TVA in the 21st Century

Why is the public-power marvel of the New Deal still the region's energy authority in 2008?

The Tennessee Valley Authority turned 75 in 2008.

It's our power company, the builder and maintainer of all of our lakes and millions of acres of recreational areas, the superintendent of our system of dams, which have successfully prevented the major flooding that once cursed East Tennessee. It's not unusual for newcomers, especially those under, say, 50, to come to town and admit they've never heard of TVA, but there was a time when TVA was controversial, even when some considered it dangerous to the American way of life.

TVA keeps a much-lower ideological profile now, but remains a political paradox: A major federal program, launched by the original liberal Democrat, it governs a region that still thinks of itself as ruggedly independent, conservative, Republican. Though TVA is no longer involved in subsidized power, subsidized fertilizer development, or programs that could be considered social engineering, it's still a liberal model of mass cooperation, extraordinarily unusual in modern America. The blue states—Massachusetts, Illinois, California—have nothing like it. And a decisive majority of the people who benefit from TVA, the people and businesses of Tennessee Valley region, in particular, consider themselves to be conservative Republicans. According to a map published in The New York Times last week, the Tennessee Valley is central to a swath of the mid-South and Southern Appalachians that appears to be the only part of the United States that, judging by this month's election, is actually growing more conservative-Republican than it used to be. In some of TVA's own maps, the TVA region, which includes almost all of Tennessee and parts of six other states, including almost half of Mississippi, is drawn among the other 50 states, as if it's a state itself, one with leadership selected at the federal level.

If TVA's existence is no longer controversial here, it may have a lot to do with the fact that even now, after the biggest electricity rate increase in decades, TVA still supplies its customers with lower residential rates than are available in most of the nation. That said, they're not dramatically lower; power rates are actually lower in the Pacific Northwest states, according to TVA, because of the massive hydroelectric power available there, as well as in some coal-producing states like Kentucky and West Virginia.

Several independent sources comparing power rates nationally differ from each other, but they all suggest that the TVA customer, regardless of his politics, is getting a pretty good deal on energy. That may explain why even Republicans learned to get along with TVA. Why we are still getting such a good deal a full human lifetime after the emergency that prompted the creation of TVA—and whether we'll always have that unusual advantage—are tougher questions to answer.

TVA is still a unique institution in the United States, without parallels: a federally owned utility, which is also in charge of flood control and several lakes and other recreational areas. We take it for granted, but we have to step back now and then to see it in perspective, to remember how unusual it is, and also maybe to consider how much we benefit from it—and whether, in all fairness to the rest of the nation, we really should.

The Tennessee Valley was hurting bad in 1933, and not just because of the national Depression. The Tennessee River system often flooded, and erosion had ruined thousands of farms, the harvest of generations of short-sighted agricultural practices. We often forget the magnitude of what TVA did in those days. East Tennesseans in particular take their national beauty for granted, but many visitors to the area in the 1930s described vast stretches of barren wasteland, especially near the rivers, thousands of acres of red-clay desert where nothing would grow.

TVA was controversial from its New Deal beginnings, when the new President Franklin D. Roosevelt proposed a radical solution for Tennessee and substantial portions of six other states in the Mid-South in his legendary first 100 days. The new administration endeavored to ease the suffering of the Great Depression, and in so doing, re-formed the United States. Almost in imitation of his own monogram—Roosevelt was the first president widely know by three initials—many of his most radical programs also came with three-letter acronyms: the WPA, the CCC, the NRA, the REA, the PWA, the TVA. (It was always "the TVA" in those early days.) The TVA, the most regionally specific program of FDR's New Deal, would bring emergency improvements to an impoverished region by marshalling land management, flood control, forestry, power generation, electrification, recreational development, and a series of real-world experiments in agriculture and even urban planning under the heading of one big federal agency. Though Roosevelt got some advice from local guys—Harcourt Morgan, one of TVA's original three directors, was the University of Tennessee's president, an agricultural expert who despite a Canadian youth was a longtime Knoxvillian­—it was mainly a top-down federal project offering local citizens or businesses little say.

