POWER, PROFITS & PROPAGANDA
McMillin, Miles
POWER, PROFITS & PROPAGANDA by MILES McMILLIN John Gunther once said: "Quite possibly the TVA is the greatest single American invention of the century, the biggest contribution the United States...
...TVA's control of the water prevented damage of an estimated $66 million...
...Despite the sweeping claims that TVA pays no taxes, it does pay local and state taxes or tax equivalents...
...Their complaint seems to be that others get bigger subsidies...
...There followed several minutes of argument about depreciation formulae and other matters and Kerr returned to the tax write-offs...
...Gross power revenues from 1933 through fiscal 1957 amounted to $1,474,000,000, of which net revenues amounted to $424 million...
...Anti-TVA papers whooped up the story, bellowed for photographs—and then settled back into a deep funk when the AP's Atlanta bureau contritely explained it had not bothered to check rumors concerning the flood-breeding rains in the Valley...
...The influence of these two great public power projects is shown by the fact that rates get progressively higher as the distance from TVA or Bonneville increases...
...No assessment of what TVA has done for the country as a whole would be complete without mentioning what has happened to the Valley's tax contribution to the federal government since TVA lifted it to a level more comparable with the rest of the nation...
...TVA's objective is the widest use of electricity at the lowest possible price to consumers...
...Almost a billion has gone for manufactured articles...
...The TVA power facilities should be transferred to local ownership and operation...
...Less than four per cent of the Valley farms were electrified when TVA's turbines started rolling and its first highlines leaped the mountains...
...Had that rate of interest been charged against the power investment, it would have amounted to half the four per cent return, or $212 million, leaving a margin of $212 million for the government...
...By law, TVA's power operations have to be "self-supporting and self-liquidating...
...The reason is simply that TVA MILES McMILLIN, editorial writer for the Madison (Wis...
...This transfer should include transmission lines, steam plants, and hydro-electric plants at TVA dams, but not the dams or other related river control facilities...
...Of course, TVA pays no income taxes to the government...
...The law imposes on TVA another obligation—one that distinguishes its power operations from the exclusive profit motive of the private utilities...
...The Eisenhower Administration has shown that it is sufficiently impressed with TVA to export the idea to foreign lands...
...The remainder, $174 million, has been reinvested in power facilities...
...its price "yardstick" has jutted out of the Valley to drive down the rates for other millions of consumers served by the private power companies...
...The avalanche of utility propaganda has not been able to dent that record...
...But the power program is still treated as if it were proscribed by the Ten Commandments...
...As the flood season (late December to early April) approaches in the Tennessee Valley, the TVA dams are controlled to reserve 12 million acrefeet for water storage...
...Capital Times, has spent many years studying public power developments...
...In the earlier stages of the fight against TVA, the utilities were willing to finance any argument that would discredit TVA—almost to the point of defending the anopheles mosquito whose life has been made more difficult by TVA's malaria control program...
...Let Walter H. Sammis, president of the Ohio Edison Company, a large utility with offices in Akron, Ohio, testify...
...I am sorry...
...Numerous authorities were cited in an effort to prove that flood control and navigation were not compatible with power production, but enthusiasm for this argument waned under the weight of contrary evidence...
...TVA carries a vital international message—a message that people from all over the wor i can see and study and carry home t their own lands...
...In 1937, when power in the TVA area was distributed by private companies, taxes paid to local and state governments by the utilities amounted to $3,350,000...
...This aim is achieved by utilizing more economical sources of power and by keeping operation and maintenance costs below the national average of the industry...
...Sammis: "|46 million as of February 28, 1957...
...In the years 1934-56 TVA made purchases of $1,024,000,000 from businesses located outside of the seven states in the TVA area...
...Twelve million acre-feet of water storage space is available at the beginning of the flood season, enough to keep within bounds the worst flood on record...
...TVA power is distributed by 151 distributing systems, 149 of which are publicly or cooperatively owned...
...Illinois, $112 million...
...It is an international symbol to people of free nations all over the globe—a symbol of democratic methods and democratic ingenuity and enterprise applied to one of mankind's most challenging problems: How to develop natural resources for the benefit of the most people...
...The testimony of the Federal Power Commission's chief accountant would seem to indicate that if anyone has cause to claim discrimination in the matter of subsidies, it is TVA...
...Two of TVA's distributors are private utilities, selling power at the same low rates as TVA's publicly owned distributors...
...15 of that year the Associated Press carried a story out of its Atlanta bureau saying: "On the Tennessee River the flood waters were too much for the great dams set up by the TVA...
