Most large organizations have a creation story that is passed down from one generation to the next. NRECA’s has two parts, and both illustrate why electric co-ops needed full-time representation in Washington.
The first part begins with coils of copper wire piled by the side of the road near Gilmer, Texas. The big power companies accused the co-ops of hoarding wire in defiance of an order from the Office of Production Management (OPM, later the War Production Board) banning the use of copper and aluminum for building rural power lines.
It was late 1941, and the distribution of essential materials and equipment was being restricted as the country prepared to go to war in Europe. Rural electrification would have to wait.
The power companies convinced the Military Affairs Committee in the House of Representatives to conduct hearings on the co-ops’ alleged unpatriotic behavior. It probably didn’t hurt their cause that the electric power section of the OPM was headed by C.W. Kellogg, who had previously been president of the Edison Electric Institute, the power companies’ trade association.
It soon became apparent that the hoarding charge was completely unfounded, but not before Committee Chairman Rep. Jack May of Kentucky had dragged the co-op board members who had come to Washington to testify through the political muck.
“The wire didn’t belong to any co-op in the first place, but an electrical contractor who had imported it from Chile,” Clyde Ellis, NRECA’s first general manager, wrote in
Giant Steps, his 1966 memoir and history of NRECA. “When the freeze on construction had been announced, the contractor had done the only thing he could do, hold the wire, because he could neither install it nor sell it.”
Ellis, who listened to the hearings as a congressman from Arkansas, believed that if NRECA had been in place at the time, there would never have been any hearings. May had taken a cheap shot at a politically weak interest group. NRECA would have shifted Congress’s attention to the critically important thing co-ops could do for the war effort: electrify farms so they could produce more food for the troops overseas.
Ellis did just that after NRECA was incorporated in March 1942. Over the next two years, the co-ops were able to get enough copper wire and other essential materials and equipment to electrify 500,000 farms.
The second part of NRECA’s creation story is better known and has to do with the Rural Electrification Administration’s insurance requirement. For the first five or six years of their existence, co-ops had difficulty obtaining casualty insurance at reasonable rates. The power companies had done a good job of convincing the insurance industry that most co-ops were run by farmers who didn’t know anything about electricity. A lot of people were going to die on the job.
Co-op rates were 50 to 100 percent higher than power company rates. Some systems couldn’t get an insurance company to write them a casualty policy at any price.
The issue was near the top of the agenda for NRECA’s first round of regional meetings in the fall of 1942, and it was on Ellis’s to-do list when he was hired on January 3, 1943.
Ellis and the NRECA board of directors hired one of the top insurance and actuarial firms in New York to do a study, and it recommended the association start its own insurance company—two companies, actually: Rural Mutual Fire Corporation and Rural Mutual Casualty Insurance Corporation.
“When our plans were made public, you would have thought we were proposing to tear down the Washington Monument and put up a hot dog stand,” Ellis recalled. “Every affected special interest lobby in the country … seemed to jump on our backs.”
When NRECA proposed to capitalize the insurance companies with the reserve funds of its more than 300 member co-ops, a not uncommon practice, “our opponents screamed that it was morally and maybe legally wrong for us to do this.”
NRECA abandoned the idea when the New York rating bureau that set casualty insurance rates backed down on its previous position and lowered co-op rates to the same level as the power company rates. Pooling the co-ops’ insurance needs also helped keep rates down.
Although he doesn’t say it directly, it’s clear Ellis believed the insurance rating bureau wouldn’t have budged unless the co-ops had put up a good fight—an organized, carefully planned fight by a national office that kept the pressure on.