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Show T Western Resources '.WRAP-UP REA fights back on proposed budget cuts i BvHeleneC.Monberg ! winston-The Reagan Ad-1 Ad-1 'iSbas a bear by the tail in its cutback on both farm support fand the availability of ' credit to farmers and rural bear is rural America. Administration feels the federal berthas become too much of a Tto the nation's farmers and to p residents generally It wants to ,n that crutch materially. It is M down the road to the time when fleets for rural electrification, iffihone hookup and cable TV ' privately funded. '' hid, the National Rural Electric Association (NRECA), one : Airiest effective of the lobbies with I rural America, replies that the 1 C,an Administration's program Sizes rural America," which has iisproportionate share of poor low-i low-i jonie people. I At Administration feels that credit I' iaiMd in the private money markets iiirtners and farm organizations will y Bore efficiently used than money wowed from Uncle Sam. NRECA sects that theory out of hand. There is iMhistory of skepticism about Wall Sset and private money markets surally in rural America. He Administration argues that the ifjeral Rural Electricifaction Adoration Ad-oration (REA), created in 1936 to liig power to rural areas, "has jtjely accomplished its purpose; to de the basic investment captial Kssary to provide electric and Aphone service in rural areas. More ias 99 percent of all farms now have -jilelectric service." The bulk of borrowing is now for per generation and power system ijnvements, costs that should be srae by system users" themselves, itethanby the federal government. -Customers of REA-financed utilities raive power and telephone services" mREAloan programs "at rates that wage 8-12 percent below customers i non-REA financed utilities," the ttainistration state on Feb. 18. DISPUTE OVER RATES -' Mso, NRECA snaps back.- Robert tftrtridge, NRECA's executive vice tsident and day-to-day manager, on Jtah 16 presented to the House Apiculture Committee NRECA's own into which indicate rural power nls "are already running an average i 1! percent above those of other fflties " Its studies are based on data tained from REA and the Depart-Milof Depart-Milof Energy from residential power Ms in all states as of Jan. 1, 1980. NRECA calls to inquirers' attention a kta that James L. Grahl, general Magerof the Basin Electric Power Operative of Bismarck, N.D., which ros 100 distribution cooperatives in states, wrote on Feb. 23. Grahl ail Basin is currently paying 13-14 ("cent interest on its borrowings from Federal Financing Bank (FFB). These exbitant interest rates have to Hie main cause of 20-30 percent "rose in our costs of electricity each W lor the past three years. These increases are, of course, passed on ""consumers" served by Basin as a "Wesale power supplier in the states 'Colorado, Wyoming, Montana, North WSouth Dakota, Nebraska, Iowa and ?"Mota, Grahl wrote Fred G. ton of Mid-West Electric Con- Association in Evergreen Colo. administration plans to cut back REA loan programs and the ability of credit thru FFB will ?y add to these rate increases, i maintained. "The people and hS68 ln 01(5 rural areas already ""Pressed by the impact of high jest rates, inadequate farm prices 'unfavorable weather. A further iSary increase in the costs i W?!?ty wiU iust make matters Grahl wrote Simonton. effect of the Administration's L 0 cut back on REA and other : m,.,1 Programs will be counter- 'Cfar as fi&htin8 inflation fiCKaC,COrding t0 Gr3hl- The ' WacksinREA "will make lMt )0riallthe more difficult and Wof L add to inflation in the ; m ' , ,S1C commodities and it will 'iis, it y the Consumer Price not reduce federal ex-W?f ex-W?f "0r wiU il change the for credit," Grahl stated. Sli??H'EST IMPACTED iCi. y NRECA show 1031 , 5on '"growng cooperatives in the ' ratiJn the West so the Ad-ttJr5 Ad-ttJr5 Proposals concerning ; ve a major impact ment T 8 growth in meT& of (L running somewhat l"ironm I1 of the nation, the Sn1-and Energy ' toT Dlvls,on of REA told purees Wrap-up (WRW) on rs r3ntives served 8.7 million ""'heendrf "g 25 rnillion people ' '""Wing iLh 1979' and meter growth i 4vea"Bp7 66,1 3 5 and 4 Percent ' -upC',':?3'11-That represents a POtalUt 250,000 additional rural population served by rural cooperatives annually, it estimated. Of the 150 loan applications listed (all are not listed) as pending before REA on Jan. 1, 1981, some 81 were from rural cooperatives in the 17 Western states in the reclamation West and Alaska. The West had a virtual lock on rural electric cooperative growth, on the basis of average number of