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One is from Congressman Hathaway, of Maine; one is from Congressman Shipley, of Illinois; one is from Congressman Resnick, of New York, our colleague; one is from Congressman O'Konski, of Wisconsin, one from Congressman Hungate, of Missouri; and the last two are from Senators Gaylord Nelson and William Proxmire, of Wisconsin.

They have asked permission to make their statements a part of the record.

And, certainly, without objection, that will be done.

(The prepared statements of Congressmen O'Konski, Hathaway, Shipley, Resnick, Hungate, and Senators Nelson and Proxmire follow :)

STATEMENT OF HON. ALVIN E. O'KONSKI, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WISCONSIN

Mr. Chairman and Members of the House Agriculture Committee, I am pleased that this Committee is holding early hearings on the Supplemental Financing measure for REA cooperatives to provide long range financing for the electric and telephone loan programs under the Rural Electrification Administration.

The Bill which I have introduced, H.R. 6026, is identical to the Chairman's Bill, H.R. 1400. It is also identical to the final "Committee print" which was worked out after long and extensive hearings in the last Session of the 89th Congress.

I introduced the Supplemental Financing legislation because of my deep interest in the economic and social well-being of my District, the 10th of Wisconsin, and because of my vital concern for continuance of the rural electric cooperative to meet the growing needs of their consumers while at the same time allowing them to take the necessary steps to become independent of Federal financing.

The legislation before your Committee will enable REA co-ops to move away from complete dependence upon the 2 per cent REA interest rate and will gear them to a new financing program involving higher interest rates. This would be accomplished through the establishment of two cooperative banks with a capitalization for 15 years of $50 million yearly for the Rural Electric Bank and $20 milion for the Rural Telephone Bank. Eventually, the Federal funds would be repaid and the banks would come under the ownership and control of the co-op borrowers. This plan follows the tried and proven pattern of the Farm Credit System and its Bank for Cooperatives. I believe it is sound economy for Congress to provide REA with the tools for their cooperatives to become self-sustaining by providing that the banks will eventually become privately owned, privately operated and privately financed corporations.

Two interest rate levels would be established in these credit agencies. One would be set at the cost of money to the Government, with a ceiling of 4 per cent; the other, a developmental loan, would carry an interest rate reflecting that on the open market.

In addition, the present 2 per cent loan program would be continued for cooperatives serving in sparsely settled rural areas which cannot afford to pay higher interest rates. There are several of these co-ops in my District whose consumers average less than 3 per mile, well below the national average of 3.5 consumers per mile. Obviously these cooperatives will require 2 per cent loans in order to overcome the handicaps inherent in the type of area they serve. Mr. Chairman, in the 25 years that it has been my privilege to serve in Congress. I have seen first hand the wonderful work of the Rural Electrification Administration in bringing electricity and telephones to the rural areas. And the ten rural electric co-ops in my home District have done much more than simply providing lights to their almost 45,000 consumer members and their families. The power furnished by these cooperatives is helping our farmers to produce the food and fiber which make our Nation the best-fed and best-clothed in the world. That co-op power is making possible the recreational and industrial developments that are so important to the revitalization of our present rural economy.

I feel that the present legislation under consideration fully combines the objectives of sound fiscal planning while at the same time providing for continuation and expansion of the proven REA program. It should and must be adopted. Thank you.

STATEMENT OF HON. WILLIAM D. HATHAWAY, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF MAINE

Mr. Chairman and distinguished Members of the Committee, I appreciate the opportunity to submit this statement in support of H.R. 1400. I have already endorsed this legislation by filing my own bill, H.R. 3314 which is identical to that of my distinguished colleague, Mr. Poage.

My interest in this matter stems from a full appreciation of the importance to Americans living in rural areas of the cooperative organizations, public power districts and other public bodies that deliver electric power and telephone service to their homes and farms.

Since the Rural Electrification Administration was established in May 1945, it has played an important role in financing rural electric systems. Since October, 1949, it has played a similar role in bringing telephone service to rural

areas.

