The Rural Electrification Administration approved a loan to the Cooperative about one year ago. To date, we have received no funds from this loan. Loans are easy to get, it seems, but how do we get the money we need. The Rural Electrification Administration say that the money is not available. With the REA appropriations now and the prospects for the future, we do not have any hopes that adequate funds will ever be available.

In a time when the Government and people are trying to eliminate poverty and to develop the Rural Areas of America, how can we overlook the need to develop or provide the necessary funds, to develop the Local Rural Electric Cooperatives, who provide service to make farm operations more efficient, provide service to remote areas to make them more desirable and to help provide a better life for the rural people?

We do not feel that a Cooperative of our size and assets can get funds locally for needed development, the Rural Electrification Administration does not have the funds, so we feel that it is a must that the Supplemental Financing Bill Number H.R. 1400 be passed in this session of Congress.

STATEMENT OF EDWARD E. WOLTER, REPRESENTING ELECTRIC POWER COOPERATIVES IN MINNESOTA, WISCONSIN, IOWA, AND NORTH DAKOTA

Mr. Chairman and Members of the Committee, my name is Edward E. Wolter. I am General Manager of the Rural Cooperative Power Association, Elk River, Minnesota, an REA financed electric generation and transmission cooperative. I am here today representing a committee comprised of representatives from other generating and transmitting cooperatives which operate electric facilities in Wisconsin, Iowa, Minnesota and North Dakota. Those cooperatives are: Cooperative Power Association, Minneapolis, Minnesota; Dairyland Power Cooperative, LaCrosse, Wisconsin; Minnkota Power Cooperative, Grand Forks, North Dakota; Northern Minn. Power Association, Grand Rapids, Minnesota; United Power Association, Elk River, Minnesota and Rural Cooperative Power Association, Elk River, Minnesota.

Our cooperatives and the others which comprise the membership of this committee are mature operating organizations which have been in the generation and transmission business since the inception of REA. We are all members of the Upper Mississippi Valley Power Pool, an operating Pool which is made up of eight investor owned electric companies and seven electric power cooperatives. The members of this committee are also members of MAPP, the Midwest Area Power Planners, a group which is comprised of fourteen investor owned electric utility companies, 17 municipal electric utilities, 6 electric G&T cooperatives, 2 Public Power Districts aand one Canadian Crown Corporation. The purpose of this MAPP group is to work together as it builds and plans generation and transmission facilities in the interest of reducing over-all costs. The members of the MAPP organization are dedicated to respecting the rights and obligations of other MAPP members and to provide adequate power facilities for service to their own respective consumers.

The cooperative members of our committee are unanimous in their praise and appreciation for the strong interest shown by this Committee to provide a supplementary financing program for our electric cooperatives. We support the program outlined in H.R. 1400 introduced by Mr. W. R. Poage, the distinguished Chairman of this Committee. My testimony here today and the Cooperative-Company agreement filed with the Committee is intended to illustrate that if certain restrictions in use of Bank funds is considered by the Congress in its wisdom to be a necessary feature of such legislation, then our cooperatives can and will respect them to the letter. We urge that compulsory arrangements be eliminated so that the cooperatives and companies can work out the relationship that will develop on a free and equal basis. Our efforts towards obtaining industry peace over the past fifteen years is culminated in a "live and let live" philosophy between the Companies and Cooperatives.

The cooperatives of this committee have met with the electric companies who operate in this same service area; the Interstate Power Company of Dubuque, Iowa; Northern State Power Company, Minneapolis, Minnesota; Otter Tail Power Company, Fergus Falls, Minnesota; and Minnesota Power and Light Company, Duluth, Minnesota, for the purpose of discussing the proposed supple

mental financing plan which was before the Congress in 1965 and which several of the companies mentioned above opposed. The purpose of these many meetings and discussions was to ascertain the problems of the Companies with the proposed financing legislation. These discussions led to an agreement, signed by the cooperatives and the power companies on certain suggested changes to H.R. 1400. These negotiations and discussions have been held in the spirit of constructive accomplishment. The companies have recognized the cooperatives' need for supplemental financing and the cooperatives have recognized the request of the companies for protection of their electric consumers as being fair and reasonable. Our agreement basically provides that loans shall not be made for generating, transmission or distribution facilities for service to consumers which are served by a supplier who does not qualify to be a borrower from the electric Bank or to provide service within the limits of a city or village which is served by such a supplier in which the borrower is not rendering service at the date of the loan application unless ordered to do so by a regulatory commission.

