Mr. Chairman, I am pleased to report that over the years, Dairyland has worked long and hard to establish what is now a good working relationship with the private power companies in its area. As a result, Dairyland, four other power cooperatives and seven investor-owned electric utilities are cooperating in power pooling arrangements that result in substantial savings to all parties. These arrangements are based on sound and economic and engineering considerations, not on differences of philosophy nor on the weakness of any of the participating power suppliers. In addition to these power pooling arrangements, Dairyland has joined five other G&T cooperatives, fourteen investor-owned power companies, twenty-two municipal systems, two public power districts and one provincial system in Canada in the organization of the Mid-Continent Area Power Planners (MAPP). Its main objective is regional power planning for over-all coordinated expansion of facilities and operations, while still permitting each member to maintain its identity and integrity. Such regional power planning has been praised by the Federal Power Commission in its recent National Power Survey as the type of arrangement which will insure maximum utilization of participating electric systems and result in lower retail rates for all consumers. As I mentioned before, Dairyland Power Cooperative is endeavoring to obtain for its member distribution cooperatives all of the savings which can be realized through the utilization of the advancing technology in the generation and transmission field. For instance, Dairyland, in cooperation with the Atomic Energy Commission, has constructed a nuclear power station which we expect to put into operation this year. However, it is important to keep in mind that the advancing technology calls for larger-scale generating plants and heavier transmission lines. In order for our members to benefit from the economies afforded by the new technology, Dairyland must be able to invest larger amounts of capital in larger-sized and more efficient generating plants and transmission facilities. In view of the budgetary squeeze which has been felt by the present REA electric loan program during the past several years, it appears highly unlikely that the rural electric cooperatives—both distribution and G&T-can obtain the amounts of growth capital needed to keep pace with either the technological advances of the electric power industry or the increasing use of power by their rural consumer-members. A source of supplemental growth capital is a critical necessity for the con. tinued progress of the rural electrification program. This is a need which cannot be postponed without a detrimental effect upon the farmers and other rural residents who depend upon the rural electric cooperatives for lights and power. Mr. Chairman and members of the Subcommittee, I strongly urge that you favorably report out S. 3720, which would set up a sound and financially feasible Rural Electric Bank. With financing available through such a cooperative Bank as a supplement to the present REA 2 percent program, the rural electric cooperatives of Wisconsin and the Nation will be able to move forward with their continuing job of furnishing adequate. low-cost, area coverage electric service to the farms and other establishments which are the backbone of our rural economy. Hon. HERMAN E. TALMADGE, HARRISBURG, PA., August 29, 1966. Chairman, Subcommittee on Agricultural Credit and Rural Electrification, Old Senate Office Building, Washington, D.C. MR. CHAIRMAN AND GENTLEMEN OF THE SUBCOMMITTEE: My name is William F. Matson. I am General Manager of the Pennsylvania Rural Electric Association. PREA is the state service organization of REA-financed, consumer-owned electric systems which furnish central station electricity to about 90 thousand people in Pennsylvania. PREA is owned and controlled by the member systems themselves. I wish to submit the following statement in support of the Cooper bill, S. 3720. The need for growth capital for the operation and maintenance of rural electric systems across the nation is vital if, in the ensuing years, we are to continue to give our members adequate electric service. The nature of the programthat of serving all people in rural, sparsely populated areas with low-cost electricity-precludes the possibility of all systems being financially able to borrow money for this purpose on the open market. The bill under consideration offers a means by which these rural electric systems can continue to serve in the capacity they were designed for, while at the same time lessening the need for financial dependence on the federal government. The record of these rural electric systems in debt repayment is good, their dedication to the concept of low-cost electricity for all is great and we do not seek to usurp the dominance of investor-owned utilities, merely to insure means to continue to serve our members in the most efficient and productive way. Thus, on behalf of the members of the Pennsylvania Rural Electric Association, I respectfully request favorable consideration of S. 3720. Very truly yours, WILLIAM F. MATSON, Pennsylvania Rural Electric Association. Hon. HERMAN TALMADGE, SANTA CLARA, CALIF., August 27, 1966. Chairman, Senate Subcommittee on Agricultural Credit and Rural Electrification, Senate Office Building, Washington, D.C. DEAR SENATOR: The California Farmer-Consumer Information Committee, representing over a