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STATEMENT OF LOUIS JAFFRE, MANAGER, UTILITIES DISTRICT OF WESTERN INDIANA RURAL ELECTRIC MEMBERSHIP CORP.

Mr. Chairman and members of the Committee, my name is Louis Jaffre and I am Manager of the Utilities District of Western Indiana Rural Electric Membership Corporation, R#2, Bloomfield, Indiana, a Rural Electric Cooperative serving some 8500 members with electric service over 1700 miles of distribution lines in the county of Greene and parts of Clay, Putnam, Owen, Lawrence, Monroe, Daviess, and Martin counties.

We are committed to the concept of complete area coverage-service to every farm and rural establishment in our franchised territory.

Our Cooperative is vitally interested in supplemental financing Bill HR1400. During recent years the capital needs of rural electrics are growing at a far more rapid rate than is now being met by R.E.A. using the funds authorized by Congress. We feel that supplemental financing is of extreme importance to the future growth and welfare of our Cooperative.

Our service area is in a low income area which is due primarily to lack of industry. If we are to improve this condition we must be able to supply dependable electric service at a reasonable price to aid in attracting industry.

It is our feeling that 2% money should be made available to Rural Electrics that are unable to pay additional interest at this time but are willing to pay more when financial conditions permit.

If we are to maintain efficient service and meet demands of the future we must have funds to invest in plant.

We urge Congress to pass HR 1400 and/or similar bills to provide for the Rural Electric Credit System to assure adequate funds at a fair rate of interest for service to the rural people of our State.

STATEMENT OF SIDNEY HALE, MANAGER, SULLIVAN COUNTY RURAL ELECTRIC MEMBERSHIP CORP.

Mr. Chairman and members of the Committee, my name is Sidney Hale and I am Manager of the Sullivan County Rural Electric Membership Corporation, 110 North Main Street, Sullivan, Indiana 47882, a Rural Electric Cooperative serving some 4000 members with electric service over 890 miles of distribution lines in the county of Sullivan and parts of Vigo, Knox, Greene and Clay.

We are dedicated to the principle of area coverage-service to every farm and rural establishment in our franchised territory.

Our service area is one of the lowest income areas in the state of Indiana. Our area over the past several years has a continuous decrease in population. We are located in an area of coal mine stripping which requires relocation and retirement of distribution lines.

Our Cooperative is interested in supplemental financing Bill HR1400 which we feel will be necessary for future financing for our Cooperative. It is our feeling that 2% money should be made available to Rural Electrics that are unable to pay additional interest at this time but when financial conditions permit, are willing to pay more.

If we are to improve our low income area, we must have available electric power at a reasonable price to attract industry. The Hoosier Generating Plant under construction will give us a source of power. This we need in Southern Indiana.

Our Sullivan County REMC must have adequate capital to take advantage of the low cost, dependable power to come from our Hoosier Energy Plant. We must have funds to invest in plant if we are to maintain service at all levels and meet demands of the future.

Hoosier Energy good only, if Sullivan and other REMC's can make use of it. We urge Congress to pass HR 1400 and/or similar bills to provide for the Rural Electric Credit System to assure adequate funds at a fair rate of interest for service to the rural people of our State.

STATEMENT OF WINFORD LEWIS, PRESIDENT, BOARD OF DIRECTORS, LA GRANGE COUNTY RURAL ELECTRIC MEMBERSHIP CORP.

The La Grange County Rural Electric Membership Corporation strongly support the Poage Bill and believe it should be passed. With the growth in inland shipping and the development of the Steel Companies at Burns Harbor and the Chicago Industrial area, the northern part of Indiana will become an urban, industrial complex. Also, with the action of a citizens group of the Fort Wayne area to bring inland shipping to Fort Wayne, much expansion and growth must be done by the R.E.M.C.'s in these areas to keep abreast and ahead of the utility responsibilities that we have to our members and to our franchised areas. Monies in a much larger quantity and on a less complicated basis must be available immediately. We believe that this bill will help to accomplish this purpose and will be of mutual benefit not only to us, but to all factors of the communities that we represent.

STATEMENT OF HARLEY Justus, Manager, Marshall COUNTY RURAL ELECTRIC MEMBERSHIP CORPORATION, PLYMOUTH, IND.

My name is Harley Justus, Manager of the Marshall County Rural Electric Membership Corporation, Plymouth, Indiana. We serve 3000 member-consumers in Marshall, St. Joseph, Starke, Elkhart, Kosciusko and Fulton counties.

