Electrification loans are made primarily to cooperative associations solely for the purpose of suppling electricity in rural areas. Borrow encouraged to expeditiously extend service to remaining unserved farms operate and maintain facilities to effectively serve the consumers and security for the Government's loan.

Telephone loans are made to private companies and cooperatives. cooperates with the industry to extend telephone service to rural areas. tinuous work is done with borrowers to develop sound construction and op policies, and with manufacturers to develop efficient and economical equi specifically designed for rural needs. Practically no standards or equi specifically designed for rural telephone systems were in existence before initiated work in this field. To protect loan security, REA works with bor which, for the most part, have had little past experience in operating n telephone systems.

REA has no field offices. Relations with borrowers are maintained th offices in Washington and a staff of field employees working directly wit

rowers.

Available funds and man-years 1963 and estimated, 1964 and 1965

1 Includes contingency reserve authorization as follows: 1963, $100,000,000 for electrification or te loans; 1964, $150,000,000 for electrification loans; and 1965, $65,000,000 for electrification or telephon

1 The 1964 Appropriation Act provides that $150,000,000 of the $425,000,000 electric authorization be in reserve to be used to the extent needed for the electrification program.

In addition to new loan authorization, rescissions of prior year loans and balances carried over fro ars are available for loans.

ncludes a proposed reserve authorization of $65,000,000 for use in either the electrification or tel Program.

1 The 1963 Appropriation Act provided that $100,000,000 of the $400,000,000 electric loan authorization be placed in reserve to be used to the extent needed for either the electric or telephone loan programs.

The following project statement reflects loans made in 1963 and estimated loans to be approved in 1964 and 1965 from new loan authorizations, balances carried forward, and rescissions of prior year loans:

Rural electrification loans.-A regular loan authorization of $300 million-plus a reserve loan authorization of $65 million, to be available as needed for use in either the electrification or telephone loan program, is requested for fiscal year 1965. The availability of $365 million for electric loans will aid in negotiating satisfactory power purchase arrangements in many areas where power supply is known to be an active issue, with the result that actual loans for fiscal year 1965 can likely be held to about $300 million.

In helping REA borrowers to meet their needs it is expected that there will be more than $650 million in loan applications under consideration during the fiscal year 1965.

Of the $300 million loans estimated to be approved, it is expected that approximately $138 million will be loaned for distribution, $160 million for generation and transmission, and $2 million for consumer financing under the provisions of section 5 of the act.

The need for adequate loan funds for generation and transmission loans is strongly supported by the heavily increasing need for electric energy. The Federal Power Commission has recently published an advisory committee report which predicts that electric energy requirements of the Nation's electric utilities will increase from 761,380 million kilowatt-hours in 1960 to 2,692,650 million kilowatt-hours in 1980, an average annual rate of increase of about 61⁄2 percent. This is consistent with REA projections of future electric power requirements of REA-financed borrowers, which are expected to increase at an average annual rate of slightly more than 6 percent during the same period.

To meet their needs REA-financed systems were generating only about 1 percent of the installed capacity of the electric utility industry at the end of fiscal year 1963, a percentage which is almost unchanged since 1960, and have been generating only about 17.6 percent of their energy, less than half as much as they have been purchasing from the power companies. The availability of generation and transmission loans has had a great impact in obtaining reasonable contract terms and in holding down the cost of purchased power.

Requirements of REA borrowers for distribution and section 5 loans have been relatively constant in recent years and are expected to continue at about the same level. REA borrowers added 142,000 consumers to their lines during fiscal year 1963, and are expected to continue to add consumers annually at about this same

rate.

Rural telephone loans.-The loan estimate of $85 million contemplates a small reduction in loans below the level of recent years. Since there is expected to be a carryover of about $22 million of unused funds from the fiscal year 1964 a new loan authorization of $63 million will be required.

Electrification loans are made primarily to cooperative associations solely for the purpose of suppling electricity in rural areas. Borrow encouraged to expeditiously extend service to remaining unserved farms operate and maintain facilities to effectively serve the consumers and security for the Government's loan.

Telephone loans are made to private companies and cooperatives. cooperates with the industry to extend telephone service to rural areas. tinuous work is done with borrowers to develop sound construction and op policies, and with manufacturers to develop efficient and economical equ specifically designed for rural needs. Practically no standards or equ specifically designed for rural telephone systems were in existence befor initiated work in this field. To protect loan security, REA works with bor which, for the most part, have had little past experience in operating telephone systems.

