is started, to complete the authorized line extension or other improvements, the result usually is that a nonunion contractor has been awarded the contract. This simply means that the Federal Government, through the Rural Electrification Administration, has subsidized nonunion employers to the detriment of organized labor.

The problems we face in our efforts to negotiate satisfactory bargaining agreements with rural electric co-operatives can be illustrated by reference to the experience of Local No. 44 with the Marias River Electric Co-operative with headquarters at Shelby, Montana.

In elections ordered by the National Labor Relations Board, Local No. 44, I.B.E.W., was successful in organizing the workers employed by the Co-operative. However, we have not been able to negotiate a contract with the Co-operative primarily because its officers have resisted the inclusion of a union security clause in the proposed contract.

Thus, winning an N.L.R.B. election is not necessarily a victory for organized labor when tax-exempt, heavily-subsidized rural electric co-operatives are involved.

It is not necessary for me to recount the tremendous sums of money which would be available to the rural electric co-operatives in this country under the provisions of H.R. 1400. We believe that there is adequate monies available for the necessary functions and growth of rural electric co-operatives under existing laws and congressional appropriation. The passage of either of these bills would permit a vast expansion in the activities of the rural electric co-operatives whether such expansion would be in generation and transmission facilities, in distribution facilities or in other system additions. It is certain that the proposed legislation would be detrimental to the investor-owned utilities. For the reasons enumerated above, passage of such legislation also will be detrimental to organized labor.

I believe that H.R. 1400, or any other legislation which would expand the functions to REA beyond that contemplated in the original Act, would not be in the best interests of the International Brotherhood of Electrical Workers.

I appreciate the opportunity of presenting this statement for the consideration of the Committee.

The CHAIRMAN. Our next witness is Mr. John Doermer, of the United Association of Office, Sales, and Technical Employees, Wisconsin Electric Power Co., Milwaukee, Wis.

Is Mr. Doermer present?

I do not believe he is.

Is Mr. Doermer in the room and wants to be heard?

If not, Congressman Gray has asked to be heard this morning. He has not come in yet.

Mr. DOLE. Mr. Chairman, may I ask permission for Mr. Doermer to file a statement?

The CHAIRMAN. Without objection, he may have that permission. It may be done.

(The statement submitted by Mr. Doermer follows:)

STATEMENT OF JOHN DOERMER, JR., PRESIDENT, LOCAL No. 2, UNITED ASSOCIATION

OF OFFICE, SALES, AND TECHNICAL EMPLOYEES

The twelve hundred men and women I represent as president of Local 2, United Association of Office, Sales and Technical Employees, of the Wisconsin Electric Power Company are greatly alarmed to hear that bill H.R. 1400-which was so rightfully put to rest by the Congress last year-is back on the agenda of your Committee on Agriculture. Much time (and taxpayers money) was consumed last year hearing testimony from those in favor, and those opposed. A decision was reached, and the bill tabled.

It is difficult for us to understand why an attempt is again being made to instill life into a dead issue. This bill is just as repulsive to taxpayers today as it was last year. Nothing has changed since your committee last met-except possibly there are fewer farmers living in rural areas.

78-690-67-29

All the members of our union are taxpayers-most of them are property owners who have demonstrated their faith in the "Free Enterprise System" that helped make the United States of America the greatest industrial country in the world. Most of us live in the Greater Milwaukee area, and are greatly concerned about the future of the metropolitan areas. We concur with Milwaukee Director of Economic Development, Mr. Kenneth Fry's remarks, made in a telegram sent to Congressmen Reuss, Zablock and Davis, when he said, "Central cities like Milwaukee face grave economic growth problems and bill 14837 to expand the REA would only make the problem worse. Industrial decentralization is already a problem in the United States and cheap power in rural areas would take more jobs away from the cities where the most fierce unemployment problems exist. Through bill H.R. 14837, the Federal Government would worsen the plight of central cities and eventually have to step up other forms of Federal assistance to correct the problems created by bill H.R. 14837."

We, as well as citizens living in other metropolitan areas, have much to lose if this proposed bill becomes the law of the land. It will destroy our tax basethus disrupting our local government, our schools, our industry, and our homes. Last year I appeared before your committee to strongly oppose this bill for our union members. We still oppose it, and would again like to state our reasons why. 1. As Americans we oppose any legislation that threatens the free enterprise system that made America the great country that it is.

2. As public utility employees we oppose any legislation that would threaten our company's future by encouraging unfair competition.

3. As union members we oppose any legislation that threatens our future job security by establishing and encouraging tax free, government subsidized utilities that could eliminate our jobs.