quarter of a million members of affiliated farm, cooperative, church, labor, resource, professional and community groups, urges prompt action in support of S. 3720, as revised, so that this vital piece of legislation may reach the Senate floor and Senate-House Conference, if necessary, before adjournment of the 89th Congress. Our affiliates which now include the Salmon River, Plumas-Sierra and Surprise Valley Rural Electric Cooperatives and the Truckee Public Utility District, support this legislation because, in the words of Senator Gaylord Nelson, so simply stated before your subcommittee on August 15th: "It will insure that rural electric and telephone cooperatives have access to sufficient growth capital at rates they can pay to meet the growing needs of rural people, and "It will provide means for gradual and orderly transfer of rural electric and telephone systems from dependence on the government to independent financing through their own credit institution * * *" In addition, we are alarmed by the continued use of "house organs" of the privately-owned public utility corporations to propagandize customers against supplementary financing for rural electric and telephone cooperatives. This subject was publicized in the August 1966 issue of the California Farmer-Consumer Reporter, enclosed, which is the official organ of the California Farmer Consumer Information Committee. Quotes are from the San Jose Mercury-News of July 31, 1966: "abolish the bargain-basement interest rate and tax-exempt status of Rural Electrification Administration co-ops .."; Southern California Edison's "Uncontrolled waste, a new plan for your tax money" photocopy enclosed; and PG&E's quote from the San Francisco Daily Commercial which was printed in the August 1966: PG&E Progress, page 6, entitled: "A Good Place to Cut". After describing "the various proposals to put the federal government deeper into the electric utility business" in detail, the editorial concludes: "Isn't it time to give the taxpayers a break, quit destroying taxpaying business with federally subsidized competition, and let the investor-owned utilities tend to the electric and telephone business of the country for which they are so eminently qualified?" A photocopy of this "editorial" will be sent to you Monday. We could add issue after issue which erroneously brag about the county and state property taxes paid by the franchised monopoly, when, in truth, these taxes become part of the rate base upon which a rate of return is set by the California Public Utilities Commission, upon which rate of return, consumers pay their monthly bills, which means that they, not the stockholders, pay these taxes. We are also enclosing our June 10, 1966 statement in support of H.R. 14000, Poage, which, starting at the bottom of page 1 and continued on page 2, recites failure of private utilities in California to provide central station electricity and telephone facilities. To these examples, we now add Mesa Grande in San Diego County and a letter printed in the November 1965 issue of Rural Electrification which reads: "We love Mesa Grande for the very reason that it is rural and beautiful, and untouched by smog, confusion and bustle of the city. We do feel, however, that in this enlightened age, we, too, should be able to have the common necessities of life that urban dwellers take so much for granted . . .” This town is in the San Diego Gas & Electric Service area, but there are too few customers per mile of proposed line to make it "profitable" for the franchised monopoly, with its rate base assured, to provide central station electricity. Only Rural Electric Cooperatives serve this purpose. Once more, we refer to the 1966 issues of the California Farmer Consumer Reporter, which enumerate the cause of thousands of rural people in this state who depend on supplementary financing to develop and or expand their cooperatives. We urge that you make these articles and the photocopy of the SCE attack part of your hearings record, along with this statement of our Committee. The issues are: March 1966-"Pacific Valley, Salmon River Fight for Central Station Service, pages 1-6; April 1966, pages 1 and 7: "Calif. Rural Electric Co-ops," "Santa Clara Rate Payers save $776,000 a Year” and “Salmon River in Bonneville Service Area"; June 1966, page 7, "Federal Bank for Rural Electrics" and "First Calif. REA Co-op"; July 1966, page 8, "Californians Back Bank for REA Co-ops"; and August 1966, "Power Lobby in Open Against REA." Again referring to our June 10, 1966 letter to Chairman Cooley supporting H.R. 14000, Poage, note the conclusion: "Let us get the best possible bill in the interest of the greatest number of our rural citizenry," followed by our wire to Congressman Poage, August 17: "For the record the California Farmer Consumer Information Committee places its quarter of a million member rural-urban affiliates firmly behind amended Committee Print No. 2, H.R. 14837, Cooley, which is the action we are requesting your Subcommittee to take." Sincerely, MRS. GRACE MCDONALD, California Farmer-Consumer Information Committee. (The statement to the House Agriculture Committee is as follows:) Hon. HAROLD D. COOLEY, SANTA CLARA, CALIF., June 10, 1966. Chairman, House Committee on Agriculture. The California Farmer-Consumer Information Committee, with a membership in excess of a quarter of a million individuals from farm, farm co-operative, Rural Electric Co-operative Associations, labor, business