Mr. ELLIS. No. Perhaps not. If his theory were carried out it might not be, I would say. We would hope New York would still recognize that principle and provide some greater benefits for the rural areas.

Mr. PICKETT. Now, has your association been consulted in the discussions that have been held, with a view to arriving at an agreement as to how this is going to be done?

Mr. ELLIS. No.

Mr. PICKETT. Do you know whether it is contemplated that you would have a voice in those discussions?

Mr. ELLIS. I do not.

Mr. PICKETT. Thank you, Mr. Ellis.

Mr. ELLIS. Mr. Chairman, I am afraid one of our people has been delayed. Mr. Sahlman is not here. Mr. Petersen would be next on the list.

(The prepared statement of Mr. Ellis is as follows:)

STATEMENT OF CLYDE T. ELLIS, EXECUTIVE MANAGER, NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION

Mr. Chairman and gentlemen of the committee, my name is Clyde T. Ellis. I am executive manager of the National Rural Electric Cooperative Association, which is the service organization of the rural electric systems of the United States. Eight hundred and ninety-two systems are members of their service organization, with a consumer membership of approximately 3,000,000 farm families in 42 States and Alaska.

STRUGGLE IN ST. LAWRENCE AREA

The rural electrification program is encountering its most difficult struggle in the St. Lawrence area. For the purpose of this discussion, we have defined the St. Lawrence area as including New England, New York, New Jersey, and Pennsylvania, because our people believe the St. Lawrence development will vastly improve the power supply situation and the power cost situation in most of this area.

Concerning the St. Lawrence project now under consideration by this committee, United States Senator Charles W. Tobey, of New Hampshire, stated on January 30, before more than 4,000 representatives of rural electric systems gathered at their recent 1951 annual meeting at Cleveland, Ohio: "We must expand, and expand, and expand our production of electrical energy, the driving force behind all great industries. No greater need exists than in the powerdeficit areas of New England and New York, and there is where it will do the most good, in our skilled metal industries."

We feel that his statement also applies to New Jersey and Pennsylvania though. possibly to a smaller degree.

In

The rural electric systems of the country conduct their own annual survey as of January 1 each year to determine, among other things, their need for further loan funds to achieve area coverage, and their power-supply requirements. There are 28 rural electric cooperatives in the St. Lawrence area. These 28 systems were serving 72,586 farms and rural establishments on January 1, but they stated that, within their system areas, there are still 24,914 which they desire to serve. other words, they had achieved only 73-percent area coverage. REA estimates that nationally approximately 85 percent of the farms and rural establishments were served on January 1. I hasten to point out that most of the St. Lawrence area is and has always been above the national average in percent of farms electrified, but the areas served by our rural electric systems are below the national average. Thirty-six percent of our systems in the St. Lawrence area report they do not have adequate power in sight for furture load growth. This is higher than the national average and 9 percent higher than last year's figure. Fifty percent of these systems report restrictions on the use of power they do buy.

REA statistics indicate our systems in this area paid an average wholesale power cost of 13% mills per kilowatt-hour last year, and this 13% mills compares with an 8.6-mill national average. This national average of 8.6 mills is a drop of 0.3 mill from the 1949 figure. At the same time, the rates in the St. Lawrence area did not decrease one iota. In many sections of this country, the individual household

consumer pays, at retail, little more than half of the wholesale rates paid by the rural electric systems in the St. Lawrence area. In Maine and New Hampshire the companies right now are attempting to raise rates even higher.

I believe you can see from these facts and figures that our power situation is very difficult in the St. Lawrence area. There is always the constant danger that our systems may run completely out of power, for they have to depend on sources that are generally unfriendly-indeed the very sources that tried to kill many of them off.

Moreover, the whole St. Lawrence area has been, and is, confronted with a critical shortage of electric power. During World War II, a WPB survey showed that the greatest power deficit in the United States existed in New York State and the second greatest in New England. For this reason, an informal embargo was placed on industrial expansion in the area. The situation has constantly worsened since then. FPC estimates that there is now only an 8-percent reserve in this region compared to 15 percent at the start of the last war. Actually there is no reserve, for industry would quickly grab any substantial block of power in the area if it existed. How are we to face the problem of increasing food and factory production without adequate electric power reserves while simultaneously supplying manpower to the Armed Forces?