4. As taxpayers we oppose any legislation that would subsidize a government agency to finance tax free utilities in open competition with utilities that do pay

taxes.

5. As citizens we favor the free enterprise system of business and wish our government would encourage private, taxpaying businesses, including public utilities, to expand their enterprises.

Thank you for giving us this opportunity to express our views. We hope you, and the members of your Committee on Agriculture, will again table this bill. The CHAIRMAN. Do you have any witnesses whom you wish to be heard, Mr. Belcher?

Mr. BELCHER. No.

The CHAIRMAN. If there are no further witnesses who have either themselves requested, or requested by their representatives, to be heard, we will call back the representatives of the American Farm Bureau. I believe that Mr. Harris and Mr. Thomas are present.

Mr. HARRIS. I am here. Mr. Thomas is here.

The CHAIRMAN. Mr. Harris and Mr. Thomas, if you will come up to the witness table and make yourselves available, we will start the questioning, although we will interrupt you to have Congressman Gary make a statement.

I believe that we ought to apply about the same time limitation to the questions which we applied to the witnesses' statements. So, we will assign 6 minutes for questioning to each set of witnesses.

I would like to ask that the junior members ask the questions, if they care to do so, first; however, it is open to all members.

Are there any questions with regard to the American Farm Bureau statement?

Mr. Dole?

Mr. DOLE. Mr. Harris, I have read your statement, that is, the first part of it, as to the proposed changes you have referred to. I wonder if you have had a chance to study H.R. 7698 which does incorporate a number of change provisions outlined in the statement?

Mr. HARRIS. Yes, I have, Mr. Dole. There are a number of points that we have incorporated in the bill which we have noted.

Mr. DOLE. I recognize that there are some basic differences between your statement and, perhaps, H.R. 7698 but I am wondering, whether you share the view that it does represent an effort to work out some reasonable and proper approach to the problem. Would you like to comment on that at this time?

Mr. HARRIS. I think that we do appreciate the progress that is represented in H.R. 7698. We do have our basic position and have made our recommendations very specific.

I think that H.R. 7698 moves closer to our basic position than does H.R. 1400.

We do think that the point of graduation to the bank is extremely important. As you know, our recommendation is that with 20 percent net worth assets should be the graduation point. This is not delineated as clearly as we would like for it to be in H.R. 7698.

We also have a firm position in regard to generation. We feel that generation should go through the bank.

Mr. DOLE. One general question in reference to this:

As I understand it, you are supporting the one bank principle rather than to have one bank for the electric and another for telephones? Mr. HARRIS. That is correct.

Mr. DOLE. It seems that there would be a lot of confusion if you had telephone people on the electric board and electric people on the telephone board, each making a decision for the other's interest. Do you think this might cause any problem-or not?

Mr. HARRIS. I think that with competent men on the board they can, certainly make suggestions on bank policy which serves both the telephone and the electric interests.

Mr. DOLE. We have tried to accomplish, in effect at least, some compromise by reducing the number of board members from thirteen to seven. We still feel that the two banks might be necessary. That is all. Thank you.

Mr. THOMAS. May I comment further on that?

As Mr. Lynn pointed out, it could be that the combination would strengthen the entire program in the diversity of their investments that they are offering in the marketplace, whereby they would be offering a single debenture rather than competing debentures.

The CHAIRMAN. May I suggest that if you want to answer a number of questions not to answer them in too much detail. If you spend too much time on one answer you won't have time for many answers. Mr. Kleppe?

Mr. KLEPPE. Mr. Harris, in your opinion, what would happen to the REA program if H.R. 1400 or any of the other related bills were not passed?

Mr. HARRIS. I think that the REA program would be placed in great jeopardy. I think it is clear that in this area the American Farm Bureau Federation believes to move toward a sound long-term financing program for our REA cooperatives-we think we are definitely in a transition period where we should move to a permanent-type program, so as to protect the availability of credit to the rural electric cooperatives on a basis that can easily be defended and perpetuated.

There is no doubt about it. And we have seen here today, as to the attacks that can be placed on the continuation of the 2-percent money, regardless of the size or the strength of the cooperatives. The Farm Bureau does feel that it is important now to protect supplemental financing that can be properly judged on a long-term basis. The CHAIRMAN. Mr. Montgomery?

Mr. MONTGOMERY. I think that the main issue that is facing me is with regard to the generation loans. I wish that you would further state why you think that the generation loans should go to the bank? Mr. HARRIS. Well, No. 1, we suggest that criteria be set up for both distribution and transmission moving to the bank based on specific standards. When you get into the generation aspect, we believe that there should be a real difference here as to whether or not the cooperatives do it or whether it can be supplied just as efficiently from some private investment.