This program has had a tremendous impact. It has increased farm productivity and profit and has improved the quality of life for all who live in rural areas. In my own State of Maine R.E.A. loans to electric systems provide for service to an estimated 7,910 rural consumers over 1,220 miles of line. Maine consumers served by R.E.A. borrowers are using increasing amounts of electricity on their farms and in their homes and businesses.

In 1955, the average monthly consumption per consumer was 117 Kilowatthours. By 1965, the average had risen to 442 Kilowatt-hours, an increase of 277%. Demand continues to rise at a rapid rate.

According to the Kuhn, Loeb studies, the rural electric systems will require some $9.5 billion in growth capital between now and 1980 in order to meet anticipated demands for power. In other words, the systems' capital needs during the next fifteen years will be almost double the amount of loan funds advanced by R.E.A. for the electric program during the past thirty years.

Obviously, it will become necessary either to greatly increase 2% R.E.A. loan funds or to provide other sources of capital. Realistically, we cannot expect the current program of R.E.A. loan funds to keep pace with increasing requirements. Budgeting pressures of the Vietnam war and the dollar needs of new domestic programs caused the Administration to cut funds authorized by the Congress in recent years. These budgetary pressures are not expected to ease in the foreseeable future so it becomes imperative that provision be made for supplementary sources of Capital.

The important legislation being considered today would meet the needs of rural electric and telephone systems and give them the flexibility to meet future capital requirements.

it would retain the 2% interest loan funds and 35 year repayment terms for those systems which, because they serve areas of the lowest consumer density, need this type of assistance.

In order to give the systems access to additional sources of capital, it would establish a Rural Electric Bank and a Federal and a Rural Telephone Bank. The banks would have the purpose of obtaining an adequate supply of supplemental Funds from non-Federal sources to be used in making loans to organizations which are borrowers from R.E.A. or which are controlled by such borrowers. Recognizing the special problems of the rural utility companies, loans would be repayable over a period of up to 50 years. Also two types of loans would be available; one at full market interest rates based on the bank's liabilities and another at intermediate interest rates but not exceeding 4% for those corporations or public bodies deserving preferential treatment.

Mr. Chairman and members of this Committee, H.R. 1400 offers a realistic and reasonable solution to the serious problem of capital funding which will become critical to the small rural electric and telephone systems in the years to come. Its enactment into law would assure their future ability to meet future demands for service in our Nation's rural areas.

Rural electrification and communications systems have contributed greatly to the development of our rural economy. These important services will, in the years to come, continue to play an important role in rural area development.

H.R. 1400 provides the means whereby the cooperatives, public power districts and other public bodies will be assisted to meet the challenges of the rapidly increasing demand for service which confronts them.

I am completely satisfied with the merits of this bill and respectfully request the Committee's support of it.

STATEMENT OF HON. GEORGE E. SHIPLEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Mr. Chairman and members of the House Agriculture Committee, the rural electrification program has been and is a major factor in the development and continuation of a sound foundation for the economic well being of the rural areas of this country.

In my home State of Illinois, the Association of Illinois Electric Cooperatives has as its motto "Good for All Illinois". As are all Americans, we are proud of our home states, and I am especially proud of what the Illinois rural electric systems have accomplished in providing dependable electric service to the rural areas of our State.

Since the first loan was made to an Illinois borrower in 1936, REA has loaned over $168 million to 29 rural electric cooperative organizations. These systems are using this money to provide electric service to about 165,000 rural consumers over some 48,000 miles of line. These few statistics give but a partial picture of the job that has been accomplished. But the important thing to remember is that the job is not done. The responsibility of an organization which supplies such a vital necessity as electric power is a continuing one. It must, at all times, be able to supply as much electric power as is needed, when it is needed, and where it is needed. To meet this responsibility the six rural electric cooperatives which serve in my Congressional District, along with the other 23 cooperatives in Illinois, and the nearly 1,000 rural electric systems in the United States, must continue to have access to an annual and dependable source of reasonable cost capital.