...The non-power functions have changed the history of the Valley...
...If a lot of water has been spilled over TVA's dams in the last quarter of a century, it is perhaps exceeded in quantity only by the volume of words that have been spilled attacking and defending TVA...
...Has your company received any certificates of accelerated depreciation [tax write-offs...
...The following exchange took place: Sammis: "It should be the policy Creeping Localism of the federal government to cooperate with taxpaying businesses and to encourage their participation to the fullest extent in the power features of water resources instead of engaging in unfair competition through the advantages of government subsidies...
...This record was made possible because TVA produced power at prices people can afford to pay...
...Ohio, $127 million...
...produces and sells electric power at prices people can afford to pay...
...46 Depreciation...
...For TVA has come to mean something to the rest of the world...
...Income taxes are based on profit and all of TVA's profits belong to the government—not just the part paid in taxes by the private companies...
...It has stood up through five years of an Administration which has been steadily probing for weaknesses—indeed, has tried to create some...
...And it is the power program that has made TVA the target of one of the most relentless propaganda campaigns in the history of the nation...
...Actually, as the New York Times reported, the "great reservoirs of Norris, Cherokee, Douglas, Fontana, and Hiwas-see on the tributary streams, took all the water that was poured into them and had plenty of room left...
...TVA's net income in fiscal 1957, after allowance for the cost of money to the government at 2V2 per cent, was approximately $21 million...
...Sammis appeared before a Senate subcommittee in opposition to the bill to allow TVA to issue bonds to help finance its operations...
...Senator Kerr: "That is all I asked you...
...This is the argument most frequently made in the propaganda of the utilities...
...When Louis V. Sutton, chairman of the board of the Carolina Power and Light Company, submitted a statement for the U.S...
...What Sutton almost said right out loud was that TVA is a great idea if the utilities can have the power produced by the dams...
...The average cost of money to the government over this period was two per cent...
...But more than that, its service to democracy would be destroyed...
...Today 95 per cent have electricity...
...This is a success story that the foes of TVA cannot ignore...
...TVA power has not only changed the way of life for millions within the seven-state region it serves...
...One of the earliest campaigns against TVA—then under the chairmanship of Arthur E. Morgan—was an attempt to persuade the public that the multiple-purpose dams could not do all the things they were constructed to do...
...In the pre-TVA era, the private power companies served 275,000 in the same area...
...If TVA is doing these things for the Valley and for the rest of the nation, then why the incessant campaign to wreck it...
...The average annual benefit from flood reduction is estimated at more than $11 millions...
...Transportation savings, now $20 million a year, return over 10 per cent on net navigation investment when measured against the cost of maintaining and operating the waterway...
...The 630-mile navigation channel is a national investment, making the Tennessee part of a 19-state, 9,000-mile inland waterway...
...If it were the income of a private utility, the government could claim only half of it, in the form of income taxes...
...TVA has helped also to control floods along the Ohio and Mississippi rivers, into which the Tennessee's waters flow...
...Senator Kerr: "I asked you if that was in the form of government subsidy...
...His articles have appeared in the New York Times, the New York Post, the Nation, and the New Republic...
...Sixty-eight per cent of the shipping is either from outside or destined for outside the TVA region...
...The average annual consumption of electric power in Valley homes has jumped from 600 kilowatt hours to 6,000—twice the national average...
...And the propaganda campaign, organized and financed by the power trust to persuade the American people that what has made the Tennessee Valley livable is communism or worse, continues unabated, day after day, year after year...
...They have found that the TVA theory of power distribution works profitably for them...
...Senator Robert Kerr, Oklahoma Democrat, was presiding...
...If the late George Norris and the others who dreamed the TVA dream had not tacked on the authority to produce power, TVA would be as acceptable today as federal bank deposit insurance...
...The huge reservoirs filled and the water was released to rush over the low country...
...more than just a federal power system...
...Senator Kerr: "How much...
...The utility propaganda which seeks to inspire sectional jealousy against TVA is always careful to hide from the American people this monumental record of service to the defense program of the whole nation...
...As late as February, 1948, TVA's detractors were praying for a great flood in the Valley—the kind that in pre-TVA days regularly ravaged the countryside...
...On Feb...
...Uncle Sam claims all of it...
...There are 1,460,000 customers buying TVA power for the use of four to six million consumers...
...The customers of these rural co-ops are buying power at less than five mills per kilowatt-hour...
...As the use of electricity by consumers goes up, the cost per kilowatt-hour of delivering it goes down...