Though some, especially owners of property along the rivers TVA flooded, resisted—and philosophical conservatives looked askance at the whole cooperative structure of the organization—TVA made good on its promise to provide low-cost power, and both Republicans and Democrats liked that part. To most locals, TVA began to seem less a commie-tilting radical and more just part of Tennessee's generally agreeable status quo.

TVA's purpose went beyond power, and in fact beyond the practical. Original director Arthur Morgan (no kin to Harcourt), sometimes called "FDR's Utopian," an Ohio academic and advocate of progressive education, proposed little less than a reordering of human society. Morgan envisioned Norris, the town, not only as a temporary housing project for the builders of TVA's first dam, but as a perfect community, with carefully controlled, egalitarian residential architecture, which would be a model of a self-sustaining, and infinitely sustainable, city. Picturing Norris as a national model for modern urban planning, Morgan was the first director to move there, but long-term plans for it survival as a small independent city based on an innovative ceramics industry never materialized; when Morgan lost his job with the agency, he left town.

Most of the New Deal's alphabet-soup social-welfare projects faded within a decade of their launching, and hopeful conservatives expected the same fate for TVA. Republican presidential candidates like Wendell Wilkie criticized it sharply as an unfair burden on the American taxpayer; Wilkie memorably said, "The Tennessee River flows through seven states and drains the nation." Opponents would work that metaphor hard for the next 20 or 30 years.

But when TVA was eight years old, the nation went to war, and TVA, still under fire from the right, proved its patriotism and continuing relevance by building more hydroelectric dams to boost massive weapons production at Oak Ridge, Alcoa, and other war factories. Under TVA's top-down command structure, the region mobilized for war perhaps more efficiently than it might have otherwise; Oak Ridge was chosen as a site for uranium refinement for the first atomic bombs partly because of the presence of TVA, a major federal network already capable of producing major amounts of energy.

Though unsettling to many Americans during its first 25 years, TVA was an international marvel. Visitors who came to Knoxville just to see how TVA worked included Jawaharlal Nehru, David Ben-Gurion, Jean-Paul Sartre, the architect Le Corbusier. John Gunther, the internationally popular writer best remembered here for calling Knoxville "the ugliest city in America" in 1947, thought TVA was purely brilliant, a model for the rest of the country to follow.

Several other TVA-like proposals for western rivers bogged down in the conservative Congress. And in the early days of the Cold War, when the Soviets were touting triumphs with collective projects that some thought seemed similar to TVA, the agency continued to loom in many minds as darkly un-American. The third of TVA's chairmen, David Lilienthal, would later inspire Ohio Republican Robert Taft to coin the phrase "soft on communism." Even our own senior senator, Kenneth McKellar, a conservative Democrat from Memphis, would call TVA a "hotbed of communism." Republican President Dwight Eisenhower, slightly more politely, would dub it "creeping socialism," and for a while he wanted to dismantle it and sell it off. Eisenhower thought TVA unfair to the nation's taxpayers. "TVA taxes Massachusetts to provide cheap power in the TVA area to lure Massachusetts business away," he remarked.

Some Republican criticism of TVA was muted in 1959 by a compromise, engineered by the Eisenhower administration, which limited TVA's territory by a "fence" and insisted that the public-power side of the agency must be, for the first time, self-sustaining, and not subsidized by the American taxpayer.

TVA's survival of the Eisenhower years may also owe something to practical Republicans' political interest in Tennessee, one of the few Republican parts of the conservative-Democratic Solid South, and still considered critical to the success of both political parties. TVA's collaborative organization was no model of Adam Smith free-market capitalism, but it's not-for-profit structure and sheer size allowed it to offer all the citizens of the conservative valley lower power rates. And by the '50s, people across the valley, especially in East Tennessee, had grown accustomed to one perk never available to any previous generation: the weekend at the lake. The affluent bought boats and built lakeside cabins on the federally subsidized lakes, and the affluent were often Republican.

