B-134138, OCT 15, 1958

B-134138, OCT 15, 1958

PRECIS-UNAVAILABLE

SECRETARY OF AGRICULTURE:

THE ACTING SECRETARY OF AGRICULTURE, BY LETTER DATED AUGUST 7, 1958, HAS REQUESTED THAT WE RECONSIDER OUR LETTER OF JULY 21, 1958, B-134138, TO YOU, CONCERNING A PORTION ($120,000) OF A LOAN OF $11,173,000 MADE BY THE RURAL ELECTRIFICATION ADMINISTRATION (REA) TO CENTRAL IOWA POWER COOPERATIVE (CIPCO) WHICH PORTION HAS BEEN USED BY CIPCO TO FURNISH POWER TO A MEMBER COOPERATIVE FOR RESALE BY THE MEMBER IN PART TO LEHIGH SEWER PIPE & TILE COMPANY (LEHIGH). ALSO, THE NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION AND THE COOPERATIVES INVOLVED (CIPCO AND GREENE COUNTY RURAL ELECTRIFICATION COOPERATIVE (GREENE COUNTY)) HAVE SUBMITTED ADDITIONAL INFORMATION AND ARGUMENTS CONCERNING OUR ABOVE MENTIONED LETTER AND SUCH INFORMATION AND ARGUMENTS WILL ALSO BE CONSIDERED IN CONNECTION WITH OUR REVIEW.

IN OUR LETTER OF JULY 21, WE SAID, IN EFFECT, THAT IT WAS CLEAR FROM THE LEGISLATIVE HISTORY OF THE CENTRAL STATION SERVICE LIMITATION CONTAINED IN SECTIONS 2 AND 4 OF THE RURAL ELECTRIFICATION ACT OF 1936, AS AMENDED, 7 U.S.C. 902, 904, TOGETHER WITH OPINION NO. 4506, DATED NOVEMBER 24, 1942, RENDERED BY A FORMER SOLICITOR OF YOUR DEPARTMENT, THAT THE PURPOSE OF THE LIMITATION WAS TO EXCLUDE LOANS FOR THE PURPOSE OF PARALLELING EXISTING SYSTEMS OR CREATING COMPETITION WITH EXISTING FACILITIES BY PROHIBITING THE USE OF LOAN FUNDS FOR CONSTRUCTION OF TRANSMISSION LINES AND SUBSTATIONS TO FURNISH POWER TO AN AREA ALREADY SERVED BY PRIVATE POWER COMPANIES WHEN SUCH COMPANIES ARE WILLING TO PROVIDE ADEQUATE CENTRAL STATION SERVICE TO PERSONS WITHIN THE AREA WHO ARE NOT TIED TO THE POWER LINES. WE FURTHER STATED THEREIN THAT ASIDE FROM THE LEGISLATIVE HISTORY OF THE CENTRAL STATION SERVICE LIMITATION WE ARE OF THE VIEW THAT WHERE A NEW BUILDING OR PLANT OF AN INDUSTRIAL COMPANY IS LOCATED APPROXIMATELY 160 FEET FROM AN OLD BUILDING OR PLANT OF THE SAME COMPANY ON THE SAME TRACT OF GROUND AND THE OLD PLANT IS RECEIVING CENTRAL STATION SERVICE FROM A POWER SUPPLIER WHO HAS OFFERED TO FURNISH ADEQUATE CENTRAL STATION SERVICE TO THE NEW PLANT, THERE APPEARS LITTLE BASIS FOR CONSIDERING THE NEW PLANT A PERSON NOT RECEIVING CENTRAL STATION SERVICE SO AS TO AUTHORIZE THE MAKING OF A LOAN, OR THE USE OF LOAN FUNDS, UNDER SECTION 4 OF THE RURAL ELECTRIFICATION ACT FOR THE PURPOSE OF CONSTRUCTING FACILITIES TO FURNISH ELECTRIC SERVICE TO THE NEW PLANT. SPECIFICALLY WE THEN CONCLUDED THAT THERE WAS AMPLE JUSTIFICATION FOR HOLDING IN THE INSTANT CASE THAT THE PORTION OF THE LOAN MADE FOR THE CONSTRUCTION OF THE LEHIGH TAP WAS NOT AUTHORIZED AND THAT STEPS SHOULD BE TAKEN BY YOUR DEPARTMENT TO REDUCE THE $11,173,000 LOAN BY THE AMOUNT ($120,000) ADVANCED TO CONSTRUCT THE LEHIGH TAP AND TO RECOVER IMMEDIATELY FROM CIPCO THAT AMOUNT. WE INFORMED YOU THAT IN THE EVENT SUCH ACTION WAS NOT TO BE UNDERTAKEN, AND YOU SO ADVISED US, WE WOULD BE REQUIRED TO REPORT THE MATTER TO THE CONGRESS.

IN EFFECT WE ARE ASKED TO RECONSIDER NOT ONLY OUR VIEWS AS TO THE PARTICULAR CASE INVOLVED IN OUR LETTER OF JULY 21 BUT ALSO THE STATEMENT THEREIN IN CONNECTION WITH THE CASE TO THE EFFECT THAT THE PURPOSE OF THE CENTRAL STATION SERVICE LIMITATION WAS TO EXCLUDE LOANS FOR THE PARALLELING OF EXISTING SYSTEMS OR CREATING COMPETITION WITH EXISTING FACILITIES BY PROHIBITING THE USE OF LOAN FUNDS FOR CONSTRUCTION OF TRANSMISSION LINES AND SUBSTATIONS TO FURNISH POWER TO AN AREA ALREADY SERVED BY PRIVATE POWER COMPANIES WHEN SUCH COMPANIES ARE WILLING TO PROVIDE ADEQUATE CENTRAL STATION SERVICE TO PERSONS WITHIN THE AREA WHO ARE NOT TIED TO THE POWER LINES.

WE WILL DISCUSS THIS MATTER FIRST.

THE REQUEST FOR RECONSIDERATION OF OUR STATEMENT AS TO THE IMPORT OF THE LEGISLATIVE HISTORY OF THE CENTRAL STATION SERVICE LIMITATION IS BASED ON SEVERAL GROUNDS, MAINLY, THAT THE CLEAR IMPORT OF THE LEGISLATIVE HISTORY OF THE LIMITATION IS CONTRARY TO THE VIEW EXPRESSED BY US, THAT WE OMITTED CERTAIN PORTIONS OF THE LEGISLATIVE HISTORY WHICH CONVEY A DIFFERENT IMPRESSION OF THE MATTER, THAT OUR VIEW IS CLEARLY INCONSISTENT WITH THE CONGRESSIONAL UNDERSTANDING OF THE SCOPE OF REA'S LENDING POWERS AS DISCLOSED BY CONGRESSIONAL KNOWLEDGE OF, AND ACQUIESCENCE IN, REA'S ADMINISTRATIVE INTERPRETATIONS OVER THE ENTIRE HISTORY OF THE RURAL ELECTRIFICATION PROGRAM, THAT OUR INTERPRETATION OF THE PROVISION WOULD ADD A NEW LIMITATION ON REA'S LENDING AUTHORITY, AND THAT THE DECISION WOULD OVERRIDE WHAT IN PREVIOUS COMPTROLLER GENERAL'S DECISIONS AND AT OTHER POINTS IN OUR LETTER OF JULY 21 IS CONCEDED TO BE THE PRIMARY RESPONSIBILITY OF THE ADMINISTRATOR OF REA.

GENERALLY, THE NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION TAKES THE SAME POSITION AS YOUR DEPARTMENT AND FURTHER CONTENDS THAT THE LANGUAGE IN SECTIONS 2 AND 4 OF THE RURAL ELECTRIFICATION ACT OF 1936 PROVIDING FOR LOANS FOR FURNISHING ELECTRIC ENERGY "TO PERSONS IN RURAL AREAS WHO ARE NOT RECEIVING CENTRAL STATION SERVICE," IS CLEAR AND UNAMBIGUOUS AND HENCE, THE LEGISLATIVE HISTORY CANNOT BE UTILIZED TO CHANGE THE CLEAR AND UNAMBIGUOUS LANGUAGE OF THE STATUTE. THE ASSOCIATION FURTHER CONTENDS THAT WE "DID NOT EVEN HAVE THE RIGHT IN THIS INSTANCE TO LOOK BEYOND THE LANGUAGE OF THE ACT ITSELF." THE ASSOCIATION CITES SUTHERLAND ON STATUTORY CONSTRUCTION AND A NUMBER OF DECISIONS OF THE UNITED STATES SUPREME COURT TO SUPPORT THESE CONTENTIONS.

DESPITE ANY VIEW THAT THE LANGUAGE IN QUESTION IS CLEAR AND UNAMBIGUOUS THIS DOES NOT, IN OUR OPINION, PRECLUDE REFERENCE TO THE LEGISLATIVE HISTORY BY US IF ONLY TO DETERMINE THAT SUCH IS THE CASE. CONCERNING SUTHERLAND, STATUTORY CONSTRUCTION, NOTE SECTION 4502 THEREOF:

"THE MOST COMMON RULE OF STATUTORY INTERPRETATION IS THE RULE THAT A STATUTE CLEAR AND UNAMBIGUOUS ON ITS FACE NEED NOT AND CANNOT BE INTERPRETED BY A COURT AND ONLY THOSE STATUTES WHICH ARE AMBIGUOUS AND OF DOUBTFUL MEANING ARE SUBJECT TO THE PROCESS OF STATUTORY INTERPRETATION. THIS RULE HIDES, ALTHOUGH IT USES MANY WORDS TO DISGUISE IT, THE BASIC FALLACY THAT WORDS HAVE MEANING IN AND OF THEMSELVES. *** A WORD IS BUT A SYMBOL WHICH MAY STAND FOR ONE OR AN INNUMERABLE NUMBER OF OBJECTS.

IT IS ONLY AS CUSTOM AND USAGE AND AGREEMENT ATTACH A PARTICULAR MEANING TO A PARTICULAR WORD THAT IT HAS ANY SIGNIFICANCE IN RELATION TO EITHER A TANGIBLE OR AN INTANGIBLE OBJECT. THUS THE WORDS USED IN A STATUTE ARE ALWAYS OF UNCERTAIN MEANING."

FURTHER THE FOLLOWING STATEMENT APPEARS IN SECTION 4706 OF SUTHERLAND, STATUTORY CONSTRUCTION:

"THE LITERAL INTERPRETATION OF THE WORDS OF AN ACT SHOULD NOT PREVAIL IF IT CREATES A RESULT CONTRARY TO THE APPARENT INTENTION OF THE LEGISLATURE AND IF THE WORDS ARE SUFFICIENTLY FLEXIBLE TO ADMIT OF A CONSTRUCTION WHICH WILL EFFECTUATE THE LEGISLATIVE INTENTION. THE INTENTION PREVAILS OVER THE LETTER, AND THE LETTER MUST IF POSSIBLE BE READ SO AS TO CONFORM TO THE SPIRIT OF THE ACT. ***."

MOREOVER, AS TO DECISIONS OF THE UNITED STATES SUPREME COURT, IN THE CASE OF BOSTON SAND AND GRAVEL COMPANY V. UNITED STATES, 278 U.S. 41, 48, THE COURT SAID:

"*** IT IS SAID THAT WHEN THE MEANING OF LANGUAGE IS PLAIN WE ARE NOT TO RESORT TO EVIDENCE IN ORDER TO RAISE DOUBTS. THAT IS RATHER AN AXIOM OF EXPERIENCE THAN A RULE OF LAW, AND DOES NOT PRECLUDE CONSIDERATION OF PERSUASIVE EVIDENCE IF IT EXISTS. ***"

IN HARRISON V. NORTHERN TRUST COMPANY, 317 U.S. 476, 479, THE COURT SAID:

"BUT WORDS ARE INEXACT TOOLS AT BEST, AND FOR THAT REASON THERE IS WISELY NO RULE OF LAW FORBIDDING RESORT TO EXPLANATORY LEGISLATIVE HISTORY NO MATTER HOW 'CLEAR THE WORDS MAY APPEAR ON "SUPERFICIAL EXAMINATION."'

