samaquoddy System a year ago. The stagnating depression which gripped northern Maine was largely the result of electric rates that were so extremely high that they were prohibitive to industry and private business alike, with rates to consumers running as much as seven times the national average.

Let us take another look at the other end of the Nation. There, the private power companies were permitted to build the transmission lines from Bonneville into central California without an alternate and supplemental transmission system being built by the Federal Government, as originally planned, to serve at least the preferential customers which the law permits under the establishment of the Bonneville Power System. As a result of this action, the private power companies serving the city of Santa Clara received their power at tremendously reduced rates. Nevertheless, they have consistently refused to make any adjustment in rates to their customers in Santa Clara on the basis of their reduced costs.

These are the same power companies that have been claiming for years that REA was being subsidized by a cheap credit and now come into this Committee and object to the plans of the REA cooperatives to pay a rate comparable to that paid by private utility companies.

They have complained for years about the "subsidy" of REA, disregarding two important facts. One of these concerns the Pace Act of 1944 which established the two percent rate and also established a social responsibility by the REA co-ops to serve all people in their area, regardless of whether or not it was profitable to the co-op. The second fact is that the franchise under which these private utility companies operate has given them benefits far in excess of any subsidy advantages that the REA co-ops have ever received from the Federal Government. The area-coverage commitment to serve anyone in the cooperative area wanting to be served, and at the same rate as everyone else, is even today, as it has been in the past, an expensive commitment.

The cost of operating this kind of a system is of necessity much greater than operating a system where there is a high density and a great demand for power. The Committee should examine again the statement by Mr. Norman Clapp concerning the interest charges and their effect on management. It should especially note his statement that a six percent interest rate to the REA co-ops would constitute 20 percent of their revenue. The attempts to limit the authority of the REA co-ops to build their own generating facilities where the cost from the private companies appears unreasonable, is another way of reducing the purchasing power of the already depleted farm dollar.

Mr. Francis A. Scarvie, President of the Northwest Public Power Association, speaking before the Oregon Rural Electric Cooperative Association on December 8 and at the Washington Public Utility District Association on December 9. had this to say: “. studies show that increasing the size of a nuclear plant from 100.000 kw to 1,000,000 kw for a privately financed plant will cut the power cost in half from about 7.2 to 3.6 mills."

The saving of one mill per kilowatt power in the Northwest would accumulate to $1.157 billion in ten years. This would build 1,157 one million dollar school facilities in that area in the ten year period. Multiply this with the vast expanse served by the REA's and we come up with staggering and unbelieveable amounts of badly needed savings in a hard pressed rural economy.

This witness has no intention of trying to re-state all the arguments in favor of this bill that have already been presented by the proponents. We would, however, point out that the bank authorized in this bill would repay its Federal credit as much as has the Federal Land Banks, at increased interest. Over 90 percent of the Federal investment in the Federal Land Banks has been retired. This REA bill introduced by Congressman Poage would also provide for some extra return to the Federal Government in the form of a franchise tax on unused profits.

To those saying that this bill will not be a saving to the Federal Government. we would point out that the presently proposed Federal Budget includes $150 million for the REA. However if this bill does not pass, the Federal Budget has allocated $314 million for this same purpose.

The suggestions for judicial review are another way of ham-stringing the efforts of the REA co-ops to expand their services to meet the growing demands of rural America. With this provision, a case could be dragged out for 8 to 10 years, delaying and harrassing the development of electric power. Quas-judicial bodies are a more equitable and quicker answer to these problems. In addition,

we would suggest that if there must be an appeal, that it go to the Federal Power Commission with the agreement that the decision of the FPC would be final. Regarding the suggestion of certificates of ownership, we would think that this is not the place to decide how co-ops are to be organized. There are a number of states where this proposition would be in contradiction to state laws.

The argument has been presented that this supplemental financing would cost $750 million. This assumes that $50 million per year would be all new money. It disregards the fact that much, if not all of this $50 million, would be in repayments from present or future REA loans. Under the present system, as you well know, the payments on interest and principal go to the Treasury, but the money for REA comes out of appropriations.

Last year when the Poage bill was presented in behalf of the REA coops, the Grange supported it with one exception. We did not believe that the conversion of control should take place when 51 percent of the investment was in the hands of the coops and not the government. We believe that the present proposal, wherein the five members appointed by the President when two-thirds of the Federal Credit is retired would cease to be members of the Board; the Board then being reduced to eight; and with two of the eight being the Administrator of the REA and the Governor of the Farm Credit Administration, provides the protection the government needs for the integrity of its own invested capital.