TVA was a freak, local Republicans had to admit, if privately—but it was our freak.

However, from a national perspective, TVA remained a pariah to some doctrinaire conservatives, a liberal punching bag for right-wing Republican hero Barry Goldwater, who condemned TVA even on a campaign stop in Knoxville; and for one particular middle-aged actor who gained some of his first national fame as a politician by giving a speech lambasting TVA for its very existence: "The annual interest on TVA is five times greater than the flood damage it prevents," Ronald Reagan, then still a full-time actor, claimed in 1959. The jeremiad upset GE, sponsor of "General Electric Theatre," of which Reagan was host. TVA was a major client for GE's giant-generator division, and they persuaded the actor to lay off. That year, TVA claimed its power-generating function was finally self-sustaining, though it was related to other TVA projects which were still receiving major national appropriations.

As a presidential candidate, Reagan criticized TVA again in 1976, suggesting that, if elected, he might consider selling TVA off. It might well have made sense; the Great Depression was long gone, the South was fully electrified, with the TVA regions of it differing little from the non-TVA regions.

But even Reagan came around, likely with the encouragement of regional Republican legislators, and decided that he liked TVA after all. Tennessee was still important in presidential politics.

In a 1980 speech on Market Square, Reagan surprised hundreds of TVA employees by pledging his support for the agency. TVA survived Reaganomics; his administration pared TVA back, especially via the chairmanship of a Reagan appointee, former automobile executive "Carvin'" Marvin Runyon, but didn't sell it.

TVA survived the political winds by emphasizing its pragmatic strengths, especially the pragmatic strengths that appeal most to Republicans: power production, recreation, and business development. But its last dam, probably TVA's most controversial project, was also maybe its least practical. Not a hydroelectric dam, Tellico was once touted as a magnet for major industry and the site of a lakeside city, to be known as Timberlake, sort of a Norris on growth hormones. The promised city emerged only as some exclusive lakeside retirement communities. Some industrial development came, but nothing like what was promised. After Tellico, TVA stopped dreaming big, and started concentrating on what its leadership knew it could do.

However, it wasn't until 1999, when the agency was 66 years old, that TVA was ostensibly self-sustaining, living mostly on electricity sales, and no longer drawing major federal appropriations from taxpayers across the country.

In 2008, TVA is at a crossroads in several respects. The valley, where per-capita energy consumption is higher than it is in most of America, is demanding more energy than it has ever needed before. Nuclear energy, hardly even a theory when TVA was formed, became a major emphasis for the agency, but was unpopular in the '70s, and after a fire at TVA's Browns Ferry reactor, seemed perhaps doomed. TVA quit construction on a couple of nuclear plants in the '70s and '80s, but now operates three, and construction is proceeding at Watts Bar's Unit 2, a nuclear plant scheduled for completion by 2012, as TVA seems likely to redeem (or perhaps rebuild) the uncompleted nuclear plants at Bellefonte in Alabama. TVA spokesman Gil Francis says TVA's nuclear construction is a necessary strategy to meet record demand in the Valley.

TVA's under more pressure than ever to control air pollution, both because parts of the Valley, including Knoxville, have been listed among the most polluted parts of America, and because greenhouse gases have become more and more associated, by bipartisan sources, with global warming. Stephen Smith, the longtime director of the Southern Alliance for Clean Energy, calls TVA "one of the highest CO2 emitters in the world," spewing 100 million tons of it a year to appease its ever-hungrier customers, and ignoring opportunities to work with area companies and alliances to improve. "In no way is TVA a leader yet," Smith says.

