In the early 1920s a growing number of farm leaders were starting to insist on rural electrification. Their interest was spurred on by the success of the Ontario Power commission in Canada which extended rural electric service to some 28 thousand Ontario farmers in 1920 at an approximate cost of five cents per kilowatt.
In 1923 a committee with the cooperation of government agencies and equipment manufacturers set up a project for study near Red Wing, Minnesota where a six-mile rural line was built to serve farm homes. It wasn't long before these farm people could report life was indeed happier and healthier.
The major stumbling block to rural electrification, at this time, was the cost of the lines was excessive. The lines built at that time were designed for city distribution and did not lend themselves as well to economical rural distribution.
Therefore, with the high cost of construction and low density, rural electrification remained dormant for the next ten years. In 1934 less than 11% of the U.S. farms were receiving central station service. Because of this slow progress the Federal Government decided to step in and lend a hand.
The Rural Electrification Administration was created by executive order of the president on May 11, 1935. Morris L. Cooke, an engineer and advisor to the Power Authority of the state of New York, was appointed the first administrator.
It was determined that REA would be a lending agency thus transferring it from relief agency to a bank type of operation in which self-liquidating, interest-bearing loans would be made for the construction of rural electric distribution lines. At this time 89% of the farms in the U.S. did not have power.
During 1935 Mr. Cooke spent his time and energies trying to induce private power companies to borrow money under this program to extend power to the rural area. He had little success. In Mr. Cooke's words, he said, "It became apparent that the industry was not going to use even a substantial portion of the funds available for rural electrification. At this time farm organizations, of a cooperative character, forged to the front as the principal borrowers under the REA Program."
To provide guidelines and uniformity in forming these cooperatives, legal staff from the Rural Electrification Administration drafted a model law for states to consider called the Electric Cooperative Corporation Act. This act not only gave the cooperative power to organize and build but specifically exempted them as cooperatives from regulation of the Public Service Commission. North Dakota passed the Act on March 12, 1937.
Source: A History of Foster County 1983 Page 104