Today, rural residents use electricity in more than 450 ways. Electric-powered equipment feed livestock, helps harvest crops, cools milk and eggs to maintain quality. By 1980 rural power use is expected to be eight times larger than today. To provide future electric power needs, rural electric systems must double their investment in the next ten years. Adequate power supply, bigger transformers and heavier wire are vital to supplying future rural power needs.

We cannot rely solely on the capital resources which may be available through the present REA direct loan program.

The capital resources to reinforce the rural electric systems must grow to match their needs. Failure to achieve this vital balance for growth will threaten not only the existence of the facilities which need to be built in the future, but even the facilities already built, which continually need to be renewed.

We cannot continue indefinitely with the facilities in place today without continual renewal and expansion of investment. The nature of the electric utility business makes that impossible.

Rural electric systems are expected to need $8 billion in capital in the next 15 years. This is $2 billion more than has been loaned in the 31 year history of the program. With all of the pressures on the Federal budget in these times, and the deep and growing concern of the public with the problems of public financing, the size of the national debt, rising interest rates and tax requirements, I think it is totally unrealistic to expect the capital needs of the rural electric to be met in the future solely by loans through REA.

There should be a 2 percent, 35 year REA loan program with adequate funding for those systems requiring such loans to meet objectives.

We need a supplemental financing plan that will assure continued growth and permanence of the rural electric systems, which will provide loans with sufficient flexibility of interest rates, amortization, requirements and maturities to enable systems to achieve program objectives.

STATEMENT OF DORIS H. SALSMAN, PRESIDENT, HENDRICKS COUNTY RURAL ELECTRIC MEMBERSHIP CORP., DANVILLE, IND.

Mr. Chairman and Members of the Committee, my name is Doris H. Salsman. I am President of the Hendricks County Rural Electric Membership Corporation, Danville, Indiana.

I represent the Hendricks County R.E.M.C. in which we serve slightly more than 5,900 members, consisting of rural and urban families, plus twenty-nine (29) power loads consisting of small commercials and manufactures.

Our area consist of parts of five (5) Counties namely Hendricks, Putnam, Montgomery, Marion and Morgan located in the central part of the State of Indiana.

It is our opinion that in order for our local R.E.M.C. to render the same high quality service in the future as we have in the past it is necessary that we give a long hard look at our financial needs.

Our studies show that our investment for facilities will be approximately $125,000 dollars per year for the next twenty (20) years, or a total of $2,500,000 dollars.

This investment is deemed necessary in order that we may keep abreast of the ever increasing demand and useage of electrical power by our present and future members.

Speaking in behalf of our Boards of Directors and membership we feel that Supplemental Financing is a way out for the future financing of our rural electrics.

Your study and support of the present Legislation which is now in your Committee to establish a Rural Electric Credit System will be greatly appreciated.

STATEMENT OF ARVAL M. SMILEY, PRESIDENT, WARREN COUNTY RURAL
ELECTRIC MEMBERSHIP CORP., WILLIAMSPORT, IND.

Mr. Chairman and Gentlemen of the Committee, my name is Arval M. Smiley. I am President and Chairman of the Board of Directors of the Warren County Rural Electric Membership Corporation, and a member of the Board of Directors of the National Rural Electric Cooperative Association, Washington, D.C., representing the State of Indiana. Warren County Rural Electric Membership Corporation serves three thousand three hundred fifty four (3,354) meters over eight hundred eighty five (885) miles of primary distribution line in a franchise territory within five (5) counties in the western part of Indiana.

On behalf of the Board of Directors of this Corporation, I am expressing our support of legislation amending the Rural Electrification Act of 1936 to provide a Federal Bank for Supplemental Financing of the Rural Electrification Program. H.R. 1400 or an identical bill establishing a Federal Bank for the Rural Electrification Program is urgently needed to establish and provide adequate capital for all rural electric systems as well as our own system to meet the increased demands for additional capacity to serve the needs of electrical power for the rural people. Due to the tremendous demands being placed upon Congress for appropriations by the various segments of Government, we do not anticipate that Congress will appropriate sufficient funds for the growing demands for future years of the electrification program, such funds are absolutely essential to meet the escalating capital requirements of these electric systems. Establishment of a Supplemental Financing Program would, in time, ease the burden of Congressional appropriations.

