Design of the TVA became an important step in the struggle of the American people to stop exploitation and useless consumption of their water resources. The TVA successfully introduced new agricultural techniques into traditional farming communities and still is admired all over the world as a devise that produces the public benefits that can be realized from wisely comprehensive development of the rivers. It is a design that may prove to be the salvation for backward countries. Today, the TVA exists as a living, dynamic model of government, responsive to needs of the American people. It creates an economic stimulus to people, economic activity, and labor. This paper examines the development of the TVA corporation, the structure of its decision-making processes, and the current set of issues facing this federally owned corporation. As a unitary public agency, the TVA differs considerably from decentralized and privately owned companies. As a self-governing federal enterprise it has federally owned autonomy in its decision making. At the same time the corporation is living within important legislative and political constraints.
Tennessee Valley Authority
The TVA serves most of Tennessee, parts of Alabama, Mississippi, and Kentucky, and some portions of Georgia, North Carolina, and Virginia, yet it does not report to state utility regulators. Neither does the TVA answer to shareholders as investor-owned utilities must, because the TVA is a public corporation. It is a complex corporation that does much more than simply to provide electricity to the Tennessee River Valley. At its creation, the TVA was designed for the planning for the comprehensive, economic use, conservation, and development of the natural resources of the Tennessee River drainage basin and its neighboring territory.
Development of the TVA System
The TVA was created in 1933 after nine-year efforts by Senator George Norris from Nebraska. Senator was very much concerned about making the quality of rural life better. At the time of TVA’s foundation, the Tennessee Valley suffered from poverty and was lacking financial support, with per capita income only 45 percent of the national average (Mitchell 205). As a result of the work that has been completed, the TVA has often been considered as the organization for improving the social conditions in the Tennessee Valley region.
The organization’s mandate was to serve the people of the valley by providing electricity, contributing to economic growth, protecting local surroundings, and providing recreation. It came into existence during widespread disappointment at the performance of private corporation as a system of economic development. This generated public power projects like those of the TVA (Davis and Hurst 103).
The same concerns that are associated with energy policy today were present in the debate over the TVA. People tried to answer the questions: should the state be in the power business? Should people who make plans play a role in economic decision making? How should equity and profit goals be balanced? In his message to Congress in 1933, President Roosevelt combined a bold vision, indicating that the TVA was planned to be created as a “corporation clothed with the power of government but possessed of the flexibility and initiative of private enterprise” (Mitchell 150).
A board that included three members was created by the president to run the corporation. One member of the board was serving as chairman. Unlike other organizations of the federal government, the board was authorized to direct the function of all the powers of the corporation. The TVA was given the “broadest duty of planning for the proper use, conservation, and development of the natural resources of the Tennessee River drainage basin and its adjoining territory for the general social and economic welfare of the Nation” (Mitchell 201).
The service area of the TVA encompasses Tennessee, parts of Alabama, Mississippi, and Kentucky, and some portions of Georgia, North Carolina, and Virginia. Combined, the Tennessee River system and the TVA power service system comprise a region of 201 counties with an area of 91,000 square miles and a population of nearly 8 million (The Tennessee Valley Authority Web site).
The length of the Tennessee River is 652 miles. It is the nation’s fifth largest river system. The Tennessee River ensures transportation for more than 40 million tons of cargo transported each year.
Considering capacity and produced energy, the TVA power system is one of the largest in the nation and is the tenth-largest electric organization in the world (Mitchell 195). The TVA established its physical system in three main phases. Each phase is being driven by a particular purpose. The first phase was driven by the purpose to take the river under control and prevent the annual floods that devastated the local land. Besides, hydro power was needed to produce electricity for homes and businesses through the whole of the region. The TVA began building of its first dam five months after the organization was established. These dams had many purposes that included navigation, flood control, recreation, economic development, and power. They needed considerably lower costs than if the dams had been constructed for a single purpose. There was organizational conformity during this period; new dams served many goals of the TVA. The organization chose to start rural electrification after some hydro constructions had been finished (Mitchell 65).