REA has no field offices. Relations with borrowers are maintained t offices in Washington and a staff of field employees working directly wit

rowers.

Available funds and man-years 1963 and estimated, 1964 and 1965

1 Includes contingency reserve authorization as follows: 1963, $100,000,000 for electrification or te loans; 1964, $150,000,000 for electrification loans; and 1965, $65,000,000 for electrification or telephon

1 The 1964 Appropriation Act provides that $150,000,000 of the $425,000,000 electric authorization be in reserve to be used to the extent needed for the electrification program.

? In addition to new loan authorization, rescissions of prior year loans and balances carried over fro years are available for loans.

3 Includes a proposed reserve authorization of $65,000,000 for use in either the electrification or tel loan program.

1 The 1963 Appropriation Act provided that $100,000,000 of the $400,000,000 electric loan authorization be placed in reserve to be used to the extent needed for either the electric or telephone loan programs.

The following project statement reflects loans made in 1963 and estimated loans to be approved in 1964 and 1965 from new loan authorizations, balances carried forward, and rescissions of prior year loans:

Project statement (on basis of estimated loans)

Rural electrification loans. A regular loan authorization of $300 million-plus a reserve loan authorization of $65 million, to be available as needed for use in either the electrification or telephone loan program, is requested for fiscal year 1965. The availability of $365 million for electric loans will aid in negotiating satisfactory power purchase arrangements in many areas where power supply is known to be an active issue, with the result that actual loans for fiscal year 1965 can likely be held to about $300 million.

In helping REA borrowers to meet their needs it is expected that there will be more than $650 million in loan applications under consideration during the fiscal year 1965.

Of the $300 million loans estimated to be approved, it is expected that approximately $138 million will be loaned for distribution, $160 million for generation and transmission, and $2 million for consumer financing under the provisions of section 5 of the act.

The need for adequate loan funds for generation and transmission loans is strongly supported by the heavily increasing need for electric energy. The Federal Power Commission has recently published an advisory committee report which predicts that electric energy requirements of the Nation's electric utilities will increase from 761,380 million kilowatt-hours in 1960 to 2,692,650 million kilowatt-hours in 1980, an average annual rate of increase of about 61⁄2 percent. This is consistent with REA projections of future electric power requirements of REA-financed borrowers, which are expected to increase at an average annual rate of slightly more than 6 percent during the same period.

To meet their needs REA-financed systems were generating only about 1 percent of the installed capacity of the electric utility industry at the end of fiscal year 1963, a percentage which is almost unchanged since 1960, and have been generating only about 17.6 percent of their energy, less than half as much as they have been purchasing from the power companies. The availability of generation and transmission loans has had a great impact in obtaining reasonable contract terms and in holding down the cost of purchased power.

Requirements of REA borrowers for distribution and section 5 loans have been relatively constant in recent years and are expected to continue at about the same level. REA borrowers added 142,000 consumers to their lines during fiscal year 1963, and are expected to continue to add consumers annually at about this same

rate.

Rural telephone loans.-The loan estimate of $85 million contemplates a small reduction in loans below the level of recent years. Since there is expected to be a carryover of about $22 million of unused funds from the fiscal year 1964 a new loan authorization of $63 million will be required.

The number of subscribers being served by REA borrowers has regular increasing by more that 100,000 per year, and this is expected to contin addition, there is a rapidly developing demand for a grade of service bett the old eight-party line. This has led REA to recommend four-party fl rural service as the preferred standard, and in response to the demand, borrowers are forecasting and developing systems to provide one- and two graded service in rural areas. The requirement of more funds for upg service is expected to lead to an increase in the submission of loan applicat 1964 and 1965 as compared to the previous 2 years.

The annual loan level of $85 million for fiscal year 1965 anticipates tha will be approximately $158 million in loan applications for consideration dur Loan applications pending at the close of the fiscal year 1965 are ex to total about $83 million.

year.

1 The 1963 Appropriation Act provides that $100,000,000 of the $400,000.000 electrification autho be placed in reserve to be used to the extent needed for either the electrification or telephone progr The reserve authorization of $65,000,000 is proposed for use in either the electrification or te loan program.

1 The reserve authorization, shown in the table for the electrification program, is proposed for use in the electrification or telephone loan program.