UNITED STATES V. AMERICAN TRUCKING ASSNS., 310 U.S. 534, 543-44. SEE ALSO UNITED STATES V. DICKERSON, 310 U.S. 554, 562. ***"

UNITED STATES V. DICKERSON, 310 U.S. 554, 561, CONTAINS THE FOLLOWING LANGUAGE:

"THE RESPONDENT CONTENDS THAT THE WORDS OF SEC. 402 ARE PLAIN AND UNAMBIGUOUS AND THAT OTHER AIDS TO CONSTRUCTION MAY NOT BE UTILIZED. IS SUFFICIENT ANSWER TO DENY THAT SUCH WORDS WHEN USED IN AN APPROPRIATION BILL ARE WORDS OF ART OR HAVE A SETTLED MEANING. SEE UNITED STATES V. PERRY, 50 F. 743, 748 (C.C.A. 8TH). THE VERY LEGISLATIVE MATERIALS WHICH RESPONDENT WOULD EXCLUDE REFUTE HIS ASSUMPTION. IT WOULD BE ANOMALOUS TO CLOSE OUR MINDS TO PERSUASIVE EVIDENCE OF INTENTION ON THE GROUND THAT REASONABLE MEN COULD NOT DIFFER AS TO THE MEANING OF THE WORDS. LEGISLATIVE MATERIALS MAY BE WITHOUT PROBATIVE VALUE, OR CONTRADICTORY, OR AMBIGUOUS, IT IS TRUE, AND IN SUCH CASES WILL NOT BE PERMITTED TO CONTROL THE CUSTOMARY MEANING OF WORDS OR OVERCOME RULES OF SYNTAX OR CONSTRUCTION FOUND BY EXPERIENCE TO BE WORKABLE; THEY CAN SCARCELY BE DEEMED TO BE INCOMPETENT OR IRRELEVANT.

SEE BOSTON SAND & GRAVEL CO. V. UNITED STATES, SUPRA, AT 48.

THE MEANING TO BE ASCRIBED TO AN ACT OF CONGRESS CAN ONLY BE DERIVED FROM A CONSIDERED WEIGHING OF EVERY RELEVANT AID TO CONSTRUCTION. ***"

(WE REALIZE THAT THE LAST QUOTED STATEMENT WAS MADE IN CONNECTION WITH THE LANGUAGE USED IN AN APPROPRIATION ACT. HOWEVER, WE FEEL THAT THE LANGUAGE IS APPROPRIATE IN CONNECTION WITH THE INTERPRETATION OF ANY STATUTE.)

ANOTHER DECISION TO THE SAME EFFECT IS PUERTO RICO V. THE SHELL CO., 302 U.S. 253, 258, WHEREIN THE COURT SAID:

"*** WORDS GENERALLY HAVE DIFFERENT SHADES OF MEANING, AND ARE TO BE CONSTRUED IF REASONABLY POSSIBLE TO EFFECTUATE THE INTENT OF THE LAWMAKERS; AND THIS MEANING IN PARTICULAR INSTANCES IS TO BE ARRIVED AT NOT ONLY BY A CONSIDERATION OF THE WORDS THEMSELVES, BUT BY CONSIDERING, AS WELL, THE CONTEXT, THE PURPOSES OF THE LAW, AND THE CIRCUMSTANCES UNDER WHICH THE WORDS WERE EMPLOYED.

ATLANTIC CLEANERS & DYERS V. UNITED STATES, 286 U.S. 427, 433; HELVERING V. STOCKHOLMS ENSKILDA BANK, 293 U.S. 84, 86, 87 - 88. ***"

FROM THE FOREGOING, IT APPEARS PERMISSIBLE TO REFER TO THE LEGISLATIVE HISTORY OF A STATUTE, OR THE PROVISIONS THEREOF, TO DETERMINE THE INTENT OF THE CONGRESS IN ENACTING THE STATUTE, EVEN THOUGH THE WORDS OF THE STATUTE ARE CLEAR AND UNAMBIGUOUS, ALTHOUGH WE REALIZE THERE ARE OTHER SUPREME COURT CASES TO THE CONTRARY.

BEFORE DISCUSSING THE LEGISLATIVE HISTORY OF THE CENTRAL STATION SERVICE LIMITATION AS CONTAINED IN SECTIONS 2 AND 4 OF THE RURAL ELECTRIFICATION ACT OF 1936 WE WOULD LIKE TO SAY THAT THERE HAS APPARENTLY BEEN A MISUNDERSTANDING AS TO THE SCOPE OF THE STATEMENT IN OUR LETTER CONCERNING THE PURPOSE OF THIS LIMITATION AS DISCLOSED BY THE LEGISLATIVE HISTORY THEREOF. WHILE WE USED THE WORD "AREA" IN OUR STATEMENT, WE HAD IN MIND THE FACTUAL SITUATION INVOLVED IN THE CASE WE WERE CONSIDERING, THAT IS, WHERE THE UNSERVED PERSON WAS LOCATED, IN EFFECT, ON, I.E., ALONG SIDE OF, EXISTING POWER LINES AND THE OWNER OF THE LINES WAS READY, WILLING AND ABLE TO FURNISH ADEQUATE CENTRAL STATION SERVICE TO THE UNSERVED PERSON AT A REASONABLE PRICE. YOU WILL NOTE THAT IN THE STATEMENT IN QUESTION WE USED THE PHRASE "WHO ARE NOT TIED TO THE POWER LINES."

WE CONTEMPLATED ONLY SITUATIONS WHERE THE UNSERVED PERSONS WERE LOCATED ON A POWER LINE, THAT IS, WHERE THE POWER LINE RAN TO OR ALONG SIDE OF, THE PROPERTY TO BE SERVED AND WHERE THE OWNER OF THE POWER LINE WAS READY, WILLING AND ABLE TO FURNISH ADEQUATE CENTRAL STATION SERVICE AT A REASONABLE PRICE TO THE UNSERVED PERSON. WE DID NOT INTEND TO IMPLY THAT A LOAN COULD NOT BE MADE FOR THE PURPOSE OF FURNISHING ELECTRIC ENERGY TO UNSERVED PERSONS LOCATED IN AREAS "GENERALLY" SERVED BY A POWER SUPPLIER, SUCH UNSERVED PERSONS NOT BEING ON, I.E., LOCATED ALONG SIDE OF OR ADJACENT TO, THE POWER LINES. IN OTHER WORDS WE DID NOT INTEND TO IMPLY THAT A LOAN COULD NOT BE MADE TO SERVE UNSERVED PERSONS WHO MIGHT BE SERVED BY EXISTING CENTRAL STATIONS IF SUCH STATIONS EXTENDED THEIR LINES, SUCH STATIONS HAVING LINES IN THE "GENERAL AREA" OF THE UNSERVED PERSONS.

YOUR DEPARTMENT CONTENDS THAT CERTAIN PORTIONS OF THE DEBATE IN THE SENATE, WHICH WE OMITTED FROM OUR LETTER OF JULY 21, CHANGE THE SENSE OF THE DEBATE AND INDICATE AUTHORIZATION TO SERVE UNSERVED PERSONS IN AREAS PURPORTEDLY SERVED BY ANOTHER SUPPLIER. ONE OF THE OMITTED PORTIONS READS AS FOLLOWS (80 CONGRESSIONAL RECORD 2751, PART 3):

"MR. MCNARY. I AGREE WITH THAT, BUT SUPPOSING THAT SOME CENTRAL STATION BY THE CONSTRUCTION OF DISTRIBUTION LINES AND TRANSMISSION LINES COULD SUPPLY THE ENERGY NEEDED IN A GIVEN AREA, COULD THE MONEY BE USED FOR THAT PURPOSE?

"MR. NORRIS. IF I UNDERSTAND THE SENATOR'S QUESTION CORRECTLY, IT IS SUPPOSING SOME LOCALITY BE NOW SUPPLIED FROM A CENTRAL STATION, MIGHT IT BE POSSIBLE FOR THAT CENTRAL STATION TO EXTEND ITS LINES FURTHER AND WOULD THE GOVERNMENTAL AGENCY BE PROHIBITED FROM ENTERING THAT TERRITORY? THAT IS THE QUESTION, I THINK NOT."

WE DO NOT FEEL THAT THE ABOVE QUOTED COLLOQUY REQUIRES A DIFFERENT CONCLUSION THAN AS INDICATED ABOVE; THAT UNDER SECTIONS 2 AND 4 OF THE RURAL ELECTRIFICATION ACT LOANS MAY NOT BE MADE FOR THE PURPOSE OF FURNISHING ELECTRIC ENERGY TO PERSONS LOCATED ON, I.E., ADJACENT TO, POWER LINES (POWER LINES RUNNING ALONG SIDE OF OR TO THEIR PROPERTY), THE OWNER OF THE POWER LINES FURNISHING ADEQUATE CENTRAL STATION SERVICE TO OTHER PERSONS LOCATED ON THE LINES AT A REASONABLE PRICE AND BEING READY, WILLING AND ABLE TO FURNISH THE SAME TO THESE UNSERVED PERSONS. AS WE UNDERSTAND IT SENATOR MCNARY WAS ASKING WHETHER OR NOT A LOAN MIGHT BE MADE TO FURNISH ELECTRIC ENERGY TO A PERSON NOT RECEIVING CENTRAL STATION SERVICE WHEN AN EXISTING CENTRAL STATION BY THE CONSTRUCTION OF DISTRIBUTION AND TRANSMISSION LINES COULD SUPPLY THE ENERGY NEEDED IN A GIVEN AREA TO FURNISH SUCH PERSONS CENTRAL STATION SERVICE. AS WE UNDERSTAND SENATOR NORRIS' REPLY, HE SAID, IN EFFECT, THAT IF THE QUESTION IS WHETHER IN THE CASE WHERE AN EXISTING CENTRAL STATION IS SUPPLYING SOME LOCALITY AND THAT BY EXTENDING ITS LINES FURTHER IT WOULD BE POSSIBLE TO SERVE MORE OF THE GENERAL AREA OR LOCALITY WOULD THE RURAL ELECTRIFICATION ADMINISTRATION BE PROHIBITED FROM MAKING A LOAN TO FURNISH ELECTRICITY TO UNSERVED PERSONS TO WHICH IT MIGHT BE POSSIBLE FOR THE CENTRAL STATION TO EXTEND ITS LINES TO SERVE, HE THOUGHT NOT. OUR LETTER OF JULY 21, AS INDICATED ABOVE, WAS NOT INTENDED TO IMPLY THAT A LOAN COULD NOT BE MADE TO FURNISH POWER TO UNSERVED PERSONS IN AN AREA WHERE EXISTING CENTRAL STATIONS COULD BY EXTENDING THEIR LINES FURNISH CENTRAL STATION SERVICE TO SUCH PERSONS. HOWEVER, WE DO NOT BELIEVE THAT SENATOR NORRIS' REPLY TO SENATOR MCNARY'S QUESTION WAS INTENDED TO INDICATE THAT A LOAN MIGHT BE MADE TO FURNISH AN UNSERVED PERSON WHERE THE EXISTING CENTRAL STATION WAS WILLING AND ABLE TO FURNISH SUCH SERVICE TO THE UNSERVED PERSON AND COULD DO SO WITHOUT EXTENDING ITS LINES AND WOULD DO SO AT A REASONABLE PRICE.

THE OTHER OMITTED COLLOQUY IS AS FOLLOWS (80 CONGRESSIONAL RECORD 2752, PART 3):

"MR. KING. IF AN ORGANIZATION WERE FORMED BEYOND THE 10-MILE LIMIT TO WHICH I HAVE JUST REFERRED AND WITHIN WHICH LIMIT THE FARMERS ARE SUPPLIED WITH ELECTRIC ENERGY, THAT ORGANIZATION WOULD NOT BE PERMITTED TO COME BACK INTO THE 10-MILE AREA TO FURNISH LIGHT TO FARMERS ALREADY RECEIVING IT?

"MR. NORRIS. NOT TO THOSE ALREADY RECEIVING IT, BUT IT MIGHT COME INTO THE 10-MILE AREA AND SUPPLY FARMERS WHO ARE NOT RECEIVING IT. THAT IS A DISTINCTION WHICH I THINK OUGHT TO BE DRAWN."

WE DID NOT INTEND TO IMPLY THAT A LOAN COULD NOT BE MADE FOR THE PURPOSE OF FURNISHING ELECTRICITY TO UNSERVED PERSONS IN AREAS THAT MIGHT BE CONSIDERED THE POTENTIAL TERRITORY OF AN EXISTING CENTRAL STATION EVEN THOUGH THE EXISTING CENTRAL STATION MIGHT BE WILLING TO EXTEND ITS LINES INTO THE POTENTIAL TERRITORY. THE TENOR OF THE COLLOQUY THAT TOOK PLACE IMMEDIATELY PRECEDING THE LAST QUOTED COLLOQUY MAKES IT APPARENT THAT THIS IS WHAT SENATOR KING AND SENATOR NORRIS HAD REFERENCE TO IN THE ABOVE COLLOQUY. THIS COLLOQUY IS AS FOLLOWS:

"MR. KING. *** SUPPOSE THAT THIS PLANT HAS A POTENTIAL CAPACITY FOR FURNISHING MORE POWER THAN IS CONSUMED - AND IT DOES, AND INDEED MAY NOW, WITH THE MACHINERY WHICH IT HAS, FURNISH MORE POWER THAN IS CONSUMED IN THE DISTRICT OF COLUMBIA - AND IT HAS A LINE RUNNING INTO VIRGINIA AND A LINE RUNNING INTO MARYLAND, AS I UNDERSTAND IT HAS, AND IS PERFECTLY WILLING TO INCREASE ITS CAPACITY AND TO LENGTHEN THOSE LINES AND TO CONVEY ELECTRICAL ENERGY TO FARMERS IN VIRGINIA AND FARMERS IN MARYLAND WITHIN A REASONABLE AREA. UNDER THE BILL WHICH THE SENATOR IS NOW PROPOSING COULD THE FARMERS, SAY, IN VIRGINIA OR THE FARMERS IN MARYLAND, ORGANIZE CORPORATIONS AND INVADE THE FIELD WHICH THIS PRIVATE ORGANIZATION, IN PART, HAS COVERED AND IS WILLING TO GO FURTHER AND SUPPLY ALL REASONABLE DEMANDS, AND THUS RESTRICT ITS OPERATIONS AND BUILD UP ANOTHER ACTIVITY PARALLELING THE WORK OF THE ORGANIZATION NOW EXISTING?

