Rural Life Without Electricity
It did not take long after Edison invented the first incandescent light bulb for private companies to commence providing electric service to most urban communities in the United States. Modern appliances like refrigerators, vacuum cleaners and radios were soon transforming the lives of urban residents. But rural electrification was not occurring at the same pace.
In the early 1900s electricity was not available in rural areas. Private electric companies claimed that it was too expensive to string their lines over the miles between farms. And where electricity was available to farms it cost almost twice as much as in urban areas.
By the mid-1930’s only 10% of rural areas had access to electricity. The lives of rural residents were not being transformed by electricity. In fact, most lived just like their parents and grandparents had. Farmers milked their cows by the light of a kerosene lamp. Their wives cooked their meals and warmed their water on a wood-burning stove. And their produce was vulnerable to spoilage because of lack of refrigeration.
Federal Support for Rural Electrification
Franklin Roosevelt understood the plight of the farmers. When he was governor of New York he had promoted development of the New York Power Authority, a state agency that produced low cost hydropower on the St. Lawrence River for use in rural areas in New York. When Roosevelt was elected President he invited Morris Cooke, who had led Giant Power, the Pennsylvania rural electrification program, to develop a federal government response to the lack of electricity in rural America.
Based on Morris’ recommendations Roosevelt created the Rural Electrification Administration (REA) in 1935. The REA was given authority to loan funds at low interest rates for construction of the infrastructure required to provide electricity to rural areas. It was initially thought that REA would loan the funds to private utilities for construction of the infrastructure. However, the private utilities continued to show little interest in serving rural areas.
Formation of Rural Electric Cooperatives
In 1936 Congress passed the Rural Electrification Act. The Rural Electrification Act gave the REA additional funding and directed it to make the low cost loans to cooperatives made up of residents of the rural communities. After passage of the Rural Electrification Act local residents joined together to form Rural Electric Cooperatives. The residents became both the owners (or members) and the customers of the Rural Electric Cooperatives. The Cooperative members elect a Board of Directors which hires the management team and employees to run the cooperative system.
The Rural Electric Cooperatives used the funds borrowed from the REA to construct their own electric distribution systems. Their cost for construction was far less than it would have been if the private utilities had provided the same service. Where available the Rural Electric Cooperatives purchased their electric generation from federal hydroelectric power projects or from private electric utilities. Where generation was not available from other sources the Rural Electric Cooperatives joined together to form Generation and Transmission cooperatives that built generation facilities for their cooperative members.
The Rural Electrification Act was one of the most successful federal programs ever implemented. By the mid-1950s over 90% of rural homes in the country had electricity. In 1994 Congress replaced the REA with the Rural Utility Service which continues to make low cost loans to Rural Electric Cooperatives. Today 99% of rural homes have electricity. Most are served by one of the 900 Rural Electric Cooperatives that continue in operation today.
I. David Rosenstein worked as a consulting engineer and attorney in the electric industry for 40 years. At various times during his career he worked for utility customers, Rural Electric Cooperatives, traditional investor owned regulated utilities and deregulated power generation companies. Each of his posts in this blog describes a different aspect of the past, present or future of the electric industry.