Out of Darkness
Against industry opposition,
REA helped ‘wire’ farms,
rural areas at remarkable rate
By Anne Mayberry
Rural Utilities Service
USDA Rural Development
Editor’s note: This is the
second of two articles
marking the 75th
anniversary of the Rural
Electrification
Administration (forerunner
of today’s Rural Utilities
Service). The first article
appeared in the March-April issue and is available
online at:www.rurdev.usda.gov/rbs/
pub/openmag.htm
“In 1936, we witnessed the most spectacular increase of rural
electrification in the history of the United States.” That was how
Morris Cooke, the first administrator of the Rural Electrification
Administration, began his 1936 report to Congress.
May 2010 marks the 75th anniversary of the creation of the Rural
Electrification Administration (REA), established in 1935 by executive
order as an independent agency to deliver electric service to rural
areas. Cooke had headed the Committee on the Relation of Electricity to
Agriculture, established by the electric industry to address rural power issues
before being named administrator to the agency.
Despite Cooke’s experience, his was no easy task. The new agency was
overwhelmed with requests to bring electricity to farms nationwide. And
while Cooke tried to work with the electric industry, opposition by utility
companies to building electric infrastructure in rural areas remained strong.
Cooke understood that the new agency needed permanent status and
worked with Senator George Norris of Nebraska, often referred to as the
champion of public power, on legislation to make REA a permanent agency.
The bill passed Congress May 11, 1936. Cooke’s next task was to find a
successor.
That successor turned out to be John Carmody, who came to
REA from the National Labor Relations Board. He also had
experience in the coal and steel industries. Under Carmody’s
leadership, the number of farms with electric power tripled.
The REA’s 1937 report noted: “The demand for rural
electrification projects far exceeds our ability to supply it…We
here at REA believe in the social soundness of the program set
up by the Congress…We believe in the economic wisdom of
bringing farm families out of the dark into the light...We are
fully conscious that the Congress gave us an extremely difficult
task….
“We have reminded borrowers that they and REA are really in
partnership…We are dealing with public funds, and we must
keep our affairs in the open and on the highest possible plane of
efficiency.”
Despite challenges, the new agency achieved rapid success.
The report noted that one farm in 10 had electricity when
President Franklin D. Roosevelt established the REA in 1935. By
1937, the gap was beginning to close — electricity had been
extended to one farm in six, or about 18 percent of all farms.
REA sets standards
Reducing the costs of bringing electric power to the
countryside was crucial to the success of the effort. REA’s
research section looked for ways to reduce costs and
implemented standards to make bulk purchases. These standards
would also facilitate the ease of working on equipment so that
linemen in rural areas nationwide would all use the same
materials.
REA was established as an independent agency, but on July 1,
1939, it was transferred to the U.S. Department of Agriculture.
The transition was not a smooth one, as the independent agency
was not accustomed to
following government
procedures.
Yet REA continued
to loan funds for
construction of electric
power in rural areas.
By the end of 1939,
nearly all of the $40
million appropriated
to REA had been
allotted, most of it to
the new rural electric
cooperatives which it
worked closely with.
At this point, 25
percent of the farms in
the country had
electric service.
Electrification stimulates
rural economy
“REA, its borrowers and the farmers
themselves are turning more and more
to the productive uses of electricity,
tending to reduce farm costs and
increase farm income,” the 1939 report
to Congress noted.
Among the challenges the new
agency faced was how to deliver power
to poorer farmers. “As construction
lines move forward, REA systems
necessarily move from areas which are
not densely populated but reasonably
prosperous to thinner territory, where
low income and limited resources offer
a new challenge. REA aims to make
that service a reality.”
One solution REA adopted was for
farmers to work with REA crews for
“payment in kind.”
By 1940, REA assisted rural electric
cooperatives in the purchase of electric
generating facilities. The 1940 report of
the REA administrator noted: “The
wholesale power bill is a rural electric
system’s heaviest single item of expense.
A difference of a few mills per kilowatt
hour in the cost of wholesale energy
may spell the difference between
success and failure of a system.”
From July 1948 to July 1949, the
greatest expansion of rural
electrification in history was achieved.
Nearly 80 percent of all farms in the
country now had electricity. Power
consumption climbed as rural residents
increased their use of electric
equipment, both on the farm and in
their homes.
By 1950, the newly established rural
telephone program was underway and
nearly $3.5 million in loans helped
provide telephone service as rapidly as
the procurement of trained personnel
would permit.
In testimony to the House
Agriculture Committee on May 3,
1951, REA Administrator Claude
Wickard said: “In both the rural
telephone program and the electric
program, the government is helping
local people and small business
enterprises help themselves.”
REA looks for capital
By 1969, REA’s focus shifted from
expansion of service to finding sources
of funding. The administrator’s report
that year noted that: “Few projects of
the federal government have created
benefits to equal those which have
flowed from these two programs….
Despite these accomplishments, the
need for new investment capital in the
two programs is greater now than at
any previous time….
“Like the farmer, rural electrification
and [telephone service] are never caught
up on their work. There is always the
next phase of growth to be planned for,
financed and carried out.”
The demand for rural electric
financing grew rapidly. The
administrator’s 1972 report noted that
for the first 30 years of REA history,
borrowers enjoyed favorable conditions
for increasing sales and declining costs.
By the 1970s, those conditions had
changed radically. The investment per
kilowatt of capacity had doubled,
environmental standards required
additional investment, transmission
costs had increased and the price of
fossil fuels had climbed.
On Dec. 29, 1972, REA announced
that it would no longer make loans.
Instead, funding would be made at
higher interest rates under new Farm
Bill provisions that created a Rural
Development Act. That announcement
triggered a strong reaction from rural
electric cooperative members, who
feared that the change would result in
sharply higher rural electric costs.
Electric co-op members traveled to
Washington to discuss the decision with
their members of Congress.
These efforts culminated in the
passage of legislation that expanded
financial resources available to both
rural electric and telephone
cooperatives, which was signed by
President Richard Nixon in May 1973.
The result was that more than $1.2
billion in financing was available to
rural cooperative utilities in 1973,
resulting in the highest amount of loans
made in the program’s history. “Fiscal
1973 was a remarkable year in the
history of the Rural Electrification
Administration,” the administrator’s
report noted.
By the close of 1980, more than 30
million rural residents were receiving
electric power as a result of REA
financing. By 1985, 99 percent of farms
had electricity and 96 percent had
telephone service. The agency’s focus
had turned to financial and
administrative improvements.
REA to RUS
Reorganization of USDA during the
1990s emphasized rural economic
development, established new programs
and revised funding and regulatory
provisions. In October 1994, the REA
merged with water and wastewater
programs to become the Rural Utilities
Service (RUS).
Today, RUS is part of USDA Rural
Development, working in partnership
with the Rural Housing Service and
Rural Business-Cooperative Service to
offer a variety of funding programs for
rural areas.
The RUS portfolio has grown to
more than $50 billion and includes
federal financing for electric and
renewable energy, water and
wastewater, telecommunications and
broadband infrastructure projects.
Today, the RUS electric program
funds an increasing number of
renewable energy projects — such as
wind turbines — and new technologies
to reduce emissions, including carbon
sequestration. “Rural electrification
fueled the economy 75 years ago and
greatly improved the quality of life in
rural America. Actions that USDA
Rural Development takes today will
continue to drive progress in rural
communities,” says RUS Administrator
Jonathan Adelstein.