and professional and consumer groups, recognizes the impact of modern increases in demand for central station service and telephone facilities presently filled by Rural Electric and Telephone Co-operatives. We concur in the action of the 24th Annual Convention of the Nat'l Electric Cooperatie Ass'n., in Las Vegas last February 16th that the situation requires supplementary legislation, such as has been written into HR 14000, Rep. Poage, a member of your Committee. The measure would establish two banks, one for supplementary financing for rural electric cooperatives, the other for similar service to telephone cooperatives, with interest, tied to the cost of money, but not to exceed 3% per annum. Continuation of the present 2% loan program for REAs is included. The need for supplementary financing in addition to sufficient funds to effectively carry on the obligations of existing and contemplated Rural Electric Cooperatives, was made clear by no other than REA Administrator Norman M. Clapp when he told the RECA Convention that “If we are successful in securing enactment of such a program at this session of Congress, we can look forward to total lending resources in the electric program during fiscal 1967 of substantially more than $270 million at 2% interest *** and $130 million additional from supplementary financing * * *" We hope that additional measures since introduced by Rep. Mills-HR 14048— and you, Mr. Chairman: HR 14837, will not reduce the proposed U.S. investment, beginning July 1, 1966 of $50 million a year for fifteen years in the electric bank and $20 million, each year, for the same period, for the telephone bank. Californians realized with a shock the fact brought out by Ted V. Rodgers, Field Editor of the Rural Electrification Magazine and double-checked by our Committee for our official organ, the California Farmer-Consumer Reporter, that thousands of rural Americans still lack electric and telephone central station service. We would like to have the articles appearing in the March and April issues of the California Farmer-Consumer Reporter made part of this hearing record. They are entitled: "Pacific Valley, Salmon River Electric Co-op Fight for Central Station Service" pages 1-6, March Reporter; "Calif. Rural Electric Co-ops," page 1, April Reporter; "Salmon River in Bonneville Service Area," page 7, April Reporter May we point out the difficulties which residents of "underprivileged" rural areas have in compelling private utilities to include them in their service structure: 1. Witness the Nashville area, close to Sacramento where misrepresentation on extent of extension line estimates was finally admitted by Pacific Gas & Electric Company and a proposed charge of $24,000 to be paid by residents served, was finally withdrawn when in reality the area was 20 feet within the area; 2. The fire hazard to National Forests in areas such as Pacific Valley and Salmon Forks from having to operate private diesel and gas generators, and the loss in fire damage from such type of generation, as experienced in the Forks of Salmon area, let alone the individual operating cost and the exhorbitant cost estimates which private utilities offer as the price of providing central service facilities; 3. In fact, admitting that there are still far too many areas in the nation still unserved by central station electricity and telephone facilities, NOWHERE IS THE NUMBER SO GREAT AS IN CALIFORNIA, a state which leads the nation in population. For these reasons, in addition to the needs of existing rural electric and tele phone cooperatives who are in position to expand into areas considered too unprofitable for private utility service, that our Committee asks favorable action on HR 14,000 Poage. We understand that there are at least two other measures dealing with this subject under consideration by your Committee at current hearings: HR 14048, Mills and HR 14837 Cooley, the latter "administration-backed". The details of the differences between these three versions of the same general objective are beyond our ability to ascertain at this writing, but they will be clear during the hearings and in time for us to express our final position as soon as the measure reaches the House floor. May I state, however, on behalf of our Committee and its affiliates, that we consider it false economy to provide less than adequate financing for domestic programs as vital to the economic stability of our nation as is that of affording all the people of this great nation the technological facilities inherent in central station electricity and connections with the rest of the nation and world provided by modern telephone, which includes telegraph services. We therefore want to express our appreciation to your Committee, to the Department of Agriculture and to the Rural Electrification Adm. for the oppor tunity to consider this important subject in time for enactment by the 89th Congress. Let us get the best possible bill in the interest of the greatest number of our rural citizenry. On behalf of the California Farmer-Consumer Information Committee. (Note. The other attachments to Mrs. McDonald's statements are on file with the committee.) STATEMENT OF A. H. McDowELL, JR., PRESIDENT, VIRGINIA ELECTRIC AND POWER COMPANY, RICHMOND, Va. Dear Mr. Chairman: Complying with the telegram of James M. Kendall, Assistant Chief Clerk, dated August 19, as to the hearing of the Senate Committee on Agriculture and Forestry on