Signed by President Roosevelt on May 20, 1936, the Rural Electrification Act enabled the federal government to “make loans…for rural electrification and the furnishing of electric energy to persons in rural areas who are not receiving central station service.” To administer the loans and monitor the progress of rural electrification, the act established the Rural Electrification Administration (REA) as a permanent agency after it had first been created by an executive order in 1935 . (See our summary of the Rural Electrification Administration for more information).
The main impetus behind the Rural Electrification Act was that private power companies were either unwilling or unable to create an energy infrastructure in sparsely populated areas at a reasonable cost (the same kind of problem that led to the creation of the U.S. Postal Service after the American Revolution). So, instead of waiting for some undetermined future time where private power companies might change their hands-off policy, New Deal policymakers decided to bring electric power to rural America immediately.
The Rural Electrification Act provided that loans be made for “generating plants, electric transmission and distribution lines” and for the “installation of electrical and plumbing appliances” in homes. Loans were to be made to individuals, corporations, states, non-profit cooperatives (“co-ops”), and others, on terms favorable to the borrower – for example, interest rates were tied to the federal government’s low borrowing rates .
The results of the Rural Electrification Act were – and are –immense: almost all small towns and rural areas have been completely electrified; tens of millions of Americans “across 80 percent of the nation’s land mass” are served by electricity co-ops; and the co-ops have developed many engineering and administrative innovations .
The Rural Electrification Act was drafted by two prominent New Deal policymakers – U.S. Senator George Norris (R-NE) and U.S. Congressman Sam Rayburn (D-TX). The former paid a price for his legislative work aimed at improving the lives of rural Americans: “Pro-business Republicans, such as Henry Ford, who called Norris a ‘socialist’ for supporting public electric power through the 1933 Tennessee Valley Authority Act and the Rural Electrification Administration, forced Norris out the Republican Party and compelled him to run as an independent in 1936” (Norris won re-election anyway) .
Sources: (1) “Rural Electrification Act of 1936” (full text), Center for Columbia River History, http://www.ccrh.org/comm/moses/primary/electrif.html, accessed May 23, 2015. (2) Ibid. (3) “WECA History,” Wisconsin Electric Cooperative Association, http://www.weca.coop/we/education/history.htm, accessed May 23, 2015. (4) Richard L. Wilson, American Political Leaders, Facts on File, 2002, p. 310.