Repayment could extend up to 25 years and the interest rate would be kept low by tying it to federal government borrowing rates. Importantly, individuals would not be held personally liable for default on an REA loan [4]. Despite early obstacles, the REA program was ultimately highly successful. The REA continued into the postwar era and helped the percentage of electrified farms in the United States rise from 11 percent to almost 97 percent by [7].
The New Deal had helped rural America achieve near-total electrification. Morris Cooke was the first administrator of the REA, from to The first official action of the federal government pointing the way to the present rural electrification program came with the passage of the Tennessee Valley Authority TVA Act in May The idea of providing federal assistance to accomplish rural electrification gained ground rapidly when President Roosevelt took office in It was not until a year later that the Rural Electrification Act was passed and the lending program that became the REA got underway.
Within months, it became evident to REA officials that established investor-owned utilities were not interested in using federal loan funds to serve sparely populated rural areas. But loan applications from farmer-based cooperatives poured in, and REA soon realized electric cooperatives would be the entities to make rural electrification a reality.
In , the REA drafted the Electric Cooperative Corporation Act, a model law that states could adopt to enable the formation and operation of not-for-profit, consumer-owned electric cooperatives. Within four years following the close of the World War II, the number of rural electric systems in operation doubled, the number of consumers connected more than tripled and the miles of energized line grew more than five-fold.
The disincentives to investment in electrical infrastructure left rural America increasingly distant from the rising standard of living in the urban and emerging suburban settings of the national economy. Lacking the greater productive efficiencies secured by the adaptation of electricity, productivity growth in agriculture, the industry that served as the central organizing principle for rural life, lagged other sectors in the economy over the to period.
Rural demands for the newest manufactured items found in urban American homes — telephones, radios, refrigerators, washing machines, hot water heaters, and household appliances — were latent. Given the widening disparities between rural and urban settings, it was not surprising that rural Americans reverted to the cooperative lifestyles of the nineteenth century as the urban markets for their agricultural products collapsed in the Great Depression.
The failure of the market to deliver affordable electricity to rural locales led to over thirty state rural power initiatives during the s and early s, as President Herbert Hoover argued that responsibility for rural electrification rested with state government Brown, , pp. Governor of New York Franklin Delano Roosevelt aggressively promoted rural electrification, and the New York Power Authority was created in to develop a substantial new source of inexpensive hydroelectric generating capacity along the St.
Lawrence River Brown, , p. But the Depression led to the collapse of many state power authorities and further raised the bar in discouraging private investment in rural electrical infrastructure.
When Roosevelt assumed the Presidency on March 4, , the market for new rural electrification investment no longer existed. While Roosevelt clearly understood the benefits electrification would bring to the rural American economy, it was Morris L. Cooke who provided vision and leadership to rural electrification efforts under the New Deal. Cooke had led Giant Power, the Pennsylvania rural electrification program, and Roosevelt invited him to address the problem at the federal level.
Using data supplied by the utility industry, electrical engineers, Giant Power, and the U. Census of , Cooke authored an eleven-page report in that provided the foundation for a federal rural electrification program. Studies commissioned by 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 Cooke, , p.
The rural cooperative model, which had been successfully employed by Giant Power in Pennsylvania, was adopted by the R. 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. Only two restrictions were placed on the formation of cooperatives: they could not compete directly with utility companies, and coop members could not live in areas served by utilities or within a municipality with a population of or more Brown, , p.
The R. The loans were guaranteed by the federal government and had an attractive interest rate and a generous repayment schedule of twenty-five years. The interest rate initially matched the federal funds rate when the loan was executed, but after the rate was fixed at two percent Joskow and Schmalensee, , p.
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