Until the referred-to partnership arrangements between cooperatives and companies came into existence in Arkansas, ours was one of the bloodiest of electric power battlefields of the commercial and consumerowned utilities.

The record of this and the other congressional committees will record and attest this fact.

If adequate funds for generation and transmission installations can cause peace and harmony to result in the power filed in a State where conditions were such as ours, how much more effective will the results and the accomplishments be in the other States with the creation of a rural electric bank such as that proposed in this legislation.

In concluding, let me make this appeal to this committee, not just for the power supply borrowers, but for the total of the rural electric program.

When I returned from service in World War II, I rejoined the staff of the REA. My assignment at the time was to appear before the boards of directors of REA borrowers composed of men of the highest caliber their neighbors could select to sell them on accepting a proposition that had been extended by the Congress of the United States entitled the Pace Act.

Representing the agency and carrying out a mandate of the Congress, I told them that for the well-being of our country, if they would practice area coverage electrification, loan funds would be made available to them at 2 percent interest for 35 years.

Most boards were at that time convinced that they had already borrowed and built as far as they could and repay the loans. The hard sale was required of me to sell 2 percent and area coverage to more than several boards.

Now, in recent years, we have been criticized for carrying out this mandate the terms of this act-but we have done our duty as we understood it.

We now know that some of us can pay more interest. We now know that we cannot expect the Congress of the United States to appropriate the funds required to supply the total power needs of this area coverage electrification which we have practiced.

Oddly, some of those who criticized the 2 percent 35-year Pace Act provisions are as much, if not more, critical of our rural electric bank proposal and our willingness to increase our interest rate where it can be done.

The dedicated directors, managers, and employees of the electric systems are leading American citizens in their communities.

To complete my example: The S. C. Chapin listed as a member of a cooperative with tremendous increased needs for electric power, as the president of Craighead Electric Cooperative, a distribution organization, is also the vice president and a great leader of the Arkansas Electric Cooperative.

They are asking for the opportunity to carry on without interruption the great benefits of this great program.

Let me summarize all the points that I have hoped to develop by quoting the esteemed former General Manager of TVA and the brother of our present esteemed Administrator of the REA, the late Gordon Clapp:

An example supply of electrical energy at the lowest obtainable cost is a basic force to stimulate the expansion of economic activity in a competitive enterprise society. If you would destroy a region, you destroy its power supply. If you would hold a region to a lower standard of living, you can do it by placing a limit on its supply of electrical power. If you would build a region, you build an ever-greater supply of electric energy. An adequate supply of electrical energy is vital to dynamic free-enterprise economy.

The CHAIRMAN. Thank you very much. We appreciate your moving right along and that you did not take too much time. I wish there were time to hear all of those who would like to be heard now, but we do not have the time.

As previously stated, all those who wish to insert their statements in the record, may do so. If there were sufficient time for others to be heard, we would try to hear them but you can see our time has expired. I want to ask the members of the committee about this.

A question was raised about examining the witnesses. Of course, it is always desirable to question the witnesses to the extent that it is possible. At the time that question came up, it was requested that we meet tomorrow afternoon. I stated that it will be impossible to have a meeting tomorrow afternoon but that it was possible to have one this afternoon. I understand now that Mr. Purcell will not hold a hearing tomorrow afternoon. Therefore, it would be possible to hold one tomorrow afternoon, too.

If the members want to hold one this afternoon and one tomorrow afternoon with the same length of time for each side, for the purposes of questioning the witnesses who were here this morning-and tomorrow afternoon after the power company representatives have testified, the Chair will be glad to hold the meeting, but that is entirely up to the committee.

Mr. GATHINGS. I think we ought to have an opportunity to examine these witnesses, to cross-examine them, that everyone should be given that privilege. I would like to see us hold a hearing this afternoon and one tomorrow afternoon with the same length of time for both sides.

Mr. BELCHER. The House is in session this afternoon, and various members have various things depending upon their being there.

You insisted on your schedule this morning; so as far as I am concerned, I think you ought to stay with it.

The CHAIRMAN. All those in favor of meeting this afternoon at 2 o'clock and allowing each member the same amount of time for questioning, hold up their hands.

Mr. ABERNETHY. I cannot come this afternoon. We usually hold our committee meetings in the morning, and we attend to our duties in the House in the afternoon.

I appreciate the fact that the Chair is trying to make the time available, but I think that the Chair knows that it is an unusual procedure. The House is in session. I do not understand why we cannot come back in the morning and question these people.

The CHAIRMAN. How many were there?

Mrs. GALLAGHER (the clerk). Seven.

The CHAIRMAN. All those opposed will hold up their hands.

Mr. ABERNETHY. I have no objection to it.

The CHAIRMAN. Understand that it is merely an effort to try to cooperate in the situation where the members ought to have time for

questioning. I think it is a reasonable request to have time for that purpose, but we have witnesses scheduled for tomorrow morning. Mr. ABERNETHY. Could I suggest this?