In order to assure the availability of this capital, I have introduced H.R. 7306, which is identical to H.R. 1400 sponsored by the distinguished chairman of this committee, Mr. Poage. I believe that this bill, which establishes a rural electric bank to supplement the capital made available under the present REA electric loan program, will provide the most efficient and effective way of meeting the capital needs of the rural electric systems.

The committee has heard a great deal of testimony from many witnesses about this legislation. Some of it has reflected divergent viewpoints. But there seems to be general agreement that these rural electric systems will require a substantial amount of capital during the next 10 to 15 years.

This year I will be serving as a member of the House Appropriations Subcommittee on Agriculture, which will be considering the loan fund appropriations for REA. At the present time these appropriations are the sole source of funds for the rural electric systems. I feel certain that, as in the past, the Appropriations Committee will do its best to meet the needs of the rural electric systems.

However, it is most important to plan ahead for the future. As the need for additional capital funds grow, it will be essential that the rural electric systems have the authority to utilize other money sources. My bill will provide a sound and reasonable method of meeting this need. I urge this committee to give it favorable consideration.

STATEMENT OF HON. JOSEPH Y. RESNICK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK

Mr. Chairman, it is indeed a privilege for me to be a cosponsor of this very important legislation providing for supplemental financing for the rural electric and rural telephone loan programs. I have spent some time reviewing much of the testimony presented, both this year and last year. In 1966, this committee heard many witnesses during the public hearings which lasted nine days and

which resulted in a printed hearing record of 808 pages. I noted that the Senate Committee on Agriculture and Forestry held four days of public hearings and produced a printed hearing record of 587 pages. Our committee this year has already heard many witnesses and received hundreds of statements which have been filed for the record, both in support and in opposition to this legislation. During the 1966 hearings the committee had one financing plan to which numerous amendments were proposed. This year, the Committee has before it two different financing plans and several variations of such plans. All of these proposals are reported to be designed to solve the problem of the future capital needs of the rural electric and rural telephone systems. Several members of this committee have sponsored these bills. Many suggestions have been made and numerous conferences have been held to resolve the divergent views that have arisen regarding this legislation. We are fast approaching the point where it is impossible to see the forest for the trees.

I believe the time has come when it would be most helpful if we could step back a pace in order to see the "whole" picture and get a reasonable, undistorted view of the rural electrification program.

I must admit that I am more than a little mystified as to why the leading officials of that portion of the electric utility industry, which controls approximately 80% of the industry in number of customers and generating capacity, can become so excited and distraught about the rural electric systems, which represent only about 1% of the total industry in electric generating capacity and 5% of the industry in revenues. In their testimony regarding all that they find wrong with this legislation, we have been treated to a variety of ludicrous and ridiculous allegations regarding the rural electrification program.

I am not sure that I understand why this committee should have to be subjected to such a performance and pressured to accept the many limitations and controls that have been proposed to this legislation in order to protect the giant against the pygmy. If this were another committee and if we were, for example, considering amendments to the Small Business Administration program on the subject of loans to small independent grocery stores, and if the giant food chains, such as A&P or Safeway, appeared to ask for amendments to protect them from the small independent grocers, I believe the American people would rise up in their wrath and ask that the chain store representatives be chased out of the Congressional committee hearing rooms. And well they should be, for the small grocers need protection from the giant food chains,. not vice versa. In many respects, I would suggest that this committee take the same attitude toward the representatives of the commercial power companies. They have no stake in this matter of supplemental financing for the rural electries: their interest is not directly involved: they abdicated their rights, if such rights ever did exist, over 30 years ago when they flatly refused to electrify rural America. Yet today, we find these commercial power company executives coming before us by the platoons, bombarding us with volleys of speciousreasoning.

On one hand, some of their witnesses testify that the rural electric systems do need capital in order to continue bringing adequate amounts of electric energy to the rural areas of this country. Then, on the other hand, they tell us that because more than 98% of the farms are electrified, the rural electrics have very little need for additional funds. Coming from spokesmen of the segment of the electric industry which is investing this year over $6 billion in new or expanded facilities, such a statement reflects badly on their motives.

