Private Money for TVA

I therefore suggest to the Congress legislation to create a Tennessee Valley Authority--a corporation clothed with the power of government but possessed of the flexibility and initiative of a private enterprise.

In the years following that plea by Franklin Roosevelt in 1933, the Tennessee Valley Authority became the swirling center of a great national controversy. Castigated by its enemies as a socialistic octopus, defended by its friends as an amiable and beneficent giant, the TVA wielded the power of government to tame the floods of the Tennessee River and revitalize its vast and poverty-stricken valley, stretching over 80,000 square miles into seven states. This week the TVA, now accepted as a permanent part of the U.S. scene by friend and foe alike, showed the initiative of a private enterprise. For the first time in its history, it went into the public bond market to get the money for a vast new construction program.

TVA put out an initial $50 million in bonds, the first of $750 million authorized by Congress. The bonds got top ratings from investment services, will be bid on by four large, nationwide underwriting groups. TVA will pay them off entirely from the proceeds of its power system, which amounted to a record $100,023,000 in fiscal 1960. On top of that, TVA, which has already paid back to the U.S. Government $250 million on its $1.4 billion investment in TVA's power facilities, will pay the Government in yearly installments until it has only a $200 million equity in the power complex.

Power-Hungry. With the money it raises, TVA has ambitious plans to supply extra power for its rapidly developing area. This week it opened bids on two proposed 800,000 kw.-capacity steam generators for a new plant in Tennessee. (TVA began to build steam generators in the 1940s after it had heavily developed the hydro power of the rivers, now uses two-thirds steam.) Part of the first $50 million will be used for two new power units at Melton Hill Dam, Tenn., scheduled to be completed in 1963. Other funds will go to a new steam plant at Paradise, Ky. that will sit practically on the coal fields, and for power additions at Wheeler and Wilson Dams, Ala.

Such additions were made necessary by the valley's tremendous growth. TVA has reforested the river's valley, created a chain of fish-stocked lakes and a recreation industry, used its coal and water supplies to become the biggest U.S. electric-generating company, wholesaling its power to 153 local electric systems, several federal agencies, and private companies that have been attracted to the valley--all at rates well below most of the U.S. TVA serves such big, power-hungry customers as Reynolds Metals, Alcoa, Monsanto, National Carbide and Hooker Chemical. Since TVA began, a seven-state area that once struggled along on a corn-and-cotton economy has seen its per-capita income jump from 45% to 64% of the national average.

Symbol for the World. Such success has made TVA an envied model of Government initiative around the world. It has served as a model for such regional resource developments as India's Damodar Valley Corp., Australia's Snowy Mountains Scheme and Iran's Khuzestan Development Service.

Some private utilities are still bitter about TVA. Kentucky Utilities Co. is fighting a battle to hold onto its facilities in Paducah, Glasgow and Princeton, Ky., where residents are trying to buy the plants, then buy power from TVA at a 30%-to-50% saving in electricity bills. But the once-widespread bitterness against the TVA has been largely muted, especially since private powermen no longer fear it will spread over the nation. TVA's congressional bond amendment has a clause limiting its expansion to no more than five miles beyond its 1957 boundaries.

Another rein to conservative criticism is that TVA is, in effect, run like a private enterprise. Though the Government still supports its vast nonprofit public projects, its power functions (82% of all its assets) have long been self-supporting and self-liquidating. TVA prospers partly because it pays no taxes. Instead, it returns 5% of its gross (excluding sales to federal agencies) to states and counties. Its coal supplies are so conveniently located that its fuel costs are only 60% of the national average. Its management is low-salaried: its three managing directors make only $20,000 a year each.

Moreover, TVA has ideal customers. Big industry and such agencies as the AEC use power in a steady flow with no peaks to worry about. TVA customers are so grateful for what TVA refers to as its "Henry Ford system" (i.e., lots of electricity at low prices) that they make freer use of their irons, TV sets, frying pans, porch lights and furnaces (nearly half the 650,000 electrically heated homes in the U.S. are in TVA territory). While the average U.S. family used 3,707 kwh. of power last year at a cost of 2.48-c- per kw-h., TVA's customers used 8,806 kwh. at an average cost of just under a penny.

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