The CHAIRMAN. Very well, Mr. Oswald, we are delighted to have you. You may proceed.

STATEMENT OF HARRY L. OSWALD, GENERAL MANAGER, ARKANSAS ELECTRIC COOPERATIVE CORP., AND ARKANSAS ELECTRIC COOPERATIVES, INC., LITTLE ROCK, ARK.

Mr. OSWALD. Mr. Chairman, my name is Harry L. Oswald; I am the general manager of the Arkansas Electric Cooperative Corp. and the Arkansas Electric Cooperatives, Inc., of Little Rock, Ark.

The Arkansas Electric Cooperatives, Inc., is an association of the electric cooperatives in our State, and its primary aim is to provide savings for consumer-owned electric utilities through vertical economic integration.

The Arkansas Electric Cooperative Corp. is a federation of 16 distribution cooperatives organized to supply their wholesale power needs in the most economical and dependable manner through integration.

Both of these organizations reflect the efforts of our rural electric leaders to provide for themselves parity of rates and services with the urban citizenship of this Nation.

I am, at the present time, serving on the Executive Advisory Committee of the Federal Power Commission, whose primary concern now is the Nation's recent blackouts, which is not much different and is

closely related to the subject on which I am testifying today, except it is in the Nation's rural sections as opposed to our urban areas.

I also now serve on the Industry Advisory Committee of the Defense Electric Power Administration of the Department of Interior, and I am impressed with the parallel between our concern there and our concern here today.

For the 3 years between 1956 and 1959, I served on the REA Administrator's Advisory Committee. I was appointed by Mr. David Hamil, who was Administrator under President Dwight Eisenhower. Administrator Hamil was one of the first prominent people in the rural electric program to foresee the needs for tremendous additional funds because of the great growth and development of the rural electric program. His voice was little heeded at the time.

I have been in the rural electrification program since early 1942, starting as a loans examiner with the Rural Electrification Administration.

Throughout the quarter of a century and in the several capacities that I have served in the rural electric movement, I have seen it proved undebatably by developments that wholesale power supply is a vital and inseparable part of the rural electric program.

The increasing electric power needs of the rural electric suppliers is obviously a result of the increased usage of the organization's

consumers.

Just as these consumers are making large expenditures for electrical appliances and equipment to use and wiring systems to supply their electric power needs, so will their distributors of electric power have to make equally large expenditures of funds to bring this power to

the consumer.

The power supply organization is simply an extension of the distribution supplier. The increased investments involved in distributing and supplying the electric power needs of the family home, of agriculture, of business, and of the industries located in an area served by an REA borrower will result in expenditures that must be made by these power supply organizations to generate and transmit the electric energy needed.

To say it a more simple way, S. C. Chapin, a farmer in the First Congressional District of Arkansas, used 2,959 kilowatt-hours in 1951 and 7,602 in 1966. He receives his service from the Craighead Electric Cooperative, of which he is the president.

The usage on his farm increased 157 percent during this period of time. Mr. Chapin was not used as an example because he is different from his neighbors, but because he is well known to the chairman of this committee and by Congressman Gathings on the committee.

I could have used just as effectively Tom Hall, a merchant and planter on the Clay County Electric Cooperative lines, or I could have been really dramatic and cited John Doyel of the Woodruff Electric Cooperative, whose usage increased 896 percent during this same period.

Mr. Doyle was not a small user at the beginning of the period, 1951, either. At that time, he was using annually 4,557 kilowatt-hours. In 1966, his increase had soared to 45,380 kilowatt-hours annually.

Members of Craighead Electric Cooperative, along with Mr. Chapin, used 25 million kilowatt-hours in 1951, 43 million in 1956, 58 million in 1961, and 86 million kilowatt-hours in 1966. At these periods of time, the Craighead Electric Cooperative had only $338 invested in facilities to serve each of its members in 1951, advanced to $396 in 1956, and then $456 in 1961, and now $600 in 1966.

The AECC, as the power supply cooperative, became a partner to Craighead in supplying the power needs of S. C. Chapin and his neighbors in 1963, and in 1966 as the total wholesale power supplier for the Craighead Electric Cooperative, had $280 invested in serving each of the members of that consumer-owned cooperative.

Instead of the $338 invested in supplying power to Craighead members as was the case in 1951, there is now an investment of $880, or an increase of 160 percent.