Much has been said in newspaper advertising and testimony before this Committee, both this year and last year, concerning the "investor owned" power companies, as if they were a particular gift of heaven to humankind. The Grange holds no brief against them, probably due to the fact that most of them are pretty well regulated by state power commissions or by the Federal Power Commission.

We would point out that there are some publicly owned power companies which have made some of this service possible on the part of the private utility companies. For instance, there are 22 public utility districts in the State of Washington, most of them organized as a result of the effort and leadership of the Washington State Grange in years past. These districts own nine hydroelectric generation systems and one nuclear generation system which is presently under construction at Hanford. Feasibility studies are required before these plants can be built, and this includes the sale of power to private utility companies and manufacturing companies.

It was one of the thrills of my life to be taken on a tour down the Columbia River and to visit some of these dams last summer. Beginning with the Grand Coulee and ending with Bonneville, the supplemental public utility districts dams in between have literally tamed the Columbia, and the water is being used over and over again as it flows from the Canadian Rockies into the Pacific.

The relatively small dam at Packwood has a peaking capability of 26 thousand kilowatts and charges 7.68 mills per kilowatt hour. The power from the 900 thousand kilowatt capacity Priest Rapids Dam is selling for 2.20 mills. The relatively old plants at Lake Chalan, built in 1955 and only cost $21 million, has a peaking capability of 57 thousand kilowatts and is wholesaling its power for 3.55 mills per kilowatt hour.

The point should be clear that the private utility companies, using up to 70 percent of the power from some of these dams, are certainly not being robbed, and the savings passed on to the people in the Northwest is a major reason for the dramatic economic development of that exciting part of our country.

As is the case in most instances, the question as to whether power should be provided by investor-owned companies, by public utility districts, by large Federally-financed and built facilities such as Bonneville and Grand Coulee and the TVA, or whether it be by the REA coops, is not a case of "either-or", but rather a case of "both-and".

We therefore conclude that HR 1400 makes adequate provision for this increased power and communications capital needs; it does it at a savings to the government; it puts them more nearly on an equal basis with the investor-owned companies; it will reflect a savings of substantial quantities to rural America; it will in no way jeopardize the lucrative profits of the private power companies who enjoy a franchised monopoly of the best power markets of the country; it will allow the REA to keep faith with its original commitment to provide power to anyone who wants it in the areas served by the REA at the same rate; and it will permit the REA to continue to make its outstanding contribution to

improving the life and the welfare of rural America as it has for the last 32 years.

The record the REA's have built has been admirable. Its service to rural America is of inestimatable value. The crippling of that service would be a great loss, a loss which could not well be sustained by the presently hard-pressed rural Americans. At a time when agriculture is losing most of its exemptions and has been the loser in a cheap food policy, we cannot afford to lose another one as important as this one until we have been assured that American agricultural income will have the kind of priority giving us an equality with the purchasing power of the rest of our economy.

Organized agriculture does not come to this Committee begging for a handout. It does come before you representing a segment of our economy that has made a maximum contribution to the welfare of the United States, both in terms of its domestic and international policy. We have well earned everything we have received in terms of favors from the Federal Government.

We ask at this time that your action will sustain a system which has proved its worth and that you will refrain from any action increasing our burden by increasing our costs and, therefore, diminishing our already much too low net farm returns.

Mr. GRAHAM. May I reminisce a bit, because I am older than some of the members of the committee and younger than some-I am not sure, because you are pretty young in heart up there, but I grew up on the farm in southern Illinois. We lived a quarter of a mile from the major transmission line, from the county seat, the little town that I went to school, and on this 14-mile span of roadway there was not a single electric connection to a single farmer.

Then, later on, when my parents moved into northern Illinois, into the western part of Cook County, in 1936, they finally got some electric power out there. Yet they lived close enough to one of the biggest private power complexes in all of the world, so that they could see the lights in Chicago from where they lived.

So, what we are trying to say is that, in general, we believe that rural America would still be living in darkness if it had not been for the advent of the REA.

The same could also be said of some of our telephone systems.

In order to be on the telephone line my father built a mile of telephone line to the company line that had been built, and he maintained. it through all of the years that we lived at that point. This was, basically, what was required before REA put in electricity, and until the REA put in some of the telephone systems in rural areas. Until that time, we had that same situation.

We had the old line with 27 customers on it, which was hardly an adequate answer for the modern communications needs of the American farmers.

I would like to suggest also, so that the record will not forget what we have learned from history, that it was the advent of public power that brought this Nation out of its darkness.

I am old enough to remember when the Muscle Shoals Dam was a matter of dispute, the time when it was built, and the time when the TVA was built.