In respect to acquisitions, we have agreed that no loan should be made for acquisition of electric facilities within a city or village which is served by a supplier not qualified to borrow from the Bank and from which service is still available unless the Bank Governor finds that 75% of those voting in a referendum in such municipality approve the sale and the acquisition improves the efficiency and effectiveness of the borrower and that the secretary approves the acquisition.

We have further agreed that no loan should be available for generating or transmission facilities to provide wholesale service to a city or village which on the date of the loan application is obtaining its full electrical requirements from a supplier not qualified to borrow from the bank unless 75% of those voting in a referendum approve such service by the borrower or such service is directed by a regulatory agency and in any case must be rendered at rates and charges similar to the rates and charges the borrower has in effect for any other similar services.

The cooperatives have thus agreed that protection for customers served by other parties is reasonable.

The companies and cooperatives are in further agreement that the compulsory interconnection of electric facilities financed by the Bank to the facilities of other suppliers is more a problem of the cooperatives and are in agreement that such interconnections as may be feasible should be on a voluntary basis and our agreement so provides.

In the matter of the intermediate interest rate, many cooperatives have indicated concern that a multi-rate program would be difficult to administer. Both the companies and the cooperatives have recommended in their agreement that a single long term interest rate for Bank loans would be more desirable. The problem of judiciary procedures was thoroughly discussed. Our agreement includes the use of judiciary procedures in two instances:

1. Where a new electric cooperative is formed and a loan application is made for the purpose of providing generation and transmission equipment to displace the power that has been historically purchased from other electric suppliers. Our agreement has provided for a judicial process substantially greater than set forth in H.R. 1400. I am pleased to advise the Committee that this and other matters have been discussed further with the companies and we would find the Federal Power Commission would be a mutually acceptable agency to review appeals in the place of provisions in our agreement or the Federal Appeals Court, set forth in this Section of the Bill. It is felt this or a similar Commission would have the expertise in the power field to hear the complaints and review the evidence where appeals are made under the provisions of the Bill.

2. Judicial procedure in our agreement has been established for the purpose of preventing violations of restrictions in the use of loan funds by a Bank borrower after receipt of loan. Our cooperatives have concurred in the companies' position that some discipline should be provided to enforce compliance by borrowers with whatever regulations are established by the Congress as to the use of loan funds. The right of injunction as a judicial procedure to correct violations by borrowers does not appear to be the only way to prohibit violations. Since this agreement was reached, this matter has been discussed with the companies who have stated their main objective is the protection from piracy of their customers by a borrower from the Bank. The companies have indicated

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they are willing to accept solutions other than a judiciary process so long as adequate protection of their customers can be achieved.

In this area our cooperatives agree that adequate restraint is in order and we would suggest consideration of the Congress that when verified complaints are received by the Governor of the Bank that Bank loan funds are being used in violation of the restrictions established by the Congress, that such complaints be turned over to an impartial committee comprised of such persons as: Chairman of the Federal Power Commission, Controller General of the United States and Administrator of Farm Credit, which committee would review the evidence and give its report to the Governor within a limited time. If the complaint is verified and a violation found to exist by this committee, the Bank would be required to suspend the borrower's qualifications and to withhold such undispersed funds as might remain until the violation had been removed by the borrower. May I emphasize that the aforementioned committee has not been reviewed or approved by the company parties to this agreement. They have, however, indicated a willingness to consider methods other than judiciary so long as adequate protection is provided. Measures which would affect the borrower's financial future would be strong, punitive measures in enforcing compliance with the provisions that may be established by the Congress.

The problem of financing the Bank is no less today than was the uncertainty of financing the new electric cooperatives when they began operation nearly thirty years ago. Until recently cooperative loans had a five year deferment period on their loan repayment period to give cooperatives a chance to get started. We believe the same conditions exist today in the establishment of a Bank, most of whose customers are not capable of supporting today's money costs.

Under H.R. 1400 the Bank will pay an excise tax in lieu of interest to the Government from its surpluses, if any exists. May we suggest this arrangement be permitted to continue for some definite period of time before the Bank is required to make interest payments. The Congress at a later date can establish a scale to increase interest rates up to the Treasury cost of money over a period of years as soon as the Bank's earning performance reflects the cooperatives' ability to pay.

