Mr. ANDERSON. Yes, sir; we did. We requested this year $650 million for the next fiscal year. Mr. PURCELL. Who did you request it from? Mr. ANDERSON. The Appropriations Committee. Mr. ANDERSON. Yes, sir. Mr. PURCELL. I have never heard of your asking for it. This is the reason that I am asking now. Mr. ANDERSON. Our politicians are not doing well enough. We have tried to inform the Congress as best we could through our local and State systems and through our own efforts of just what this need is going to be. Mr. PURCELL. But you never appeared before this committee to get us to review it? Mr. ANDERSON. No, sir; we do not come before this Committee on Appropriations. Mr. PURCELL. I understand that, but you do come over here and ask us to help. Mr. ANDERSON. We asked individually, yes. Mr. PURCELL. That is all I have. The CHAIRMAN. Thank you very much. The CHAIRMAN. The House is in session. Mr. OLSON. I believe it would be helpful to the committee if I could ask Mr. Anderson to supply for the record the location of the G. & T. loans that have been made and the rate at which they generate or furnish current, along with a comparison of the rates in that specific area for wholesale power. Can you supply that for the record? Mr. ANDERSON. We will be glad to supply that. (The information above referred to, follows:) First, as to the comparison of the cost of power produced by REA-financed facilities with that sold to the distribution systems by power companies, certain basic differences exist which must be taken into consideration. It was stated that the power company average charge per kilowatt hour in fiscal 1965 was 7.4 mills while self-generated cooperative power was delivered for 8.3 mills, as shown in REA's 27th Annual Report of Energy Purchased by REA Borrowers. That report does not disclose the essential differences between the energy coming from these two sources. Power company energy is normally delivered at the high side of transformation (substation) facilities owned by the purchasing cooperatives. The cooperative pays the transformation loss and the cost of transformation which can be as high as .7 mill per KWH and must be added to the power company cost. The cooperatives frequently supply the transmission line required to deliver the power from the companies' points of delivery to the cooperative load centers. This transmission cost, including line loss, must also be added to the average power company cost. The Cooperative-generated power is normally delivered at the low side of the substation paid for by the seller who also bears the transformation loss. cooperative supplier also usually delivers the power at its member systems' load centers and bears the cost of transmission and transmission line losses. These savings do not show up in the average cooperative power cost of 8.3 mills. Further, the 8.3 mill figure does not reflect the ultimate real cost of cooperative-generated energy to the member systems. In 1965, the power-type (or wholesale) cooperatives earned net margins aggregating $7,618,181 which, although allocable to the patron-systems, as patronage capital, were retained for reinvestment in plant or for retirement of the principal of REA loans. These net margins represent the equivalent of .6 mill per kwh of energy sold, and are properly deducted from the 8.3 mill per kwh average to yield a real cost of 7.7 mills per kwh for cooperative produced power. This latter figure should be utilized in making a comparison of cost of power purchased after the adjustments discussed above are added in to the cost of wholesale power from the investor-owned utilities and deducted from the cost of power from the powertype cooperatives. An important factor to be considered in appraising the cost of cooperativegenerated power is that cooperative generating plants are financed by REA and built where special circumstances are present which require these plants. REA, since its inception, has made loan funds available for the construction of generation and transmission facilities where there was either (1) an inadequate source of power, or where there was no power supply available because of the isolated areas in which the cooperative operated, or (2) an achievement of lower power costs in comparison with that available from other sources. It is, therefore, frequently the case that cooperative generating plants are located in high cost areas. This necessarily is reflected in the average cost of power sold from cooperative plants. For example, the largest cooperative generating system, Dairyland Power Cooperative, resulted from the merger of two smaller systems in Wisconsin which were built to obtain power below the 18 mill cost of the power companies in the North Central states. In 1965 Dairyland Power Cooperative's power cost was 7.4 mills per kwh. However, cooperatives in Wisconsin which still have to depend on power from private suppliers paid 11.9 mills per kwh during 1965. In addition to this cost of 11.9 mills, these distribution cooperatives had to construct their own transmission and substation facilities in order to deliver power to their load centers. If these costs were included their true power cost is approximately 13 mills. While Dairyland actually charged its members 10.1 mills per kwh during 1965, the difference