Financial History 140 Winter 2022 - Page 37

US National Archives and Records Administration
Group photo of the men working at the Norris Dam , circa 1930s .
takeover of the electric power industry . But the incoming President believed a federal agency like the TVA would be able to charge lower rates than private companies , and then use that “ yardstick ” to demonstrate the true value of electricity .
In congressional hearings on the TVA Act in April 1933 , legislators heard from several representatives of the investorowned utility industry , including Wendell L . Willkie , President of Commonwealth and Southern Corporation ( C & S ), and senior managers from three of that holding company ’ s operating units that served the Tennessee Valley . Those executives noted their general approval of the TVA ’ s overall plan and acknowledged the federal government ’ s long-established right to operate power plants and generate electric power . But they challenged the provision in the proposed law that gave the Authority the right to also distribute and market that power and thereby begin competing with investor-owned utilities .
Despite the private utility industry ’ s objections , the Act that President Roosevelt signed in May authorized the TVA to not only operate dams — such as the one it was to acquire on the Tennessee River at Muscle Shoals , AL — but also transmit their power to municipally owned distributors and cooperatives that would send the electricity directly to consumers .
Developing the Authority ’ s Power Policies
The TVA Act did not specify the relative importance of the Authority ’ s goals of regional planning , agricultural reform , industrialization , navigation , flood control or the production and distribution of electricity . So it was left to its three directors ( appointed by the President and confirmed by the Senate ) to chart the TVA ’ s immediate future . In July 1933 , those directors agreed to divide their responsibilities based on their own areas of expertise . Chairman Arthur Morgan was a civil engineer experienced in building dams and a social reformer who believed strongly in the community planning role the President envisioned for the TVA . Harcourt Morgan was an agricultural scientist intent on using his experience in crop rotation and insect control to help the Tennessee Valley ’ s farmers . David Lilienthal was a lawyer who specialized in public utility law and whose service with the Wisconsin Public Service Commission made him the logical person to direct the TVA ’ s power program .
Less than two weeks after the TVA Board ’ s first meeting , Morgan told Willkie the Authority did not intend to interfere with the business of the C & S companies providing electric service in the Tennessee
River Basin . Morgan expected the Authority to cooperate with them by selling the power the TVA ’ s dams would generate to C & S ’ s operating units , who in turn would market the electricity to consumers . He did not want the TVA ’ s broad range of missions jeopardized by unnecessary wrangling over the issue of the federal government ’ s role in both producing and delivering electric power .
Lilienthal had a different attitude towards the C & S and its subsidiaries . He shared FDR ’ s enmity of investor-owned utilities and believed it was important for the TVA to establish its power policy before discussing any cooperative distribution agreements with any of them . In late August , the Authority published that policy . The first of its 11 points set the tone : “ The business of generating and distributing electric power is a public business .” Another noted the TVA ’ s intention to serve the public interest even to the detriment of any private electric company .
The TVA identified the first market for its electricity as an area paralleling the transmission lines it would be building between the renamed Wilson Dam at Muscle Shoals and two dams it would also begin constructing : the Norris Dam some 230 miles away on the Clinch River in Northern Tennessee , and the Wheeler Dam on the Tennessee River about 15 miles upstream from Muscle Shoals . Lilienthal shared FDR ’ s belief that the private utilities serving the area had long been charging rates that were both unjustifiably high and largely unaffordable by most of the population . So even before the TVA generated any power , he established a rate structure that would make the Authority ’ s distributor customers price the use of 1,200 kw hours per year at 2.7 cents per kw hour . This unusually low pricing structure was controversial because it was not based on the TVA ’ s present expense levels , but on the assumed levels it would experience once its power plants reached their optimal operating rates .
The average power consumer of the C & S companies operating in the area at that time used only about 735 kw hours per year for which they paid about 5.2 cents per kw hour . Lilienthal believed the availability of inexpensive power would encourage the purchase of more electrical appliances , thus leading to higher annual usage by each customer and justifying a lower average price per kw hour . To
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