Senator COOPER. And the Congress acted, as I remember, by an overwhelming vote in both Houses. Senator ELLENDER. Yes. Senator COOPER. It provided the authority to TVA to finance, by the issuance of bonds, its own needs. That has had two results as I see it: (1) TVA has been able to meet the needs for power within its area, and (2) it has relieved the Treasury and taxpayers of providing the amounts of money which have been secured through the self-financing authority. I was just saying that Chairman Wagner testified that it amounted to $345 million. The point I am trying to develop is this: I believe it cannot be denied that the requirements and the demands for electricity by consumers, in whatever power system they belong are increasing. Just a few weeks ago, again before the Public Works Committee, I remember that several officials of the investor-owned systems testified that their needs and the needs generally of investor-owned systems were increasing at a rate that would double in 8 to 10 years. That situation is the same in the areas served by the REA cooperatives. If the Federal Government does not provide sufficient funds to enable these cooperatives to meet their needs, or authority for them to secure outside funds, then they will die on the vine just as the TVA would have died on the vine if the Congress had not provided another method of financing to meet its growing demand. So, I think that is the base of the problem we are talking about today. I know that the argument made by a great many: "Well, REA has served its purpose. It is now furnishing energy to 98 or 99 percent of the farms." Apparently, those who do not know the situation imagine that statement solves the problem. But it does not, because the power demands of consumers served by the cooperative systems are growing, their needs are growing, just as they are in the investor-owned systems. To make the argument that most farms are now connected to power lines, as if that ended the job of providing electric service to these rural areas, is a diversion-as I have said in this testimony, and have said in my own State and whenever I have discussed this problem. Senator ELLENDER. Let me ask the Senator this question: Does the Senator believe that the Federal Government should furnish cheap money to further develop the cooperatives, if the cooperatives can get electricity in sufficient quantity to meet their needs and at a price as cheap or cheaper than they themselves can produce it? Senator COOPER. First let me say that one of the criticisms against the Rural Electrification Administration and its cooperatives is the fact that it has secured funds at 2-percent interest. That is one of the standard criticisms that have been made by persons who are against the REA cooperatives. The program which we are beginning to develop today would move away from that, to this extent: Under this program and under these bills that have been introduced, the REA would continue to supply funds at 2 percent to the weaker cooperatives-those it is determined are not yet able to borrow money at a higher rate to provide the facilities to meet their needs. So that would continue to carry out the original purpose of the REA Act. But secondly, if this plan should be adopted it would provide that an intermediate interest rate would be charged on loans made to the stronger cooperatives Senator ELLENDER. I wish to say this Senator COOPER (continuing). First, at 3 or 4 percent, and ultimately the stronger cooperatives would bear the full cost of money provided to them through the electric bank. Senator ELLENDER. I want to say to my good friend from Kentucky, as chairman of this committee, I have never objected to the 2-percent loan rate, to extend electric service to all of the farms, but my objection is centered in the Appropriations Committee as to loans made for the development of the G. & T. where it could be shown that the cooperatives forming these G. & T.'s could obtain the electricity in quantities desired at a price as cheap or cheaper as they could themselves produce it. I again ask the question: If they can do that-in other words, if the cooperatives or a member of the cooperatives can obtain their needs from private enterprise at a price as cheap or cheaper than what they themselves can produce it for, and in the quantities sufficient to meet their needs, does not the Senator believe that private enterprise should be permitted to furnish this electricity? Senator COOPER. Yes. Senator ELLENDER. That is my only point. Senator COOPER. I would like to elaborate on that statement. I remember very well that the Senator, as a member of the Appropriations Committee, did write into the committee reports certain criteria-upon which a decision must be based before funds could be allocated for the construction of a G. & T. plant. I might say that in this modified bill, criteria have been provided on the very subject you and I are discussing. I am sure we will hear more about that later. On the other hand, I must say this, for I appreciate that the Senator wants my specific answer. I know that the REA should have authority to provide loans, as it does now and would have under this plan, to afford the construction of necessary G. & T. plants and lines. Senator ELLENDER. Under your conditions Senator COOPER. Under this criteria that I said would be testified to by others. That will be developed in this hearing. Senator ELLENDER. But I simply would like to have the Senator state this: Let us forget about these bills. But suppose it can be shown that private enterprise stands ready and willing to furnish the electricity as cheap or cheaper than it can be developed by the cooperatives, and in quantities sufficient to meet their needs. Does the Senator still feel that these cooperatives should go into the G. & T. end of it? Senator COOPER. I think you are generally correct; but a situation may develop where a group of cooperatives should have the assurance that they could have a steady supply of power from their own sources. In that case, I want to say that, subject to criteria, I Senator ELLENDER. Even though it costs more to produce it? Senator ELLENDER. I say that is my point, the only point that I have argued with my many friends, that if they can show that they cannot obtain the electricity in quantities sufficient to meet their needs at a rate as cheap or cheaper than they can themselves produce it, I will never raise any objection. It is only where efforts are made to produce electricity of their own where the cost to the consumer would be greater that I have raised the objection. Senator COOPER. I understand that. Senator ELLENDER. I have the record on that. Senator COOPER. This criteria is provided to meet the situation we are talking about. I do not accede to the position held by some that the REA should not have the authority under proper criteria to construct generating plants and transmission lines. Senator ELLENDER. They have the authority under the present law. Senator COOPER. I understand that. But there are many people in this country who seem to think a great volume of electricity is being generated by the REA. It is about 2 percent of the total. Senator ELLENDER. It is very small. Senator COOPER. It