The second phase of construction was a result of a growing demand for power that could not be fully produced from hydro sources. The TVA began construction of its first fossil fuel plant in 1941 to create an additional source of generation. Defense activities that include the top-secret Manhattan Project developed during World War II, and process of constructing to satisfy national security needs advanced rapidly. Designs of the Atomic Energy Commission (AEC) and other federal organizations were main drivers of load growth during the 1950s, 1960s, and 1970s, and are important today. As a result, twelve coal-fired plants were built. These fossil plants today provide over half of TVA’s total production.
The third phase of construction resulted from rapidly rising coal costs in the 1960s. As a result of this process the TVA started a great nuclear construction program in 1966 to meet planned system load growth. At the middle of the construction project, the TVA worked on seventeen nuclear units either under construction or in commercial transactions at seven plant sites.
In the 1980s, the previously planned load growth had not been realized. TVA stopped building of four nuclear units in 1982, and stopped four more buildings in 1984. By 1985, the TVA decided to close its three-unit Browns Ferry Nuclear Plant and its two-unit Sequoyah Nuclear Plant because of a constantly growing number of safety, technical, operational, and management concerns. Yet, after improving this situation through comprehensive review and reorganization of the nuclear program, both units at Sequoyah were started again in 1988 and one unit at Browns Ferry was reopened in 1991.
Currently, the TVA has eleven fossil-powered plants, twenty nine hydroelectric dams, three nuclear power plants, and six combustion turbine plants. The approximate dependable capacity for the system is the following: hydroelectric capacity about 5,224 MW; coal- fired capacity about 16,057 MW; nuclear power capacity about 5,491 MW; and gas turbine capacity about 2,066 MW. Total generating capacity is about 28,838 MW (Davis and Hurst 103).
Power is supplied to TVA consumers over a transmission system of about 16,800 miles of lines, together with 2,400 miles of extra high-voltage (500,000 V) transmission lines.
The TVA corporation has contracts with fourteen joining utilities, with various types of cooperation arrangements with each unit. The size and types of interchange traffic depend on the features of the systems’ loads, the management processes of the systems, and other characteristics. TVA tries to maximize production through the use of these interchange contracts. These arrangements help the TVA minimize investments in facilities and improve services.
Some of TVA’s most well-known non-power projects are the Demonstration Farms, the tree seedling program, and many forestry and wildlife projects. The corporation has also developed a number of recreational programs in the Tennessee Valley region. These projects have produced a vast recreational area that contains 11,000 miles of shoreline, thirty-six dam reservations, and 199 recreation locations. These recreational places include campgrounds, picnic areas, boat launching ramps, and trails (The Tennessee Valley Authority Web site).
Another important project in the resource area is the National Fertilizer and Environmental Research Center (NFERC) that is located in Muscle Shoals, Alabama. This center is famous for its fertilizer studies and current research. It is reported that the research and studies from NFERC are used in making approximately three-fourths of the fertilizers in this region. Today, the center works more on environmental research and less on fertilizer products research since most of the fertilizer developments have already been achieved.
Sources of Revenue and Financing
Considering a financial standpoint, TVA projects fall into two groups. One group is the power program that is self-governing and self-liquidating. The other group consists of all non-power projects, including navigation, flood control, fertilizer research, and regional resources developing.
Initially, most of the money needed for the building of dams and steam plants was given by congressional appropriations. However, a 1959 correction in the TVA Act altered this provision. The 1959 change, along with following changes, permits the TVA to receive on loan up to $30 billion to finance the building of power facilities. The TVA power borrowings include bonds, notes, and other evidences of debts issued by the TVA as a federal organization, and are regulated by Section 15d of the TVA Act (Morgan and Donald 39).
Principal and interest on the borrowings are to be paid completely from the TVA’s net power proceeds. Power operating revenues continue to pay for all operating expenses. Remaining power income provided by the proceeds from borrowing constitutes most of money needed for additions to power plant and equipment. The 1959 addition also provided for the TVA to make paying to the United States Treasury to repay $1 billion of monies that were invested in the organization’s power system (Mitchell 67).
