President Roosevelt created the REA on May 11, 1935 with Executive Order No. 7037, under powers granted by the Emergency Relief Appropriation Act of 1935 . The goal of the REA was to bring electricity to America’s rural areas. While cities had enjoyed electric power for many years, in 1935 “fewer than 11 of every 100 U.S. farms were receiving central station electric service.” The main problem was that the power companies were unwilling and/or unable to string wires over long distances, across farmland and back country, at an affordable price .
The REA was initially expected to provide direct relief to the nation’s unemployed, but very few of the unemployed in rural areas had the needed electrical trade skills. It was also expected that the REA would be a grant-making agency and that it would work closely with private power companies. However, with private power companies unenthusiastic about the idea of extending their power lines across rural America at affordable rates, the REA quickly developed into an agency that made loans to state and local governments so that rural areas could develop their own electric power supply .
The Rural Electrification Act of 1936, signed by President Roosevelt on May 20, 1936, set forth new REA policies based on the agency’s early experience. Key among these policies was that loans would be made available for both large construction projects (for example, power plants and power lines) and for individual homes (for example, wiring and appliances). Repayment could extend up to 25 years and the interest rate would be kept low by tying it to federal government borrowing rates. Importantly, individuals would not be held personally liable for default on an REA loan .
Despite early obstacles, the REA program was ultimately highly successful. Whereas private power companies had originally suggested prices of $1,500 to $2,000 for each mile of power line constructed, “By 1939, REA borrowers were building lines for an average of less than $825 per mile, including overhead” . By 1943, $466 million had been lent by REA for electric power infrastructure, 380,000 miles of power lines had been installed, and over a million consumers were receiving electricity . The REA continued into the postwar era and helped the percentage of electrified farms in the United States rise from 11 percent to almost 97 percent by 1960 . The New Deal had helped rural America achieve near-total electrification.
Morris Cooke was the first administrator of the REA, from 1935 to 1937. John Carmody followed as administrator from 1937 to 1939. In 1939, the REA was put under the U.S. Department of Agriculture and, shortly thereafter, Harry Slattery became the third administrator, serving until 1945 . The REA was terminated on October 13, 1994, with the passage of the Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994. Its functions were absorbed into the newly-created Rural Utilities Service .
Sources: (1) “Executive Order 7037 Establishing the Rural Electrification Administration,” American Presidency Project, University of California – Santa Barbara, http://www.presidency.ucsb.edu/ws/?pid=15057, accessed March 25, 2015. (2) U.S. Department of Agriculture, “Rural Lines – USA: The Story of the Rural Electrification Administration’s First Twenty-five Years, 1935-1960,” Washington, DC: U.S. Government Printing Office, January, 1960, pp. 5-6. (3) Ibid, pp. 7-9. (4) Ibid. at pp. 9 and 12. (5) Ibid, p. 18. (6) Ibid, pp. 55-56. (7) Ibid, p. 3. (8) Ibid. at pp. 7, 11, and 33. (9) “Records of the Rural Electrification Administration,” National Archives and Records Administration, http://www.archives.gov/research/guide-fed-records/groups/221.html, accessed March 26, 2015.