Better Know your Electricity History Series, Part Three: Rural Electrification Act

By Brooke Drake, April 13, 2015, News

Next up in our Better Know your Electricity series is focusing on the Rural Electrification Act. The Rural Electrification Act was one of the most important parts of President Franklin D. Roosevelt’s New Deal. It was passed by Congress in 1936 to give those in rural America a fair chance at life.

Past
You see back in the 1930’s, only 10 percent of people living in rural areas had access to electricity. Though there were privately owned utility companies during that time, those companies did not support rural communities as they found them to be too spread out to be profitable. The lack of electricity caused people to age faster and die younger than their “intown” counterparts due to unhealthy living conditions such as unheated homes and poor sanitation. Rural farmers were affected by no electricity as well because they had no means to modernize their farming practices, had no access to running water, and had little means to store their food (encyclopedia). So in effort to have electricity, they turned to each other for help to form nonprofit cooperatives to bring electrification to their areas. The only problem was they didn’t have the proper resources to operate them successfully.

That’s when President Roosevelt stepped in by creating the Rural Electrification Administration (REA) that was established to execute and oversee the Rural Electrification Act once it was passed in 1936. The Act allowed the federal government to make low-cost loans to farmers in nonprofit cooperatives in order to bring electricity to rural America (nps.gov). The low-cost loans helped those communities buy the proper generation and distribution facilities needed to successfully supply
their farms with electrical power. In addition to providing loans, the REA helped rural farmers “develop assembly line methods for electrical line construction with uniform procedures and standardized types of electrical hardware” (Encyclopedia.com), which modernized rural farming practices. Soon, more and more rural residents could afford electricity and by 1950, 90 percent of American farms had electricity. After seeing such success, Congress wrote an amendment to the Rural Electrification Act in 1949 to provide loans in order to improve rural telephone service as well.

Present
In today’s times, the REA no longer exists. With the creation of the USDA (United States Department of Agriculture) in 1994, the REA became the RUS (Rural Utilities Service). It still works with rural areas to provide telephone and electricity services, but also took over the USDA’s water and sewage programs. Now, rural electric cooperatives (RECs) are different than any other type of energy provider because each customer is a member and owner of the business and has equal say. Because RECs are nonprofit, they can offer lower prices compared to other types of energy companies; however rural electric coops serve only about 7 customers per mile line compared to 48 on average for publicly owned utilities thus making their costs to generate and transmit greater distances more expensive. To help with the higher costs, many of the rural coops have joined together to either run a large wholesale cooperative that generates and transmits their own electricity (also known as G&T’s) or to purchase and deliver electricity from public or investor owned power plants to supply their own customers with energy.

Statistics
Currently about 99 percent of farms are being powered by RECs. There are a total of 905 RECs that serve approximately 42 million people (12% of the nation’s electric consumers) in 47 states and own and maintain 42% of the nation’s electric distribution lines that cover ¾ of the country’s land mass (National Rural Electric Cooperative Association). Though the RECs are not the dominant energy providers within the US, they are dominant among the country’s rural areas. Also, though all investor owned energy companies are regulated by the Federal government, all but 16 RECs are left to regulate themselves with their own local board of directors.

Stay tuned for the next installment of our Better Know your Electricity History Series, Part 4.

Resources:
National Park Service
Encyclopedia.com
Wikipedia
University of Wisconsin Center for Cooperatives

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