We feel Federal back-up by the Treasury is a must for this beginning organization. A Bank without an established credit rating would have little if any chance of obtaining private funds from sophisticated investors, particularly at a time when the cost of construction is putting a burden on profits of electric utilities. Give this Bank the same opportunity that other beginning institutions have needed and let the cooperatives go to work in making the Bank the success all cooperatives ultimately want to achieve.

All cooperatives have acclaimed the opportunity the Congress of the United States has provided to electrify the rural area. The starting of this Bank is a similar embarkation on another venture which will be just as successful as the results a few rural electric cooperatives have made and others are striving for.

STATEMENT OF F. E. COMAN, PRESIDENT, DAVIDSON ELECTRIC MEMBERSHIP CORP., LEXINGTON, N.C.

Davidson Electric Membership Corporation has been in existence 28 years. During these 28 years we have invested in plant $7,500,000, and we are rendering electric service to approximately 12,000 rural consumers in the Northern Piedmont Section of North Carolina. Engineering estimates of growth of our system predicts that in the next 10 years we will need approximately $6,000,000 to further heavy up our lines to meet demands of the territory and consumers which

we serve.

In the past we have been able to borrow from the Rural Electrification Administration, from monies appropriated annually by Congress. It is our belief that this arrangement will not last indefinitely. We, therefore, support many of the provisions of H.R. Bill 1400, which allow for the establishment of a Rural Electric Credit System, or Bank, which would initially require government investment but would also allow the Bank to go into the money market to obtain additional funds. We particularly support the provisions in this Bill, which would enable the cooperatives to pay off the government investment in the Bank and eventually own and control the Bank.

We also are fully conscious of the fact that it is necessary to continue the 2 percent REA Loan Program as it now exists, as there are some cooperatives who serve in sparsely settled rural areas, who, if they were deprived of this source of loan money, would be in serious financial condition.

We feel after careful study of H.R. Bill 1400 that it includes many of the provisions that would enable our Electric Membership Cooperative to continue to meet the growth requirements of our area, and would eventually lead to freedom of dependence on Federal financing.

We feel that this is a problem that Congress must deal with sooner or later if our Cooperative and the other rural electric cooperatives in the Nation are to survive.

STATEMENT OF ORVAL B. COUCH, MANAGER, CLAIBORNE ELECTRIC COOPERATIVE, INC., HOMER, LA.

Mr. Chairman, my name is Orval B. Couch, Manager of Clairborne Electric Cooperative, Inc., headquartered in Homer, Louisiana. Our distribution cooperative serves 10,610 member-owners in the parishes of Clairborne, Webster, Bienville, Union, Lincoln, and Ouachita where less than 2% of the rural homes and farms had electricitiy when our Co-op was organized in 1938. I am proud to announce today our Co-op offers 100% area coverage, serving all who desire service with reasonable rates, no matter their economic staus, race, color or creed. I think we have contributed greatly to the social and economic progress of both town and country made possible by the loans from REA which are repayable.

Our critics, in their determination to destroy the small flame of competition by example posed by electric cooperatives in Louisiana, twist our record as proof that our job is done, that we need no more capital to meet the growing demands of our rural consumers and for rural development. Paradoxically, these same absentee-owned power companies almost daily proudly propagandize huge capital expenditures projected in our developing State.

Mr. Chairman, we need the establishment of a Rural Electric Bank to provide supplemental financing for the systems which can afford its service. Our cooperative has borrowed $7,383,814.29 since 1938, serving 10,610 member-owners on 2,806 miles of line. With a gross annual revenue of only $439.38 per mile. The companies have an annual gross revenue of over $12,000.00 per mile.

We are proud to say that we operate a first-class cooperative in giving service to our consumer members. We have repaid $2,030,837.00 of the $7,383,814.29 on the loans. We are proud to report that we have paid in advance $996,287.00. This gives us an equity of 33.5 percent ownership of our member cooperative. Mr. Chairman, in the next ten (10) years our cooperative will need to invest $3,750,000.00 We do not think this money will be available from the REA program. We need to keep the 2% loan program for our generation and transmission here in Louisiana which will give us just a spark of competition, for in our rate negotiations we need the 2% REA money available to electric cooperatives that are serving marginal areas where no other service was available.

