A' 



On Rural Pectrification 



NEXT to farm-to-market all-weather roads, nothing 

 would be more appreciated by a great number of Illi- 

 nois farmers perhaps than the extension of electric light 

 and power to their farms and homes. 



Government interest and intervention in the field of elec- 

 trification, namely, in the Tennessee Valley, has given rural 

 people who are without this service renewed hope that some 

 way, somehow electricity may be brought to them at rates 

 they can afford to pay. 



Two years ago the A.F.B.F. adopted a resolution on utility 

 rates stating that "the cost of electrical current, measured in 

 terms of generation and distribution, has been too high, and 

 overcapitalization, pyramiding of costs, excessive salaries, 

 and the equivalent of 'blue sky' issues of stock have compelled 

 the consumers of this current to pay tribute to an indefen- 

 sible economic practice." 



\t the meeting in Nashville last December, the Farm Bu- 

 reau reiterated its interest in rural electrification and ap- 

 proved a resolution that ways and means be provided through 

 Farm Credit Admiiiistration for financing at low interest rates 

 co-operative electric light and power associations. 



Following a state-wide meeting of Farm Bureau leaders 

 in Ohio recently, a committee was appointed to make a study 

 and recommend a definite program to meet this problem. 

 Similarly, the Indiana Farm Bureau has recently secured 

 the enactment of the Indiana Rural Electric Membership Cor- 

 poration Act which provides for the creation, under order 

 of the Public Service Commission, of rural membership or- 

 ganizations having in part the characteristics of municipalities 

 and of co-operatives. 



Co-operative ownership of rural transmission lines and the 

 purchase of electricity at wholesale rates, now in effect in 

 the south, promises to receive greater consideration in the 

 middle west. Utility companies have pleaded that they can- 

 not extend their lines to farms, except in certain areas where 

 l>opuIation is concentrated, on a profitable basis. The cost 

 of transmission lines erected by power companies and the 

 minimum rates asked, on the other hand, have been such as 

 to forestall any general extension of service to farms. More 

 recently companies generally report that they have been hard 

 pressed to pay operating costs and meet their interest and 

 payments on bonded indebtedness. This is especially true 

 where valuations were written up during the period of post- 

 war inflation which culminated in the crash of 1929. 



It might be appropriate here to mention the recent 200- 

 page report of the New York Power Authority on the finan- 

 cial structure of the electric companies serving New York 

 City. "Government reports are notoriously dull, but if one 

 has a liking for tales of modern brigandage and is not too 

 insi.stent on the ultimate triumph of virtue, this document 

 is worth the time spent on it," comments THE NATION. 



".attention has been centered chiefly on the inflation of 

 the origrinal capitalization — which in the case of the New 

 York electric companies was 179,000,000, or more than half 

 the total fixed capital. But this piece of highwaymanship is 

 but a minor part of the entire write-up. The excess profits 

 obtained on the basis of the original water have constantly 

 been reinvested in such a way as to widen the breach between 

 the true and the nominal value of the plant 



".\fter making a careful analysis of all these factors, the 

 Power Authority estimates the total amount of water in 

 the fixed capital of New York companies to be at least $280,- 

 000,000 or 62 per cent of the true capital value of the exist- 

 ing properties. .\t seven per cent, this means an excess an- 

 nual charge of 119,500,000 to the consumers— nearly $10 per 

 meter. If the City had purchased the electric system in 1907 



Is This The Answer? 



instead of establishing a system of regulation, and had dune 

 its financing at 4.5 per cent, the gross revenue colleoted from 

 consumers would have covered all costs including deprecia- 

 tion, taxes, and interest, wiped out all indebtedness, and pro- 

 vided a surplus of $140,000,000 for the city treasury." 



It is such exploitation as revealed by the New York Power 

 Authority that is responsible for legislation kow pending in 

 congress to dissolve utility holding companies unless they can 

 show some reason for existence besides that of making money 

 for a few individual's. 



Farmers are not unfamiliar with instances in which local 

 telephone lines have been sold, the capitalization written up 

 and a new and higher schedule of rates adopted based on the 

 fictitious values. Becau.se there has been skullduggery and 

 profiteering in some utilities does not mean that all com- 

 panies are tarred with the same stick. There undoubtedly 

 are many sound operating companies with honest and effiWent 

 management that are doing their best to serve the public. 

 Thinking farmers recognize that they are not going to get 

 electric service for nothing, that at best it will cost the farmer 

 more than the city dweller. A dozen or more city families may 

 be supplied with no greater investment in transmission lines 

 than is needed to supply one farm family. 



There needs to be more investigation and study of pos- 

 sibilities in reducing the cost of transmission lines and 

 equipment to a minimum. The problem must be approached 

 not so much from the profit motive in building the lines as 

 from the motive of rendering electric service if possible at a 

 fair return on the investment. The initiative might well be 

 taken by the power companies for if they do not make a 

 genuine effort to extend their service throughout rural areas 

 where farmers want such service, the clamor for government 

 intervention and assistance will grow^EDITOR. 



The index of farm prices in mid-February at 111 per cent 

 of pre-war was the highest since October 1930 and compares 

 with 107 in January and 8.3 in February 19.34. Prices paid 

 by farmers is estimated at 127 for February and the ex- 

 change value per unit of farm products for commodities 

 bought by farmers was at 87 per ceat. 



APRIL, 15S5 



11 