To increase agricultural production with less manpower requires more and more electric energy on the farm. It can easily be seen that the power situation in this region is no longer critical. It is desperate. It is estimated that by 1960, 2.7 million kilowatts of additional capacity will be needed in the New York-New England area alone. The St. Lawrence project would provide about 25 percent of that capacity. Construction would require only a modest expenditure of strategic materials and manpower, and could be carried out on a completely selfliquidating basis.

MUST HAVE POWER AT OUR LOAD CENTERS

Perhaps I should say a word about getting our power delivered to the load centers. All electric distribution systems are necessarily designed with load centers into which the power must be fed. Our generation and transmission co-ops and the Federal Government make a practice of selling their power delivered to our distribution co-op load centers. Private companies deliver it to our load centers in some cases, but in a large percent of the cases the private companies require us to build our own lines from our load centers to selected points on their transmission system in order to pick up the power.

We are paying the Federal Government an average of 5 mills per kilowatt-hour for wholesale power in other sections of the country, delivered at the load centers. We are paying the private companies in the St. Lawrence area 13% mills, much of it not delivered to our load centers.

HIGH HANDED POWER COMPANY POLICY

Perhaps I should say another word also about restrictions. Whereas our generation co-ops and the Federal Government do not restrict our use of powerdo not tell us to whom we may sell it-many of the power companies do restrict us, and this holds true for nearly half of the cooperatives in the St. Lawrence area. The power companies scream free enterprise on the one hand (always carefully omitting the word "competitive"), while subjecting us to monopolistic control practices on the other hand. They go so far as to tell us whom we can serve and whom we can't, and for how much. They demand to be the only grocer in several counties and yet they prohibit us from feeding one child at all, tell us how much we can feed another and penalize us for feeding a third. Their policies are unscrupulous and undemocratic.

SAVINGS AND AREA COVERAGE AT TVA RATE

I am listing here our 28 cooperatives in the St. Lawrence area, showing the amount and cost of power they purchased last year, July 1, 1949, to June 30, 1950, what the cost to the co-ops would have been at the TVA rate, and the savings at the TVA rate. I believe it is fair to use the TVA rate as the comparison because we understand that due to the tremendous and constant flow of the St. Lawrence, the potential power there can be produced at a cost much less than that of TVA. The St. Lawrence flow is 115 times as constant as the Tennessee and 35 times as constant as the Columbia. There will be practically no generation capacity

81181-51-pt. 1—25

standing idle because of seasonal low water. This means high energy output per dollar of money invested. Saying it another way, it means abundant, low-cost electric energy.

It is our opinion that if the cooperatives in the St. Lawrence area could obtain this low-cost energy, they would achieve area coverage and still operate in the black. With present rates, some of them are now in the red; and they probably can never serve the sparsely settled areas.

OTHER REASONS OUR PEOPLE FAVOR ST. LAWRENCE

The St. Lawrence area is the largest area in the country that has had no Federal power development. Farmers in the New England area are particularly becoming concerned about their market. When the mills close down, milk sales decrease; the whole economy is affected.

Our people in this area, like all people throughout the country, are also interested in the fact that, should war come again, the St. Lawrence development would supply power and navigation requirements that might not be obtainable from any other source. The farmers are interested in the fact that by 1960, 40 million tons of iron ore will have to be imported each year to maintain annual steel production at 130 million tons, which has been set as our goal to meet defense needs. This means low-cost transportation facilities must be available to deliver ore to blast furnaces and converters in the Great Lakes region.

Our people also know that great amounts of energy will be required for the expanding aluminum, magnesium, titanium, and other electrometalurgical and electrochemical industries. TVA, together with Bonneville, Grand Coulee, and Hoover Dams, gave us the extra power for World War II expansion. The St. Lawrence can provide a big portion of the power needed to carry out our present preparedness program.

NOT ADVOCATING NATIONALIZATION

The power companies are spreading a lot of propaganda to the effect that some people are advocating nationalization of power. I want to make it clear that I know of no farmer among our 3 million rural families who is advocating nationalization of the electric power industry. We do not advocate it, and I do not advocate it. We believe the power companies will get along as well, or better, when the St. Lawrence is developed, because they will then be able to replace some of their less efficient, small-size internal combustion and steam capacity with low-cost St. Lawrence hydro power. We do not want the Federal Government in the retail power business. But these farmer-owned cooperatives do want adequate wholesale power, delivered to their load centers without restrictions, and at the lowest possible costs.