kilowatts used per hour for the period 1973-79 according to NRECA. The 10 fastest growing cooperatives during that period were Duncan Valley Electric Cooperative, Duncan, Ariz.; Delta-Montrose Delta-Montrose Electric Association, Delta, Colo.; LaPlata Electric Assn. Durango, Colo.; Lincoln County Power District No. 1, Pioche, Nev.; Columbus, Electric Cooperative, Deming, N.M.; Umatilla Electric Cooperative Assn.', Hermiston, Ore.; Prairie Power Cooperative, Fairfield, Idaho; Copper Valley Electric Assn., Glennallen, Alaska; Continental Divide Electric Cooperative, Grants, N.M., and McKenzie Electric Cooperative, Watford City, N.D. Increases in population in rural areas and higher demands for electricity due to irrigation water developments, energy developments and other mineral developments in the West have caused the increases in electrical energy use in these high growth cooperatives, according to REA's energy forecasting unit. REA told WRW on March 18 there appears to be a levelling off of growth in the rural areas. This is a new trend. Former REA Administrator Robert W. Feragen told WRW just before he left his office in January that the availabilities of amenities (electricity, telephones and cable TV) had caused more people recently to move to rural areas. Today's record high cost of transportation is now slowing that trend, REA said. ISSUE JOINED Two separate teams from NRECA were sent by Partridge this week to seven locations through the country to brief representatives of local cooperatives in "the Administration's plans to eliminate a large part of the long , standing rural , electric, loan program." One team started in Columbus, Ohio, on March 18, then went on to Seattle on March 18, Dallas on March 19, and Atlanta on March 20. Another started in Kansas City on March 18, went on to Denver on March 19 and to Minneapolis on March 20. The most critical of the Administration's Ad-ministration's proposals is a planned termination of FFB funding of REA loan guarantees as of Oct. 1, 1981. It is most critical, NRECA told WRW on March 17, because it would take merely administrative action to cut REA out of FFB operations; Congress would not have to act on it. Since FFB was set up in 1974 it has made money available at levels up to $6-$7 billion annually for power supply and transmission projects which carried REA loan guarantees and approval. Recently the interest rate to rural cooperatives has been about 13 percent on the average. NRECA said this action "will force generation and transmission cooperatives to the open market for their. ..investment capital at interest rates estimated at least 1 percent higher than FFB." Partridge told the House Budget Committee on March 12 he was concerned con-cerned about the private money market's "ability and-or willingness adequately to finance electric cooperatives with long-term loans on a sustained basis." He also said "a major question remains as to the terms and conditions under which those loans would be made." The Congressional Budget Office noted this Administration Ad-ministration proposal is off-budget, hence would not affect the on-budget deficit altho it would affect the total outstanding public debt of the United States by cutting back on it slightly. The Administration proposes to cut back REA direct lending by $187 million in 1981 and by $400 million in 1982. It proposes to end REA loans to telephone companies and cooperatives under the rural telephone program. It proposes to discontinue the two percent direct loans and make all REA loans carry at least a five percent interest in-terest rate. It proposes to have $150 million reserved for these loans, with 70 percent of a project carrying a 5 percent per-cent REA insured rate, and the other 30 percent to be supplied by other sources such as the Rural Utilities Cooperative Finance Corporation (CFC), a lending institution set up in 1970 in which cooperatives own stock, or 12 district banks for cooperatives with the central bank headquartered in Denver. It would deny direct 5 percent loans for generation and transmission cooperatives and substitute instead privately originated loans carrying an REA guarantee effective on April 1. The Administration claims these actions would reduce direct federal lending by over $33 billion between 1982-86 and cut federal interest subsidy costs by $270 million in the same time period. It also proposes to cut a number of Farmers '-Home --"Administration program. NRECA has estimated the collective value of these programs at 704,000 new jobs since 1961. "Quite a blow to rural America," it said. 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