History of the Rural Electrification Industry

By Patton, Bob | Management Quarterly, Winter 1997 | Go to article overview

History of the Rural Electrification Industry


Patton, Bob, Management Quarterly


Note: The information contained within this article was digested directly from the following:

Lowell J. Endahl. 1996. "Electrification of Rural America," Encyclopedia of Rural America. Department of Sociology/Anthropology, North Dakota State University, Garland Publishing, Inc.

NRECA. 1990. Rural Electric SOURCEBOOK. J.C. Brown, Patrick Dahl, Jennifer Sparkman, editors, National Rural Electric Cooperative Association, Arlington, VA, Library of Congress Catalog Card Number: 9063458.

NRECA. 1996. Regional Meeting Mini Seminars. Greg Boudreaux, Author, and Zan McKelway, editor, National Rural Electric Cooperative Association, Arlington, VA.

The Need

In the 1930s with the invaluable help and support from many rural organizations, partnerships were formed with an agency of the U.S. Government to plan a network of not-for-profit electric cooperatives that would provide a source for reliable and cost-efficient electric service for all rural areas of the United States. These member-owned cooperative businesses answered a need when investor-owned electric corporations and others would not or could not provide electricity to many of the country's rural areas.

Electric power had a profound effect on life in America's cities for nearly a half-century prior to the advent of the Rural Electrification Administration (REA). Electric service was one of the key attractions of city life in those times, and was a contributing factor to the exodus of many rural residents - especially young people - from the farms and into the nation's metropolitan areas.

According to the electric power industry of that time, it was far from being economically feasible to provide central station electric service in all parts of rural America. As profit driven businesses, they could foresee no profits to be made in serving the sparsely populated rural countryside. As late as the mid-1930s, nine out of ten rural homes were without electric service and living and working standards were primitive compared to life and work in the cities. As a result of the unavailability of electricity in rural areas, their economies were limited entirely and exclusively to agriculture.

The private, investor-owned companies that served most of the nation's cities gradually extended their lines along many of the main roads leading out into the countryside. Some farmers who lived along those routes were able to take advantage of the central station electric service. However, in those few and favored locations, though, the price usually was high and service often erratic. Rural customers were required to pay the full cost of connecting their homes to the "highline" - a price ranging from $2,000 to $3,000 a mile. (In 1996 dollars, this would be $26,109 to $34,664). And after the farmer paid to have a line extended to his home, that line became the property of the power company.

On top of that initial investment, rural consumers soon found that the rate they had to pay for electric service was frequently 10 to 12[cents] per kilowatt-hour. A typical price for an urban customer was 5[cents]. In some places, the companies charged as much as 25[cents] or even 40[cents] per kWh.

The Genesis

The first official action of the federal government pointing the way to the rural electrification program (which in the 1990s evolved into the rural utility services program) came with the passage of the Tennessee Valley Authority Act in May 1933. This act authorized the TVA Board to construct transmission lines to serve "farms and small villages that are not otherwise supplied with electricity at reasonable rates" and to give preference in the sale of surplus power to "cooperative organizations of citizens or farmers" as well as certain public agencies.

The idea of providing Federal assistance to accomplish rural electrification gained ground rapidly when the New Deal administration under President Franklin D. Roosevelt took office.

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