The records and history of this rural electrification system indicates that the sales of electricity to our member-consumers will double in less than ten (10) years. To meet this service demand on our system, we must have additional capital to increase the capacity of our existing facilities and to provide new facilities to serve new member-consumers. According to engineering and financial studies available to us, our investment in physical plant will more than double in the period of years. Without adequate capital we would be unable to make such improvements and this would act as a detriment to the growth of the rural areas in which we serve. The increased requirements in the use of electrical service for rural homes, consolidated schools, grain processing establishments and for grain and livestock farming must be provided for by this rural electric system. A large percentage of the electrical consumption in our area is used by grain and livestock farms.

We believe that legislation establishing a Federal Bank for Supplemental Financing of the rural electric systems is urgent and required legislation to support the needs of our rural people. Therefore, we ask for prompt and favorable consideration by this committee on this legislation.

STATEMENT OF WILLIAM F. MATSON, IN BEHALF OF THE PENNSYLVANIA RURAL ELECTRIC ASSOCIATION AND ALLEGHENY ELECTRIC COOPERATIVE, INC.

And the following member systems: Adams Electric Cooperative, Inc., Gettysburg, Pa.; Bedford Rural Electric Cooperative, Inc., Bedford, Pa.; Central Electric Cooperative, Parker, Pa.; Claverack Electric Cooperative, Inc., Towanda,

Pa.; New Enterprise Rural Electric Cooperative, Inc., New Enterprise, Pa.; Northwestern Rural Electric Cooperative Association, Inc., Cambridge Springs, Pa.; Somerset Rural Electric Cooperative, Inc., Somerset Pa.; Southwest Central Rural Electric Cooperative Corporation, Indiana, Pa.; Sullivan County Rural Electric Cooperative, Inc., Forksville, Pa.; Tri-County Rural Electric Cooperative, Inc., Mansfield, Pa.; United Electric Cooperative, Inc., Brookville, Pa.; Valley Rural Electric Cooperative, Inc., Huntington, Pa.; Warren Electric Cooperative, Inc., Youngsville, Pa.

Mr. Chairman and Gentlemen of the Committee: My name is William F. Matson. I am general manager of the Pennsylvania Rural Electric Association, trade association for the 13 distribution Rural Electric Cooperatives and Allegheny Electric Cooperative, Inc., a G & T federation. Our member systems have 93,000 metered connections in rural Pennsylvania, and operate more than 18,000 miles of line, with total investments of nearly $60 million. These 13 cooperatives and the Pennsylvania Rural Electric Association are also members of the National Rural Electric Cooperative Association, whose spokesmen discussed in depth the legislation under consideration.

The Pennsylvania Rural Electric Association would like to be recorded as supporting fully the supplemental financing plan which was based upon a lengthy study by NRECA and Kuhn-Loeb and presented to our membership upon a number of occasions, including our mid-year directors meeting at Seven Springs, Pa., our regional meeting of the national association, at meetings of managers and the February national meeting of NRECA which was attended by directors and managers.

For the sake of brevity, let me summarize :

1. We support the testimony presented in detail by our national association, NRECA.

2. The members of our statewide association (PREA) have by resolution supported the Poage Bill, H.R. 1400.

3. Our needs and our position duplicate the detailed testimony presented by us and others to this Committee last year.

4. We encourage the prompt enactment of this legislation as being in the best interests not only of all rural electric members, but good for all America as well.

STATEMENT OF JOE MENG, SECRETARY-TREASURER, WARREN RURAL ELECTRIC COOPERATIVE CORP., BOWLING GREEN, KY.

Mr. Chairman and Members of the Committee, I am Joe Meng, SecretaryTreasurer of Warren Rural Electric Cooperative Corporation, serving a little over 20,000 members in south-central Kentucky, covering the greater part of eight counties.

I appreciate the opportunity to make known to this committee the views of our Board of Directors and our Member Advisory Committee, composed of some 200 members from throughout our service area.

It is our opinion that the only hope for our Cooperative meeting the electric service growth requirements of our members is by the supplemental credit system developed through our National Rural Electric Cooperative Association, R. E. A., and the friends of rural people in the Congress. It is our hope and purpose to shift the greatest possible amount of our capital requirements from Congressional authorization to a system of self-financing. Our growth at Warren R. E. C. C., and the other R. E. A. Cooperatives throughout this country, is so great that only by establishing an equitable and adequate supplemental credit system can we expect to meet these tremendous demands.

Our load has been more than doubling every five years over the past fifteen year span. Our residential and farm consumption per member increased over 14% in the last twelve months.