"MR. NORRIS. THE SENATOR HAS INCORPORATED IN HIS QUESTION SOME ASSUMPTIONS THAT WILL HAVE TO BE TAKEN INTO CONSIDERATION BEFORE A DIRECT ANSWER MAY BE GIVEN. I WILL TAKE NOW THE LOCALITY HE HAS MENTIONED AND ASSUME THAT IN WASHINGTON THERE IS A COMPANY THAT IS ABLE TO SUPPLY ADDITIONAL FARMERS WHO HAVE NOT BEEN SUPPLIED AS YET, ALTHOUGH FOR 20, 40, OR 50 YEARS IN A GREAT MANY PLACES THE POWER COMPANIES HAVE NOT DONE SO. IF THEY HAVE SUPPLIED A CERTAIN LOCALITY, THIS BILL WOULD NOT AUTHORIZE THE GOVERNMENTAL AGENCY GOING INTO THAT LOCALITY; BUT IT WOULD NOT NECESSARILY FOLLOW THAT THE AGENCY COULD NOT GO INTO THE POTENTIAL TERRITORY SURROUNDING WASHINGTON AND ORGANIZE FARMERS UNDER THE LAWS OF VIRGINIA OR THE LAWS OF MARYLAND, FOR INSTANCE, WHO, IN TURN, COULD, IF THEY WANTED TO - IT WOULD DEPEND ON THEM ENTIRELY - BUY THEIR ELECTRICITY FROM THE CENTRAL STATION HERE. THE FACT IS THAT IF WE PROVIDED IN THIS BILL THAT THE RURAL ELECTRIFICATION COULD NOT GO INTO ANY TERRITORY THAT COULD BE POTENTIALLY HELD TO BE WITHIN THE TRANSMISSION DISTANCE OF AN EXISTING CENTRAL POWER STATION, IT WOULD MEAN THAT WE PROBABLY WOULD CONTINUE THE CONDITIONS WHICH HAVE EXISTED IN THE PAST. IN MANY INSTANCES, IF NOT IN MOST INSTANCES, THE CENTRAL POWER STATIONS HAVE PICKED OUT THE CREAM IN A CERTAIN LOCALITY AND HAVE BUILT LINES AND SUPPLIED IT WITH ELECTRICITY. BEFORE THE RURAL ELECTRIFICATION ADMINISTRATION WOULD LOAN MONEY TO SUCH AN ORGANIZATION IN VIRGINIA OR MARYLAND, THEY WOULD HAVE TO KNOW JUST EXACTLY WHAT THE POSSIBILITIES WERE. THEY WOULD HAVE TO MAKE A SURVEY OF THE TERRITORY AND KNOW WHAT WOULD HAVE TO BE PAID FOR THE ELECTRICITY IF IT WERE BOUGHT HERE. THEY WOULD NOT MAKE A LOAN UNLESS ALL THOSE THINGS PUT TOGETHER SHOULD CONVINCE THEM THAT AT A DECENT REASONABLE RATE THE ORGANIZATION WHICH WAS SEEKING TO GET ELECTRICITY WAS SELF-LIQUIDATING AND WOULD PAY OUT.

"MR. KING. MR. PRESIDENT, WILL THE SENATOR PERMIT ANOTHER INQUIRY?

"MR. NORRIS. CERTAINLY.

"MR. KING. ASSUME THAT AN AREA WHICH IS NOW COVERED BY THE POWER PLANT IN WASHINGTON EXTENDS INTO VIRGINIA, SAY, 10 MILES BEYOND THE DISTRICT LINE - AND I AM USING THIS AS AN ILLUSTRATION WITHOUT KNOWING ANYTHING ABOUT THE FACTS - AND ADEQUATE LIGHTING FACILITIES ARE FURNISHED TO ALL FARMERS WITHIN THAT AREA WHO DESIRE SUCH FACILITIES, AND SUPPOSE A CORPORATION IS ORGANIZED UNDER THE LAW IN MARYLAND TO FURNISH LIGHT TO FARMERS A LITTLE BEYOND THE AREA WHERE THE LIGHTING IS NOW FURNISHED; WOULD THAT CORPORATION WHEN ORGANIZED BE PERMITTED TO COME WITHIN THE 10- MILE AREA TO WHICH I HAVE REFERRED AND ENTER INTO COMPETITION WITH THE COMPANY NOW FURNISHING LIGHT THERE?

"MR. NORRIS. THE SENATOR SAYS 'COME IN COMPETITION.'

THEY WOULD NOT COME IN COMPETITION WITH FARMS ALREADY SUPPLIED. THEY MIGHT COME IN COMPETITION WITH THE CENTRAL POWER STATION.

"MR. KING. THAT IS NOT MY QUESTION.

"MR. NORRIS. THERE IS NO INTENTION OF GOING INTO A FARMING COMMUNITY WHICH IS ALREADY SUPPLIED WITH ELECTRIC CURRENT AND FORMING FARM ORGANIZATIONS THERE AND HAVING THEM BUILT UP TO GO INTO COMPETITION, AS THE SENATOR SUGGESTS, WITH FARMERS WHO ARE ALREADY GETTING THEIR ELECTRIC CURRENT FROM A CENTRAL STATION."

(80 CONGRESSIONAL RECORD 2752, PART 3.)

IN CONNECTION WITH THIS LAST QUOTED REPLY OF SENATOR NORRIS, WE DO NOT FEEL THE SENATOR INTENDED TO IMPLY THAT LOANS COULD BE MADE FOR THE PURPOSE OF GOING INTO THE FARMING COMMUNITY HE REFERS TO, TO FURNISH ELECTRICITY TO FARMS LOCATED ON, I.E., ADJACENT TO, POWER LINES THEREIN BUT NOT TIED TO SUCH LINES, AT LEAST WHERE THE OWNER OF THE LINES IS READY, WILLING AND ABLE TO FURNISH ADEQUATE CENTRAL STATION SERVICE TO THESE UNSERVED FARMERS AT A REASONABLE PRICE. ALSO IT IS APPARENT FROM THE COMPLETE COLLOQUY THAT SENATORS NORRIS AND KING HAD IN MIND LENGTHENING OR EXTENDING LINES TO REACH UNSERVED PERSONS THAT COULD BE POTENTIALLY HELD TO BE WITHIN TRANSMISSION DISTANCE OF EXISTING CENTRAL POWER STATIONS AND NOT UNSERVED PERSONS LOCATED ON EXISTING POWER LINES, THAT IS, WHERE THE POWER SUPPLIER COULD FURNISH THE POWER WITHOUT, IN EFFECT, EXTENDING ITS LINES. AGAIN, WE REITERATE THAT WE DO NOT BELIEVE THAT SENATOR NORRIS HAD IN MIND AN UNSERVED PERSON WHO FELL IN THE LAST MENTIONED CATEGORY.

IT IS CONTENDED BY THE ACTING SECRETARY THAT THE ACTION OF THE SENATE PRIOR TO FINAL PASSAGE OF S. 3483 IN REJECTING A PROPOSED SUBSTITUTE FOR S. 3483 INTRODUCED BY SENATOR KING WHICH, AMONG OTHER THINGS, WOULD HAVE ADDED TO THE DESCRIPTION "PERSONS IN RURAL AREAS WHO ARE NOT RECEIVING CENTRAL STATION SERVICE" THE PROVISION "AND FOR WHOM SUCH SERVICE MAY NOT BE FURNISHED OR MADE AVAILABLE BY COMPETING PRIVATE ENTERPRISE" WAS PERHAPS THE MOST SIGNIFICANT ITEM OF LEGISLATIVE HISTORY OVERLOOKED IN OUR LETTER OF JULY 21. WE NOTE THAT THE PROPOSED SUBSTITUTE CONTAINED OTHER CHANGES AND WAS REJECTED WITHOUT DEBATE. THERE IS NOTHING IN THE LEGISLATIVE HISTORY TO INDICATE THAT THE SUBSTITUTE WAS REJECTED MERELY BECAUSE IT MODIFIED THE UNSERVED PERSON LIMITATION. WE NOTE THAT SECTION 3 OF SENATOR KING'S PROPOSED SUBSTITUTE AUTHORIZED THE APPROPRIATION OF $10,000,000 PER YEAR FOR TEN YEARS FOR THE PURPOSE OF MAKING LOANS AND SECTION 6 THEREOF AUTHORIZED THE APPROPRIATION OF $300,000 PER YEAR FOR TEN YEARS FOR THE PURPOSE OF ADMINISTERING THE ACT AND FOR MAKING STUDIES, INVESTIGATIONS, PUBLICATIONS AND REPORTS. SECTION 3(A) OF S. 3483, AS PASSED BY THE SENATE AUTHORIZED AND DIRECTED THE RECONSTRUCTION FINANCE CORPORATION TO MAKE LOANS TO THE ADMINISTRATOR OF REA NOT EXCEEDING $50,000,000 IN EACH OF THE FISCAL YEARS ENDING, RESPECTIVELY, JUNE 30, 1937, AND JUNE 30, 1938, FOR LOAN PURPOSES, AND SECTION 3(B) THEREOF AUTHORIZED THE APPROPRIATION OF $40,000,000 PER YEAR FOR EIGHT YEARS FOR THE PURPOSES OF THE ACT AS THEREIN AFTER PROVIDED. THUS, IT APPEARS THAT SENATOR KING'S SUBSTITUTE MAY HAVE BEEN REJECTED FOR REASONS OTHER THAN THE MODIFICATION OF THE UNSERVED PERSON OR CENTRAL STATION SERVICE LIMITATION.

IN CONNECTION WITH THE LEGISLATIVE HISTORY OF THE RURAL ELECTRIFICATION ACT THE HISTORY DISCLOSES THAT THE BILL PASSED BY THE SENATE WAS THE ONE ON WHICH THE HOUSE HELD HEARINGS. AS YOU ARE AWARE, BOTH SECTIONS 2 AND 4 OF THE BILL AS ENACTED BY THE SENATE CONTAINED THE CENTRAL STATION SERVICE LIMITATIONS NOW IN THE EXISTING LAW AND, HENCE, THESE WERE THE LIMITATIONS BEFORE THE HOUSE COMMITTEE DURING THE HEARINGS. WE BELIEVE THAT THE HOUSE HEARINGS FULLY SUPPORT THE VIEW THAT THE RURAL ELECTRIFICATION ACT DID NOT CONTEMPLATE THE MAKING OF LOANS TO FURNISH ELECTRICITY TO UNSERVED PERSONS WITH PROPERTY LOCATED ON, I.E., ALONG SIDE EXISTING POWER LINES. NOTE IN THIS CONNECTION THE FOLLOWING DISCUSSION BETWEEN MR. COOKE, ADMINISTRATOR, RURAL ELECTRIFICATION ADMINISTRATION (AS SET UP BY EXECUTIVE ORDER OF THE PRESIDENT AND APPARENTLY THE FIRST ADMINISTRATOR AFTER THE RURAL ELECTRIFICATION ACT BECAME EFFECTIVE) AND MR. MAPES OF THE COMMITTE (PAGES 72 AND 73 OF THE HOUSE HEARINGS ON S. 3483):

"MR. MAPES. IT IS NOT QUITE CLEAR TO ME TO JUST WHAT EXTENT YOU ENTER THIS FIELD OF FURNISHING OR ASSISTING IN FURNISHING ELECTRICITY TO THESE RURAL COMMUNITIES.

"MR. COOKE. YOU MEAN STIRRING THEM UP?

"MR. MAPES. NO. YOU DO NOT PROPOSE TO FURNISH ELECTRICITY OR TO LEND MONEY FOR ANYONE TO GET ELECTRICITY WHERE IT IS NOW AVAILABLE, AS I UNDERSTAND?

"MR. COOKE. ABSOLUTELY.

"MR. MAPES. WHAT IS THE DIVIDING LINE AS TO WHERE IT IS AVAILABLE AND WHERE IT IS NOT AVAILABLE?

