The creation of the Tennessee Valley Authority

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Tapping Water Power

The Creation of the Tennessee Valley Authority

The Origins of the Tennessee Valley Authority

In 1916, the federal government acquired the Tennessee Valley area to construct a dam, which would generate electricity to produce explosives for World War I

This did not materialize. In the following years, there were efforts to sell it to the private sector and opposition to keep it in public ownership and to develop it. When Franklin Delano Roosevelt was elected in 1933, he signed the Tennessee Valley Authority Act within his first 100 days in office. The Act was committed not only to improve navigability on the Tennessee River. It was also mandated to provide flood control, reforest and improve farmland, contribute to industrial and agricultural development and help create a government nitrate and phosphorus manufacturing facility. For its wide reach, the TVA was considered one of the most ambitious projects under the New Deal.. The New Deal was President Roosevelt's reform and recovery program, which addressed the consequences of the Great Depression. His concept of the TVA was a completely different agency. He wanted it to be a corporation with the power of government but with the inherent flexibility and initiative of a private business.

Congress passed the TVA Act on May 18, 1933.

.The TVA immediately embarked .on its mission and commitment by adopting an integrated resource management approach. Each issue or objective was considered in its broadest context and weighed against others. A three-member board initially headed TVA. These board members were Arthur Morgan, Harcourt Morgan and David Lilienthal. They had different advocacies and, thus, different perceptions of the direction TVA should take. Arthus Morgan favored social planning and thought that TVA was that opportunity for a partnership between the government and private business. He envisioned TVA as a model for national regional planning, which could wipe out poverty in Tennessee Valley. Harcourt Morgan fought for the welfare of southern commercial farmers and against experiments in government planning. David Lilienthal, on the other hand, openly promoted public power and urged direct competition by TVA against private power businesses. The clash among them persisted from 1933 to 1938. President Roosevelt eventually dismissed Arthur Morgan for his public criticism of the TVA. The TVA was, indeed, involved in many controversies and sustained failures. But it also provided electricity to thousands at reasonable price, controlled floods in the Valley, improved navigation and brought in modern agricultural techniques.

The Tennessee Valley includes parts of Kentucky, Virginia, North Carolina, Georgia, Alabama, and Mississippi.

Before the signing and creation of the Authority, the region was among the most disadvantaged in the South. That was the rationale of its mission to improve the economic and social conditions of the people in the river basin. Among the agencies that have cooperated in the pursuit of this goal are the U.S. Department of Agriculture, the U.S. Forest Service, Civilian Conservation Corps and state agricultural experiment stations and extension services. The very first construction project was the Norris Dam, named after Senator George W. Norris of Nebraska, in October 1933. Senator Norris campaigned for the creation of TVA in the 1930s. This was among the largest hydropower construction programs in the U.S. The TVA constructed 16 dams and a steam plant under this program between 1933 and 1944. Most of these were under construction at about the same time and the same design. It employed a total of 28,000 laborers.

Before the creation of the TVA, almost 90% of urban dwellers and only 10% of rural dwellers had electricity in the 1930s.

Private electricity companies found it too expensive to provide electricity to distant or isolated rural farmlands. Furthermore, most rural dwellers could not afford it. Yet the improvement of living conditions heavily relied on affordable electricity. The Roosevelt Administration thought that the government should do what the private sector enterprise could not. Hence, it created the TVA. By 1941, it realized this goal and became the largest producer of electric power in the U.S. Private companies saw the cheaper energy provided by the TVA as a threat to them. They strongly contended this in court as unconstitutional. They filed many lawsuits against the TVA for this cause. Eventually, the Supreme Court upheld the TVA's authority to produce, sell and distribute power. The TVA proceeded to fulfill its mission. It created the Electric Home and Farm Authority or EHFA to help farmers buy electric appliances, such as electric ranges, refrigerators, and water heaters, at affordable prices. They could do so through loans from EHFA at low-cost financing.

TVA created programs of new farming methods to the Valley.

These were to increase crop production, replant forests, and improve fish and wildlife habitat. The programs aimed at changing old and unproductive farming techniques, and at teaching farmers to use nitrates with plants, such as alfalfa and clover, to add nitrogen naturally to the soil. The TVA also implemented extension programs for contouring plowing, crop rotation, the use of phosphate fertilizers, and cover crops for soil conservation. It also conducted demonstrations to teach new techniques and farm products. The most successful farmers were often those chosen to demonstrate these techniques.

There was unprecedented economic growth in the region in the 1960s.

Farms and forests were much improved. With larger and more efficient generating units, TVA continued to provide among the lowest electric rates in the country. In expectation of increased power needs, the TVA began building nuclear plants as new source of cheap electricity. On account of the international oil embargo in 1973 and rising fuel costs in the late 70s, the average cost of electricity region increased 5 times till the early 80s. The demand for energy decreased and construction costs increased. These developments led the TVA to cancel many nuclear plants and other utilities throughout the U.S. In the decade. In the 90s, the electric utility industry was to undergo restructuring and TVA had to compete. It reduced operating costs to almost $800 million and its workforce to more than half. At the same time, it raised the generating capacity of its plants, stopped constructing nuclear plants and devised a plan for the energy requirements of the region up to the year 2020. Although its production costs were among the lowest in 1997, TVA continued to seek out ways of reducing costs and raising efficiency. It endeavored to keep its rates competitive according to its-year business plan. It also created and enforced a Business Transformation Program to reduce further costs and entered into contracts with distributor customers to meet their requirements. In 1998, it came up with a new clean-air program to reduce pollutants. It was to add modern equipment to help the region come up to stricter air-quality standards as it continued to fulfill its mission to induce industrial and economic growth in the region.

TVA's power system reportedly operates at almost 100% dependability every year since 1999.

