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1 March 8, 2006 Energy Week at the World Bank Rural Electrification in the United States,1930–1950 An Institutional, Political, and Social Perspective.

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Presentation on theme: "1 March 8, 2006 Energy Week at the World Bank Rural Electrification in the United States,1930–1950 An Institutional, Political, and Social Perspective."— Presentation transcript:

1 1 March 8, 2006 Energy Week at the World Bank Rural Electrification in the United States,1930–1950 An Institutional, Political, and Social Perspective Paul Wolman

2 2 The United States as a Developing Country Agriculture, the U.S. Rural South, 1930s Left: Boy with hoe. North Carolina, Right: Tenant tobacco and corn farmer, Hwy. 144, Person County, NC, July Nitrate negatives, Farm Security Administration. Photos: Dorothea Lange.

3 3 Conditions in the U.S. Rural South, 1930s Low farm prices, agricultural depression, 1920s– Large population movements to cities and West High levels of debt and farm-mortgage foreclosure High rates of sharecropping and tenancy Poor health, nutrition, sanitation (especially for women and children) Low population densities Rural electrification: less than 15%. The United States as a Developing Country

4 4 The U.S. Electrical Industry, 1930 Nonfarm electrification: 84% Large utility holding companies controlled 75% or more of generating capacity Multiple regional grid systems Utilities “grew out of jurisdictions” of metropolitan, county, and state authority Lack of effective national regulation Little interest in RE because of low density (U.S. trailed most of Europe)

5 5 Origins of the RE Program Progressive initiatives –early 1900s (e.g., Country Life Movement; T. Roosevelt, L. H. Bailey, G. Pinchot) (Republican) progressives –engineering and political ideas, 1920s (e.g., G. Pinchot and M. Cooke, “Giant Power”) (Democratic) New Deal,1930s (e.g., F.D. Roosevelt, TVA, M. Cooke, D. Lilienthal)

6 6 Origins of the RE Program U.S. Rural Electrification Administration n REA Founded: FDR executive action,1935 n Rural Electrification Act of 1936 n Utilities would not participate in distribution n Utilities did participate in generation and wholesale electricity transmission

7 7 Origins of the RE Program n Cooperatives became focus n “Rochdale” principles n Egalitarian “area coverage” versus cherry-picking by utilities

8 8 Early Difficulties RE about 12 percent in the rural U.S. in 1935 Existing “RE” not really rural –primarily near higher-demand towns or large- scale farms Utilities sought to subvert RE (e.g., “spite lines”) Opposition from some state commissions Opposition from academic and agricultural extension

9 9 REA and Co-ops Respond Farmers had long resented utilities REA mobilized technical and support and innovation, cut costs REA construction costs 1/3 to 1/2 of utilities Electricity rates 1/3 to 1/2 of utilities Perceived equity of REA program and co-ops solidified popular support

10 10 Financial Viability n Distribution loans at 3% n Early lending heaviest in South and Midwest Nonprofit co-ops had to use all revenue and operating income to amortize debt to REA/RFC –Term for distribution loans, 25 years (extendable to 30). No formal subsidies –Lending for household wiring and appliances, terms up to 66% of appliances’ lifespan, capped at 5 years Wholesale electricity pricing constrained by TVA and federal power 2 to 5¢/kWh

11 11 A Typical Rural Electric Cooperative Consumer membership — 1,000 Total distribution line — 425 miles Average monthly bill (100 kWh) — $5 to $6 Minimum consumption averaging 60 kWh/mo per customer (REA/RFC loan required) “Lifeline” rates for poor consumers Long-term financing for wiring (“Arkansas Plan”) and appliances (EHFA)

12 12 Electrified Tenant Farmhouse Georgia, 1941

13 13 Household Diary, Oklahoma 1939–50 July 27, 1939—signed for [cooperative membership] June 1, 1940—Uncle Lark wired house August 8, 1940—Got electricity August 26, 1940—Bought a washer October 29, 1940—Bought a radio January 6, 1941—Wired milk barn July 25, 1941—Bought iron September 19, 1941—Bought refrigerator January 21, 1942—Wired Dutton Church December 3, 1942—Bought mixer, radio December 31, 1948—Bought deep freezer August 30, 1950—Bought sewing machine Source: Oklahoma Electric Cooperative.

14 14 Consumer Acceptance The REA sponsored fairs and campaigns aimed at promoting connections and demand Co-op members enjoying the benefits of electrification—listening to the radio

15 15 Impact of the RE Program From zero consumers to— 3.4 million consumer/members served 1.1 million miles of distribution line built at costs ~1/2 those of utilities 1,007 self-sustaining coops (vs. 2 in 1935) 147kWh/month average rural household consumption

16 16 Household Electrification

17 17 Key Success Factors Technical assistance from REA key to low line construction costs and power rates Security and stability of funding in initial years Pace Act 1944 extended REA’s term indefinitely EHFA and “Arkansas” plans— funded acquisition of appliances Egalitarian “area coverage” united rural residents around co-ops Co-ops’ simple self-governance, bill collection Suprapartisan political support —Progressives, New Deal Democrats, and even utilities (in generation)

18 18 Conclusions USRE a product of “Great Depression” but also of more general consensus on rural development However, enfranchisement of African Americans and Native Americans lagged behind that of whites RE programs important to social stabilization Shows value of mixed / joint venture with public funding, regulation, and popular private nonprofit ownership Co-ops still operating effectively “Electrification is not an implacable force moving through history but a social process that varies from one time period to another, from one culture to another” –David Nye, Electrifying America


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