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Rural Electrification Administration

The Rural Electrification Act was one of the most important legislation during the era of President Franklin D. Roosevelt. It allowed the federal government to make low- cost loans to non-profit cooperatives for the purpose of bringing electricity to much of rural America for the first time. Presidential Executive Order created the Rural Electrification Administration, or R.E.A., on May 11, 1935. Congress authorized $410 million in appropriations for a ten-year program to electrify American farms and the amount of funding initially allocated by congress for enactment of the legislation borrowed by nonprofit electric cooperatives. On October 28, 1949, Congress made an important amendment to the Rural Electrification Act that allowed the further modernization and improvement of rural America. This amendment authorized the REA to make loans for the purpose of furnishing and improving rural telephone service. Cooperatives were not for profit consumer-owned firms organized to provide electric service to member customers. Each cooperative was typically governed by a board of directors elected from the ranks of its residential customers. The board established rates and policies for the cooperative, and hired a general manager to conduct the ordinary business of providing electricity to customers within the service region. Two restrictions were placed on how to form the cooperatives. They could not compete directly with utility companies, and co-op members could not live in areas served by utilities or within a municipality with a population of 1500 or more. For one to three customers the cost of the line with transformers and meters will range from $500 to $800 per mile. Cooke suggested that household payments for electricity would be a minimum of one dollar per month for the first ten kilowatts of electricity, three cents per kilowatt for the next forty kilowatts, and two cents per kilowatt for the remaining balance. The estimated cost to provide electricity to 500,000 farms, at an average of three farms per mile of rural road, was $112 million, or $225 per farm. If new generating facilities were needed for all 500,000 farms, the 333 power plants that would have to be constructed would cost an additional $87 million. Based on that, Cooke's high-end estimate for the complete electrical infrastructure needed to bring electrical service to 500,000 rural American farms was $200 million, or $400 per farm. Many groups were against the federal government's involvement in developing and distributing electric power, especially utility companies, who believed that the government was unfairly competing with private enterprise. Other people thought that farmers simply did not have the skills needed to manage local electric companies. Before signing the legislation, Roosevelt clearly understood that the benefits of the Electrification Act would bring to the rural American economy. After 1949, the R.E.A. was authorized to finance the formation of telephone cooperatives, through low-interest federal loans, to extend telephone service to underserved rural areas. . In 1994, Congress established the Rural Utilities Service (R.U.S.) as a federal agency within the United States Department of Agriculture (U.S.D.A.), and it absorbed the R.E.A. and its responsibilities for rural electrification and telephone service. Today, almost all rural Americans have electric service and 98 percent have telephone service.