between Dairyland's cost of 7.4 mills and the 10.1 mills it charged will later be returned to the members. Further to be taken into account is the fact that many of the cooperative generating plants are small in size and relatively inefficient. They were planned and built to serve an immediate, pressing purpose. Many of them are still in use and their high costs affect the national average cost of cooperative-generated power. The following are examples of plant and power costs in isolated areas where no other power sources were available. Rather than burden the record with voluminous material which may not be germane to the matter before the Committee, I shall confine the balance of this response to issues raised by power company executives relative to generation and transmission loans in their testimony. Since most of the loans attacked are for facilities not yet constructed, due to power company obstruction, the type of data requested is not yet available. These are the loans made to Alabama, Colorado, Indiana, Kentucky, Louisiana and Mississippi generation and transmission cooperatives. Except for Alabama Electric Cooperative and ColoradoUte, these plans are not yet in operation. There is no adequate actual operating experience, except for the Alabama system, with which to make actual cost comparisons. Mr. Walter Bouldin, President of Alabama Power Company, who is a veteran of many wars before State bodies, courts and before committees of the Congress, against the Alabama Electric Cooperative, listed the main targets of the power company's campaign and cited to the Committee the Congressional hearings where power company testimony against these loans could be found. To com plete the record for the Committee and to avoid unduly burdening the record of these hearings, here are citations to rebuttals and statements filed by the generation and transmission cooperatives and REA: ALABAMA ELECTRIC COOPERATIVE (ALA. 42) Cooperative statements and rebuttal Food and Agriculture Act of 1962, H.R. 10010, 87th Congress, 2nd Session. Department of Agriculture Appropriations 1964, 88th Congress, 1st Session. Department of Agriculture Appropriations, 1966, 89th Congress 1st Session. REA statements and rebuttal Department of Agriculture Appropriations, 1963, 87th Congress 2nd Session. Hearings before Senate Appropriations Committee, p. 28. Department of Agriculture Appropriations, 1964, 88th Congress 1st Session. Hearings before House Appropriations Committee, Pt. 4, p. 2471-4; Hearings before Senate Appropriations Committee, Pt. 2, p. 22, 57. COLORADO-UTE ELECTRIC ASSOCIATION (COLO. 46) Cooperative statements and rebuttal Department of Agriculture Appropriations, 1964, 88th Congress 1st Session. Hearings before House Appropriations Committee, Pt. 5, p. 485-9, 620-6; Hearings before Senate Appropriations Committee, Pt. 2, p. 321–7. Department of Agriculture Appropriations, 1967, 89th Congress 2nd Session. Hearings before House Appropriations Committee, Pt. 5, p. 561-4. REA statements and rebuttal Food and Agriculture Act of 1962, H.R. 10010, 87th Congress 2nd Session. Department of Agriculture Appropriations, 1964, 88th Congress 1st Session. INDIANA STATEWIDE REC, INC. (HOOSIER DIV) (IND. 105) Cooperative statements and rebuttal Food and Agriculture Act of 1962, H.R. 10010, 87th Congress, 2nd Session. INDIANA STATEWIDE REC, INC. (HOOSIER DIV) (IND. 105) REA statements and rebuttal Department of Agriculture Appropriations, 1964, 88th Congress 1st Session. BIG RIVERS RURAL ELECTRIC CO-OP. (KY. 61) Cooperative statements and rebuttal Department of Agriculture Appropriations, 1964, 88th Congress 1st Session. Hearings before House Appropriations Committee, Pt. 5, p. 496–500, 531–2, 572– 91; hearings before Senate Appropriations Committee, Pt. 2, p. 273–93. Department of Agriculture Appropriations, 1966, 89th Congress 1st Session. Hearings before Senate Appropriations Committee, Pt. 2, p. 410. Department of Agriculture Appropriations, 1967, 89th Congress 2nd Session. Hearings before House Appropriations Committee, Pt. 5, p. 555-61. REA statements and rebuttal Department of Agriculture Appropriations, 1967, 89th Congress 2nd Session. Hearings before House Appropriations Committee, Pt. 5, p. 160-1. LOUISIANA ELECTRIC CO-OP. (LA. 30) Cooperative statements and rebuttal Department of Agriculture Appropriations, 1965, 88th Congress 2nd Session. Hearings before Senate Appropriations Committee, Pt. 2, p. 375-91, 417-18, 426-27. Department of Agriculture Appropriations, 1966, 89th Congress 1st Session. Hearings before House Appropriations Committee, Pt. 5, p. 492-4; hearings before Senate Appropriations Committee, Pt. 2, p. 302-8, 411-24, 429. Department of Agriculture Appropriations, 1967, 89th Congress 2nd Session. Hearings before House Appropriations Committee, Pt. 5, p. 564–7. REA statements and rebuttal Department of Agriculture Appropriations, 1966, 89th Congress 1st Session. Hearings before Senate Appropriations Committee, Pt. 2, p. 526–38. Department of Agriculture Appropriations, 1967, 89th Congress 2nd Session. Hearings before House Appropriations Committee, Pt. 5, p. 362-4. SOUTH MISSISSIPPI ELECTRIC POWER ASSN. (MISS. 53) Cooperative statements and rebuttal Food and Agriculture Act of 1962, H.R. 10010, 87th Congress 2nd Session. The following