The Tennessee Valley Authority is a New Deal agency created to generate electric power and control floods in a seven-U.S.-state region around the Tennessee River Valley. President Franklin Delano Roosevelt signed the Tennessee Valley Authority Act creating the TVA on May 18, 1933. The agency still exists.
The Authority, whose headquarters lies in Knoxville, Tennessee, is a government-owned agency that competes with private power companies. There is some controversy surrounding the TVA, as government-owned means of production is a statist concept. Controversy has been a feature of the TVA since its inception.
During the 1920s and the Great Depression years the public of the USA became disenchanted with privately owned power and began to support the concept of Government ownership of utilities, particularly hydroelectric power facilities. The concept of Government owned generation facilities selling to publicly owned distribution utilities was a controversial political issue.
Many believed that the privately owned power companies did not employ fair operating practices and were subject to abuse by their owners, utility holding companies, at the expense of consumers. By forming utility holding companies, the private sector controlled 94% of generation by 1921, and was in fact, unregulated because the States could not regulate interstate holding companies. (This situation gave rise to Public Utility Holding Company Act of 1935 (PUHCA)).
On the other hand there were many who believed that the Government should not enter the electricity generation business because they believed the Government was exploiting hydroelectric sites.
In the years following the Great Depression, the US Congress took steps to alleviate the plight of the farmers and the unemployed and one of those steps was the development of Federally owned power. One of the major schemes was established on the Tennessee River under the Tennessee Valley Authority Act of 1933. Under this law the Federal Government provided electric power to States, counties, municipalities and nonprofit cooperatives. It was a part of the Federal initiatives to provide navigation, flood control, strategic materials for national defense, electric power, relief of unemployment and improvement of living conditions in rural areas. The TVA was more than just a power supplier.
In its power supply role it was given authority to enter into long term (20 years) contracts for the sale of power to government agencies and private entities. It can also construct electric power transmission lines to areas not otherwise supplied and establish rules and regulations for electricity retailing and distribution. The TVA is both supplier and regulator.
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Even by Depression standards, the Tennessee Valley was in sad shape in 1933. Much of the land had been farmed too hard for too long, eroding and depleting the soil. Crop yields had fallen along with farm incomes. The best timber had been cut. TVA developed fertilizers, taught farmers how to improve crop yields, and helped replant forests, control forest fires, and improve habitat for wildlife and fish. The most dramatic change in Valley life came from the electricity generated by TVA dams. Electric lights and modern appliances made life easier and farms more productive. Electricity also drew industries into the region, providing desperately needed jobs.
None of this was easy. The TVA officials had to overcome a deep suspicion of government agencies and inculcate what were revolutionary practices into traditional farming communities. They did this by blending in and finding champions. A Tennessee farmer would not take advice from an official in a suit and tie. The TVA people also had to find the leaders in the communities and convince them that crop rotation and the judicious application of fertilizers were the ways to restore the soil's fertility. Once they had convinced the leaders the rest would follow.
Selling the benefits of electricity would have involved convincing the wives of the farmers that their lives would be easier and letting them work on their menfolk. This is another story and belongs more in the electricity marketing history.
During World War II, the United States needed aluminum to build bombs and airplanes, and aluminum plants required electricity. To provide power for such critical war industries, TVA engaged in one of the largest hydropower construction programs ever undertaken in the United States. Early in 1942, when the effort reached its peak, 12 hydroelectric projects and a steam plant were under construction at the same time, and design and construction employment reached a total of 28,000.
By the end of the war, TVA had completed a 650-mile (1,050-kilometer) navigation channel the length of the Tennessee River and had become the nation's largest electricity supplier. Even so, the demand for electricity was outstripping TVA's capacity to produce power from hydroelectric dams. Political interference kept TVA from securing additional federal appropriations to build coal-fired plants, so it sought the authority to issue bonds. Congress passed legislation in 1959 to make the TVA power system self-financing, and from that point on it would pay its own way.
The 1960s were years of unprecedented economic growth in the Tennessee Valley. Farms and forests were in better shape than they had been in generations. Electric rates were among the nation's lowest and stayed low as TVA brought larger, more efficient generating units into service. Expecting the Valley's electric power needs to continue to grow, TVA began building nuclear reactor plants as a new source of economical power.
Significant changes occurred in the economy of the Tennessee Valley and the nation, prompted by an international oil embargo in 1973 and accelerating fuel costs later in the decade. The average cost of electricity in the Tennessee Valley increased fivefold from the early 1970s to the early 1980s. With energy demand dropping and construction costs rising, TVA canceled several nuclear plants, as did other utilities around the nation.
As the electric-utility industry moved toward restructuring and deregulation, TVA began preparing for competition. It cut operating costs by nearly $800 million a year, reduced its workforce by more than half, increased the generating capacity of its plants, stopped building nuclear plants, and developed a plan to meet the energy needs of the Tennessee Valley through to the year 2020.
Still attempting to manage debt (over 20 billion dollars’ worth) and increase profits, TVA has recently made news by again reducing its workforce and by beginning new campaigns to improve its public image. It has also received acclaim from pro-nuclear organizations for restarting a previously mothballed nuclear generating unit at Brown's Ferry (unit 1). In 2004,TVA implemented recommendations from the Reservoir Operations Study (ROS) in how it operates the river system.
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Last updated: 05-13-2005 07:56:04