The people of the Tennessee Valley are using about 2 percent more energy every year. It's not necessarily that we're more wasteful, Francis says. We do run air conditioners and dehumidifiers more than most Americans, but we also rely more on electricity for heat than most residents of the Northeast, who use more gas and oil. And, Francis says, we're just using more electrical devices than ever before—computers, cellphones, big-screen TVs, bigger stoves and refrigerators, larger houses, and electric cars (a tiny but growing market). They all need electricity, and despite TVA's famous hydroelectric sources, most of it still comes, as it always has, from coal-burning plants.

Smith says TVA's not doing nearly enough. New technology costs money, of course, and rather than raising rates for everybody, TVA launched Green Power Switch, a voluntary effort that allows consumers to chip in and pay more to support alternative energy. Smith calls it "a good program for its time," when it was launched eight years ago. He happens to serve on TVA's Green Power Marketing Committee. But he admits its results are barely a drop in the bucket. Smith says only about 30 megawatts come from alternative energy sources like solar power and wind, maybe one tenth of 1 percent of TVA's 32,000 megawatt output—even though he says businesses in the valley have made important innovations in that regard. He thinks TVA should make much stronger pushes in that regard, but he doesn't yet see the will to make it happen.

Francis admits solar converters aren't as expensive as they used to be, but insists that the Tennessee Valley just doesn't get as much direct sun as the Southwest does—and the Valley, surrounded by mountains and rarely windy, makes wind power problematic. "To find wind, you have to go to a place like Buffalo Mountain," he says, mentioning the 18-windmill installation completed in 2004 near Oak Ridge, which produces about 29 megawatts. Some windmill projects proposed for mountaintops have drawn objections for their impact on the landscape.

He also points to a promising sewage-methane project under TVA supervision in Memphis. So far, it generates about four megawatts a year. TVA's mission, Francis reiterates, is to provide low-cost energy with limited environmental impact. "Right now, there's no breakthrough on that," he says.

A more obvious recent change is organizational. Four years ago, Congress expanded TVA's governing board to nine members. For 72 years, there were only three, each nominated by the president, who made the big decisions for TVA. And TVA now hires a CEO, just like a big private corporation. Board members—who are in the habit of calling TVA a "company"—say it works more efficiently that way.

We spoke to several critics of TVA, most of whom demurred about speaking for the record; TVA's involved in many different spheres of public and private life in Tennessee. It should be noted that the most vocal regional critics of TVA today aren't the Republicans. Some, like Smith, come at TVA from the general vicinity of the left. Unlike Republican critics of the past, Smith doesn't mind that TVA is a major federal agency. His problem is that TVA "a huge agency that has virtually no accountability."

Moreover, TVA will soon have a new boss at the top. Though the president has little direct control over TVA operations, he picks the board members, who do—just as FDR did. And as far as TVA is concerned, this particular president-elect is a big question mark.

President-elect Barack Obama has never mentioned TVA, to anybody's knowledge, and that fact make some folks privately nervous, largely because he's the first president in a very long time who owes nothing to Tennessee's electorate, which went decisively for the Republican John McCain. In TVA's 75-year history, the only president who got into office without Tennessee's electoral votes was John Kennedy—and by the time JFK was elected, he had already visited Knoxville and pledged his support for TVA. Obama, Smith says, is "the first president in the history of TVA who has no political ties to Tennessee."

TVA's nine-member board currently has two vacancies; two more will be up for renewal in May. During his first six months in office, Obama will appoint four of TVA's nine directors, and likely the rest before his first term is up. Smith says Obama's dilemma is unprecedented. In the past, presidents have leaned heavily on Tennessee senators of the same party for such recommendations; and in the past, whether the president was a Republican or a Democrat, there was at least one such senator from Tennessee. If Obama wants to get recommendations from his own party, he'll have to look elsewhere than Tennessee's senatorial delegation, who are now both Republicans. "Where does Obama go and say, ‘Hey, I'm looking for advice about TVA appointments'?" Smith says. "He could go to the governor, I guess—but personally, I hope he doesn't. I hope he appoints people who match his philosophy." There are hopes among environmental activists that Obama will launch a "Green New Deal," a push to put America at the forefront of clean-energy research and development. Whether TVA might be a major part of that is anyone's guess.