The CHAIRMAN. The vote is in the negative. We will not meet today; that is, this afternoon.

Mr. ABERNETHY. May I ask this? The witnesses who testified this morning are all in Washington with the exception of the gentleman from Arkansas. All I want to do is to get informed a bit about this. I do not question the accuracy of the statements presented. I would like to ask some questions about the bill.

Could we not have a morning session for this purpose, to talk with these people?

The CHAIRMAN. If we permit 3 minutes per member for thatMr. ABERNETHY. It involves more than 3 minutes. It will involve more than that.

The CHAIRMAN. I am just pointing out what would happen when we take a morning for that purpose and each member has the same amount of time for questioning.

Mr. ABERNETHY. The chairman has stated the rules and he wants to stick with them. That is all right. That is my opinion about it.

The CHAIRMAN. The committee will not meet this afternoon. We will meet at 10 o'clock tomorrow morning.

Mr. ABBITT. I would like permission to file this statement on behalf of Mr. Earl J. Shiflet, executive manager of the Virginia Association of Electric Cooperatives.

The CHAIRMAN. Without objection, it will be made a part of the record at this point.

(The statement referred to follows:)

STATEMENT OF EARL J. SHIFLET, EXECUTIVE MANAGER, VIRGINIA ASSOCIATION OF ELECTRIC COOPERATIVES

Mr. Chairman and distinguished members of the committee, my name is Earl J. Shiflet. I am Executive Manager of the Virginia Association of Electric Cooperatives, which represents 15 electric cooperatives in Virginia and two in Maryland. The 17 electric cooperatives have an aggregate consumer-membership of approximately 165,000, which means they serve more than 450,000 rural people in the two states.

The leadership of this Association has for several years thought that some steps should be taken to study the financing of rural electric cooperatives with a view toward relating interest rates to ability to pay.

It was, therefore, with a great deal of satisfaction that the members of the Association supported a study inaugurated by the National Rural Electric Cooperative Association in 1964 to see what, if anything, could be done about the total financing of rural electric cooperatives.

With all the strength that we can muster, we urge this Committee to study carefully the proposed legislation before you in the form of HR 1400, and to report out a bill that will grant to the rural electric cooperatives a sound and adequate means for obtaining supplemental financing.

The 17 member cooperatives of this Association have borrowed from REA $134.462,000 through 1966. A conservative projection indicates that these same 17 cooperatives will require in excess of $125 million in new loan funds through 1980--which is an average of more than $9 million a year.

Until a financing bill has been passed and signed, and the criteria for judging ability to pay higher interest rates have been established, we cannot know for certain how many of our systems can pay more than 2% interest on their loans. We believe now that some can pay more; we believe others cannot pay more than 2% on the money borrowed and remain financially sound. This situation is not

unique to Virginia and Maryland. It is quite the same for the entire United States.

It does not seem logical to wait until every cooperative in the country is financially capable of paying more than 2% interest before any cooperatives start paying more than 2% interest on their loans. Therefore, it seems to us, the only reasonable and logical approach is for Congress to provide a means of supplemental financing for those cooperatives that can afford to pay a higher rate of interest so they may begin now to do so.

The proposal for an Electric Bank, as contained in H.R. 1400, is such a reasonable and logical approach. However, we have severe reservations on Section 405, paragraph (2) of subsection (j), which provides for judicial review. We further question the wisdom of including in this legislation provisions pertaining to the structure of electric cooperatives as provided in Section 408, subparagraph (a) of paragraph (5), subparagraph (b), page 25, which pertains to the issuance of "certificates of ownership".

The investor-owned power companies have adamantly opposed such supplemental financing proposals for rural electric cooperatives as contained in H.R. 1400. It is stated that they fear that the electric cooperatives will achieve a permanent status by making such a Bank available. This is exactly what should happen. There is no logic in wanting to force the electric cooperatives out of the electric business. Certainly in Virgina this does not make sense. Territories have been certificated to all power suppliers, including rural electric cooperatives. Each supplier is charged with the responsibility of rendering adequate, dependable service in that assigned area. Neither can one power supplier compete with another for new customers. We hold, therefore, that the electric cooperatives should be accorded every opportunity to strengthen themselves in keeping with sound business principles and to render the service that is demanded of them by state statute.

While the President of the Virginia Electric and Power Company has in recent years suggested to the electric cooperatives that they consider "unification" with his company, none of our cooperatives is of a mind to unify with the investorowned power companies. Our cooperatives prefer to increase their capability of rendering adequate and dependable service at as low a cost as possible within the territory assigned them.

While we in Virginia would welcome the support of the investor-owned power companies in the establishment of an Electric Bank, we do not consider it any of their concern, as long as we are not competing unfairly or conducting our business in an improper manner.

