(return
to previous page)
Why did investor-owned electric
utility companies bypass farms while providing service to towns and
cities during the 20s and 30s?
IOUs have many rural customers, and
some of these customers date back to the early days of electric
service in North Dakota. In spite of this fact, we've all heard
stories about investor-owned utilities refusing service to farms
unless the farmers paid the full price of the installation up front,
with no opportunity to amortize the cost of the installation through
payments on their power bills. Some of those stories are true. But
they're true for a reason!
The reason is a simple one, one upon
which our nation's economic system is based: A business-any
business-must show a profit if it is to remain in existence. Without
the expectation of profit no individual or group of investors would
put at risk the capital needed to build a new company or grow an
existing one. That's as true for an investor-owned utility as for any
other business.
During the 1930's, economic
conditions in North Dakota were in shambles. Banks were failing and
taking depositors money with them. Poor farming practices and drought
had combined to create the Dust Bowl. And the pesticides and
herbicides that might have improved the yield of those few crops that
were surviving were not available.
Those devastating agricultural
conditions, coupled with the stock market crash of 1929, created an
incredibly tight money market. Remember, federally supported loan
programs did not exist at that time, so bankers required large equity
positions before they would grant loans either to farms or to
businesses. That made borrowing money all but impossible for the
majority of farmers, and put expansion capital in tight supply for all
businesses, including investor-owned utilities.
With expansion capital in tight
supply, the IOU's had little choice but to expend what little
expansion funds they had on towns and cities. There, the cost of
building the poles and wires needed to serve a community of several
hundred customers was a small fraction of the cost of serving a few
farms located several miles apart, making it possible to earn a
moderate profit. Any other strategy would have been economic suicide.
Of course, the same economic
conditions led to the federal government's decision to bring electric
service to farms and sparsely populated areas through the Rural
Electrification Act. Today, however, with the entire nation
electrified, USND opposes continued taxpayer-financed government
subsidies to serve population centers.
(return
to previous page)
