I do think we should have a full morning to go into these questions. The CHAIRMAN. All I am trying to suggest is that we have to hear the power companies. We have asked them to come in on next Tuesday, and they are coming in from all over the United States. It seems to me that it would be grossly unfair to put these people in on Tuesday, and we have to hear Mr. Anderson yet.

Mr. ABERNETHY. They are all here in Washington.

The CHAIRMAN. May I proceed for just 1 minute to complete what I was saying?

It would be grossly unfair, it would seem to me, if we are going to question these witnesses for several hours more, that we ought to have several hours with the power people, too. All I am trying to say that we are trying to give the two groups the same amount of time, and if we postpone this until Wednesday morning we might ask the power companies to remain Wednesday, so that we could give them the same amount of time; that is, giving the same amount of time to each group. That is all I am trying to get at, that they both have the same amount of time.

Mr. BRASCO. May I comment?

The CHAIRMAN. Yes.

Mr. BRASCO. I see your point in trying to balance out the time, giving both sides equal time, but it seems to me that there may be some of us like myself who would be more interested in getting some more information about this unique question. In any event, I would think that, so far as I am concerned myself, I would rather spend some additional time, as I said, with this unique REA concept on which I have received a note today from the Navopache Electric Cooperative stating they view this program as an antipoverty program and so that I might better understand the power companies' position, and I would like to spend more time with these people, too. I would not like to put an hour limitation on it, just for the sake of balancing off the time. We may have more questions of REA people than we do of the power people.

The CHAIRMAN. Many of us would like to understand the unique position of the power companies, too; I am sure that I would. I would like to understand that.

Mr. BRASCO. Then, I agree with my colleague, Mr. Abernethy, and say just let us have the power companies in, and if they have to come. back, let them come back also. But I think it is unfair to limit it to 1 hour in an effort to balance out the time, or in an effort to balance both sides in terms of time that they spend before the committee.

The CHAIRMAN. After these people come back here on Thursday, it might be all right to give the power people additional time. Would that be satisfactory?

Mr. ABERNETHY. It makes no difference to me, Mr. Chairman.

I think that we can finish next week. We may even finish in 1 day. The CHAIRMAN. Suppose we go on the basis of asking the power people to be here for 2 days and give Tuesday and Wednesday and then bring these people back on next Thursday. That is 1 week from today.

Mr. ABERNETHY. Suppose we finish with the power people before Wednesday, we could call these back for Wednesday?

The CHAIRMAN. If we finish with them, it would be proper to have them back then. In other words, let us see that each group has the opportunity for the same amount of time.

Mr. BELCHER. I do not subscribe to that theory at all. I have tried lawsuits for many years, and I have never seen a judge who said that the plaintiff will have an hour for presenting his evidence and that the defendant will have an hour to put on his evidence. Every lawsuit I have tried in my life, the plaintiff was permitted to put on all of his evidence, and then the defendant was given all of the time necessary to put on all of his evidence, and we cannot divide the time any way we want to in that respect. I think that every side has to have time; whether it is just exactly the same length of time on each side or not, they should have sufficient time to present their side. I have never tried a lawsuit in which the plaintiff had to put in his case in an hour's time, and then the defendant had to put in his case in an hour's time, and if you did not get through you could not go ahead, because, in some instances, the plaintiff or the defendant might have to have an extra hour. That is the way that I have tried lawsuits. I think that this is pretty much the same thing here.

Here is this man who wants to ask a lot of questions of these particular witnesses. Maybe you and I will not have any to ask of them. The CHAIRMAN. We are going to provide for another day, so that they can ask questions.

We will provide another day, so that if some of us want to ask the power companies more questions, all right.

Mr. BELCHER. And that we are not going to have any such thing as 10 minutes, or anything like that. Let us give both sides all of the time they need. When everybody has general information to bring to this committee and the committee members have questions that they want to ask, I think that we ought to give them the time.

The CHAIRMAN. That is a reasonable thing.

We will extend this.