George W. Bush got the first crack at supplying the new, expanded board. His choice nominees have been criticized for the fact that most are better known as Republicans than as experts in power or flood control. "There's a few bank presidents, a Republican Party chairman." says Smith. "It's not a board of really sophisticated directors who are willing to ask TVA the tough questions."

That's Smith's problem with TVA's accountability: He claims the only organization TVA has to report to is its own board. "Who's the TVA regulator?" he asks. "The TVA board is the regulator! That is highly unusual."

His organization, Southern Alliance for Clean Energy, is a multi-state watchdog group that overseas power issues in several states. He says private power companies are much easier to challenge. Smith says SACE can much more handily get high-level response and documentation from a private power company like North Carolina's Duke Energy, for example, than from TVA.

"With TVA, their board meetings are the biggest joke in the world," he says. "You're lucky, if you're a member of the public, to get three minutes to ask a question. Their structure is still inaccessible and antiquated. Their board went from three to nine members, and there's still no accountability."

TVA spokesman Gil Francis scoffs at the charge. He says two Congressional committees oversee TVA operations: the Senate's Environment and Public Works Committee, and the House of Representatives' Subcommittee on Water Resources and Environment, part of the Transportation and Infrastructure Committee. In addition, the Office of Management and Budget reviews TVA's finances, and TVA's finances are included in information reviewed by the General Accountability Office. He says TVA submits quarterly reports to Congress, and the Office of the Inspector General submits biannual reports to Congress.

However, it may be worth noting that the Inspector General's most recent report, in September, mentions "inherent conflicts in TVA's role as a regulator" as one of "many significant management challenges" the agency faces. The report notes that in early 2006, the OIG issued a report bringing up their concerns about "TVA's Role as Regulator." In this fall's report, the OIG quips, "The fact that it took TVA over two years to respond to our report suggests the magnitude of the problem."

Smith has some experience with the Congressional side, because he has testified before Congressional subcommittees concerning TVA operations. But he says Congress is in the habit of rubber-stamping most of what TVA does, without close scrutiny. When the board makes a strange or unpopular choice, Smith says, a few Congressmen may object publicly, but, in the end, usually go along.

In the case of the recent $3.3 million package the TVA board voted to give TVA executive director Tom Kilgore—almost simultaneously with TVA's biggest rate increase in decades—veteran Congressman Jimmy Duncan released an Oct. 31 letter he sent to TVA board chairman Bill Sansom. The letter was sharply worded, calling the pay raise "excessive and very unnecessary" and its timing "very unfortunate." But the letter ends humbly, accepting that Sansom and the Board have the only say in the matter: "I assume that the Board will not rescind this latest pay raise and will continue giving out huge bonuses, despite tremendous public opposition," Duncan wrote. "But I will consider delaying this pay raise... until this Nation comes out of recession or until TVA rescinds its recent rate increase."

(Smith, for the record, ran for Duncan's Con-gressional seat in 1996. His 27 percent of the vote is the best any Democratic challenger has gotten in recent memory. Duncan was unavailable for comment.)

Several TVA critics, off the record, claim TVA is a sort of duckbilled platypus of federal agencies, combining the public and private spheres, sometimes seeming like one, sometimes like another, surviving 75 years of political weather by adapting. "If they want to be a federal agency, they need to be held more accountable," perhaps with an independent regulating board, says Smith. If TVA wants to behave at time a private company, it should submit to the same rules regarding private companies. As it is, Smith says, "they lean whichever way they need to lean."