...Huge amounts of aluminum and chemicals vital to the defense program are produced by private industry using TVA power...
...Sammis: "Oh surely...
...In the intervening 19J4 years the increase in state and local taxes was 270 per cent...
...But they had the practical idea that as long as dams had to be built, the power potential should be used for the benefit of the people who were paying for the dams...
...The Air Force wind tunnel plant at Tul-lahoma is supplied by TVA, as is the Redstone missile program...
...By this means the flood crest at Chattanooga was cut 10 feet with an estimated saving of $6 million...
...But to President Eisenhower, TVA in actual operation at home is a disease called "creeping socialism" which should be treated with applications of old-fashioned power trust snake oil bearing the Dixon-Yates label...
...Wisconsin, $60 million...
...In 1933 traffic on the Tennessee was 33 million ton-miles...
...But when the critics are examined on this point they are usually found retreating to another point which permits them to make vague charges about "socialism" or to cry out that TVA pays no taxes or interest...
...Many of the distributors have been able over the years to reduce rates...
...POWER, PROFITS & PROPAGANDA by MILES McMILLIN John Gunther once said: "Quite possibly the TVA is the greatest single American invention of the century, the biggest contribution the United States has yet made to society in the modern world...
...Furthermore, the utilities' argument that the difference in tax payments accounts for the difference in rates doesn't stand up in the light of practical experience...
...In 1956 it was about 2 billion ton-miles...
...It is estimated that this power at private utility rates would cost the Atomic Energy Commission from $50 to $60 million more each year than it pays to TVA...
...TVA earned $424 million—a four per cent return on the investment...
...In February of 1957 the Valley had its second largest flood of record...
...In 1932 some of the highest electric rates in the nation were paid in the TVA area cities, according to studies made of cities of 50,000 population This simplified diagram shows how TVA dams control the water of the Tennessee and its tributaries...
...During the 1933-56 period $21,900,000,000 was collected...
...It was best expressed by the people of the Valley who belong to the Tennessee Valley Public Power Association, in a letter to President Eisenhower in April of 1957: "TVA is more than a regional agency...
...It is worth speculating, considering the power shortage of World War II, whether the United States would have taken the lead in the development of atomic energy had not the power facilities of TVA and the Columbia River program been available to pour out the staggering amounts of electricity needed for the Oak Ridge and Hanford projects...
...The record shows that the law has been obeyed...
...By 1956 the situation was reversed...
...Near the end of the flood season the reservoirs are allowed to fill and are fed out during the dry season for power production and stabilization of navigation...
...TVA power has made the Valley a strategic defense area for the nation, accounting in large measure for the rapid expansion in steam-produced power...
...Has TVA done so much damage to the private utilities that they should continue to spend millions of their customers' dollars in a campaign to destroy it...
...Here is where some of the money went: Pennsylvania, $311 million...
...At the 1933 rate only $12,200,000,000 would have been collected...
...Senator Kerr: "Let's talk about government subsidies...
...Why...
...They amounted to $4,744,000 in fiscal 1957...
...Senator Kerr commented that the utilities really have no objection to subsidies as such...
...The distributors of TVA's power also operate at costs far below those of other utilities...
...268 Total Expense ................$1,050 Net Income Before Interest ....................................$ 424* Investment Assignable to Power (24-year average)..$ 442 Annual Return on Investment (24-year average) .. 4% * Of the $424 million net income before interest shown above, $10 million has been used to pay interest on bonds, $65 million has been used to retire bonds, and $175 million has been paid into the federal Treasury as an offset to appropriations previously made...
...Workers in Milwaukee and Schenectady are living better because farmers in the Tennessee Valley are living better...
...More than half (57 per cent) of TVA's power goes to the atomic energy projects at Oak Ridge and Paducah...
...The more closely the anti-TVA propaganda is examined, the more clear it becomes that the utilities have only one aim in their attacks: to get their hands on the power-producing facilities of this great public asset...
...The other functions of TVA— flood control, navigation, fertilizer development, recreation, soil erosion control—have come to be accepted...
...Hardly a session of Congress goes by that the friends of TVA do not have to ward off another attack...
...While private power companies must necessarily give primary emphasis to power production, power production by TVA must be consistent with the operation of its dams for flood control and navigation...
...TVA has forced the utilities to sell power more cheaply, it is true...
...The report made it clear that consumers receive no benefits from these subsidies, because of government rulings that they need not be passed on in decreased rates...