"MR. COOKE. THAT IS NOT A VERY FINE LINE. IF THE FARMER HAS NOT GOT IT NOW, AND IT IS NOT AVAILABLE TO HIM - THAT IS, THE LINE DOES NOT GO WITHIN A REASONABLE DISTANCE OF HIM - WE CONSIDER IT NOT AVAILABLE.

"THE ELECTRICAL INDUSTRY HAS TAKEN THE POSITION, I THINK NOT UNIFORMLY, BUT IT IS GENERALLY HELD THAT IF A COMPANY HAS NOT ADVISED US WHERE THEY PROPOSE TO BUILD A LINE AND WHEN, THAT THAT IS OPEN TERRITORY AND NO EXCEPTION CAN BE TAKEN TO OUR GOING IN AND BUILDING A LINE.

"JUST WITHIN THE LAST WEEK WE HAVE HAD A LETTER - JUST TO SHOW YOU HOW THIS THING WORKS OUT - WE HAD A LETTER FROM THE PRESIDENT OF A PROMINENT COMPANY IN ONE OF THE SOUTHERN STATES CLAIMING THAT WE WERE VIOLATING OUR RULE.

"WE WROTE HIM A LETTER SAYING THAT THAT RULE WAS INVIOLABLE, AND THAT WE WOULD IMMEDIATELY GO AFTER IT AND FIND WHAT GAVE RISE TO THIS RUMOR. THIS MORNING I GOT WORD THAT THERE WAS A COMPLETE MISUNDERSTANDING ABOUT IT.

"THAT IS ABSOLUTE, MR. MAPES. IN NO PLACE HAS A SINGLE CUSTOMER BEEN PUT ON WHERE HE HAD THE OPPORTUNITY TO GET ENERGY FROM THE PRIVATE COMPANY BEFORE WE BEGAN OUR OPERATIONS.

"MR. MAPES. SUPPOSE A PRIVATE COMPANY HAD TO MAKE AN EXTENSION, WE WILL SAY, OF HALF A MILE OF A LINE. WHAT WOULD YOU SAY THEN?

"MR. COOKE. IF THEY DID IT, NOT AFTER THE THING WAS FIRST SUGGESTED, BUT AFTER THE THING HAD BEGUN TO TAKE FORM WITH US - YOU SEE, THE COMPANIES HAVE THE OPPORTUNITY OF FILING WITH US ANYTHING THAT THEY PROPOSE TO DO. SOME OF THEM HAVE DONE IT. SOME OF THEM HAVE DONE IT IN A VERY GENERAL WAY, SAYING, 'THIS IS OUR TERRITORY AND WE INTEND TO REACH IT IN DUE TIME.' THERE IS ONE COMPANY THAT HAD A VERY DEFINITE PROGRAM OF REACHING PRACTICALLY EVERYBODY IN A CERTAIN DISTRICT IN 5 YEARS. THE PRESIDENT CAME IN AND SAID, 'WE REALIZE THAT WE ARE UNDER PRESSURE AND WE WOULD LIKE TO AGREE TO DO THAT WITHIN A YEAR', AND WE HAVE DONE WHAT WE COULD TO QUIET THE PUBLIC AGITATION THERE, AND I THINK THEY WILL GO AHEAD AND CARRY OUT THEIR PLAN.

"MR. MAPES. THE LANGUAGE OF THE BILL IS, IN EFFECT, THAT YOU ARE TO ASSIST IN THE FURNISHING OF ELECTRICITY IN RURAL AREAS WHERE THEY ARE NOT RECEIVING CENTRAL STATION SERVICE. WHAT IS YOUR DEFINITION OF CENTRAL STATION SERVICE?

"MR. COOKE. THAT IS TO PROVIDE A DIFFERENCE BETWEEN THE NORMAL SERVICE FROM A POWER LINE AND INDIVIDUAL DELCO PLANTS. YOU SEE YOU WILL FIND PLENTY OF PLACES WHERE THERE ARE DELCO PLANTS ALONG THE ROAD ABOUT AS THICK AS THE CENTRAL-SERVICE-STATION CUSTOMERS ARE ON OTHER ROADS.

"MR. MAPES. AND UNDER YOUR INTERPRETATION OF THAT, IS ANYONE IN THE RURAL COMMUNITY WHO IS NOT RECEIVING ELECTRICITY - "MR. COOKE. FROM A HIGH LINE.

"MR. MAPES. FROM A HIGH LINE?

"MR. COOKE. YES.

"MR. MAPES. YOU ARE ABLE TO SERVICE HIM.

"MR. COOKE. YES.

"MR. MAPES. AND THAT INCLUDES VILLAGES UP TO A POPULATION OF 1,500, AS WELL AS FARMS.

"MR. COOKE. YES. IT ONLY REFERS TO HIGH-LINE SERVICE. "MR. MAPES. DOES INCLUDE ANYONE WHO IS NOT RECEIVING HIGH-LINE SERVICE?

"MR. COOKE. THAT IS RIGHT. AND THERE IS NO OPPOSITION FROM THE DELCO PEOPLE, BECAUSE THE DELCO PEOPLE WANT TO SEE THE RURAL DEVELOPMENT ***."

THUS IT APPEARS THAT THE TEMPORARY REA, WHICH PRECEDED THE REA AS SET UP BY STATUTE, DID NOT MAKE LOANS TO FURNISH ELECTRICITY TO UNSERVED PERSONS LOCATED ON, I.E., ADJACENT TO, EXISTING POWER LINES, AT LEAST WHERE THE OWNER OF THE LINES WAS WILLING TO FURNISH SATISFACTORY SERVICE AT A REASONABLE PRICE, AND THE HOUSE COMMITTEE WAS MADE AWARE OF THIS FACT. WHAT MR. COOKE SAID ABOVE IN CONNECTION WITH PERSONS RECEIVING ELECTRICITY FROM A HIGH LINE MUST BE CONSIDERED TOGETHER WITH WHAT HE SAID IN CONNECTION WITH FURNISHING ELECTRICITY TO UNSERVED PERSONS WHERE IT IS ALREADY AVAILABLE TO SUCH PERSONS.

ALSO NOTE THE FOLLOWING TESTIMONY BY MR. COOKE ON PAGES 56 AND 57 OF THE ABOVE MENTIONED HOUSE HEARINGS:

"MR. HUDDLESTON. I AM CORRECT, AM I NOT, IN SAYING THAT THE FUNDAMENTAL PURPOSE OF THIS BILL IS TO GIVE ELECTRIC SERVICE TO THOSE WHO NOW HAVE NOT THAT BENEFIT?

"MR. COOKE. THOSE WHO DO NOT NOW HAVE IT.

"MR. HUDDLESTON. YES.

"MR. COOKE. YES, SIR; WE HAVE MADE THE PRACTICE, ABSOLUTELY, MR. HUDDLESTON, OF NOT BUILDING ANY COMPETING LINES. OUR CURRENT ONLY GOES TO FARMS AND FARM HOMES THAT DO NOT NOW HAVE IT AND WHERE, IN A FEW INSTANCES, IT HAS BEEN NECESSARY FOR US TO PARALLEL AN EXISTING LINE IN ORDER TO REACH THAT MARKET, WE HAVE MADE THE RULE THAT NO CURRENT IS TO BE TAKEN OFF OF THAT LINE. IN OTHER WORDS, AT NO POINT HAVE WE COMPETED WITH EXISTING LINES; AND I WILL BE GLAD TO KNOW IF ANY MEMBER OF THIS COMMITTEE HAS HEARD IN ANY STATE OF A SINGLE EXCEPTION TO THAT.

"MR. HUDDLESTON. MAY I SAY THAT MY QUESTIONS ARE NOT ADDRESSED TO THE MATTER OF COMPETITION OR DUPLICATION OF SERVICE, BUT TO THE FUNDAMENTAL PURPOSES OF THE BILL. YOU WANT TO GIVE ELECTRIC CURRENT TO FARMERS WHO NOW HAVE NOT GOT IT.

"MR. COOKE. THAT IS RIGHT.

"MR. HUDDLESTON. IN MANY INSTANCES IT WILL INVOLVE JUST A FEW MILES OF LINE TO BE HOOKED ON TO AN EXISTING UTILITY LINE?"

IT APPEARS THAT IN VIEW OF WHAT MR. COOKE SAID (AS QUOTED ABOVE) IN REGARD TO UNSERVED PERSONS LOCATED ON POWER LINES THAT IT WAS THE PRACTICE OF REA TO PARALLEL EXISTING LINES ONLY WHEN NECESSARY TO DO SO IN ORDER TO REACH GROUPS OF UNSERVED PERSONS LOCATED BEYOND EXISTING POWER LINES AND THAT IN SUCH A CASE IT WAS THEIR RULE THAT NO CURRENT WAS TO BE TAKEN OFF THE LINE CONSTRUCTED BY REA FUNDS WHERE IT PARALLELED EXISTING LINES.

ALSO, WE AGAIN CALL TO YOUR ATTENTION IN CONNECTION WITH THE INTENT AND PURPOSE OF THE RURAL ELECTRIFICATION ACT THE FOLLOWING STATEMENT MADE IN THE HOUSE DURING FLOOR DEBATE ON S. 3483:

"MR. RAYBURN. MAY I SAY TO THE GENTLEMAN THAT WE ARE NOT, IN THIS BILL, INTENDING TO GO OUT AND COMPETE WITH ANYBODY. BY THIS BILL WE HOPE TO BRING ELECTRIFICATION TO PEOPLE WHO DO NOT NOW HAVE IT. THIS BILL WAS NOT WRITTEN ON THE THEORY THAT WE WERE GOING TO PUNISH SOMEBODY OR PARALLEL THEIR LINES OR ENTER INTO COMPETITION WITH THEM. IT WAS OUR THOUGHT THAT IN THE STATES WHERE ELECTRICITY IS NOW GENERATED AND DISTRIBUTED THE LAWS OF THAT STATE WOULD CONTROL THE RATES. MAY I SAY FURTHER THAT THE RURAL ELECTRIFICATION ADMINISTRATION WILL HAVE NOTHING WHATEVER TO DO WITH THE RATES THAT MAY BE FIXED IN THESE COMMUNITIES, FOR THE SIMPLE REASON THAT MATTER WILL BE CONTROLLED BY STATE LAW."

(80 CONGRESSIONAL RECORD 5283, PART 5.)

WE FEEL THAT THE PROPER INTERPRETATION OF THIS STATEMENT IN THE LIGHT OF THE HOUSE HEARINGS IS THAT THE SPONSOR OF THE BILL IN THE HOUSE DID NOT CONTEMPLATE THE PARALLELING OF EXISTING LINES, AT LEAST FOR THE PURPOSE OF FURNISHING ELECTRICITY TO UNSERVED PERSONS LOCATED ON THOSE LINES, AND THAT THE "PERSONS WHO DO NOT NOW HAVE IT" REFERRED TO IN THE STATEMENT ARE THOSE NOT LOCATED ON POWER LINES, BUT THOSE LOCATED BEYOND, OR AT LEAST NOT WITHIN A REASONABLE DISTANCE (AS DETERMINED BY THE ADMINISTRATOR OF REA) OF POWER LINES.

CONCERNING THE ADMINISTRATIVE PRACTICE OF REA BEING CONTRARY TO THE POSITION TAKEN IN OUR LETTER OF JULY 21, 1958, WE AGAIN CALL YOUR ATTENTION TO THE FOLLOWING STATEMENTS MADE BY A FORMER SOLICITOR OF YOUR DEPARTMENT IN OPINION NO. 4506 DATED NOVEMBER 24, 1942 (APPEARING AT PAGE 498 RURAL ELECTRIFICATION PLANNING, HEARING BEFORE A SUBCOMMITTEE ON INTERSTATE AND FOREIGN COMMERCE):

"A STUDY OF THE DEBATES IN CONGRESS AND THE COMMITTEE HEARINGS INDICATES THAT THIS PROVISION WAS INSERTED BECAUSE OF A LEGISLATIVE INTENT TO EXCLUDE LOANS FOR THE PURPOSE OF PARALLELLING EXISTING SYSTEMS AND THUS CREATING COMPETITION WITH ESTABLISHED UTILITIES. ***

"*** PRACTICALLY THE ENTIRE DEBATE ON THE LIMITING CLAUSE HERE UNDER DISCUSSION CENTERED ABOUT THE QUESTION OF COMPETITION. IT SEEMS CLEAR FROM THE LEGISLATIVE HISTORY THAT THE INTENT OF THE LIMITATION WAS TO PREVENT LOANS THAT WOULD CREATE FEDERALLY FINANCED COMPETITION WITH EXISTING UTILITY ENTERPRISES. IT APPEARS TO BE EVIDENT THAT THE LIMITATION WAS NOT INTENDED TO PREVENT LOANS, OTHERWISE VALID, MERELY BECAUSE OF THE FACT THAT PERSONS ALREADY RECEIVING SERVICE WOULD BE COLLATERALLY INVOLVED.