is about 2 percent of the total. Again, about 8 percent of the power being provided in the country— only about 8 percent-is being provided through the REA cooperatives. The point I am making is that this threat we always hear aboutthat the REA is about to take over the generating and transmission and supply of electrical energy in this country-is just not borne out by the facts. I will return to my statement. The second possibility, then, if the Congress will not provide steadily increasing annual appropriations to meet the growing use of power by REA consumers, is to find a means that will provide the funds needed by the REA systems to supplement appropriations by the Congress. That is the purpose of this bill. I would like to develop briefly what it would do. It would establish a rural electric bank, which would be capitalized as follows: First, the Federal Government would provide capital from the proceeds of loan repayments to the REA. As the existing REA loans are paid back, they would be used to help capitalize this bank-but under the modified plan only to the extent of $50 million a year, and for 15 years. Senator ELLENDER. Is that the approximate amount of money that is collected each year? Senator COOPER. It is a good deal more than that. The original bill placed no limit on the proportion of the total receipts which could be used. The modified bill provides that not to exceed $50 million a year could be used. Second, following the analogy of the Production Credit Association Cooperatives, with which the Senator is so familiar and as the committee knows are financed through the intermediate credit bank, the borrowers would themselves provide some of the capital of the bank, by purchasing stock equal to 5 percent of their loans. Senator ELLENDER. Similar to the Federal land banks? Senator COOPER. Yes, sir. Then, third, the bank would issue its debentures for sale, up to a total of eight times its paid-in capital. The original bill provided for up to 10 times the capital. I think that is a familiar system. We know that is the policy with regard to the Farm Credit Administration banks. Not long ago, you will recall we increased the ratio for the intermediate credit bank from 10 to 1 to 12 to 1. Senator ELLENDER. How about the rate of interest? 70-671-665 Senator COOPER. As I have noted, REA loans would still be provided at a rate of 2 percent to the weaker cooperatives-that is, from the usual appropriations. Senator ELLENDER. How do you define a weaker cooperative? Senator COOPER. That would be determined by the REA, and along the same lines used today to determine the financial strength of a cooperative. We know that a great many of our cooperatives have very few consumers per mile of line, compared to the larger number of consumers not only in certain other cooperatives but also in the investor-owned systems. So, there is this problem of securing a return comparable to that of systems supplying more densely populated areas. Senator ELLENDER. Would you permit me to make a suggestion to the chairman of the subcommittee? Senator COOPER. Yes, sir. Senator ELLENDER. That we obtain from some source the identification of all co-ops located throughout the country, as to where they obtained their electricity, how much was paid, and how much have they on hand aside from the amount necessary to meet their expenses. The reason I am asking that question Senator TALMADGE. Will you get that information for the record? Senator ELLENDER. Either under the present quotations, or otherwise, we have a lot of cooperatives, I understand, that have as high as $500,000 that they can pay into the Government to relieve the Government of borrowing money. They could pay back more, but instead they invest their surplus at a rate again sometimes as much as 3, 32, 4, or 412 percent. I am not opposed to that, but the reason I am asking this be supplied is to determine just how these cooperatives are getting along and where they get their electricity. The claim is that they are not getting enough electricity and the cry is that they are paying too much for it, and yet I have found a few that have created a surplus, and, also, Mr. Chairman, it might also be well to find out what the rate for the electricity is to the customers of these respective cooperatives and what other details are necessary in that locality as to private enterprise. Senator MILLER. Will you yield at that point? Senator ELLENDER. Yes. Senator MILLER. I wonder if we could have that refined a little bit, because some of those surplus funds probably are set aside or at least are programed for the purchase of new equipment and updating their equipment. I think that what we need, if we are going to have a meaningful figure-and I do think that we ought to have it—is to have it broken down by cooperatives and to have them give their investment and the program for reinvestment out of that surplus fund, leaving the balance which I think you would be most interested in. Senator TALMADGE. They file annual reports to the REA Administrator, do they not? Senator MILLER. Yes, they do. Senator ELLENDER. So, you could look as to each cooperative, as to what they originally borrowed, how much they paid back and how much they have on hand, how much of their funds they have used for expanding all of that could be easily obtained, I am sure. Senator MILLER. Yes, sir. I think it would give us an unfair and not a very meaningful picture if we just got a figure of so many millions of dollars in surplus, because some of that is going to be used for replacements and updating equipment. And I think that we need to have that in there to get a refined figure. (Information submitted by the Department of Agriculture is as follows:) 1. IDENTIFICATION OF ALL CO-OPS LOCATED THROUGHOUT THE COUNTRY REA publishes lists of all active electrification and telephone borrowers as of January 1, 1966. In the electrification list, all borrowers are cooperatives except those designated as public bodies by the letter "P" in parentheses following the REA project designation, and those designated as investor-owned utilities by the letter "U" in parentheses following the REA project designation. In the telephone list, those borrowers which have an asterisk following the REA project designation are cooperatives. Copies of these lists are on file with the committee. 2. WHERE THEY OBTAINED THEIR ELECTRICITY AND HOW MUCH WAS PAID This information is furnished for each electrification borrower in an annual report published by REA, the latest issue being "27th Annual Report of Energy Purchased by REA Borrowers-Fiscal Year Ended June 30, 1965" (REA Bulletin 111-2). This publication contains national summaries, and reports, alphabetically by States, and in numerical order by REA project designation number for each borrower: KWH Purchased, Cost of Energy Purchased, Cost Per KWH, and identifies the Supplier. Copies of this document are on file with the committee. The summary charts and tables are as follows:) CENTS CHART I: AVERAGE COST PER KWH OF ENERGY PURCHASED BY REA BORROWERS FISCAL YEARS 1940-1965 CENTS 1940 Publicly-owned suppliers 0.50 • Excludes energy purchased by Ank-la Electric Cooperative, Inc. Ila. 211 for fiscal years 1943-46 0.25 1965 O |