...Chamber of Commerce last year to the Senate Subcommittee on Rivers and Harbors opposing legislation to give TVA authority to issue its own revenue bonds, he was careful to distinguish between TVA's power and non-power functions: "TVA," he said, "should conduct only its authorized non-power functions...
...The enemies of TVA have not always been willing to grant the wisdom and legitimacy of its non-power functions...
...Surely...
...TVA has endured, not because the words of the defenders have been wiser or more forceful...
...Yet they are able to make a profit just as if they bought power from private sources for resale at presumably higher rates...
...Studies of the period 1937-1955 show that earnings available to common stockholders of the big profit utilities across the country multiplied by less than three times—yet companies bordering TVA multiplied similar earnings 6^2 times...
...But it is the power program which is primarily responsible for raising the productive level of the region...
...The utilities claim that TVA is unfair because it is subsidized...
...Here is a summary of TVA's power operation through fiscal 1957: Millions of Dollars 1933 through 1957 Revenue ..................................$1,474 Expense: Operation & Maintenance ..$ 736 Taxes...
...If the utilities themselves weren't subsidized by the federal government on a scale more staggering than TVA, this argument might have some appeal to fair minded citizens...
...Sammis: "Yes sir...
...If TVA were just an idea—and not the reality it is—Gunther might find his evaluation accepted these days even at the White House...
...From a cold business viewpoint, Uncle Sam's stockholders would have a difficult time finding a better investment...
...I didn't get your point earlier...
...Are these tax write-offs subsidies...
...TVA's flood control program has succeeded because it has adhered faithfully to the mandate of Congress "to regulate the stream flow primarily for the purpose of promoting navigation and controlling floods...
...If its power program is allowed to be pillaged and turned over to the profit utilities, TVA's service to the people of the Valley and of the nation will be ended...
...The total under public ownership in 1957 was $12,390,000...
...As they reduced rates under the impact of the TVA "yardstick," they reaped the financial benefits of the resulting increase in demand...
...The Senate Anti-trust and Monopoly Subcommittee recently issued a report quoting R. C. Rainwater, chief accountant of the Federal Power Commission, as saying that the tax write-off policy has benefited utilities in the 1955-57 period by $2,621,318,000...
...The paradox of TVA is that, while we proudly export its principles, it is the one New Deal achievement which has to continue to fight at home the hammer blows of those who have long since accepted, in varying degrees, the other accomplishments of perhaps the most socially creative era in our history...
...This is $45 million more than the $170 million that would have been paid in taxes under private operation...
...Significantly, the private utilities in the areas bordering TVA have not been hurt...
...The truth is that under the fast tax writeoff policy the utilities have been handed subsidies over a two-year period that exceed the total investment in TVA in more than a quarter of a century...
...If TVA had been privately owned over the last 24 years, it would have paid federal income taxes of about $170 million...
...In roughly the same period the state and local taxes paid by private utilities across the nation increased by 232 per cent—a difference of 38 per cent in TVA's favor...
...That $10 billion difference is almost five times the amount the government has invested in all of TVA's functions...
...New York, $156 million...
...Also ignored in these sectional appeals are the expenditures made by TVA with industry located outside the Valley...
...Its own record of achievement for the people of the Valley and the people of the nation is its stoutest shield...
...In cities of 50,000 and over, the lowest rates are now in the TVA area and the area serviced by the Bonneville program...
...The price has dropped from an average 5.7 cents per kilowatt hour to 1.2 cents, less than half the national average of 2.6 cents...
...TVA's power operations are often criticized by the power trust as "unsound and unbusinesslike...
...In 1933, 3.4 per cent of total federal individual income tax collections came from the seven states which embrace the TVA region...
...Its distributors paid $7,646,000 in taxes or equivalents in 1957...
...The utility industry insists that these low rates are made possible because of TVA's tax exempt status...
...Add to that the $1,750,000,000 the users of TVA power have spent on appliances—most of them manufactured in other states—and you get a fair notion of how TVA is helping business in the rest of the country...
...The 6,000,000 acre-feet Kentucky Reservoir, near the mouth of the river, permits the TVA system to contribute substantially td regulation of flood waters in the lower Ohio and Mississippi Rivers* and over...
...Recent studies show the proportion of tax contribution has almost doubled...
...Sammis: "That is right...
...In fiscal 1957 they sold 15^2 billion kilowatt hours and earned revenues of $163 million, of which $25 y2 million was net profit...
...Except for the Pacific Northwest, where Bonneville and Grand Coulee are transforming the energy of the mighty Columbia, this is the lowest rural electric rate in the nation...
Vol. 22 • May 1958 • No. 5