table briefly illustrates the cost objectives of these G&T loans: 1 Average power cost to members if power was continued to be purchased from the alternative power suppliers in the area rather than installing the generation or transmission facilities as provided for in the loon. Power cost to members for normal load factor requirements. With the addition of large high-load factor load to be served the overall cost is estimated to be 3.98 mills per kilowatt-hour. * Present average cost of power (1965) to distribution cooperatives in Kentucky from private suppliers not cluding the cost of necessary transmission and substation facilities needed to deliver power to cooperatives' load centers. The 7.97 mills per kilowatt-hour is the average cost to the regular distribution members of ColoradoUte. In addition, Ute will furnish power to the Arkansas Valley G. & T. cooperative at a cost estimated at 5.65 mills per kilowatt-hour. The Indiana loan listed in the table above has been under constant and sustained attack by Public Service Company of Indiana whose president is scheduled as one of the opposition witnesses to appear before this Committee. The public-spirited character of this company and its management was demonstrated last month when it cut off power supply to Southeastern Indiana Rural Electric Membership Corporation on a flimsy pretext. Service was restored after court proceedings were instituted. Alabama Electric Cooperative has had almost 25 years of operating experience, and has survived despite its constant harassment by Mr. Bouldin's company. The following is a revealing summary of the experience of the Alabama cooperative with respect to their wholesale power supply. The Facts The first loan to Alabama Electric Cooperative was made on September 23, 1941. In the year ended June 30, 1941, Alabama Power Company sold nine Alabama electric cooperatives 36,744,013 kilowatt hours of electric energy for $435,954.71 at an average price of 11.3 mills per kwh. TVA was then delivering power in Alabama for 6.3 mills per kwh. In the year ended June 30, 1965, the company sold thirteen Alabama Electric cooperatives 446,808,341 kwh of energy for $2,708,612, at an average price of 6 mills per kwh. In 1941, Alabama Power Co. made wholesale sales to 25 other utilities, of 1,245,167,000 kwh for $6,708,749 at an average price of 5.4 mills per kwh, less than half the average price charged the nine cooperatives in that year (11.3 mills per kwh). In 1964, Alabama Power Company made wholesale sales for resale to 87 other utilities, of 2,136,576,000 kwh for $12,473,453 at an average price of 5.8 mills per kwh. Since the Alabama Electric Cooperative system came into operation, the Alabama Power Company has reduced its wholesale rates to those cooperatives to which it still sells power. Today the wholesale price of power from the Company to its rural electric customers and the cost of power to Alabama Electric Cooperative members are comparable, after taking into account the cost factors and differences previously described. (Note: It is anticipated that the cost of power produced by Alabama Electric Cooperative will be further reduced when it is permitted to construct its new generating plant, the loan for which was approved in November, 1961. Since that time, because of the tactics of the Alabama Power Company, the Alabama Electric Cooperative has not been able to proceed with the construction of this vitally needed plant). The Conclusions Contrary to the claims made by utility witnesses before this committee (1) This G&T cooperative has not destroyed or in any way adversely affected the wholesale business of the Alabama Power Company. On the contrary, the company's sales of energy to electric cooperatives have increased twelve-fold since the G&T cooperative came into the picture. (2) A substantial reduction, almost 50 percent, in the company rates to its cooperative customers has occurred despite the fact that its average charge for wholesale power increased by almost 72 percent in the same period. Therefore, it is crystal clear that the company's reduction in the wholesale rate to the electric cooperatives from 11.3 mills in 1941 to 6 mills in 1964 does not reflect a general trend of reduction of rates. (3) In 1964 Alabama Power Company's wholesale rate to the cooperatives had reached substantially the same level as the TVA rate of 1941. The two "yardsticks," TVA and the Alabama Electric Cooperative, brought about the substantial reduction in rates. (4) Alabama Power Company's purpose and design in their dealings with the Alabama electric cooperatives are best summarized in the remark of its general counsel when, in a discussion of power supply, he said to a cooperative official— "We are out to gut you." (See Hearings before Senate Appropriations Committee on H.R. 6754, 88th Congress, 1st Session, p. 317). The CHAIRMAN. Thank you very much, Mr. Anderson, Mr. Katzin, and Mr. Partridge. Mr. Stubblefield? Mr. STUBBLEFIELD. Mr. Chairman and members of the committee, I would like to call your attention to the fact that the State association from my State of Kentucky has filed a statement with the secretary of the committee in favor of the proposed legislation in the form of the Poage bill, H.R. 14000. I would call attention to the fact that they |