In one case we have an office where people may come in with their questions and get an answer. We have had two men and a secretary in that office that is in Spokane. It is the reason you spoke about, that there are a lot of peculiar problems and particular problems that should be looked into.

Another reason is that it is a great distance from Washington. The people out there, I think, get a sense of frustration in that it takes a whale of a long time to write a letter to Washington and get one back. I do not know if there is very much difference between air mail between Arizon, perhaps, and Oregon at the present time, and you own State.

It is possible that we will enlarge the staff in Spokane, which I think will be pretty well located to take care of the Columbia Valley and the Great Basin when the need comes. If so, we will either enlarge the staff in that area or handle it in some other way.

That is one of the things that we think we have been able to accomplish through not setting up the regional offices with complete personnel there to process loans and all that sort of thing, but have been able, as the burden shifts from one area to another, to transfer them to the other area.

For field appraisals we only need 10 or 12 people in the organization, because we are able to shift them all over the country. If they were located in one territory we could not send them to where the problems arise so readily.

We have had only, at least until the supplemental appropriation was made available to us, one person, including the stenographers, for every borrower we have had in the country.

The borrowers are getting up to nearly $2,000,000 enterprise. We have used our personnel to the greatest advantage and have gone to where the problem occurred, your territory, for instance, and shifted them from some territory where the need was decreasing.

We have been able to do it because we think in some ways we have the greatest decentralized agency in the country because most of the work is done by these organizations themselves.

We do not have agencies in the counties nor do we have so-called State employees. We work with the cooperatives who are basically responsible for the local controls.

To sum up what I am trying to say and answer your question, we want to keep things as flexible as we can to meet the need and, if necessary, to add additional force to the Spokane office.

We will do it within the limits of the resources we have.

Mr. HORAN. We have had an example today of how the maze of development through Federal inspection of our electrical facilities, its transmission and its distribution can complicate the work.

Of course, we have no less than at least three separate departments of the Government that do develop our water facilities, the Department of Agriculture does a little, the Interior does a whole lot, and the Army engineers do a whole lot, that is, in the development of generation facilities, aside from what REA does.

It is increasing. Of course, in the actual distribution we have complications in which many of them have to be resolved finally here in Washington, D. C.

We have peculiarities out in our States. We have the district power bill in the State of Washington. It tends to complicate, somewhat, the processing of loan applications.

You realize that is a very real problem. I was out there December 15 when we broke ground for Chief Joseph Dam.

I have already mentioned the fact that we are very much heartened that the contracts came in on the initial bids 20 percent under the estimates. It is very good news.

We are making great headway out there toward the development of cooperative distribution of our electricity, based to some extent on the district power law and through the utilization of the REA facilities.

There is a close cooperation. Although I can see again where that complicates the study of each individual project. However, on the same day that we broke ground out there we began construction of a bridge which is at the mouth of the river that enters the Columbia just below the site of Chief Joseph Dam.

The only available source of supply there at Bridgeport is the Douglas County REA set-up, which is known as a public utility out there.

I would like to read into the record a letter that I got from that district.

The time element has been a big factor in our operation this last year or more and has cost the district a lot of money. We started negotiating with the REA for a loan in October 1948, and to date it still has not been released.

This is dated January 13, 1950. I guess this loan was finally processed about that time.

Mr. WISE. If this is the same one that you talked to Mr. Blackburn about, it had already gone.

Mr. HORAN. That is what we want to get straightened out.

Mr. BLACKBURN. The matter you talked to me about involved a requisition for funds to close an acquisition transaction involving the Douglas district.

Mr. HORAN. Let us find out what this is. What I am trying to find out what the situation is and to help-and I know that is the attitude of the subcommittee-if we find administrative problems.

On my last trip to Washington-and he has made three on this last one-I tried to explain to the heads of different departments what we would be up against in the growth of our town, caused by construction on the Chief Joseph Dam. We have been forced to go ahead with some construction in hopes that the money will be forthcoming.

I would like to cite you one instance of what is happening-this is not criticism; this is a problem we will have to work out-a contract was awarded to Atkinson Construction Co. on the 15th of December 1949 to build the bridge here at Bridgeport over the Columbia River. They asked us for service for an estimated load of 225 horsepower to be ready by the 10th of January. We called Washington and were told to proceed with the work. We have taken care of what service they requested, but on the 10th of January, we received the following telegram:

"RURAL ELECTRIFICATION ADMINISTRATION,
"Washington, D. C.

"We recommend contract with Atkinson Contracting Co. for service under your schedule B monthly minimum should be $111.75 based on installed transformer capacity. Please submit three copies of executed contract for administrative approval. Schedule 14 appears too low for general use. Letter follows. "RUSSELL O. ADAMS."

Here is the important part, Mr. Wickard:

Our rate schedule 14 is a rate that has been approved by Bonneville Power Administration, the Army engineers, and by Mr. Keffer, of REA, who is a representative of the Administrator. We quoted the Atkinson Co., schedule 14 when they asked for our rates. The minimum on the contract they signed with us was $114.50 per month, so should be about in line. If we send in and wait for administrative approval on the contract based on other approval we have tried to get, they will have finished the bridge with Diesel power as they have only a year in which to do the work.

I cite that as a specific instance.

Mr. WISE. I am familiar with that.

Mr. HORAN. I am sorry that Mr. Adams is not here.

Mr. WISE. We have to say frankly, Congressman, that we do have a little difficulty with the man who is the manager of that particular agency. He does not believe in REA procedures. We feel that they are not bureaucratic ideas which hold people up, but that they are necessary if they are to maintain the feasibility of our projects.