Its lowest levels of interruptions were in 2004. It has also ceased to receive federal funding and now finances all its programs from selling bonds in the financial markets. These include programs for environmental protection, river management and economic development. The board also expanded membership from the original 3 to 9 part-time membership. A chief executive officer position has been created by board appointment. In meeting power demands and keeping rates affordable, the Board restarted Browns Ferry Nuclear Plant Unit 1 in 2007. This added 1,150 megawatts at cost-effective levels. It hopes to complete Watts Bar Nuclear Plant Unit 2 by 2013 to add 1,180 megawatts to its generating capacity. At the same time, TV has been increasing power system efficiency by extensively modernizing and automating its 29 hydro plants. It intends to reduce the growth of peak power demand by up to 1,400 megawatts by 2012 through its energy-efficiency programs. In response to environmental goals, TVA has reduced ozone-season nitrogen oxide emissions by 80% below 1995 levels. It now aims at reducing sulfur dioxide emissions by 80-85% of 1977 levels this year.

The Tennessee Valley Authority Act

This Act was signed by President Roosevelt on May 18, 1933.

Its aims are to improve the navigability of the Tennessee Valley River, to control flood, reforest, and to conduct the proper use of marginal lands in the Valley; to oversee its agricultural and industrial development; and to create a government corporation for the operation of government properties around and near the Muscle Shoals in the State of Alabama. It is dedicated to the economic, environmental, social and physical well-being of the people of the region. The Act created a corporate body, consisting of a Board of Directors, made up of 9 members. These members shall be appointed by the President. At least 7 of them shall be residents of the Valley. Members of the Board shall serve for 5 years and receive $45,000.00 per annum as stipend. Committee chairmen shall receive $46,000.00 per annum stipend and the Board chairman, $50,000.00 per annum. The Board shall meet four times a year.

TVA Company Profile

The TVA is a self-financed government agency with approximately 13,000 employees, as of 2002 estimates.

It realized a $6.99 billion sales from hydroelectric power generation, fossil fuel, electric power generation, nuclear power generation, other electric power generation, electric bulk power transmission and control and electric power distribution. Its mission is to bring prosperity to the Tennessee Valley through excellent business performance and public service. These are to be achieved by supplying low-cost but reliable power, maintaining a thriving River, and fostering economic growth throughout the southeaster region, traversing 7 States. At the peak of its growth, TVA was serving more than 8 million users in more than 80,000 square miles of region

The TVA's integrated management of water resources, combined with its exceptional institutional capacity enabled it to lift one of the poorest regions in the U.S. into a strong economy and healthy environment today.

It accomplished this through its broad-based local programs and extensive physical infrastructure. In its early years, TVA set up a healthy natural resource base, a strong infrastructure and the human pool to work for the social and economic development of the region. As it was envisioned by President Roosevelt, TVA was a river basin equipped with the authority and resources as a planning unit and watershed to realize that development. There were issues surrounding relocations and resettlements but TVA responded to these through speedy and quantifiable economic development. The people's income and standard of living in the region grew dramatically. Flood control, navigation and power generation were viewed and managed as a means to advance the people's social and economic well-being. Resource development went under a single agency, the TVA, which functions in its own headquarters in the region itself, rather than as a branch of the central government in Washington.

The organizational structure of the TVA for almost 68 years has consisted of 3 board directors, a general manager and operating divisions.

Its broad responsibility has been to set down policies for implementation by the general manager, later a chief executive officer. Policy-making has been centralized, but the planning, management and implementation have been decentralized. Planning has always been drawn from operations and physical development programs. Decision-making among the operating arms has been self-coordinated. Conflicts and other issues are addressed and resolved at the lowest possible working level, rising to high management levels if persistent. An advantage of this framework has been that it kept TVA action-oriented and grounded on tasks that have actual relevance to the lives of the people in the region. This and cooperation with local agencies attracted widespread support and brought success to the development and construction phases. The downside was that transition from a development role to a management and stewardship role. The lack of centralized planning also thwarted TVA from fulfilling its local mission. Fierce competition was stimulated, as a consequence.

One major criticism against TVA was the lack of system to examine and oversee its structure and operations.

There were attempts to correct this defect in 1988 with organizational changes. These were increasing the authority of the Board; increasing its competitiveness in the field; more efficient operation of the water control system; and a business-like operational system. Restructuring continues to the present to address lags in competitiveness. As it is, TVA is the fifth largest river system in the U.S. It covers 650 miles of navigable river; 11,000 miles of public shorelines; 480,000 acres of recreation lakes; and 25 flood control dams. It has served 6 million customers with its fossil, nuclear, hydro and combustion turbine fuel sources. U.S.$829 million has been invested in the Valley; U.S.$23 million worth of loans has been committed for its economic development; and U.S.$951 million for goods and services businesses. Its total assets are worth U.S.$33 billion and it has a total debt of U.S.$26.

A Review of TVA Today

TVA derives its legal authority from the TVA Act of 1933.

This Act grants the agency broad powers for multi-resource conservation and regional planning and to create its own projects, . Its natural resource programs have been traditionally funded by the U.S. Congressional appropriates. But its budget has been less than 5% of its annual revenue in the last decade or before it. TVA's only partially successful initiative into nuclear power has been viewed as a misguided and costly decision, as it led to indebtedness. Congress had to raise the debt ceiling to adjust to the indebtedness problem. In itself, this advantage was not even granted to the private sector business. Considerations of the future of its non-power programs led to the scrapping of the budget for these programs for the year 2000 and after. The agency at present funds its own non-power programs from its own revenues. Analysts see an annual revenue at U.S.$6 billion against an accumulated debt of more than $20 billion as not a sound condition, per today's business standards.