"WHERE THE EFFECT OF A PROPOSED LOAN, REGARDLESS OF ITS ESSENTIAL PURPOSE, WOULD BE TO SUBSTITUTE A COMPETITIVE REA-FINANCED SERVICE TO PERSONS ALREADY SERVED, THE LOAN MAY NOT BE MADE. FOR EXAMPLE, IT IS MY OPINION THAT A COMPETING LINE COULD NOT BE FINANCED EVEN THOUGH IT WERE ONLY A SMALL PART OF A SYSTEM DESIGNED TO REACH UNSERVED PERSONS AND EVEN THOUGH THE PROJECT COULD NOT PROPERLY BE DEVELOPED WITHOUT SUCH COMPETING LINE. THIS QUESTION WAS INVOLVED IN THE CASE OF ALABAMA POWER COMPANY V. JOHN M. CARMODY, ADMINISTRATOR (UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA. IN EQUITY NO. 65469, DECIDED IN OCTOBER 1937). JUSTICE DANIEL W. O'DONOGHUE DENIED A MOTION FOR AN INJUNCTION RESTRAINING THE REA ADMINISTRATOR FROM FINANCING CERTAIN COMPETING LINES. THE DEFENDANT'S CASE WAS PRESENTED AND ARGUED ON THE GROUND THAT THE PLAINTIFF'S LINES WERE 'SPITE LINES' CONSTRUCTED AFTER THE COOPERATIVE WAS ORGANIZED FOR THE PURPOSE OF HAMPERING OR DEFEATING THE REA PROJECT AND HENCE NOT ENTITLED TO THE PROTECTION OF THE LIMITATION IN THE REA STATUTE. THE JUDGE DID NOT WRITE AN OPINION BUT IN ORAL STATEMENTS AT THE CONCLUSION OF THE ARGUMENT ON OCTOBER 7, 1937, HE INDICATED THAT HIS DENIAL OF THE MOTION WAS NOT BASED UPON THE 'SPITE LINE' THEORY BUT UPON A MUCH BROADER THEORY, NAMELY, THAT THE COMPETING LINES COULD BE FINANCED BECAUSE THEY WERE NECESSARY IN ORDER TO SERVE LARGE NUMBERS OF UNSERVED PERSONS IN OTHER AREAS OF THE PROJECT. THIS ORAL OPINION FROM A VERY ABLE JUDGE IS INTERESTING BUT, IN VIEW OF THE PLEADINGS AND FORMAL RECORD IN THIS CASE, THE DECISION CANNOT BE REGARDED AS AUTHORITY FOR A POWER TO FINANCE COMPETING LINES EXCEPT IN SPITE-LINE SITUATIONS.

"IN THE ABOVE ANALYSIS I HAVE ENDEAVORED TO DELIMIT AND POINT THE ISSUE BY REFERENCE TO SITUATIONS WHICH FALL CLEARLY WITHIN THE IMPLIED PROHIBITION OF THE CLAUSE HERE UNDER DISCUSSION: (1) THE FINANCING OF FACILITIES WHICH COMPETE DIRECTLY WITH EXISTING BUSINESS, REGARDLESS OF THE FACT THAT SUCH COMPETING FACILITIES MIGHT CONTRIBUTE MATERIALLY TO THE CONSTRUCTION OF A SYSTEM TO SERVE UNSERVED PERSONS; AND (2) THE FINANCING OF ACQUISITIONS IN RESPECT OF WHICH THERE IS WHOLLY LACKING THE ESSENTIAL STATUTORY PURPOSE OF SERVING UNSERVED PERSONS."

IT IS EMPHASIZED THAT THE SOLICITOR STATED THAT IN HIS OPINION A COMPETING LINE COULD NOT BE FINANCED EVEN THOUGH IT WERE ONLY A SMALL PART OF A SYSTEM DESIGNED TO REACH UNSERVED PERSONS AND EVEN THOUGH THE PROJECT COULD NOT BE PROPERLY DEVELOPED WITHOUT SUCH COMPETING LINE. THE VIEW EXPRESSED IN OUR LETTER OF JULY 21, WAS INTENDED TO BE CONFINED ONLY TO LOANS FOR FURNISHING ELECTRICITY TO UNSERVED PERSONS LOCATED ON, I.E., ADJACENT TO, POWER LINES. FURTHER, NOTE THAT THE SOLICITOR ALSO SAID THAT A SITUATION WHICH FALLS CLEARLY WITHIN THE CENTRAL STATION SERVICE LIMITATION IS THE FINANCING OF FACILITIES WHICH COMPETE DIRECTLY WITH EXISTING BUSINESS REGARDLESS OF THE FACT THAT SUCH COMPETING FACILITIES MIGHT CONTRIBUTE MATERIALLY TO THE CONSTRUCTION OF A SYSTEM TO SERVE UNSERVED PERSONS. THIS OPINION SEEMS TO SUBSTANTIATE THE CONCLUSION REACHED IN OUR LETTER OF JULY 21 AS CLARIFIED HEREIN. IN FACT THIS OPINION APPEARS TO BE MORE RESTRICTIVE THAN THE INTENDED SCOPE OF THE STATEMENT MADE IN OUR LETTER TO YOU IN CONNECTION WITH THE UNSERVED PERSON LIMITATION. THE QUOTED STATEMENTS IN THE OPINION APPEAR TO INDICATE THAT THE SOLICITOR FELT THAT THE COMPETITION REFERRED TO WAS NOT ONLY COMPETITION WITH PERSONS ALREADY SERVED BUT COMPETITION WHICH MIGHT BE CREATED IN CONNECTION WITH SERVING UNSERVED PERSONS. HOWEVER, AS STATED BEFORE, WE DID NOT INTEND TO IMPLY IN OUR LETTER THAT LOANS COULD NOT BE MADE TO SERVE UNSERVED PERSONS LOCATED BEYOND, I.E., NOT LOCATED ON OR ADJACENT TO EXISTING POWER LINES, EVEN THOUGH SUCH A LOAN MIGHT HAVE THE EFFECT OF CREATING COMPETITION WITH EXISTING UTILITIES.

FROM THE FOREGOING IT DOES NOT APPEAR THAT THE ADMINISTRATIVE INTERPRETATION OF THE ACT AS EXPRESSED IN THE CITED OPINION IS DIAMETRICALLY OPPOSED TO THE VIEWS EXPRESSED IN OUR LETTER OF JULY 21 CONCERNING THE CENTRAL STATION SERVICE LIMITATION AS HEREIN CLARIFIED.

CONCERNING THE POSITION TAKEN BY US IN THE PAST ON REA LOANS, AS INDICATED IN THE ACTING SECRETARY'S LETTER, WE SAID IN A LETTER DATED MARCH 12, 1943, B-32920, TO THE CHAIRMAN, SUBCOMMITTEE ON AGRICULTURAL APPROPRIATIONS, HOUSE OF REPRESENTATIVES THAT:

"OF COURSE, THE QUESTION AS TO WHETHER THE BASIC PURPOSE OF A PROPOSED LOAN IN A PARTICULAR CASE IS TO PROVIDE ELECTRIC SERVICE TO UNSERVED PERSONS IN RURAL AREAS IS A MATTER FOR DETERMINATION ADMINISTRATIVELY, RATHER THAN BY THIS OFFICE, AFTER A THOROUGH CONSIDERATION OF THE PERTINENT FACTS AND CIRCUMSTANCES IN THE CASE."

WE CONTINUED BY SAYING:

"AND, WHILE IT IS REALIZED THAT THE ACCOMPLISHMENT OF THE ESSENTIAL STATUTORY PURPOSE OF A LOAN OF THE TYPE HERE INVOLVED WHICH IS PRESENTED TO THE ADMINISTRATOR FOR APPROVAL AT THIS TIME WOULD BE DELAYED, IN ALL PROBABILITY, UNTIL AFTER THE CESSATION OF THE PRESENT EMERGENCY BECAUSE OF THE SHORTAGE OF CRITICAL MATERIALS REQUIRED IN CONNECTION WITH THE ERECTION OF THE FACILITIES CONTEMPLATED THEREBY, IT WOULD SEEM THAT, IN VIEW OF THE AUTHORITY WHICH THE CONGRESS HAS VESTED IN THE ADMINISTRATOR AND IN THE ABSENCE OF ANY STATUTORY PROVISION PROHIBITING THE USE OF APPROPRIATED FUNDS FOR THE PURPOSE OF SUCH A LOAN, THE DETERMINATION MADE BY THE ADMINISTRATOR WITH RESPECT TO THE QUESTION AS TO THE APPROVAL OF THE LOAN MUST BE REGARDED AS A MATTER OF POLICY AND, THEREFORE, NOT SUBJECT TO REVIEW BY THIS OFFICE."

AS CAN BE SEEN FROM THE FOREGOING, THE QUESTION INVOLVED IN THE CITED LETTER WAS THE AUTHORITY OF THE ADMINISTRATOR TO APPROVE A LOAN TO FURNISH ELECTRICITY TO UNSERVED PERSONS IN A CASE WHERE THIS ACCOMPLISHMENT (FURNISH ELECTRICITY TO THE UNSERVED PERSONS) WOULD BE DELAYED UNTIL THE CESSATION OF WORLD WAR II. WE INDICATED, IN EFFECT, THAT SINCE THE STATUTORY PURPOSE WAS PRESENT AND IN THE ABSENCE OF ANY STATUTORY PROVISION PROHIBITING THE USE OF APPROPRIATED FUNDS FOR SUCH A PURPOSE, THE DETERMINATION OF THE ADMINISTRATOR TO APPROVE A LOAN WHERE THE ACCOMPLISHMENT OF THE STATUTORY PURPOSE WILL BE DELAYED IS A MATTER OF POLICY AND THEREFORE NOT SUBJECT TO REVIEW. HOWEVER, WE DO NOT FEEL THAT A DETERMINATION BY THE ADMINISTRATOR AS TO WHETHER A PERSON IS OR IS NOT RECEIVING CENTRAL STATION SERVICE IS A MATTER OF POLICY AND NOT SUBJECT TO REVIEW, BUT IS RATHER A QUESTION OF FACT.

MOREOVER, IN THIS SAME CONNECTION IN A LETTER TO ANOTHER CONGRESSMAN DATED FEBRUARY 3, 1943, WE MADE THE FOLLOWING STATEMENT:

"*** IN THIS CONNECTION IT MAY BE STATED THAT THE QUESTION AS TO WHETHER THE BASIC PURPOSE OF A PROPOSED LOAN IN A PARTICULAR CASE IS TO PROVIDE ELECTRIC SERVICE TO UNSERVED PERSONS IN RURAL AREAS IS A MATTER FOR DETERMINATION ADMINISTRATIVELY, RATHER THAN BY THIS OFFICE, AFTER A THOROUGH CONSIDERATION OF THE PERTINENT FACTS AND CIRCUMSTANCES IN THE CASE, AND SUBJECT TO THE LIMITATION THAT THE ADMINISTRATOR'S DISCRETION IN THIS REGARD MAY NOT BE ABUSED."

IN ANY EVENT, WHETHER OR NOT WE HAVE THE AUTHORITY TO REVIEW LOANS MADE BY THE ADMINISTRATOR OF REA WITH A VIEW TO TAKING EXCEPTION THERETO OR DISALLOWING SAME, WE HAVE BOTH THE AUTHORITY AND THE DUTY UNDER THE BUDGET AND ACCOUNTING ACT OF 1921, AS AMENDED, TITLE 31, U.S.C. TO REPORT TO THE CONGRESS ANY TRANSACTION OF AN EXECUTIVE DEPARTMENT WHICH WE FEEL CONTRARY TO THE INTENT OF STATUTES ENACTED BY THE CONGRESS FOR WHATEVER ACTION THE CONGRESS DEEMS APPROPRIATE. FURTHER WE DO NOT CONSIDER ANYTHING WE SAID IN OUR LETTER OF JULY 21 TO BE DIAMETRICALLY OPPOSED TO THE VIEWS OF THIS OFFICE AS SET FORTH BY PREVIOUS COMPTROLLER GENERALS.