Under our terms, before a borrower enters into a contract with a consumer-this is not an ordinary domestic consumer but one who represents a very large load-if we do not have the contract submitted to our office for approval and assurance that it is sufficient from a demand standpoint and regarding any investment which may be required on the part of the consumer, we cannot be certain of the feasibility of the project. Without adequate checking we might not have the record we have here but a much poorer record.

That gentleman has been told a number of times that he must submit copies of a contract and have it approved before he can offer a rate to a large user. He told our people he does not care about that. But just we cannot operate in that fashion.

We do not take more than 2 or 3 days to process those accounts. He has never sent it in nor has he complied with our other requirements, which is one of the reasons these delays occur.

(Discussion off the record.)

TUESDAY, JANUARY 31, 1950.

Mr. WHITTEN. The committee will come to order.

RURAL TELEPHONE PROGRAM

Mr. Wickard, we will be glad to hear from you in regard to the work you have done this year in setting up the program for rural telephones, including the development you have had up to this point.

Mr. WICKARD. Mr. Chairman, the law or amendment to the REA Act providing for a rural-telephone program became effective October 28, 1949. Since that time we have been busily occupied in trying to develop the essential requirements and provisions for this program. We spent considerable time in November and December conferring with farm organizations, with telephone organizations and associations, with telephone manufacturers, and other people who were interested in and who had some knowledge of rural-telephone service.

APPLICATIONS FOR RURAL TELEPHONE LOANS

About the last of December we put out a bulletin which-a copy of which you have here was a rather concise statement about the rural-telephone program. At the same time we put out an application form, of which you also have a copy.

This application form was not required in the case of the rural electrification program. There are two reasons why we decided that it would be advisable to have an application form for telephone applicants.

One reason is that the law gives certain preference to people already in the telephone business, who have made an application.

We wanted to be sure to have something rather definite with somebody's signature on it so we would know when application had been made.

Another thing was that it was evident that there were going to be more applicants during the first year or two, at least, for telephone service than was the case in the rural electrification program.

We had to have some means of measuring what the people wanted when they made an application, what they might have to do to be eligible and what we must do to know which ones were really meritorious.

We have had up until this time about 1,117 inquiries from all over the United States. You have a chart before you which indicates where these inquiries have come from.

Since this application form and this bulletin were available, about the 1st of the year, we have received 144 signed applications.

Mr. WHITTEN. Who is the applicant in those cases? Is it a group? They have not organized, have they?

Mr. WICKARD. I do not believe we have a single application from a new company. These are all from existing telephone organizations. I will give you the kinds of organizations at this time.

Out of this 144, 51 were from individuals and partnerships, which were unincorporated; 53 were from commercial corporations; 16 were from mutuals and cooperatives, which were unincorporated; 17 were from mutuals and cooperatives which were incorporated; and 7 were from farmer lines, unincorporated. By farmer lines is meant a line which does not have an exchange operation of its own, but just the single line to serve a group of farmers.

As I said, all these companies were in existence at the time the bill was passed. They are the ones from which we have received the signed applications.

BASIC LEGLISLATION REQUIRES AREA COVERAGE

In this application form there is certain information_requested which I would like to discuss with this committee. One of the problems which is apparent and is going to have to be faced is the requirement under the law, a very definite statement in the amendment to the Rural Electrification Act that we must have assurance before a loan is approved that there will be an area coverage program carried out by the applicant.

That, I think, is a very wise provision in the act, but it is not so easy to get that assurance as we would like to have it, according to these applications.

Some of these are simply an effort on the part of the applicant either to get refinancing for his present operation or to get some more of the more lucrative territory included in his operations without giving us a definite pledge or some method of measuring his desire and ability to serve the entire area, which might well be considered his service area.

I mention that as one of the problems which seems to be present in many of the telephone applications. In some of the work that we have done already in connection with these applications, and in some of the communications we have had with them, we have indicated that this is a requirement of the act. At the present time some of the companies are out making a survey of the territory with the idea of submitting another application which would meet our requirements in that respect.

I have said that some of them were apparently thinking mainly about refinancing their present obligations. Some of them, I would say, are thinking about having us make a loan maybe to repair some storm damage or to pay off a note or something of that kind, which does present a rather pressing financial problem so far as that company is concerned.

We have tried to make it plain to them that although we are permitted under the act to do some refinancing, we feel that the objectives of the act are such that they will have to indicate their willingness to improve and extend service to the people in the territory along with meeting their financial problem.

I believe that a lot of the applicants see now that that is required under the act.

APPLICANTS FOR TELEPHONE LOANS MUST FURNISH EQUITY

This matter of being sure that we can certify that the loan will be paid back in the time agreed upon offers problems which are not present in many respects, at least, in the rural electrification program. As was brought out here yesterday in the discussion, we believe, and we have ample evidence to show it, that rural people regard electric service as almost indispensable.

Experience has shown that that is not always true in the case of telephone service. Some of the telephone companies have indicated to us that during the last depression about 50 percent of the farmers did not continue to pay their telephone assessments or dues, and the telephone company was faced with the problem of trying to, in some way, cut down the financial loss which was incurred.

One of the representatives, I believe one of the vice presidents of Bell system, told me in my office not so long ago, in the New England area where he was in charge of the Bell Telephone activities, that they tried various things to induce farmers to keep the service, such as cutting the rates in half and giving them an opportunity to pay later the amount of money which was due the telephone company.

He said that program was not very successful, and that farmers apparently got to the place where they felt that they could not afford a telephone and they did not want to take it even on the basis of a payment which would be made later.

60623-50-pt. 4- 8