The year was 1936. The Rural Electrification Administration (REA) was in its second year of operation, a new federal agency still feeling its way forward.
It was a time of uncertainty but not indecision. REA Administrator Morris Cooke and his deputy, John Carmody, knew that President Franklin D. Roosevelt expected the number of electrified farms to increase every month.
REA had already given up on the idea that profit-making power companies would use the agency’s low-interest financing to extend their lines down back roads. Now these same companies were gouging co-ops on power supply.
“The program wasn’t getting underway too well because of the high cost of wholesale power,” Carmody, who was 79 and retired from government service at the time, said in a 1960 interview. “How could [the cooperatives] succeed if they had to pay excessively high rates for the energy they had to buy from the commercial power companies serving their area?”
REA, he recalled, was inclined to approve a loan for a co-op based in Meadville, Pennsylvania, about 40 miles south of Erie, “but [it was] difficult to justify on the basis of power costs and payout data submitted.”
If this were not enough, the local power company was beginning to build spite lines to serve “farmers they had refused to serve for years and therefore cripple the cooperative as a going concern.
“I was outraged when I learned this first rural electric co-op in Pennsylvania was about to be smothered out of existence,” Carmody said. (This was Steamburg Electric Association, which soon merged with Northwestern RECA.)
Carmody got Cooke’s permission to visit Meadville to see what he could do to turn things around. Cooke also agreed to Carmody’s request that other REA staff stay out of it until he returned.
“One of my assistants and I went up there, and we looked up some of the people who had started the cooperative,” he said. “We talked to them, and we talked to other rural people. … We slogged through the mud talking first to this farmer, then to that one, then a blacksmith, a filling station owner, and others along the roads. At the end of the first day, we came back to the hotel dog tired and dirty.”
A cub reporter from the local paper was there to meet them: “a young man with eagerness written all over his face.”
Carmody didn’t know what he was going to say when he started to talk to the reporter, but he had taken to heart the farmers’ complaints about the high cost of wholesale power.
“Then, like a flash, the answer came to me.”
He told the reporter that REA was going to build a generating plant in Meadville that would provide all of the farmers’ electricity needs at a price far lower than they could get from any power company.
Carmody said he went into some detail about what he had seen and heard that day, as well as what he knew about rate design. The young reporter left the hotel “beaming.” He had a really good story—a scoop.
The next morning, Carmody bought a copy of the paper on his way into the hotel dining room for breakfast and saw the banner headline: “REA TO BUILD BIG GENERATOR HERE.”
“As I read the story, I found the reporter had done an excellent job,” Carmody said. “He had quoted me accurately and in full. I felt a queer feeling of surprise, but I was not troubled in any way. I was glad for what I had done, and I was prepared to defend it, even though I realized that here was the beginning of an uncharted course.”
A few minutes later, Carmody got a call from Washington, and though the caller didn’t identify himself, Carmody recognized the voice of REA’s general counsel. He said he had just gotten off the phone with someone up in Pennsylvania who had seen the story.
“Were you quoted accurately? Did you say those things?” he’d asked.
“Yes, that’s right,” Carmody recalled saying. “That’s what I said last night.”
“Well, REA is not going to build a generating plant in Meadville,” the general counsel said.
“Who says so?” Carmody asked.
“I said so!”
Carmody then reminded the lawyer that lending money to build generating plants was in the REA Act of 1936 and suggested he visit Meadville “to see the trouble on the ground rather than make all judgments from Washington.”
Turns out Carmody didn’t have to make good on his threat.
“We threw a scare into the power companies,” he said. “By the time the dust settled after I created headlines so unexpectedly, the power companies offered the cooperative power at lower rates and worked out a settlement of the ‘spite line’ annoyance.”
Carmody replaced Cooke as REA administrator in 1937 and stayed in the job until 1939. He never had to publicly threaten a power company again.