THE FACTS IN THE CITED CASE OF KANSAS CITY POWER AND LIGHT ET AL., V. MCKAY ET AL., 115 F. SUPP. 402, DO NOT APPEAR TO BE THE SAME AS THE FACTS INVOLVED IN THE MATTER BEFORE US. FURTHERMORE, WE NOTE ON APPEAL THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA (96 U.S. APP. D.C. 273), VACATED THE JUDGMENT OF THE DISTRICT COURT, ALTHOUGH WITHOUT PASSING ON THE SUBSTANTIVE ISSUES INVOLVED, AND HELD, IN EFFECT, THAT THE PLAINTIFFS HAD NO STANDING TO SUE. IN ANY EVENT, AS INDICATED ABOVE IT DOES NOT APPEAR THE CIRCUMSTANCES INVOLVED IN THE CITED COURT CASE WERE THE SAME AS THOSE PRESENT IN THE INSTANT CASE, NOR THE SAME AS THOSE WE HAD IN MIND IN CONNECTION WITH THE CENTRAL STATION SERVICE LIMITATION. WOULD LIKE TO SAY HERE THAT THE VIEWS EXPRESSED IN THE LETTER OF JULY 21 WERE NOT INTENDED TO APPLY TO REA LOANS MADE FOR THE PURPOSE OF "HEAVYING UP" FACILITIES PREVIOUSLY CONSTRUCTED WITH REA LOAN FUNDS.

CONCERNING THE PRIOR FEDERAL AND STATE COURT PROCEEDINGS IN THE INSTANT CASE, NEITHER THE FEDERAL NOR THE STATE COURTS PASSED ON THE VALIDITY OF THE INSTANT LOAN. AS WE UNDERSTAND IT, THE FEDERAL COURTS HELD THAT ON THE BASIS OF KANSAS CITY POWER AND LIGHT V. MCKAY, 96 U.S. APP. D.C. 273, THE PLAINTIFF HAD NO STANDING TO SUE AND DID NOT GO INTO THE SUBSTANTIVE ISSUES INVOLVED. THE CASE IN THE IOWA STATE COURT APPARENTLY INVOLVED THE MATTER OF FRANCHISES RATHER THAN THE VALIDITY OF THE LOAN. HENCE, OUR VIEWS WOULD NOT APPEAR CONTRARY TO ANY COURT DECISIONS RENDERED IN CONNECTION WITH THE INSTANT CASE.

AS TO THE WEIGHT TO BE GIVEN ADMINISTRATIVE DETERMINATIONS, WE AGREE THAT THE PRIMARY RESPONSIBILITY UNDER THE REA ACT FOR DETERMINING WHETHER A PROPOSED LOAN MEETS STATUTORY TESTS IS LODGED IN THE ADMINISTRATOR. ALSO AGREE THAT SUCH DETERMINATIONS MERIT CONSIDERABLE RESPECT AND WEIGHT AND IT IS OUR POLICY TO GIVE CONSIDERABLE WEIGHT AND RESPECT TO ADMINISTRATIVE DETERMINATIONS. HOWEVER, IF A DETERMINATION WHICH MAY BE LEGALLY SUPPORTABLE UNDER THE STRICT LETTER OF A STATUTE IS CONSIDERED BY US TO BE CONTRARY TO THE EVIDENT SPIRIT AND INTENT OF THE CONGRESS IN ENACTING THAT STATUTE AS DISCLOSED BY THE LEGISLATIVE HISTORY THEREOF, WE FEEL WE HAVE A DUTY UNDER THE BUDGET AND ACCOUNTING ACT OF 1921, AS AMENDED, TO REPORT THE MATTER TO THE CONGRESS FOR WHATEVER ACTION THE CONGRESS DEEMS APPROPRIATE.

THE ACTING SECRETARY NOW ADVISES THAT REA HAS KEPT THE CONGRESS FULLY INFORMED OF ITS ACTIVITIES OVER THE YEARS AND INDICATES THAT THE CONGRESS HAS ACQUIESCED IN REA'S MAKING LOANS FOR THE PURPOSE OF SERVING ANY UNSERVED PERSONS; AND THAT IT HAS BEEN REA'S UNIFORM ADMINISTRATIVE PRACTICE OVER THE PAST 22 YEARS TO MAKE LOANS TO BRING ELECTRIC SERVICE TO ALL UNSERVED PERSONS IN RURAL AREAS, AND REITERATES THAT THIS HAS BEEN SO WITHOUT REGARD TO THE "AVAILABILITY" OF SERVICE FROM OTHER SOURCES.

AS INDICATED IN OUR DISCUSSION ABOVE, WE HAVE CONSIDERABLE DOUBT THAT THE LEGISLATIVE HISTORY OF THE RURAL ELECTRIFICATION ACT, TAKEN AS A WHOLE, CONTEMPLATED THE MAKING OF A LOAN TO FURNISH ELECTRIC ENERGY TO AN UNSERVED PERSON LOCATED ON AN EXISTING POWER LINE, I.E., WHERE THE PROPERTY TO BE SERVED IS ALONG SIDE OF POWER LINES AND THE OWNER OF THE POWER LINES IS READY, WILLING, AND ABLE TO FURNISH ADEQUATE CENTRAL STATION SERVICE TO SUCH UNSERVED PERSON AT A REASONABLE PRICE. HOWEVER, THE LONG-CONTINUED PRACTICE AS REPORTED BY THE ACTING SECRETARY, IF CARRIED ON WITH CONGRESSIONAL KNOWLEDGE WOULD TEND TO SUPPORT THE DEPARTMENT'S POSITION, OR AT LEAST, INDICATE CONGRESSIONAL ACQUIESCENCE IN THE PRACTICE FOLLOWED BY THE DEPARTMENT. IN VIEW OF THE FOREGOING WE WILL TAKE SUCH ACTION AS MAY BE NECESSARY TO INSURE CONGRESSIONAL KNOWLEDGE OF THE INTERPRETATION OF THE ACT BY REA AND THE PRACTICES FOLLOWED BY INCLUDING A DISCUSSION OF THE MATTER IN THE REPORT REFERRED TO IN THE LAST PARAGRAPH OF THIS LETTER.

CONCERNING THAT PORTION ($120,000) OF THE LOAN OF $11,173,000 MADE BY REA TO CIPCO (THE SPECIFIC CASE INVOLVED IN OUR LETTER OF JULY 21), THE RECORD BEFORE US DISCLOSED THAT A PLANT OF LEHIGH LOCATED ON A TRACT OF GROUND OUTSIDE THE TOWN OF LEHIGH, IOWA, WAS BEING FURNISHED 25-CYCLE ELECTRIC SERVICE BY THE FORT DODGE, DES MOINES, AND SOUTHERN RAILWAY COMPANY (RAILWAY COMPANY), THE PREDECESSOR OF THE IOWA-ILLINOIS GAS AND ELECTRIC COMPANY (IOWA-ILLINOIS), AT THE TIME THE LOAN TO CIPCO WAS MADE.

PRIOR TO THE MAKING OF THE ABOVE-REFERRED-TO LOAN, IT APPEARS THAT LEHIGH DECIDED TO BUILD ANOTHER BUILDING OR PLANT ON THE SAME TRACT OF GROUND, APPROXIMATELY 160 FEET AWAY FROM ITS EXISTING PLANT, AND TO OPERATE BOTH PLANTS OR BUILDINGS, APPARENTLY AS SEPARATE ENTITIES. LEHIGH CONTEMPLATED USING MACHINERY IN THE NEW PLANT WHICH WOULD REQUIRE 60-CYCLE ELECTRIC SERVICE. IT APPEARED THAT BY LETTER DATED MAY 19, 1955 (CONFIRMING A DISCUSSION HELD ON MAY 10, 1955), THE RAILWAY COMPANY OFFERED TO SUPPLY 60 -CYCLE ELECTRIC SERVICE TO LEHIGH. FURTHER, IT APPEARED FROM THE RECORD THAT THE RAILWAY COMPANY AGAIN, ORALLY, ON SEPTEMBER 28, 1955, OFFERED TO FURNISH LEHIGH 60-CYCLE SERVICE FOR ITS PROPOSED NEW PLANT AND CONFIRMED SUCH OFFER IN WRITING BY LETTER DATED OCTOBER 4, 1955.

LEHIGH, HOWEVER, APPARENTLY DID NOT DESIRE TO ACCEPT SUCH SERVICE FROM THE RAILWAY COMPANY ON THE GROUND THAT THE RATE QUOTED BY THE COMPANY WOULD PREVENT LEHIGH FROM PRODUCING ITS PRODUCTS AT A COMPETITIVE PRICE.

IT APPEARED THAT LEHIGH ENTERED INTO NEGOTIATIONS WITH GREENE COUNTY FOR 60-CYCLE SERVICE AND, SUBSEQUENT TO THE DATE OF THE ABOVE-REFERRED TO LOAN, ENTERED INTO A CONTRACT WITH GREENE COUNTY FOR SUCH SERVICE.

THE ACTING SECRETARY CONTENDS THAT OUR LETTER OF JULY 21 LEAVES THE IMPRESSION THAT THE FACILITIES OF THE MEMBER COOPERATIVE WERE REMOTE FROM THE PROPOSED NEW PLANT OF LEHIGH AND THAT THE ONLY ELECTRIC FACILITIES IN THE VICINITY WERE THOSE OF THE RAILWAY COMPANY. HE SAYS THE FACTS ARE NOT ONLY THAT THE GREENE COUNTY FACILITIES WERE IN THE IMMEDIATE VICINITY OF THE PROPOSED NEW PLANT BUT ALSO THAT GREENE COUNTY WAS ACTUALLY SERVING A STRUCTURE ON THIS TRACT OF LAND. THE ACTING SECRETARY FURTHER SAYS THAT OUR LETTER INDICATES THAT GREENE COUNTY MADE A MOVE TO SERVE THE NEW LEHIGH PLANT ONLY AFTER THE RAILWAY COMPANY HAD CONSIDERED SERVING IT, BUT THE FACT IS THAT GREENE COUNTY HAD BEEN APPROACHED AND THEREUPON HAD UNDERTAKEN NEGOTIATIONS WITH LEHIGH DURING THE SAME PERIOD THE RAILWAY COMPANY INDICATED ITS DESIRE OR ABILITY TO SERVE THE PROPOSED NEW PLANT.

WE MADE NO STATEMENT TO THE EFFECT THAT THE ONLY ELECTRIC FACILITIES IN THE VICINITY WERE THOSE OF THE RAILWAY COMPANY AND DID NOT INTEND TO LEAVE THAT IMPRESSION. WE DID NOT CONSIDER THE FACT THAT GREENE COUNTY WAS SERVING THE RESIDENCE (OWNED BY LEHIGH AND ON THE SAME TRACT OF GROUND AS THE PROPOSED NEW PLANT) OF THE KILN FOREMAN PARTICULARLY SIGNIFICANT IN CONNECTION WITH THE USE OF THE PORTION OF THE LOAN IN QUESTION OR WITH THE DETERMINATION THAT LEHIGH AT ITS NEW PLANT WAS A PERSON NOT RECEIVING CENTRAL STATION SERVICE. WHILE YOUR DEPARTMENT'S PRIOR REPORTS TO US INDICATED GREENE COUNTY WAS FURNISHING ELECTRIC ENERGY TO THE KILN FOREMAN'S RESIDENCE, APPARENTLY THE PURPOSE OF SUCH REFERENCE WAS TO INDICATE THAT EACH STRUCTURE ON THE SAME TRACT OF LAND, DEPENDING ON ITS USE, MIGHT BE CONSIDERED A SEPARATE ENTITY. WE WOULD LIKE TO POINT OUT HERE THAT THE PROPOSED NEW PLANT WAS TO BE USED FOR THE SAME GENERAL PURPOSES AS THE OLD PLANT, APPARENTLY TO MANUFACTURE SEWER PIPE AND TILE. FURTHERMORE, IT HAS BEEN REPORTED THAT THE SAME CLAY REMOVAL AND CLAY- TRANSPORTATION FACILITIES, CARPENTER AND MACHINE SHOPS ARE USED IN CONNECTION WITH BOTH THE OLD AND THE NEW PLANTS. HENCE, IT COULD NOT ACCURATELY BE STATED THAT THE NEW PLANT IS A COMPLETELY SEPARATE AND INDEPENDENT ENTITY. AS TO THE DATE LEHIGH ENTERED INTO NEGOTIATION WITH GREENE COUNTY, WE HAD AND HAVE NO SPECIFIC KNOWLEDGE THEREOF AND THE REPORTS FURNISHED US BY YOUR DEPARTMENT IN CONNECTION WITH THE MATTER DO NOT CONTAIN SUCH INFORMATION NOR DOES THE ACTING SECRETARY'S LETTER. APPEARED FROM THE RECORD BEFORE US AT THE TIME, HOWEVER, THAT THE RAILWAY COMPANY ENTERED INTO NEGOTIATIONS WITH LEHIGH ON MAY 10, 1955, AND WE ASSUMED (SINCE LEHIGH INDICATED GREENE COUNTY WAS THE ONLY SUPPLIER WHO COULD FURNISH IT THE QUALITY AND QUANTITY OF ELECTRICITY IT REQUIRED AT A PRICE THAT WOULD ENABLE IT TO PRODUCE ITS PRODUCTS AT A COMPETITIVE PRICE) THAT GREENE COUNTY ENTERED INTO NEGOTIATIONS SOMETIME THEREAFTER. IN ANY EVENT, IT APPEARED FROM THE RECORD THAT THE RAILWAY COMPANY OFFERED TO FURNISH 60-CYCLE SERVICE TO THE PROPOSED NEW PLANT APPROXIMATELY 4 MONTHS PRIOR TO THE DATE (SEPTEMBER 9, 1955) THE $11,173,000 LOAN TO CIPCO WAS APPROVED AND, OF COURSE, PRIOR TO THE DATE LEHIGH ENTERED INTO ITS POWER CONTRACT WITH GREENE COUNTY, THIS LATTER DATE BEING SUBSEQUENT TO THE DATE OF APPROVAL OF THE CIPCO LOAN.