During the past five years, our own Cooperative has spent on capital improvements to provide for member increase usage a total of $5,013,654. Our Cooperative has made a comprehensive engineering and financial requirement study of our expected growth for capital requirements during the next ten years. These projected capital expenditures to accommodate the expected growth for this ten year span is $12,600,000.

No regulatory utility commission would permit any utility to generate this amount of capital from its consumers through rates. The only logical solution to the financing problem of our rural electrification program is through a credit system such as being proposed before this Committee.

STATEMENT OF THOMAS H. MOORE, GENERAL MANAGER, ASSOCIATION OF
ILLINOIS ELECTRIC COOPERATIVES, SPRINGFIELD, ILL.

My name is Thomas H. Moore. This statement is submitted on behalf of the Association of Illinois Electric Cooperatives. I have served as General Manager of the Association since 1961.

The principal office of the Association of Illinois Electric Cooperatives is at R. R. 4, Springfield, Illinois. It is a Statewide Association with all of the 27 distribution and the three generation and transmission cooperatives in Illinois as active members on a voluntary basis. Its primary function is to provide services to its member-cooperatives that each would find difficult or impossible to provide as an individual organization. The Association provides electric cooperatives and their members information on legislation and other governmental activities and functions affecting individual cooperatives. It also assists in coordinating the activities of its member cooperatives and represents them before legislative and administrative bodies. The 27 electric distribution cooperatives in Illinois serve about 148,000 members.

The electric cooperatives are a small, but significant and necessary, part of the electrical industry in Illinois. In 1964 operating revenues of all the electric cooperatives in Illinois totaled only $29,185,144. In contrast, the total operating revenues of the six major public utilities operating in the state was $954,964,228. The average distribution cooperative in Illinois has 1,700 miles of line and serves 5,300 members. In 1964 the six major public utilities in the state averaged 14,200 miles of line and 614,600 customers each. In 1964 the average distribution cooperatives had 3.10 customers per mile of line and received $60.20 in operating margins per mile of line annually. For the same year, the major public utilities in the state averaged 43.05 customers per mile and received $1,980.83 in operating income per mile.

There is considerable difference between the electric cooperatives in Illinois. One cooperative, Farmers Mutual Electric Company, with headquarters at Geneseo, has only about 265 miles of line and 660 members. In contrast, Southeastern Illinois Electric Cooperative with headquarters at Eldorado, has nearly 2700 miles of line and 15,000 members. There is also considerable variance in their financial ability and financial position. For example, Spoon River Electric Cooperative, Inc., at Canton, finds it increasingly difficult to provide its members with adequate electric service at a reasonable cost. In 1964, its net margins indicated a loss of $1,308.1 Because its potential for growth is extremely limited, its present financial plight is likely to continue for a long period of time. Spoon River Electric Co-operative's membership of 3,249 consists primarily of small to medium sized farms, many of which are on rough land along the tributaries of the Illinois River. For more than a decade it has lost members in much greater proportion than other cooperatives in Illinois, due to the vacation of farms because of the open-cut (strip) coal mining. A significant increase in the use of electricity in its service area is not anticipated now or in the foreseeable future. On the other hand, we have in Illinois, Corn Belt Electric Cooperative, Inc., with headquarters at Bloomington. Corn Belt serves 6,389 members. The territory served by this cooperative is in the heart of the Illinois corn belt, which is one of the most productive cash grain areas in the United States. Many of the farms it serves use large amounts of electricity. In addition, power loads have increased through the years because of the establishment of a considerable number of non-farm users of electricity in its service area. It appears that Corn Belt Electric Cooperative will experience a steady increase in the volume of electricity sold and will have little difficulty in providing its member-consumers with adequate electric service at a reasonable price in the foreseeable future. From a financial viewpoint, the other 25 electric distribution cooperatives in Illinois fall somewhere between the two extremes outlined above. Spoon River Electric Co-operative will continue to have difficulty operating even with loans for capital improvements amortized over a period of 35 years at an interest rate of two per cent. In contrast, Corn Belt Electric Cooperative, Inc., is in a better position to pay interest rates on money borrowed for capital improvements that will more nearly reflect the cost of money in the open money market, if there is a

1 During 1964, Egyptian Electric Cooperative and Western Illinois Electrical Coop. also operated at a loss. However, it is believed that these losses are of a temporary nature and do not indicate the long range financial potential of these cooperatives.

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