Mr. BELCHER. I do not believe that we have given the people an opportunity to have a full hearing. We have had a foot race and not a hearing.

The CHAIRMAN. The committee will recess until Tuesday morning, at which time we will hear questions of the power companies on Tuesday and Wednesday next week, if there is no objection.

Mr. MILLER. I am not sure that the people understand the action that is going on. There are other people who have come many miles and are probably wondering why we are leaving.

Will you explain that?

The CHAIRMAN. I think that Mr. Miller is exactly correct. The Chair would like to explain to all of you that the House is in session. We did not anticipate that it would be in session this morning, but the House is in session. Those bells are calling us back to the House floor. The Members must be there to answer the call.

That is the reason that we are recessing the hearing at the moment. This committee's members must be there.

I will ask you gentlemen to return 1 week from this morning. The committee stands in recess until Tuesday morning at 10 o'clock, April 11, 1967.

(Whereupon, at 11:40 a.m., a recess was taken until 10 a.m., Tuesday, April 11, 1967.)

RURAL ELECTRIC AND RURAL TELEPHONE

SUPPLEMENTAL FINANCING

TUESDAY, APRIL 11, 1967

HOUSE OF REPRESENTATIVES,
COMMITTEE ON AGRICULTURE,
Washington, D.C.

The committee met, pursuant to recess, at 10 a.m., in room 1301, Longworth House Office Building, Washington, D.C., Hon. W. R. Poage (chairman) presiding.

Present: Representatives Poage, Gathings, Abernethy, Stubblefield, Purcell, O'Neal, Foley, de la Garza, Jones of North Carolina, Dow, Nichols, Montgomery, Brasco, Stuckey, Belcher, Dole, Wampler, Goodling, Miller, Burke, Mathias, Mayne, Zwach, Kleppe, Price, and Myers.

Also present: Christine S. Gallagher, clerk; Hyde H. Murray, assistant counsel; Francis LeMay, staff consultant; and Fowler C. West, assistant staff consultant.

William J. Clapp, president, Edison Electric Institute, and president, Florida Power Corp., St. Petersburg, Fla.;

Shearon Harris, president, Carolina Power & Light Co., Raleigh, N.C.;

Herbert B. Cohn, vice president and general counsel, American Electric Power Service Corp.; and

John Thornborrow, assistant managing director, Edison Electric Institute.

The CHAIRMAN. The committee will please come to order.

The committee is met this morning for further consideration of H.R. 1400 and related bills.

This morning we have with us Mr. Clapp and his associates to answer questions which members of the committee might want to propound.

To those of you who are not familiar with our procedure, let me say that we have heard witnesses from Government and from National Rural Electrification Association one day with no questioning, and they have been back for one day of questions, and we have heard from the representatives of the power companies 1 day with no questions. In an effort now, to enable the members to ask questions, we have called back the representatives of the Government and of the National Rural Electrification Association who were here last week but because of an unexpected quorum call we had to adjourn, and it was suggested that they should come back at a later date. They have been called to return on the day after tomorrow. In the meantime, we asked Mr. Clapp and his associates to be here today rather than changing the order of

hearing them to some other date, staying over for tomorrow, if they can, so there may be an opportunity to have the same amount of time for each group. Those represented by Mr. William Clapp will have 2 days of questioning, and we might say that those represented by Mr. Norman Clapp will have 2 days of questioning. So, today, we have the representatives of the power companies, having directly before us a panel of which Mr. William J. Clapp of the Edison Electric Institute and president of the Florida Power Corp. will preside and direct.

The questions will be directed to the panel, and if any member wants to ask a specific individual any question, I am sure that will be all right.

Are there questions of Mr. Clapp and his associates?

Mr. PURCELL. I have several.

The CHAIRMAN. We will start with you, Judge Purcell.

Mr. PURCELL. Mr. Clapp, I think that we all realize that what we are really talking about in these various bills is with reference to generation and transmission.

Now, then, as I understand it, the claim of the privately owned power companies is that generally speaking the private power companies would sell electricity to the distribution cooperatives at a lower price than, generally speaking, the distribution co-ops get their power for from the generation and transmission cooperatives.