AS TO WHETHER THE FACILITIES WHICH THE REA LOAN WAS FINANCING WOULD SUPPLANT OR PERFORM THE FUNCTION THERETOFORE BEING PERFORMED BY, OR REDUCE THE VALUE OF, EXISTING FACILITIES OF THE RAILWAY COMPANY, WE UNDERSTAND THAT THE TOWN OF LEHIGH, WHICH APPARENTLY WAS A CUSTOMER OF THE RAILWAY COMPANY AND ITS SUCCESSOR, IOWA-ILLINOIS GAS AND ELECTRIC COMPANY, TERMINATED ITS SERVICE FROM IOWA-ILLINOIS AND NOW BUYS ITS POWER FROM GREENE COUNTY THROUGH THE SO-CALLED LEHIGH TAP. WE REALIZE, OF COURSE, THAT THE CENTRAL STATION SERVICE LIMITATION DOES NOT NECESSARILY PRECLUDE REA LOANS, OTHERWISE VALID, BECAUSE OF THE FACT PERSONS ALREADY RECEIVING CENTRAL STATION SERVICE WOULD BE COLLATERALLY INVOLVED.

THE ACTING SECRETARY ALSO SAYS THAT A MISLEADING IMPRESSION IS ALSO GIVEN BY OUR REFERENCE IN OUR PRIOR LETTER TO "A MODIFICATION OR ADJUSTMENT" OF THE EXISTING RAILWAY COMPANY SERVICE AS BEING ALL THAT WAS INVOLVED IN SUPPLYING THE NEW PLANT'S ELECTRIC NEEDS SINCE SUBSTANTIAL NEW CONSTRUCTION WAS REQUIRED TO FURNISH THE PROPOSED NEW PLANT 60-CYCLE SERVICE. WHILE IT MAY BE THAT SUBSTANTIAL NEW ELECTRIC FACILITIES HAD TO BE CONSTRUCTED TO FURNISH POWER TO THE PROPOSED LEHIGH PLANT, IT APPEARS THE RAILWAY COMPANY COULD ALSO HAVE USED, AT LEAST TO SOME EXTENT, ITS EXISTING FACILITIES (THE FACILITIES USED TO FURNISH POWER TO THE OLD PLANT). SINCE THIS WOULD APPEAR TO BE THE CASE, IT APPEARS THAT CONSTRUCTION OF THE LEHIGH TAP HAD THE EFFECT OF PARALLELING, IN SOME DEGREE, AN EXISTING POWER SYSTEM WHICH WAS FURNISHING POWER TO LEHIGH'S OLD PLANT LOCATED ON THE SAME TRACT OF GROUND, APPROXIMATELY 160 FEET AWAY FROM THE PROPOSED NEW PLANT. THEREFORE, AND SINCE THE RAILWAY COMPANY WAS FURNISHING LEHIGH 25-CYCLE SERVICE AND LEHIGH DESIRED 60-CYCLE SERVICE FOR ITS PROPOSED NEW PLANT AND THE RAILWAY COMPANY APPARENTLY HAD POLES AND POWER LINES RUNNING TO THE OLD PLANT, WE CONSIDERED THE FURNISHING OF 60- CYCLE SERVICE A MODIFICATION OR ADJUSTMENT OF THE TYPE OF SERVICE LEHIGH WAS PRESENTLY RECEIVING, THAT IS, A CHANGE, A DIFFERENT TYPE SERVICE, EVEN THOUGH CERTAIN CONSTRUCTION HAD TO BE UNDERTAKEN TO FURNISH THE NEW TYPE SERVICE.

THE ACTING SECRETARY'S LETTER CONTINUES, IN PERTINENT PART:

"THE DECISION ALSO OMITS SIGNIFICANT FACTS CONCERNING THE BACKGROUND, NATURE AND STATUS OF THE ELECTRIC SERVICE BEING FURNISHED BY RAILWAY COMPANY. THIS COMPANY INITIALLY UNDERTOOK ELECTRIC SERVICE TO THIRD PARTIES MERELY AS A MINOR INCIDENT OF ITS ELECTRIC RAILWAY OPERATIONS; UPON CONVERTING ITS RAILWAY OPERATIONS FROM ELECTRIC TO DIESEL IN 1955, IT SOUGHT TO DISPOSE OF ITS INCIDENTAL ELECTRIC PROPERTIES AND LEAVE THE POWER SUPPLY BUSINESS. ACCORDINGLY, FOR SOME TIME IT HAS MADE NO EFFORT TO KEEP ITS ELECTRIC FACILITIES IN MODERN CONDITION, AND THE FAULTY AND INADEQUATE CHARACTER OF ITS SERVICE HAD FOR SOME TIME BEEN THE SUBJECT OF WIDESPREAD COMPLAINT AMONG ITS CONSUMERS. IN 1956, RAILWAY COMPANY EVEN OFFERED TO SELL ALL ITS ELECTRIC FACILITIES TO CIPCO AND GREENE COUNTY. IT IS AGAINST THIS BACKGROUND, AND AGAINST THE BACKGROUND OF THE OBSOLETE CHARACTER OF THE RAILWAY COMPANY SERVICE TO THE OLD LEHIGH PLANT, THAT THE NEGOTIATIONS BETWEEN GREENE COUNTY AND LEHIGH WITH RESPECT TO THE NEW PLANT MUST BE VIEWED. THE 25 CYCLE SERVICE BEING RENDERED BY RAILWAY COMPANY TO THE OLD LEHIGH PLANT WAS OF A CHARACTER WHICH WOULD HAVE PRECLUDED LEHIGH, AS STATED BY ITS OFFICERS, FROM UNDERTAKING THE CONSTRUCTION OF A TRULY MODERN, ECONOMICAL AND EFFICIENT NEW PIPE AND TILE MANUFACTURING PLANT."

WHILE YOUR DEPARTMENT IN ITS LETTER OF MAY 5, 1958, ADVISED US THAT HAD AN ADMINISTRATIVE FINDING BEEN MADE THAT LEHIGH WAS NOT RECEIVING ADEQUATE CENTRAL STATION SERVICE FROM THE RAILWAY COMPANY, IT BELIEVED THAT SUCH A DETERMINATION WOULD HAVE BEEN ADMINISTRATIVELY JUSTIFIABLE AND LEGALLY SUPPORTABLE, IT DOES NOT APPEAR THAT SUCH A DETERMINATION WAS IN FACT MADE. THE FACT THAT, IN 1956, THE RAILWAY COMPANY HAD OFFERED TO SELL ITS FACILITIES WOULD NOT APPEAR PERTINENT TO THE QUESTION INVOLVED HERE SINCE THE PURCHASER WOULD APPARENTLY HAVE HAD TO BUY SUBJECT TO ANY CONTRACTS WHICH THE RAILWAY COMPANY HAD WITH ITS CUSTOMERS.

FURTHER, WHILE IT MAY BE THAT THE 25-CYCLE SERVICE BEING FURNISHED BY THE RAILWAY COMPANY TO LEHIGH'S OLD PLANT WAS OF A TYPE WHICH WOULD HAVE PRECLUDED LEHIGH FROM UNDERTAKING THE CONSTRUCTION OF A MODERN, ECONOMICAL, AND EFFICIENT NEW PLANT, AS INDICATED IN OUR LETTER OF JULY 21, THE RAILWAY COMPANY HAD OFFERED (PRIOR TO THE DATE OF THE LOAN INVOLVED HERE AND PRIOR TO THE APPROVAL OF THE USE OF $120,000 OF THE LOAN FUNDS TO CONSTRUCT THE LEHIGH TAP), TO FURNISH LEHIGH THE TYPE OF SERVICE IT (LEHIGH) WANTED FOR ITS PROPOSED NEW PLANT, APPARENTLY AT A REASONABLE PRICE.

THE ACTING SECRETARY SAYS THAT THE CIRCUMSTANCES SURROUNDING THE DECISION OF LEHIGH TO BUILD ITS NEW PLANT ON THE SITE IN QUESTION NEGATES ANY INFERENCE THAT THE NEW PLANT HAD ANY CONNECTION WHATSOEVER WITH THE OLD PLANT, AND THAT ANY ATTEMPT TO IDENTIFY THE NEW PLANT AND THE OLD PLANT AS PARTS OF THE SAME ELECTRIC LOAD IS FURTHER NEGATED BY THE DIFFERENCE IN CAPITAL INVESTMENT BETWEEN THE TWO PLANTS AND THE DIFFERENCE IN PEAK KW DEMAND AND KW-HOUR CONSUMPTION PER YEAR BETWEEN THE NEW AND OLD PLANTS. DO NOT FEEL THAT THESE DIFFERENCES, EVEN THOUGH SUBSTANTIAL (CAPITAL INVESTMENT, OLD PLANT $259,790, NEW PLANT (PROPOSED) $1,379,819; PEAK KW DEMAND AND KW-HOUR PER YEAR, OLD PLANT 240 KW AND 400,000 KWH, RESPECTIVELY, NEW PLANT (ESTIMATED) 1,000 KW AND 1,800,000 KWH, RESPECTIVELY), ARE NECESSARILY DETERMINATIVE OF THE QUESTION AS TO WHETHER LEHIGH IS BUT A SINGLE PERSON WITH RESPECT TO THE OLD AND NEW PLANTS (THE NEW PLANT APPARENTLY BEING LOCATED APPROXIMATELY 160 FEET FROM THE OLD PLANT ON THE SAME TRACT OF LAND). IN CONNECTION WITH WHETHER THE TWO PLANTS SHOULD BE CONSIDERED A SINGLE PERSON, WE UNDERSTAND THAT THE EXISTING POWER SUPPLIER TERMINATED ITS 25-CYCLE SERVICE TO LEHIGH'S OLD PLANT AND THAT GREENE COUNTY IS NOW FURNISHING 60-CYCLE SERVICE TO BOTH THE OLD AND NEW PLANTS AND METERING IT THROUGH A SINGLE METERING STATION. IN OTHER WORDS, LEHIGH, AS TO BOTH ITS NEW AND OLD FACILITIES, IS BEING TREATED AS A SINGLE CUSTOMER BY GREENE COUNTY. ALSO, WE UNDERSTAND THAT GREENE COUNTY HAS A PUBLISHED RULE FORBIDDING THE COMBINING OF TWO OR MORE CUSTOMERS ON A SINGLE METER.

THE ACTING SECRETARY'S LETTER CONTINUES:

"THERE IS, FURTHER, ABUNDANT EVIDENCE THAT CIPCO WOULD HAVE BUILT THE SO- CALLED LEHIGH TAP EVEN WITHOUT THE GREENE COUNTY-LEHIGH CONTRACT, BECAUSE THE COOPERATIVE HAD TO UNDERTAKE TO SUPPLY MANY OF ITS MEMBERS FROM A NEW LOAD CENTER WHICH WAS TO BE CONNECTED THROUGH THIS LEHIGH TAP.

IN FACT, GREENE COUNTY IS NOW SERVING THROUGH THIS LINE 307 OF ITS MEMBERS, IN ADDITION TO THE NEW LEHIGH PLANT."

