Library of Congress
Wilson Dam , circa 1930s . also sued the TVA . They asserted that the Authority had no right to develop a power program that used extremely low rates to drive private utility companies out of business . In December , a District Court agreed and imposed a preliminary injunction against certain of the TVA ’ s operations .
By then , it was becoming apparent that Lilienthal ’ s prediction about the effect that lower prices for electricity would have on its consumption were proving correct . From 1933 to 1936 , annual power usage doubled in most of the limited areas the TVA served . Consumption also increased in areas served by private companies , such as Alabama Power and TEPCO , after those utilities lowered their own rates by an average of 30 %.
In the Autumn of 1936 , power plants at the newly completed Norris Dam and Wheeler Dam went online , thus nearly doubling the capacity of the TVA system . Legal challenges continued to hamper the Authority ’ s activities . Nevertheless , by the end of fiscal 1937 , the TVA was serving 32 municipalities and cooperatives in addition to nine industrial customers . It generated revenue of $ 1,680,000 from the sale of 731,600 kw hours of power .
In January 1938 , a Circuit Court of Appeals dissolved the injunction granted TEPCO et al . in December 1936 . Shortly afterwards , a three-judge panel of a District Court ruled that the TVA ’ s activities on the Tennessee River were primarily aimed at improving navigation and flood control and not on destroying the business of any private utility company . The plaintiffs appealed to the Supreme Court . In the meantime , however , Willkie was concluding that the investor-owned utility industry could not prevent the continued expansion of the TVA . He offered to sell the TVA all the C & S operating units in the Tennessee Valley if the Authority would agree to operate only within that geographic area . Director Lilienthal rejected that offer ; but he did agree to begin negotiations about a potential settlement of the TEPCO case . Willkie proposed selling TEPCO to the TVA for $ 90 million ; Lilienthal offered $ 57 million , so no deal was reached .
In January 1939 , the Supreme Court dismissed the TEPCO case , stating that the plaintiffs had no right to protect themselves from potential competition from an organization such as the TVA . The following month , Willkie and Lilienthal agreed to a purchase price of $ 78.4 million for TEPCO . In April , Congress authorized a $ 61 million bond issue to provide the bulk of the funds to complete that purchase . The resolution of this final legal challenge to the TVA ’ s existence and authority , the opening of another dam on the Tennessee River at Pickwick Landing and the addition of power plants at two other sites helped power sales surge . In the fiscal year that ended June 30 , 1939 , unit sales totaled 1,616,793 kw hours .; revenue exceeded $ 5,445,000 .
In August 1939 , Lilienthal presented Willkie with a check for $ 44.7 million , the TVA ’ s share of the purchase price for TEPCO . Representatives of 33 municipalities and cooperatives provided the remaining $ 33.7 million . The addition of TEPCO ’ s output , several other acquisitions completed during the year and new facilities at other sites supported an unprecedented expansion of the TVA ’ s power program . In fiscal 1940 , the first year during which the TVA was not hampered by legal challenges to its existence , unit sales and revenue almost tripled to 3,630,000 kw hours and $ 15.1 million , respectively .
The TVA in 1940
By the summer of 1940 , the TVA had become an important provider of electricity and a strong counterbalance to the investor-owned utilities President Roosevelt believed had long been exploiting a part of rural America . The much ballyhooed “ yardstick ” FDR espoused in 1933 proved to be a controversial and unworkable notion . As it happened , however , the private utilities operating in areas within Alabama , Mississippi and Tennessee not served by the TVA actually followed the Authority in lowering the price of electricity . In contrast to their earlier fears , they continued to generate respectable profits
and feed the capital accounts necessary to maintain their own expansion programs .
Lilienthal may not have intended for the TVA to become the country ’ s largest producer of electric power . Indeed , he shared his fellow directors ’ dismay that the Authority had not made as much progress in accomplishing some of its other goals . But he agreed with government officials and utility industry executives alike that the TVA ’ s position of strength in the electric power industry made it a particularly important government body . Fortunately for the country , that wholly owned government organization was quite capable of satisfying what would soon become the enormous needs of many defense industry installations along the Tennessee River .
Michael A . Martorelli is a Director Emeritus at Fairmount Partners and a frequent contributor to Financial History . He earned his MA in History from American Military University .
Emmons , William M . III . “ Franklin D . Roosevelt , Electric Utilities , and the Power of Competition .” The Journal of Economic History . December 1993 .
Hargrove , Ernest C . Prisoners of Myth : The Leadership of the Tennessee Valley Authority , 1933 – 1990 . Princeton University Press . 1994 .
Lambert , Jeremiah D . The Power Brokers . The MIT Press . 2015 .
McCraw , Thomas K . TVA and the Power Fight , 1933 – 1939 . J . B . Lippincott Company . 1971 . Owen , Marguerite . The Tennessee Valley
Authority . Praeger Press . 1973 .
Tennessee Valley Authority Annual Reports . United States Government Printing Office . 1934 – 1940 .
Twentieth Century Fund . Electric Power and Government Policy : A Survey of the Relations between the Government and Electric Power Industry . Twentieth Century Fund . 1948 .
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