All of us who believe in our free enterprise system must endorse the two major concepts underlying this Electric Bank proposal. The first concept is the opportunity for certain cooperatives to pay a higher rate of interest. The second is the eventual freedom of electric cooperatives from the need for loans from the Federal Government.

In view of the reasons here stated, we trust that this Committee will in its wisdom, report to the House of Representatives H. R. 1400 with such refinements as you think necessary to strengthen the ability of the electric cooperatives to fulfill their mission of rendering adequate and dependable electric serv ice to their more than 5 million consumer-members at as low a cost as possible. The CHAIRMAN. As I stated previously, those who desire to insert statements and letters into the record, as well as statements which have been submitted for insertion into the record, may do so, and they will be made a part of the record at this point.

The statements and letters referred to follow :)

STATEMENT OF FRANKLIN CORYA, PRESIDENT, BOARD OF DIRECTORS, DECATUR COUNTY RURAL ELECTRIC MEMBERSHIP CORP., GREENSBURG, IND., IN SUPPORT OF SUPPLEMENTAL FINANCING FOR RURAL ELECTRIC SYSTEMS (H.R. 1400)

My full time occupation is farming. It would be impossible to continue today's mechanized farming without low cost power. I can distinctly remember farming before Rural Electrification and also recall vividly the refusal of the local investor-owned utility to serve our rural areas.

The greatest, "Crime of the Century", would be to let REMCS starve to death financially. Our members have pride of ownership as evidenced by the attendance at our recent Annual Meeting.

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Member-owners understand the benefits that they and the community have received from this REMC and I am being asked daily to keep our locally-owned sytem strong.

I ask the Committee to design legislation that will assure distribution systems, like us, adequate amounts of growth capital and also to strengthen our power supply cooperatives, because the largest cost of operation is our power cost.

STATEMENT OF ARTHUR VANDERBUR, TREASURER, BOARD OF DIRECTORS, DECATUR COUNTY RURAL ELECTRIC MEMBERSHIP CORP., IN SUPPORT OF SUPPLEMENTAL FINANCING FOR RURAL ELECTRIC SYSTEMS (H.R. 1400)

I have been a member of this Board of Directors since 1957. During this time I have seen this REMC, in co-operation with other Rural Electric Systems be "Leaders" in providing programs that allow member-owners to obtain the maximum beneficial use of their Cooperatives through such innovations as providing rental dusk-to-dawn automatic yard lights and the development of rates that have brought about a fantastic growth in electric home heating.

I submit the above examples as factual evidence of Dr. Horace Gray's statement, "One of the most brilliant institutional innovations in American history— the Rural Electric System."

Let's keep America's Rural Electric Systems strong and dynamic with the passage of H.R. 1400 which will provide adequate amounts of growth capital.

STATEMENT OF RALPH HARMEYER, ASSISTANT SECRETARY, BOARD OF DIRECTORS, DECATUR COUNTY RURAL ELECTRIC MEMBERSHIP CORP., IN SUPPORT OF SUPPLEMENTAL FINANCING FOR RURAL ELECTRIC SYSTEMS (H.R. 1400)

I am a dairy farmer. I have served on this Board of Directors since 1959. I live several miles from the closest town. Today's modern dairy farm would be impossible to operate without low cost, non-profit electric power. My farm did not have electric power until the REMC provided service.

As a member of this Board of Directors, I know firsthand the various attempts to keep wholesale power rates to REMCs as high as possible by the local private power company. The cost of power is more than 45% of our system's cost of operation. Retail rates are governed to a large extent by the cost of wholesale power.

Please help Rural Electrics remain strong and thus provide low cost power for our future needs by providing adequate financing for power supply systems as well as distribution systems. I believe H.R. 1400 will accomplish this for us.

STATEMENT OF JAMES R. LAWSON, MEMBER, BOARD OF DIRECTORS, DECATUR COUNTY RURAL ELECTRIC MEMBERSHIP CORP., IN SUPPORT OF SUPPLEMENTAL FINANCING FOR RURAL ELECTRIC SYSTEMS (H.R. 1400)

Although my primary occupation is farming, I am part owner of a store in the city of Greensburg and because of this ownership I know firsthand the practices of the local investor-owned utility. For example, it was impossible to get three-phase service for our store without a cash contribution which is located in the city limits of Greensburg and is less than one block from a public institution receiving three-phase service. This is the result of an investor-owned utility operating for the benefit of stockholders with thoughts of providing service being secondary.

With the treatment that I have received from the local investor-owned utility, you can understand the tremendous economic damage that would occur to rural people should REMCS slowly die because of lack of growth capital. Decatur County REMC will require almost as much capital in the next 10 years as in the past 28 years of operation.

I ask the Committee to report out H.R. 1400 with adequate provisions for generation and transmission loans.