WHILE IT MAY BE THAT CIPCO WOULD HAVE BUILT THE LEHIGH TAP EVEN WITHOUT THE GREENE COUNTY-LEHIGH CONTRACT, THE ACTING SECRETARY DOES NOT SAY THAT USE OF THE LOAN FUNDS FOR SUCH CONSTRUCTION WOULD HAVE BEEN AUTHORIZED ON THE BASIS OF SERVING THE 307 MEMBERS MENTIONED ABOVE, ABSENT THE LEHIGH POWER LOAD. WHILE YOUR DEPARTMENT'S PRIOR REPORTS TO US IN THE MATTER MAKE REFERENCE TO THE FACT THAT THE LEHIGH TAP IS ALSO SERVING 307 FARM CONSUMERS OF GREENE COUNTY, THERE IS NOTHING TO INDICATE THAT THE FURNISHING OF SUCH SERVICE WAS FOR CONSIDERATION IN DETERMINING THE PROPRIETY OF THE USE OF THE LOAN FUNDS TO CONSTRUCT THE LEHIGH TAP OR THAT SUCH FACT COULD BE TAKEN INTO CONSIDERATION IN CONNECTION WITH THE DETERMINATION THAT LEHIGH AT ITS NEW PLANT WAS A PERSON NOT RECEIVING CENTRAL STATION SERVICE. PRESUMABLY REA WAS AWARE THAT THE LEHIGH TAP WAS TO BE USED TO SERVE 307 FARM CUSTOMERS OF GREENE COUNTY WHEN IT RETURNED THE GREENE COUNTY LEHIGH POWER CONTRACT WITHOUT APPROVAL ON OR ABOUT NOVEMBER 15, 1955, BECAUSE IT APPEARED THAT LEHIGH "WAS THEN RECEIVING 25 CYCLE ELECTRIC SERVICE FROM" THE RAILWAY COMPANY. FURTHERMORE, IT APPEARS FROM THE RECORD THAT THE PROPOSED SERVICE TO THE LEHIGH SEWER PIPE AND TILE COMPANY WAS THE PRINCIPAL JUSTIFICATION FOR THE TRANSMISSION LINE TAP AND THE NEW SUBSTATION. WE ASSUME FROM THE FOREGOING THAT USE OF THE LOAN FUNDS FOR CONSTRUCTION OF THE LEHIGH TAP WOULD NOT HAVE BEEN AUTHORIZED ABSENT THE FURNISHING OF POWER TO LEHIGH.

THE ACTING SECRETARY CONTENDS THAT THE STATEMENT IN OUR LETTER THAT THE OLD PLANT WAS RECEIVING CENTRAL STATION SERVICE IS OF QUESTIONABLE VALIDITY. WHILE THAT MAY BE, AS INDICATED ABOVE, THE RECORD SHOWS THAT THE USE OF THE LOAN FUNDS FOR CONSTRUCTION OF THE LEHIGH TAP WAS NOT APPROVED BY REA IN NOVEMBER 1955 AND THAT REA WITHHELD APPROVAL BECAUSE SUFFICIENT EVIDENCE WAS NOT PRESENTED TO SHOW THAT LEHIGH WAS AN ELIGIBLE BENEFICIARY OF REA LOAN FUNDS BECAUSE OF THE CENTRAL STATION SERVICE TO THE OLD PLANT. FURTHERMORE THE ADMINISTRATIVE DETERMINATION BY REA TO THE EFFECT THAT LEHIGH AT ITS NEW PLANT WAS A PERSON NOT RECEIVING CENTRAL STATION SERVICE, APPARENTLY (IN VIEW OF ALL THE FACTS AND CIRCUMSTANCES) IMPLIES THAT LEHIGH AT ITS OLD PLANT WAS RECEIVING CENTRAL STATION SERVICE, OTHERWISE THERE WOULD HAVE BEEN NO NECESSITY FOR QUALIFYING THE ADMINISTRATIVE DETERMINATION BY REFERRING ONLY TO THE NEW PLANT. FURTHER, THE DEPARTMENT'S PREVIOUS REPORTS TO US MADE NO MENTION OF COMPLAINTS OF THE ADEQUACY OF THE CENTRAL STATION SERVICE BEING FURNISHED LEHIGH, NOR DID THE REPORTS INDICATE THAT THE ADMINISTRATIVE FINDING CONCERNING THE NEW PLANT WAS BASED, IN PART, ON THE COMPLAINTS OF THE ADEQUACY OF THE SERVICE TO THE OLD PLANT.

THE ACTING SECRETARY FURTHER STATES THAT THERE IS CONSIDERABLE DOUBT THAT THE 25-CYCLE SERVICE THAT WAS BEING FURNISHED BY THE RAILWAY COMPANY CONSTITUTES ADEQUATE CENTRAL STATION SERVICE IN THIS COUNTRY AT THE PRESENT TIME, SINCE 60-CYCLE SERVICE IS STANDARD AND ELECTRICAL APPLIANCES AND EQUIPMENT ARE DESIGNED AND MANUFACTURED FOR 60-CYCLE OPERATION. WHILE THIS MAY VERY WELL BE, IT DOES NOT APPEAR, AS INDICATED ABOVE, THAT REA MADE ANY ADMINISTRATIVE DETERMINATION TO THE EFFECT THAT LEHIGH WAS NOT RECEIVING ADEQUATE CENTRAL STATION SERVICE AT ITS OLD PLANT.

AS TO WHETHER THE OFFER OF THE POWER SUPPLIER OF THE OLD PLANT TO FURNISH ADEQUATE CENTRAL STATION SERVICE TO THE NEW PLANT COULD HAVE BEEN CARRIED INTO EFFECT, THERE WAS NOTHING IN THE RECORD BEFORE US TO INDICATE THAT THE RAILWAY COMPANY, AT THE TIME IT MADE THE OFFER, COULD NOT HAVE CARRIED IT INTO EFFECT. WE REALIZE THAT IT WOULD HAVE BEEN NECESSARY FOR THE RAILWAY COMPANY TO CONSTRUCT CERTAIN ADDITIONAL FACILITIES (AT A COST OF APPROXIMATELY $100,000 ACCORDING TO THE ACTING SECRETARY'S LETTER) IN ORDER TO CARRY OUT ITS OFFER. FURTHER, WHILE IT MAY BE THAT THE RAILWAY COMPANY AND IOWA-ILLINOIS DID NOT HAVE THE NECESSARY FRANCHISE REQUIRED TO UNDERTAKE SUCH CONSTRUCTION, THERE IS NOTHING IN THE RECORD TO INDICATE THAT EITHER WOULD HAVE BEEN UNABLE TO OBTAIN SUCH A FRANCHISE, HAD EITHER ENTERED INTO A CONTRACT TO SUPPLY LEHIGH ELECTRICITY, SINCE EACH FURNISHED 25-CYCLE SERVICE TO LEHIGH. FURTHER, THERE WAS NOTHING IN THE PRIOR RECORD TO INDICATE THAT THE RAILWAY COMPANY DID NOT HAVE A FRANCHISE TO FURNISH 25-CYCLE SERVICE TO THE OLD PLANT OR THAT IT COULD NOT HAVE OBTAINED ONE AT THE TIME IT MADE THE OFFER TO FURNISH 60-CYCLE SERVICE TO LEHIGH'S PROPOSED NEW PLANT. IT APPEARS THAT CIPCO WAS NOT GRANTED A FRANCHISE TO CONSTRUCT THE LEHIGH TAP UNTIL AUGUST 28, 1956, I.E., AFTER GREENE COUNTY ENTERED INTO THE CONTRACT WITH LEHIGH AND AFTER REA APPROVED THE USE OF THE LOAN FUNDS TO CONSTRUCT THE LEHIGH TAP. IN ANY EVENT, IF THE ADMINISTRATOR OF REA HAD DETERMINED AT THE TIME THE USE OF THE LOAN FUNDS FOR THE PURPOSE IN QUESTION WAS APPROVED THAT THE EXISTING POWER SUPPLIER TO THE OLD PLANT COULD NOT HAVE OBTAINED THE NECESSARY FRANCHISE TO FURNISH POWER TO THE NEW PLANT AND WE HAD BEEN SO ADVISED IN EITHER OF YOUR DEPARTMENT'S TWO PRIOR REPORTS, THEN WE WOULD NOT HAVE FELT IT NECESSARY TO TAKE ANY ACTION IN THE MATTER.

ALSO, WHILE IT MAY BE THAT, IN THE INSTANT CASE, GREENE COUNTY COULD FURNISH POWER SOMEWHAT CHEAPER THAN THE EXISTING POWER SUPPLIER, IT APPEARED FROM THE RECORD BEFORE US THAT THE PRICE AT WHICH THE EXISTING SUPPLIER HAD OFFERED TO FURNISH POWER WAS REASONABLE, ALTHOUGH LEHIGH ALLEGES IT COULD NOT PRODUCE ITS PRODUCT COMPETITIVELY AT THE PRICE AT WHICH THE POWER SUPPLIER OF THE OLD PLANT HAD OFFERED TO FURNISH SERVICE. IN ANY EVENT, IN THE ABSENCE OF A DETERMINATION BY THE ADMINISTRATOR OF REA THAT THE PRICE AT WHICH THE EXISTING POWER SUPPLIER OFFERED 60-CYCLE SERVICE TO LEHIGH WAS UNREASONABLE, WE ASSUMED THE PRICE WAS REASONABLE.

THE ACTING SECRETARY SUMMARIZES THE FOLLOWING FACTS AND STATES THAT, ON THE BASIS OF THESE AND OTHER RELEVANT FACTS AND CIRCUMSTANCES, THE REA ADMINISTRATOR FOUND, AND YOUR DEPARTMENT THINKS PROPERLY SO, THAT LEHIGH AT ITS NEW PLANT (APPARENTLY AS DISTINGUISHED FROM ITS OLD PLANT) IS A PERSON NOT RECEIVING CENTRAL STATION SERVICE:

"*** (1) THE ELECTRIC FACILITIES SERVING LEHIGH'S OLD PLANT COULD NOT WITHOUT MAJOR REHABILITATION AND CONSTRUCTION BE UTILIZED TO SERVE THE NEW PLANT; (2) THE POWER REQUIREMENTS OF THE NEW PLANT GREATLY EXCEED AND OVERSHADOW THE ELECTRICAL REQUIREMENTS OF THE EXISTING OLD PLANT; (3) LEHIGH'S CAPITAL INVESTMENT IN THE NEW PREMISES GREATLY EXCEEDS AND OVERSHADOWS ITS CAPITAL INVESTMENT IN THE OLD PLANT; (4) THE CAPITAL INVESTMENT REQUIRED FOR PROVIDING ELECTRIC SERVICE TO THE NEW PLANT, REGARDLESS OF THE SUPPLIER, IS VERY SUBSTANTIAL (IN THIS CASE IN THE ORDER OF $100,000) AND GREATLY EXCEEDS AND OVERSHADOWS THE CAPITAL INVESTMENT IN ELECTRIC FACILITIES SERVING THE OLD PLANT; (5) THE LOCATION AND SCOPE OF THE NEW PLANT WERE DETERMINED BY LEHIGH IN THE LIGHT OF A DESIRED NEW ELECTRIC SUPPLIER; (6) THE OPERATION OF THE NEW PLANT WAS COMPLETELY INDEPENDENT OF THE OPERATION OF THE OLD PLANT; AND (7) GREENE COUNTY HAD BEEN SERVING, SINCE 1952, A LEHIGH-OWNED RESIDENCE LOCATED ON THE SAME TRACT AS, AND APPROXIMATELY 400 FEET FROM, THE OLD PLANT."

NOTWITHSTANDING THE FACTS SUMMARIZED ABOVE, WE ARE STILL OF THE VIEW (AS INDICATED IN OUR LETTER OF JULY 21) THAT WHERE A NEW BUILDING OR PLANT OF AN INDUSTRIAL COMPANY IS LOCATED APPROXIMATELY 160 FEET FROM AN OLD BUILDING OR PLANT OF THE SAME COMPANY ON THE SAME TRACT OF GROUND AND THE OLD PLANT IS RECEIVING CENTRAL STATION SERVICE FROM A POWER SUPPLIER WHO HAS OFFERED TO FURNISH ADEQUATE CENTRAL STATION SERVICE TO THE NEW PLANT, THERE APPEARS LITTLE BASIS FOR CONSIDERING THE NEW PLANT A PERSON NOT RECEIVING CENTRAL STATION SERVICE SO AS TO AUTHORIZE THE MAKING OF A LOAN, OR THE USE OF LOAN FUNDS, UNDER SECTION 4 OF THE RURAL ELECTRIFICATION ACT FOR THE PURPOSE OF CONSTRUCTING FACILITIES TO FURNISH ELECTRIC SERVICE TO THE NEW PLANT.

IN VIEW OF THE FOREGOING AND TAKING INTO CONSIDERATION ALL THE FACTS AND CIRCUMSTANCES, WE WILL INCLUDE A FULL REPORT OF THIS PARTICULAR TRANSACTION, INCLUDING THE VIEWS OF YOUR DEPARTMENT (TOGETHER WITH ANY FURTHER VIEWS YOU MAY WISH TO PRESENT) IN OUR NEXT AUDIT REPORT TO THE CONGRESS ON REA ACTIVITIES FOR WHATEVER ACTION THE CONGRESS MAY DEEM APPROPRIATE.

THEREFORE, AND SINCE THE LOAN FUNDS IN QUESTION ($120,000) APPARENTLY HAVE BEEN EXPENDED AND THE FACILITIES CONSTRUCTED AND IN USE, AND INASMUCH AS CIPCO, MUST, IN ANY EVENT, PAY BACK THE AMOUNT OF THE LOAN, NO ACTION NEED BE TAKEN BY YOUR DEPARTMENT TO RECOVER BACK THE $120,000 BEFORE IT FALLS DUE.