In 1933, I was in a mountain cabin, in a one-room cabin, up in the mountains of eastern Tennessee, where I was going to a school that had electricity through the REA. They had a dropcord light in the kitchen, and a drop-cord light on one room of the cabin. The kitchen was a lean-to, but they had a power washer setting outdoors. And

this was a number of years before electricity came to the farms of the States of Iowa and Indiana and Illinois.

And then there was an advent of power in the public utilities district of Washington, in which the Grange played such a major part, again to develop both of these very dynamic economies and growing economies in these two areas.

Over against that, we have the private power monopoly in New England and along the eastern seaboard, in which the industries in those areas were practically starved to death because of the cost of electricity, and the industries that were in those areas were moving into areas that had cheap electricity.

I think the lesson is clear that in this argument between private and public power that private power does not come into this situation with entirely clean skirts.

We hold no brief for some of the things that have been done, as pointed out by previous witnesses, where the REA's have used money that they received from the Government in ways which were not very commendable.

We also do not believe that we ought to pass legislation that would further hamstring the development of the REA's in the rural areas, in their development that we believe is essential to the carrying on of our modern farming operations.

We have seen this change in farming, in which we have had to continually depend more and more on power and less and less on hand labor, because of what we have been able to do in this area, and, as a result we have reduced the number of people that are needed on the American farms.

The great growth of our American economy has been largely stimulated by the availability of workers who came off of the American farms as the result of the substitution of power for hand labor. And I think that one of the greatest things that did happen is that this did happen.

My mother could throw away her washboard, and I could quit pumping water for 100 cows by hand, and the riddance of some of the things that went with those good old days on the farm that I do not want to say anything about.

This power need is going to continue; it is going to continue at an accelerated rate. We are substituting power now in all kinds of ways. The load is going to increase substantially especially because of the increased cost of labor for the American farmer. We cannot afford in the dairy industry anybody to clean the barns. We depend on automatic barn cleaners. We depend on power silos. We depend on electric power to do many, many of the jobs on the farms, those jobs that we used to do by hand.

The hired labor is just not there.

Therefore, we are supporting H.R. 1400.

We are not supporting H.R. 1400, exclusively. We think this more nearly meets the needs we have in the rural areas.

We, at least beg of you that you do not pass legislation that would be restrictive to the development of the REA system.

The experience of the Federal land banks, I think, is adequate to prove that the banking system in the hands of farmers does work.

I will conclude. Last year, we supported the Poage bill with the exception of that which transferred the power to the cooperative at the time of 51 percent.

At this point we would still raise this question of control, and we would agree, in agreement with the longstanding Grange principle that which creates has the right of control. We believe the right to control still remains with the Congress.

We thank you.

The CHAIRMAN. We thank you very much, Mr. Graham.

You have remained within your allotted time.

Our next witness is Mr. Harvey Sickels of the National Farmers Organization. We will be glad to hear from you now.

STATEMENT OF HARVEY SICKELS, NATIONAL FARMERS
ORGANIZATION

Mr. SICKELS. Mr. Chairman and members of the committee, it gives me great pleasure to appear here today in an effort to encourage those of you in favor of this urgently needed legislation and to answer questions from those of you that seem to be opposed to allowing the REA's to solve their own problems.

It seems very confusing to us that some groups say on the one hand that we need to get the Government out of our business; then oppose plans that are a step in this direction.

You have been saturated with the mechanics of figures and statistics on the necessity and need of this program. You have been informed by the power companies of the hardship this is supposed to impose on them if it is passed. The same power companies that refused to provide service to many of us at any price before the Rural Electrification Act was enacted in 1936 are now trying to woo the farmers by the old adage of efficiency of private industry over cooperatives.

Congress provided a solution in the form of REA, a Government program designed not to directly subsidize the people in rural America but to give them the tools to help themselves. REA has a most outstanding record of repayment that many would like to disregard.

We testified in favor of this legislation last year. We had congressional NFO leaders from 23 States travel to Washington to visit with their respective Congressmen and Senators in favor of this legislation. The response of some Congressmen left much to be desired when these farmers returned to their respective homes and farmsteads that are lighted by rural cooperatives and many wondered how long it would be before the lights would dim, the water pumps, the milking machines, the feed grinders, the automatic barn cleaners and many other tools so necessary to a modern agriculture would grind to a halt because the people who are representing them in Washington refused to speak out in their defense.

This is not just farm legislation even though the hearing is being held under the Agriculture Committee. The effect of not having adequate electricity for agriculture would be felt even in Washington.

The arrangements for the 2-percent money provided by the original REA bill and appropriated by subsequent sessions of Congress has and is serving to make it possible for many rural areas to have

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