Rural Electrification Administration

The Rural Electrification Administration (REA) was created during the Depression era to provide electricity to rural areas. President Franklin D. Roosevelt established the REA through Executive Order 7037 on May 11, 1935. In 1939, the REA became part of the Department of Agriculture (USDA). Subsequently, the agency's role was expanded by Congress to include directing a rural telephone program in 1949 and the delivery of rural Internet-based broadband telecommunications programs in 2002. In 1994, the Department of Agriculture was restructured under the Federal Crop Insurance Reform and Department of Agriculture Reorganization Act. This restructuring ended the REA but created the Rural Utility Service (RUS), which was charged with administering rural utility programs, rural housing programs, community facilities programs, rural water and waste disposal programs, and select rural business programs.

The vision of the Rural Development unit (which runs the RUS programs) of the USDA is “a rural America that is a healthy, safe, and prosperous place in which to live and work.” Its mission is “to increase economic opportunity and improve the quality of life for all rural Americans.” To serve its mission, the agency provides direct loans, loan guarantees, and modest levels of grant assistance in public-private partnerships. The RUS offers its services to rural cooperatives, nonprofit associations, public bodies, and for-profit utilities. The agency estimates that it supports the development of economic opportunity for more than 60 million Americans living in the 80% of the country classified as rural.

The Electric Program is the largest of the infrastructure programs of the RUS, accounting for approximately $28.5 billion of its fiscal-year 2006 loan portfolio. Water and telecommunications projects account for the remaining $12.5 billion of the agency's loan portfolio.

The agency has identified two key strategic initiatives: broadband service access in rural areas to provide for equal economic development opportunity and a grant program for high home energy cost areas. The RUS views affordable broadband as an “essential business tool.” The agency is committed to the provision of such technology that will improve distance learning opportunities and telemedicine care for sparsely populated areas. The energy grant program is targeted to pockets of homes in nine states with energy costs exceeding 275% of the national average. This program seeks to improve generation, transmission, and distribution facilities for those communities.

The provision of electrical service to rural America by the government through the REA was not without its detractors; for example, the bituminous coal industry objected to the federal government's entry into the power business through subsidies using taxpayers' money. Although large private power companies may [Page 1849]have been capable of generating and delivering electrical power to rural customers during the Depression, few actually provided such service, citing prohibitive costs and customer payment risks. Similar arguments are made regarding current RUS initiatives. However, the RUS essentially serves as a financing agency for infrastructure needs, providing 25-year loans to private companies, cooperatives, and public agencies at interest rates approximating the prevailing rate for government obligations.