stanley Engineers, Muscatine, Ia., shows the total cost of meeting distribution plant needs will total an additional $2,976,000. In addition to this investment for distribution plant, this Cooperative faces the need of additional transmission line which will require a capital investment of $850,000. The need of growth capital for this Cooperative will increase our plant 127% over that of the 1966 level. We have operated our Cooperative on a true cooperative basis by refunding to our members patronage refunds in the amount of $293,536. Due to decreased margins and reserves at this time, we are not currently making patronage refund payments. It is apparent that the future need of capital would point to the necessity of supplemental financing for rural electric cooperatives. The Poage Bill H.R. 1400 seems to be a reasonable answer to these supplemental funds. It would be expected that such a proposed Federal Bank for electric cooperatives, as proposed in this Bill, would provide the needed capital requirements for the rural electric cooperatives. As the proposed Federal Bank for Cooperatives increases in its capacity of funds, an increased number of electric cooperatives could afford the higher rate of interest. This leaves the annual Congressional appropriation to the marginal cooperatives that cannot exist on a higher than 2% interest charge. In conclusion, on behalf of McDonough Power Cooperative, its directors and members, I respectfully urge you, as Chairman of your Committee, to study the needs of Supplemental Financing for rural electric cooperatives and find in their respected judgment, that the Poage Bill H.R. 1400 will meet the needs and satisfy the requirements of the 90th Congress of the United States so that the Bill may be adopted. ARTHUR H. PEYTON, Manager. |