The people's voice. [volume] (Helena, Mont.) 1939-1969, 1940-04-17
REA GENERATING
PLANT COSTS
EXPLAINED

There was printed in the March
| issue of the Rural Identification
News letter which Robert B.
| Craig, assistant administrator, wrote
| to directors and officers of all REA
financed power system in Minnesota
| warning them against certain pro-
| posed wholesale power contracts. A
later letter written by Mr. Craig to
| the same REA systems commenting
on the costs of financing electricity
at REA-financed cooperative gener-
ating plants follows:
On February Ia l sent you a bulle
tin calling attention to defects in the
wholesale power contract which the
Northern States Power Co. has been
trying to persuade your cooperative
to sign. Since then cooperative Off
Gals have reported that for some time
past there has been circulated mis-
leading information about the costs
of producing electricity at REA-fi-
nanced cooperative generating plants.
Some of this propaganda, local Off
GERS advise us, is being disseminated
by agents of Northern States. OF
course, the object of such propaganda
lis perfectly plain-to justify demands
for high wholesale rates by making
costs at cooperative plants appear
higher than they are. You are enti-
tied to know the truth. I hope that
you will see that it reaches all of
your members.
Electricity is being generated at two
EA-financed generating plants at
Hampton and Pocahontas, Iowa, at an
average cost of less than II mills per
kilowatt-hour. At the Pocahontas
plant the real cost is just over IL
mills. At the Hampton plant it is
barely over ! cent. In contrast with
these real costs, the propaganda,
which appears in the form Of So
called analysis" purports to show
that the production cost is very near
ly III cents.
The analysis" is typed up in such
way that 1t looks as if Minnesota
cooperative officials had put it out.
Certainly this presentation is anything
but fair
Moreover, the analysis" suggests
that significant and necessary items
have been omitted from the data ON
costs at the Iowa plants. This is not
true The production costs given
above for the two Iowa plants in
clude all normal expenses for opera
tion, maintenance, and overhead.
Contrary to the representations in
this so-called analysis" these figures
include taxes and insurance. They
include an allowance for interest and
Notwithstanding for the plants
an allowance that is regularly figured
in each month, whether or not pay
ments are due. In other words, at the
end Of the amortization period the CO.
operatives will own, free and clear of
all debt, two generating plants hav-
ing very substantial value. The CO.
operatives are buying these plants
right now, day by day, as they pay
for the generated electricity.
Furthermore, the unit cost of gener-
alton will gradually diminish as these
plants develop a fuller load. They
have been in operation less than two
years and are being called upon stead
lily to produce more energy as the CO.
operative members learn to utilize
more and more effectively.
This increased use will reduce the
costs per kilowatt-hour for fixed
charges on capital investment and
overhead and operating items.
The Wisconsin Power Cooperative
at Chippewa Falls, which produced
for distribution to 10000
CONTINUED on Page Four)