these bills, we submit this statement on, behalf of Virginia Electric and Power Company with the request that it be made a part of the record. The hearings on similar bills already held before the Committee on Agriculture of the House have materially narrowed and defined the issue. It is not whether the Rural Electrification Administration should be continued in accord with its original purpose, but whether Congress should sanction a radical de parture from that purpose by creating a vast new public power system without any effective limit as to location, duplication or extent, free of taxes, guaranteed by the United States and subject to no regulation or control. This can be shown concisely, as we now do. 1. In all the lengthy hearings in the House, no one questioned the REA program "for the furnishing of electric energy to persons in rural areas who are not receiving central station service" (7 USC § 904). It is established, however, that more than 98% of the farms of the country now receive such service, so that in that sense the purpose of REA has been fulfilled. We do not question that these distribution facilities will need upgrading with load growth. Nor do we question that the systems in sparsely settled territory which cannot pay the going cost of capital may fairly ask, as a matter of social need, that funds for this purpose be supplied through continuation of a subsidized lending program, even though the funds must be obtained by the United States through borrowing at much higher rates. Quite definitely, therefore, the issue is not for or against REA. The real question is obviously something larger and further afield. 2. Historically, each cooperative loan has been reviewed by the Administrator and the aggregate requests have been submitted for Congressional consideration in the budget. In contrast, there has been no evidence in any of the lengthy hearings to show the load growth or financial needs of any particular cooperative or of the cooperatives as a whole. In short, no need at all has been shown for this huge financial authorization. There is only a generalized reference (Jerry L. Anderson, before the House Committee on Agriculture, June 1, 1966) to a study by Kuhn, Loeb & Co., which has not been made available for public review, to the effect that the rural electric systems would require about $9.5 billion between now and 1980, of which over half would be needed for distribution facilities. The amount contemplated for distribution facilities could be provided by continuing the present 2% loan program in the amount of about $300 million a year. The vast additional sums to be made available by means of the so-called "Bank" contemplated by these bills are clearly for some wholly novel purpose. 3. The real purpose is therefore not normal growth but revolutionary takeover. It is in fact to enable electric systems originally established as rural electric cooperatives to take over municipally-owned plants and other existing systems (Norman M. Clapp, before the House Committee on Agriculture, July 13, 1966). The bills deliberately contemplate the invasion of urban and suburban areas even though now provided with quality electric service at reasonable rates by investor-owned, tax-paying electric utilities and impose no limitation whatever on the scope of extensions and acquisitions in rural areas. As pointed out in the House hearings (id.), “the change is basically that you take out any reference here to rural area people in any way." The result is clearly to create a new Federal system without reference to rural areas or availability of power supply from other sources, thus creating a huge duplicate facility that would compete with the investor-owned, tax-paying utility systems. 4. Both bills presuppose the continuation of the present 2% loan program and that we do not oppose for those cooperatives serving sparsely settled areas which do not provide sufficient revenues to permit a more realistic interest rate. But we invite the Committee's attention to the huge additional liabilities to be imposed on the United States. Initially S. 3337 contemplates an outlay by the United States in installments up to a total of $1 billion. This is not to be repaid at any definite time, but only "as soon as practicable” and only in such manner as "will not unduly impair the operations of the Federal Electric Bank" (8 405 (c)). Meanwhile there will be no return on that outlay. The bill then authorizes the so-called "Bank" to borrow 10 times the whole amount of its socalled capital. Ten times the Treasury contribution makes an aggregate of $11 billion. But this is only the starting point. The bill further requires that 5% of every loan shall be reinvested in stock of the so-called "Bank”, on which it may then lend 10 times such amount again, with the result that every loan automatically entitles the "Bank" to lend over half that much again. The result is a pyramiding effect on a moving base, to which no precise limits can be confidently fixed. Our estimate is that the total lending power of the "Bank" would exceed $20 billion or, if combined with a continuation of the 2% loan program at $300 mi1lion a year for 15 years, a total exceeding $25 billion. This is over twice the total of all Federal appropriations throughout history for generation and transmission projects and nearly half of the entire electric utility industry investment in the United States in 1964. While the lending power under S. 3720 is |