These power company witnesses suggest that, because 5 out of 6 consumers being hooked up by the rural electric systems today are not farm consumers, the rural electrics are doing something sinister and evil. This bit of double talk or oral sleight-of-hand would have you believe that "rural" equals "farm" and anything which is not farm-connected is not rural. The fact is that one farm has always supported at least two non-farm jobs in rural America, and the aid of our rural areas development program is to encourage even more non-farm jobs in rural America.

It is my privilege to serve as Chairman of the House Agriculture Subcommittee on Rural Development. This Subcommittee is vitally concerned with all the problems of rural America, and interested in all proposals which can improve and help the rural residents of this country.

The rural areas of the United States, if they are to continue to fulfill their vital role in the economic structure of this country, must be assured that they

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will have available adequate and dependable utility services. Both farm and nonfarm rural enterprises are dependent upon adequate electric and telephone service. In most of the rural areas, these services are provided by rural electric and rural telephone systems which are dependent on REA for their financing. Mr. Chairman and fellow members of the Committee, I believe that rather than tying ourselves up in knots by writing all sorts of restrictions and prohibitions into this legislation, this committee should give serious consideration to the bill which has been introduced by me and a number of my colleagues— identical to H.R. 1400.

I am concerned that the many compromise amendments which have worked their way into this legislation can have only deleterious results and reduce the effectiveness and value of this very important piece of legislation. As I observed earlier, we are in danger of losing sight of the forest because of the trees. trees.

In my home State of New York, the five rural electric cooperative systems, which have managed to survive earlier destructive efforts of the commercial power companies, offer no threat to the electric utilities in the state. I know that the rural consumer-owners of these cooperatives have no designs on the service areas of the investor-owned utilities. I am quite certain that they do not plan to invade the urban areas of New York; yet I note that the Vice President of one of our New York utility systems has felt it necessary to go on record in this matter.

In my judgment, the existing powers and authorities vested in regulatory commissions, and the basic economic strength of the commercial power companies arising out of their overwhelming domination of the electric utility industry affords them ample economic and legal protection. The restrictions on the rural electric systems that have already been included in my bill are more than enough protection or assurance that their activities will not injure the commercial power companies. In fact, I am more concerned that some of the provisions might prove to be adverse to the interests of the rural electric systems. These systems have assumed the responsibility of providing dependable electric power to the rural areas of the United States-areas which require higher capital investment and greater economic risk in order to furnish electric service to these thinly populated parts of the country. It was because of such factors that the Congress enacted the rural electrification program in 1936. It is because of the important contribution to the economic betterment of the rural areas that this program has continued to have the solid support of the Congress. It is because the rural areas of the country require a vital and dynamic rural electrification program that we should be certain that this Committee report out a bill establishing a rural electric credit system that can assure the continued progress of this program.

I urge my fellow committee members to strip away the propaganda and examine the facts. When you do, I believe that you will agree that supplemental financing legislation-without the numerous restrictions and inhibiting considerations now being attached to it-will prove to be one of the major legislative achievements in behalf of rural America of this or any other Congress.

STATEMENT OF HON. WILLIAM L. HUNGATE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MISSOURI

Mr. Chairman: I appreciate the opportunity of appearing before this Committee to present a statement in support of H.R. 1400, a bill to amend the Rural Electrification Act to provide additional sources of financing for the rural electrification and rural telephone programs.

This legislation is needed to make it possible for the rural electrification and rural telephone systems to serve the needs of our farms and rural areas in the years ahead. Current estimates indicate that the electric and telephone systems will require $11 billion of new capital in the next fifteen years, more than double the loan authorizations approved during the past 15 years. The electric systems will require $8 billion and the telephone systems about $3 billion.

The rural electric and telephone programs currently financed by the Rural Electrification Administration are faced with constantly increasing demands for service from new consumers and improved service for the present customers. During the past 5 years electric and telephone borrowers have added approxi

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