To express their wishes on the St. Lawrence project, these people, after thorough discussion, adopted the following resolution at their 1951 meeting:

"Whereas the necessity for full farm and industrial production is essential to national defense, and whereas over 2 million horsepower of electric energy is available to Canada and the United States by development of the St. Lawrence waterway; now therefore be it

"Resolved, That National Rural Electric Cooperative Association urge Congress to immediately implement the development of this power potential in line with the statement of Federal power policy of this association."

Our 4,000 farm leaders who voted for this resolution were representing practically every section of rural America, and they voted for it unanimously.

On behalf of these 3 million families, we urge this committee to approve the St. Lawrence seaway and power project at the earliest possible date.

STATEMENT OF ERHARDT PETERSEN, COCHAIRMAN, NORTHEASTERN POWER COMMITTEE, AND MANAGER, STEUBEN RURAL ELECTRIC COOPERATIVE, INC., BATH, N. Y.

Mr. PETERSEN. Mr. Chairman and gentlemen of the committee, my name is Erhardt Petersen. I am managing a rural electric cooperative in the northern tier of New York State. In addition, I am cochairman and coordinator of a power committee, set up by 14. northeastern electric cooperatives to prepare a preliminary study on the possibilities or feasibility of generating of our own power.

We have realized the power shortage and the high cost of power in our area for a considerable time. We have appeared here on hearings on the St. Lawrence. We are preparing our preliminary study in such a way that the possible plants may be integrated with the St. Lawrence and possibly Niagara as stand-by plants.

We are at the present time in an emergency. Our farms in the northeastern section are not producing what they should produce and what they could produce. The reason for that, in many cases, is lack of modern equipment, which can only be had with plenty of power. Many phases of electrical farm operation cannot be entered into in that section because of the high power costs. It is impossible for those farmers up there to compete with farmers doing the same kind of work in lower-cost areas. Consequently, they do not do it and they do not get the production that we should have. We have empty factories standing up there that could be used, and probably are needed, but they are not there because the power cost is too high.

It has been realized by our able Administrator, Mr. Wickard, in his report for 1950. He has put aside a little paragraph for the northeastern section. With your permission I would like to read that paragraph and, if agreeable, have it entered into the record.

It is found on page 19 of the report of the Administrator of the Rural Electrification Administration for 1950, United States Department of Agriculture, and it reads as follows:

NEW ENGLAND AND NEW YORK Power PROBLEM

In New England and New York the progress, and even the continued operation of some REA borrowers, has been threatened by the critical power shortage.

These cooperatives suffered from "spite line" opposition in their formative stages, and since that time have been so surrounded by the commercial utilities that they have been precluded from expanding into efficient operating units. To make the situation more critical, they are handicapped by the necessity of paying approximately 40 percent more for their power than the national average cost to all REA borrowers.

Special studies in each cooperative area were initiated during 1950 in order to determine the feasibility of developing additional generating facilities, and investigations were made to determine the best procedures for coordinating the needs of other large power users with those of the rural electric cooperatives. These include municipalities, industries, mines, and smaller rural industries that are suffering from power shortages. The effort will be to develop cheaper power immediately that may eventually tie into a larger regional system supplied from the St. Lawrence and other public power developments.

Thank you for hearing me, gentlemen. That is all I have.

Mr. LARCADE. Mr. Chairman, may I ask a question of the gentleman?

The CHAIRMAN. Yes.

Mr. LARCADE. Mr. Petersen, you testified before the committee in 1950 on this project, did you not?

Mr. PETERSEN. That is right, sir.

Mr. LARCADE. I see on page 404 of the hearings referred to that you stated that the supplier of the electric energy is unfriendly and without competition.

Mr. PETERSEN. That is right, sir.

Mr. LARCADE. Is that correct?

Mr. PETERSEN. Yes.

Mr. LARCADE. Does that condition still exist?

Mr. PETERSEN. The condition does exist to a certain extent. It has been eliminated some in New York State, but not in New England. Mr. LARCADE. I was just wondering whether or not the State of New York had some agency that controlled public utilities?

Mr. PETERSEN. They have a public service commission.

Mr. LARCADE. That is what I referred to. They do have a public service commission?

Mr. PETERSEN. Yes.

Mr. LARCADE. It looks to me that if you are complaining about excessive rates, that that agency ought to be able to see to it that people are provided with electric power and other public utilities at a fairly reasonable cost.

Mr. PETERSEN. Our experience has shown that such a procedure is very, very slow and tedious. It also takes a considerable amount of money to put a case through the public service commission, which is not available.

Mr. LARCADE. I have observed that you and others have complained about that condition, in appearing before this committee over a long