Federal resources to support TVA’s non-power projects are made by Congress after the Office of Management and Budget and the Congressional Appropriations Committees have made a comprehensive examination of TVA’s annual budget expenditure (Mitchell 60). The funds can be different every year; in 1995 funding has been in the range of $135 million. Although the fertilizer development project does not function for the purpose of producing revenues, considerable revenues are received from the sale of fertilizers and are used to support part of the operating expenses of the project. The other non-power projects depend almost wholly on appropriations for both agency operations and construction process.
Internal Decision Making
The TVA’s Board of Directors includes three members appointed for nine-year staggered terms. One term expires at each three-year period. Eventually, all decisions are discussed and confirmed by the board members at board meetings occurring once every month. As indicated by the congressmen who managed the TVA legislation on behalf of the House of Representatives in 1933, “We are fully persuaded that the full success of the Tennessee Valley development project will depend more upon the ability, vision, and executive capacity of the members of the board than upon legislative provisions. We have sought to set up a legislative framework, but not to encase it in a legislative straitjacket.” (Derthick and Bombardier 235). Authorized with this power, the board members carry out four chief responsibilities (Mitchell 99):
- They establish and review the results of TVA’s general policies and projects.
- They approve the organization’s annual budget and spending plan.
- They approve appointment of key managers and maintain a management for carrying out TVA policies and projects.
- They approve processes of major importance to the TVA or the public.
TVA is regulated like all other organizations regarding the environmental issues. Most of its recent boards have placed environmental protection and enrichment issues among the top three concerns of the corporation. Current top environmental concerns include acid rain compliance, toxin emissions, global worming, cooling water use, and electro-magnetic fields (Macy and Sarah 190).
Most of the organization’s coal-fired plants were constructed during the postwar period when inappropriate environmental standards were in function, and nearby high-sulfur coal was the resource of choice for both cost and political reasons (Macy and Sarah 200). Thus the corporation must now make major efforts to act in accordance with rules of the 1990 Clean Air Act Amendments. Amendments of the TVA started in the year 2000 and require additional controls at the remaining TVA plants (Davis and Hurst 103).
Another important environmental issue is the need for control of utility industry toxic air emissions that is at present being researched by the Environmental Protection Agency (EPA). Global climate issues are currently receiving considerable national and international attention and could be an expensive proposition to the organizations that have considerable emissions of CO2 (Davis and Hurst 103). Current concerns about health effects from electric and magnetic fields are also possibly a huge challenge for electric organizations in the near future.
If there has ever been created a real “contractual relationship” between government and the American people, it has been the organized structure and progress of the TVA. For the first time in the history of American legislation, Congress recognized in the TVA the unity of nature and brought to a more advanced stage all the resources of a great river basin for the benefit of all the American people. Besides considerably increasing the production and lowering the cost of electric power for both private and public consumption, the TVA has produced navigational successful completions, means for flood control, fertilizer improvement and soil management, recreation and animals and plants management. But the most significant contribution of the TVA to the people is the electric rate standard it established. The indisputable fact is that the American consumer has been protected more by the establishment of TVA’s rates than he has by other forms of utility regulation that have been offered. The TVA is the most important single factor in maintaining power monopoly rates within reasonable limits. Indeed, it provided the yardstick against which the people in all the states could measure exceeding rates, quality of service, and monopolistic operations. People must continue comprehensive, economic use of the TVA’s resources.
Davis, Jack and Renee Hurst. “A River Runs through It.” Forum for Applied Research and Public Policy 16 (2001): 103.
Macy, Christine and Sarah Bonnemaison. 2003. Architecture and Nature: Creating the American Landscape. Routledge: New York.
Mitchell, Jerry. 1999. The American Experiment with Government Corporations. M. E. Sharpe: Armonk, NY.
Morgan, Arthur E. and Donald Davidson. (1980). The Making of the TVA. Prometheus Books: Buffalo, NY.
The Tennessee Valley Authority. Web site. http://www.tva.gov/
Derthick, Martha and Gary Bombardier. 1974. Between State and Nation: Regional Organizations of the United States. Brookings Institutuion: Washington, DC.