We believe that this is an area where we have heavily subsidized money not being appropriate in competition with private investment. Can you add to that, Mr. Thomas?

The CHAIRMAN. Just asking him to add to it has used up all of the time. Our time is up for consideration of your views.

Mr. ABERNETHY. May I ask one question?

Mr. MONTGOMERY. I did not get my complete answer.

The CHAIRMAN. Go ahead.

Mr. THOMAS. We are further of the opinion that the cost of generating is pretty well defined and can be substantiated. We think, as Mr. Lynn indicated, further, that the difficulty in determining the cost of transmission is a more difficult area.

The CHAIRMAN. Some are simple questions which can be answered "Yes" or "No," but the ordinary witness will not answer that way. I am not criticizing these gentlemen. I would probably want to make a more involved reply myself.

Ask your question, Mr. Stubblefield.

Mr. STUBBLEFIELD. On page 4, the second paragraph, do I take this to mean that you would oppose a lowering of the REA rates, that is, lowering their wholesale rates? Do you oppose a lowering of the REA wholesale rates?

Mr. HARRIS. We apply that criteria of ownership to every one, that they have to meet this criteria, and if there is a regulation of the REA that prevents that, those regulations should be changed.

Mr. STUBBLEFIELD. I just want a "Yes" or "No" answer. Do you oppose the REA lowering their rates in a TVA area? Mr. HARRIS. Are you referring to rural electric cooperatives? Mr. STUBBLEFIELD. I mean an electric cooperative lowering its rate instead of requiring an increase. Are you opposed to the REA lowering its rates in TVA areas?

Mr. HARRIS. We are for rural electric cooperatives to have the lowest rate possible; also, to have a certificate of ownership, so as to indicate the ownership before they can get credit from the bank.

Mr. ABERNETHY. May I put one question along that line?

The CHAIRMAN. Yes.

Mr. ABERNETHY. This very much involves the eastern end of my congressional district, all of the northeastern corner of my State, the

State of Tennessee, and also the district in Kentucky represented by Mr. Stubblefield.

If the cooperative does not want to issue a certificate of ownership, and it is operating in a TVA area, and the TVA issues a contract that requires them to reduce their rates, which, of course, would not allow them to issue the certificate of ownership, it would have to put its profits into a reduction in rates. Suppose that the cooperative wanted to go along and not issue the certificate of ownership but instead desired to reduce its rates, why should it not be allowed to do that?

Mr. HARRIS. Well, it depends on whether the Congress is going to set the policy.

Mr. ABERNETHY. I do not care what the Congress sets. I asked: Why should not the cooperative be allowed to reduce its rates if it wanted to do so? It is their property. They just say: "We are not interested in a certificate of ownership-we would rather reduce the rates." Why should they not be allowed to do that?

Mr. THOMAS. I think that you put your finger on their property and the equity in it. We are talking about the equity that there is in these businesses, and we feel that they ought to be allocated to the membership in a certificate of ownership.

Mr. ABERNETHY. Thank you. That is all.

The CHAIRMAN. Are there any further questions?

If there are no further questions, we thank you for being with us. Mr. HARRIS. Thank you.

Mr. THOMAS. Thank you.

The CHAIRMAN. We will next have the representative of the chamber of commerce, Mr. Stainback, together with Mr. Gray and Mr. Watts.

Are there any questions now of any of the representatives of the chamber of commerce?

Mr. Dole?

Mr. DOLE. I have one question: I just wonder if you have had a chance to analyze any of the other proposals other than H.R. 1400? Mr. STAINBACK. We have already indicated our support of the McMillan proposal. I would ask Mr. Watts to comment further. He is with the research department.

Mr. WATTS. We reviewed your bill, and we have taken the position that the electric bank would not be to the best interests of the REA cooperatives or the Nation.

Mr. DOLE. You are opposed to the whole bank principle?

Mr. WATTS. That is correct.

Mr. STAINBACK. Yes.

Mr. WATTS. But we realize that there is need for providing funds for distribution loans.

We support the loan concept.

Mr. DOLE. Thank you.

Mr. STAINBACK. As outlined in H.R. 7390.

Mr. ABERNETHY. I would like to ask some questions.

The CHAIRMAN. Very well.

Mr. ABERNETHY. What is your opinion as to whether or not the stronger cooperative which, presumably, would use the bank, should obtain any loans at all from private lending companies?