Are you and I in agreement so far in that general statement? Mr. CLAPP. That has been the experience on the average, yes, sir. Mr. PURCELL. Now, then, as I understand the difficulty, just taking these as absolute criteria, at least in the part of the country that I am supposed to be familiar with, in Texas, the difficulty in the total analysis is that the distribution cooperatives feel that if the price quoted is cheaper that there is difficulty in getting the private power companies to put the electricity at the place that the distribution cooperative needs the electricity, depending on the distribution cooperative.

What is your experience and what is the policy of your association in regard to delivering power to the place that it is needed?

Mr. CLAPP. Well, I think, as a whole, that the industry has cooperated in delivering at the point of need. I know that is true in Florida. We serve within a 20,000-square-mile area with approximately 70 points of connection for the REA's.

Mr. PURCELL. Do you get into argument whether you are delivering electricity at the point that the cooperative needs or has this been resolved?

Mr. CLAPP. Well, it has been resolved mostly by working together on it. Sometimes, the cooperative agrees to move the substation, or sometimes we would agree to move a proposed substation location, and sometimes we will agree to run a transmission line for them.

Mr. PURCELL. Is there a general policy in regard to the private power company furnishing electricity through the distribution cooperative in regard to who pays for the substation?

Mr. CLAPP. That varies with the individual companies.

Mr. PURCELL. But if the distribution cooperative is having to put in a substation, even though the electricity is delivered, say, to that substation at a cheaper rate than would appear in a contract from a

generating cooperative, this would really have an effect on the cost of the electricity to that consumer and to their consumers, would it not? Mr. CLAPP. I would think that in the majority of cases where the investor-owned power company was making a proposal to serve a location, that a discount would be allowed on the rate in most cases if the REA furnished the high voltage substation.

Mr. PURCELL. You mentioned the word "discount." I am interested in knowing about that.

As I understand it, at least at the time when generation came into being from the cooperatives that the price of the power then immediately went down from the private power companies to the distribution cooperatives. The method used to lower that cost was to give a discount under the existing contract. Is this the general policy?

Mr. CLAPP. No, sir, I do not think so, except where equipment is furnished by the REA's which would normally relieve the investmentowned company of some capital investment.

Mr. PURCELL. Is there any policy among the members of your association that calls for discounting-I am not sure that I am relating to you what I want, but to me, if you are going to lower the rateyou have a contract that is airtight and you want to lower the rate because if there is some discount put in there, then whoever puts the discount in could take it off and up the price again, and the consumer would not have any control over it. Is it the policy of your association, or the policy of anybody that you know of, to have some discount put into a contract that would be at the choosing of the supplier and, therefore, they could put the price up again if they wanted to?

Mr. CLAPP. The Edison Electric Institute would have no policy on that. It would be entirely up to each individual company in negotiation of the contract with the REA-with the individual REA. Mr. Harris here has had experience with this type of operation in the Carolinas. If you would care to, I would like to have him comment on this.

Mr. HARRIS. Judge Purcell, I really think that to get at what I perceive to be the heart of your inquiry at this moment, that is, the ability of the supplier to raise the price, I think that it ought to be understood that the wholesale power supply moves in interstate commerce and is subject to regulation by the Federal Power Commission. This brings me to the experience of our own operations. For example, in supplying a number of distribution cooperatives with their wholesale power supply in North Carolina, we have for 20 years or more maintained a flat 7.5 mill rate for wholesale power supply to the distribution cooperatives.

Historically, through that 20-year period that has been the lowest rate in our books.

Within the last 3 or 4 years, the Federal Power Commission has asserted its jurisdiction over that rate, because that power does move in interstate commerce, and I would hazard the speculation that of all of the wholesale power supply to cooperatives in the Nation that certainly some 80 to 90 percent of it is roughly subject to Federal Power Commission regulation.

We have the 7.5 mill rate. It is on file with the Federal Power Commission. If we were to undertake to change that rate, either up