President Franklin D . Roosevelt signs the TVA Act , 1933 . The first TVA Board : Arthur Morgan , Harcourt Morgan and David Lilienthal .
encourage such purchases , the director persuaded FDR to establish the Electric Home and Farm Authority ( EHFA ) as a de facto subsidiary of the TVA . This new agency provided low-interest loans to consumers wanting to purchase electric appliances . Manufacturers , such as General Electric and Westinghouse , cooperated with this marketing effort by designing new low-priced models of various appliances to sell to a group of previously unreachable customers .
In October , Willkie urged Lilienthal to abandon his ambitious plan for the TVA and to instead agree to sell the C & S all the power the Authority ’ s power plants would generate for about $ 500,000 per year . Lilienthal signaled his contempt of that suggestion by announcing the TVA ’ s first new contract ; it would begin selling power to a publicly owned distribution system in Tupelo , MS , in February 1934 upon the expiration of a contract the Corps of Engineers had signed to send the Muscle Shoals ( now Wilson ) Dam ’ s power to the Alabama Power Company . Lilienthal then proposed that his agency should use its power of eminent domain to take over transmission facilities in several counties in Alabama , Mississippi and Tennessee and begin distributing electricity over a wider area . Of course , he noted , if the C & S would be willing to sell those assets to the TVA , that would be a satisfactory alternative .
In January 1934 , the C & S president and the TVA director in charge of power operations reached an agreement . The investorowned utility would sell the TVA a system in northeastern Mississippi for $ 850,000 ; it would also grant the TVA options to purchase transmission lines and related assets in northern Alabama and eastern Tennessee in exchange for $ 1 million to be paid to C & S ’ s Alabama Power subsidiary and another $ 900,000 to its Tennessee Electric Power Company ( TEPCO ) unit . C & S acknowledged the TVA ’ s right to both provide power and handle its distribution ; and the TVA conceded its mandate to do so only in certain designated geographic areas . The contract gave the TVA the right to purchase other willing utilities ’ assets and to negotiate distribution agreements with additional municipalities and cooperatives in its authorized territory .
Producing and Distributing Electric Power
The TVA began operating the Wilson Dam in July 1933 . In September , crews began constructing the Norris and Wheeler Dams . That same month , the TVA had to suspend much of its fledgling power program to cope with the first of many legal challenges to its existence . George Ashwander and 13 preferred stockholders of Alabama Power sued to enjoin the Authority ’ s performance under the January 1934
contract with C & S , claiming that its directors went beyond their statutory authority when they signed it . In addition , disputes over the precise terms of the proposed sale of properties from certain C & S units to the TVA made it impossible for the Authority to acquire those assets . Despite these limitations on its activities , in the fiscal year that ended June 30 , 1934 , the TVA generated revenue of $ 835,000 from selling 395,800 kw hours of power from the Wilson Dam to municipal or cooperative customers in Alabama and Mississippi .
Dealing with legal challenges hurt the TVA ’ s power program in each of the next few years . In February 1935 , a District Court upheld the injunction in the Ashwander case ; in July , a Circuit Court of Appeals overturned that decision . The plaintiffs and the Authority both appealed the case to the Supreme Court . In March 1936 , that Court dismissed the case ; the justices ruled that the TVA ’ s directors did indeed have the right to sign contracts to sell the Wilson Dam ’ s power and to purchase assets from private power companies . That decision cleared the way for the Authority to resume distributing power to a group of more than a dozen municipalities and cooperatives and to continue negotiating with private power companies to acquire their assets .
Just two months later , TEPCO and a group of 18 other investor-owned utilities ( including five C & S operating units )
36 FINANCIAL HISTORY | Winter 2022 | www . MoAF . org