Our projections show more sharp increases in the needs of this distribution cooperative and this power supply federation in the days ahead. Scientific studies show that this Craighead Electric Cooperative will market to its members 120 million kilowatt-hours in 1972, 168 million in 1977, and 189 million kilowatt-hours in 1980-an increase of 656 percent since 1951.

To relate this growth to the power production and transmission expected of AECC, these are its projections in the same intervals. In 1972, the federation will market 1,712 million kilowatt-hours; in 1977, 2,408 million, and in 1980, 2,879 million kilowatt-hours.

For those who would question the accuracy of these projected power needs, let me assure you that Craighead was not selected as an isolated example in Arkansas. It has been or will be duplicated throughout the Nation.

Craighead was selected because it is in the district of our Arkansas Congressman who is on this committee and, therefore, more familiar to him as an example.

Actually, history has proven these studies to be conservative. Our similar studies made in February 1957, show that in 1967 Craighead members would use 76 million kilowatt-hours. The record shows that actually in 1966 they were using 86 million kilowatt-hours.

More dramatic would have been to use the First Electric Cooperative as an example. The 1957 study showed that its members in 1967 would use 56 million kilowatt-hours. Again, the record actually shows that in 1966 this cooperative delivered 118 million kilowatt-hours to its patrons.

The increasing financial needs of AECC as a power supply cooperative can again be dramatized by these facts:

The federation borrowed and invested $1011⁄2 million in a 125-megawatt station at Augusta, Ark. At the time of the loan, our studies indicated that this plant would supply the power needs of the Woodruff Electric Cooperative (15,000 members), the First Electric Cooperative (12,000 members), the Petit Jean Electric Cooperative (6,000 members), a part of the power needs of the Carroll and North Arkansas Electric Cooperatives, and approximately 10,000 of the members of the Craighead Electric Cooperative through the year 1975.

Our present projections and studies, based on actual developments already related, show that the First Electric alone will require the

total output of this plant in 1975. Plans and investments to supply the power needs of the 25,000 remaining consumers of the other cooperatives must be made soon.

When this plant was installed, plans were made for it to be expanded to a million-kilowatt facility. The time for this expansion is nearer than we realized.

Let me use one of the reasons for the tremendous growth of the power needs of the First Electric Cooperative to demonstrate further the critical needs of Arkansas Electric Cooperative Corp. for an additional source of funds for expansion.

An industry-Arkansas Kraft Corp.-recently went into operation in the territory served by this cooperative. The initial load was 6,000 kilowatts. First Electric was told to prepare to furnish 10,000 kilowatts in 4 to 5 years. This is 10 percent of the total output of the generating station built to serve this and its neighboring cooperatives.

It does not include the homes of the workers and the places of business that will serve the hundreds of employees that work for this industry. When the money was borrowed to build our generating plant to serve this cooperative, we had no indication that such a load would develop.

This is not an isolated example. It has happened frequently in recent years. Under the laws of our State, all power suppliers are assigned a definite territory. No suppliers can invade or supply power in a territory allocated to another system. Under these laws, the duplication of investment is avoided and the consumer receives his essential service at the lowest possible cost. In Arkansas, 62 percent of the geographic area of our State is dependent upon REA cooperative borrowers for electric power for its industrial as well as its agricultural growth.

There are similar laws in other States, and in areas where the avoidance of duplication of service is not prevented by the laws of the State, the laws of economics dictate just as strongly that the power supplier in the area be capable of supplying the total power needs of the territory, regardless of the nature of the loads.

The investment required to produce, transmit, and distribute the power needs of the S. C. Chapins all over this Nation will be directly connected to their increasing power demands. With the electric needs of these people and their establishments—their farms—their homesin rural America as a denominator, the generation, the transmission, and the distribution of their electricity becomes inseparable numerators of the fraction required to supply the power needs of a dynamic and prosperous rural America.

Few have envisioned the growing demands of consumers for electric energy. Few of us who have been so directly involved in the rural electric movement foresaw that electric service would have to be as reliable as the consumer demands that it be.

We conducted ourselves as if the proven predictions of the world's great did not apply to the rural users of electricity. For example: In 1885, the French writer Emile Zola made this observation:

The day will come when electricity will be for everyone as the waters of the rivers and the wind of heaven. It should not merely be supplied, but lavished, that men may use it at their will as the air they breathe.