However, Smith suggests TVA is more politically than technologically adept. Part of TVA's slowness to respond to environmental issues, Smith says, is in its structure: On one level, TVA is a confederacy of approximately 158 municipal utilities and cooperatives, "little serfdoms," as Smith terms them, many of them run by "good-ol'-boy" networks with little interest in innovations that go beyond obtaining the most energy at the cheapest price. They're technically free to leave the TVA fold, and those on the fringes are sometimes tempted to do so, which leaves TVA's leadership reluctant to challenge them. "We're dealing with a structure that's incredibly cumbersome and difficult," Smith says. "It's a structure with a lot of inertia that makes it difficult for TVA to be nimble. Of those 158, you can find maybe three or four doing innovative things. That, in my opinion, holds TVA back, and is beginning to hurt us in the Valley. These structural things may have served us well in the '30s, but they may be a hindrance to us in the 21st century. Just because you did it this way for the last 75 years doesn't mean you have to do it the same way for the next 75 years."

Smith's no neo-Reaganite about abolishing TVA; he holds out hope that it could still be an international leader in improving energy technology. "It used to be a ‘big laboratory,' as they used to call TVA," Smith says. "They can be a big laboratory again."

Some, including Smith, criticize TVA for its sweetheart deal with getting loans. TVA has a AAA rating, a perfect score not shared by all power companies, and it permits TVA to borrow money more cheaply. Critics assume it's partly because the federal government's standing behind TVA. Francis insists it's not so: "The revenue generated by the sale of electricity is what backs TVA bonds." Comparing TVA to Fannie Mae and Freddie Mac, Smith suspects the federal government wouldn't let TVA go broke, and that lenders know that. Some observers believe that advantage is a major reason that TVA can still deliver low rates, despite aging power plants (according to the OIG, the average TVA coal-fired plant is 59 years old; the average hydroelectric dam, 66) and consequent higher-than-average operating costs.

It is true that, unlike private power companies, TVA pays no federal taxes. It does make payments in lieu of taxes, to states and municipalities in the Valley.

Some argue that by the time they get to the bottom line, TVA gets a much better break in that regard than private power would. But whether or not that's true, earmarking its taxes to benefit projects in the Valley seems, in itself, an unusual benefit for the region, considering that the federal taxes levied on private power just go to the federal government. Last year, TVA paid almost $455 million to state and local governments throughout the Valley, about $265 million in Tennessee alone; the total estimate for 2009 is $495 million. Of course, if TVA were a private company, it would also be paying some significant city or county property taxes. There's some balancing there, but it's likely that, without TVA, significant sums might have to be cut from budgets, or raised in additional state and local taxes.

TVA power plants, which use TVA waterways for transportation and cooling, add further benefits unlikely with a conventional power-plant setup. "Private power companies are profit driven," says Francis. "They provide power, but at a profit. TVA's mission is to provide safe, reliable power, but at the lowest possible cost."

All together, TVA seems an asset we wouldn't have in 2008 if Roosevelt and his advisors hadn't felt especially sorry for us back in 1933. Is Roosevelt's benevolent ghost still smiling on us? Is red-state Tennessee still, in 2008, a beneficiary of New Deal charity?

And if TVA's such an ideal, why hasn't such a cooperative public venture been tried elsewhere in the country, like the Missouri, or the Columbia, or the Colorado?

"This model has worked well for the Valley," says Francis, adding a koan-like amplification: "Could it have been applied elsewhere? Probably so. Was it? No, it wasn't."

"There's really no reason other than the historical incentive that we have TVA," says Smith, mentioning the "ironies" of this Democratic project that once dabbled in social engineering which still dominates a Valley that's overwhelmingly Republican—adding quickly that he's not against maintaining it indefinitely. "I think government can bring value and cooperation," Smith says.

As it is, TVA remains mainly a mammoth power company that's also in charge of flood control and recreational areas and that tries to recruit economic development—for reasons having something to do with an ever-more-dimly remembered emergency, 75 years ago.