Our Board of Directors urge you to provide us with the supplemental financing bank. We believe you have faith in us to see that it is passed over the strong opposition.

STATEMENT OF PAUL E. WEATHERBY, MANAGER, AMICALOLA ELECTRIC MEMBERSHIP CORP., JASPER, GA.

The Board of Directors of this Cooperative and I urge you to support the passage of H.R. Bill 1400 introduced to provide supplemental financing for Rural Electric cooperatives. The cooperatives are faced with unprecedented growth. with prices for material and labor at an all-time high and financing critical. Yet they are providing, and wish to continue to provide, service to all permanent residents, even in the most sparsely populated areas at rates that are comparable to those paid by residents in the most populated cities.

Our Cooperative is located approximately 60 miles north of Atlanta, Georgia, in the poultry center of the world. We serve approximately 7100 meters and 6500 rural farm families located on 1447 miles of line in 10 counties. In addition to agriculture our area has almost unlimited potential for industry and recreation. Industrial development groups and planning commissions are hard at work plan

ning for the development and expansion of our area. They are doing an excellent job of bringing in new industry and developing our resources to provide recreation for both rural and urban residents.

For several years we have financed our operations and expansion with our own funds, but as we have continued to grow we are now facing a need for between $250,000 and $300,000 in additional capital annually. We are submitting an application to REA for a loan of $548,000, but cannot be assured it will be approved. Our reserves are approximately 6% of plant. One ice storm could completely wipe this out and leave us at the mercy of those who would destroy the cooperative system.

If we cannot secure the necessary financing in the immediate future we will be forced to raise rates and curtail improvements and expansion. This would mean that our poultry industry which has done so much for this area would be stifled. It would mean that some 6500 rural families would have less money to spend at a time when farm income is down and prices are at an all-time high. Also that they would have more frequent power interruptions and less dependable service. The efforts of the planning commissions and industrial development groups to secure new industry and develop recreation in rural areas would be in vain as we would not be able to expand our system. Our urban friends who like to spend vacations and week-ends in the mountains would have to look elsewhere for recreation.

The supplemental financing program is the most logical method that has been presented to make it possible for the rural electric cooperatives to move away from government dependence. We are not asking for a donation-instead we are asking for assistance in helping to develop and serve Rural America. Won't you please lend your support.

STATEMENT OF RUSSELL A. BOVAIRD, MANAGER, WHEATLAND RURAL ELECTRIC ASSOCIATION, WHEATLAND, WYO.

The plant investment of the Wheatland Rural Electric Association has been growing at the rate of $100,000 per year. Even though this is not a large amount in comparison to the utility industry, it is much more than our system can raise internally, even with rural rates 30% higher than the national average. We are completely dependent upon Congress for our future capital needs since it appropriates funds annually to the Rural Electrification Administration which in turn are loaned to our association. We are concerned about the availability of capital funds for the future since our needs are growing much more rapidly than appropriations from Congress. Loss of capital funds at reasonable terms could seriously jeopardize the ability of the association to provide the electric service needs of our farmers, ranchers, and industrial users.

It is with these thoughts in mind that urges me, with all sincerity, to request your strongest support of financing bills H.R. 1400, 1401, 1402, 3122, 3314, and 6026. These bills are supposed to provide the rural electric systems the means of obtaining capital from sources other than the government. I am for all of these bills since passage of just one of them will give me the assurance that our association can continue without hesitancy and with economies of marketing to meet the electrical requirements of our members.

With rates 30% higher than the national average, a density of 1.1 per mile compared to 3.4 per mile for all rural electric systems and 33 per mile for private utilities, and an investment per service of $1980 compared to $980 for other rural electric systems, our association must depend, among other things, upon adequate capital at reasonable terms and conditions to meet our utility obligations.

STATEMENT OF W. H. CALLAWAY, MANAGER, HART COUNTY ELECTRIC
MEMBERSHIP CORP., HARTWELL, GA.

The Board of Directors of the Hart County Electric Membership Corporation and I wish to join together to urge passage of H.R. 1400 to provide a Supplemental Financing Plan for Rural Electric Cooperatives.

Our cooperative is located in Northeast Georgia and is bordered on the east by Clark Hill, Hartwell and the proposed Trotters Shoals Reservoirs. The presence of these lakes greatly enhances the potential of this area with their plentiful supply of water and electricity and unlimited recreation.