Mr. BIDDLE. You have sold other separate parts of power companies to T. V. A., haven't you? Mr. WILLKIE. Yes; under the same P. W. A. proposition. Mr. BIDDLE. You have sold them, anyway? Mr. WILLKIE. Yes; under the same pressure and process. Mr. BIDDLE. What was the basis of your sale there? Did you take into consideration what you call the investors' cost in that January 4 contract? Mr. WILLKIE. No; in the January 4 contract Mr. BIDDLE. May I finish? When you sold portions of your Alabama and Mississippi properties? EFFECT OF PUBLIC WORKS ADMINISTRATION GRANTS Mr. WILLKIE. No, sir; in the January 4 contract, that is when the P. W. A. first started. While we were negotiating that contract the P. W. A. system was created. Mr. BIDDLE. Had any grants been given? Mr. WILLKIE. I will explain that to you. Mr. Lilienthal and I were negotiating about these principles, that they would acquire all areasMr. BIDDLE. You said P. W. A. Did you mean P. W. A. or T. V. A.? Mr. WILLKIE. No; P. W. A. Mr. BIDDLE. P. W. A? Mr. WILLKIE. I have used that term. Wasn't it called something else besides P. W. A? It was free money, I don't know whether they called it P. W. A. Acting CHAIRMAN SCHWARTZ. One of your witnesses yesterday called it "a hand-out" with a sneer. all. Mr. WILLKIE. I don't say that, it is free money to the city, that is Mr. BIDDLE. They can get juice from you or anybody else? Mr. WILLKIE. Yes, but they only get it when they get it from T. V. A. Mr. BIDDLE. There are many municipalities that get juice from the Alabama Power Co? Mr. WILLKIE. Yes, but they don't get any P. W. A. money. Mr. BIDDLE. None of them? Mr. WILLKIE. No, I am sure about that. Mr. BIDDLE. You don't think anywhere in the country the municipalities are getting P. W. A. money when they are buying juice from somebody else? Mr. WILLKIE. Yes, but they are not in the T. V. A. area. We were negotiating this contract. The theory of it was they would acquire a small area, and that they would not go into the balance of/ In the midst of those negotiations the P. W. A. system was our area. created. Mr. BIDDLE. Weren't the grants and allocations made after the negotiations had broken down? Mr. WILLKIE. Mr. Lilienthal came to me and said that he had discussed the matter, and that they were going to make free grants to the cities, and the grants began to come, and I figured that the thing to do this was a small amount of property-the thing to do, if I could get protection for the balance of the property was to throw it to the hounds, so that I could get peace as to the balance, and I recited right on the face of the agreement the percentage of discount I had to take. Mr. BIDDLE. So that sale you would not consider on a fair basis? Mr. WILLKIE. Not at all. Mr. BIDDLE. Although it was completed? Mr. WILLKIE. Not at all, and I so said at the time, and it is recited right in the contract that it is a certain percentage. Mr. BIDDLE. Isn't it true the allotments didn't start until the negotiations with T. V. A. over the purchase of power broke down? Mr. WILLKIE. Not at all. Mr. BIDDLE. What was the first allotment made by P. W. A., when was the first allotment made, if you know? Mr.WILLKIE. I will have to ask somebody that. It was in northern Alabama that the first one was made. The first applications were in August 1933 I am told. Mr. BIDDLE. When was the first grant or the first money paid under P. W. A. grant? Mr. WILLKIE. I can't give that to you. I will find that out for you. But during that period the grants began to come. Mr. BIDDLE. Have you found out, by the way, how many grants have been made to cities? Mr. WILLKIE. No, I haven't; but we will find out the grants and the amounts. Mr. BIDDLE. You had a suggestion that power be bought at the switchboard. Do you remember that? Mr. WILLKIE. Yes. COMMONWEALTH AND SOUTHERN UNWILLING TO BUY POWER FROM TENNESSEE VALLEY AUTHORITY FOR RESALE Mr. BIDDLE. If the power would be bought at the switchboard, I suppose you would, or would you, couple such an arrangement with the understanding that the retail rates would be fixed by negotiation between municipalities to which the power was sold by T. V. A. as required by the act? Mr. WILLKIE. My suggestion-I have no objection to that, but my suggestion would be, since I am talking to a congressional committee, which is obviously going to make recommendations, if such a plan was considered I would say what we would be perfectly willing to do is we would be perfectly willing to buy the power and sell it under Federal regulation, whether that Federal regulation be by the Federal Power Commission, the T. V. A., or some new board created, or some other process. Mr. BIDDLE. You have not again answered the question. Mr. BIDDLE. I said would you be willing now, are you now on record as saying you would be willing, to buy power at the switchboard on the understanding that in accord with the requirements of the T. V. A. Act the retail rates at which that power would be resold to municipalities and cooperatives would be fixed by agreement between T. V. A. and the municipalities and cooperatives to which the power was sold, are you willing now to go on record as agreeing to such a method? Mr. WILLKIE. You are saying to me, would we be willing to buy the power Mr. BIDDLE. At the switchboard? Mr. WILLKIE. At the switchboard, and then have T. V. A. and the municipality enter into an agreement as to what the rates are? Mr. BIDDLE. The retail rates at which the power was sold to municipalities and cooperatives? Mr. WILLKIE. No; I would not agree to that, but I would agree to any Federal agency fixing those rates. Mr. BIDDLE. Then your answer is "no"? Mr. WILLKIE. Yes. Mr. BIDDLE. Why did you make the suggestion, knowing it would be illegal under the act? Mr. WILLKIE. I am talking to a congressional committee, which I assume is going to make a report to Congress, with the idea that Congress may act upon it. Mr. BIDDLE. It was not your thought that it was possible or feasible under the act? Mr. WILLKIE. I supposed this committee was appointed to make a recommendation to Congress. Mr. BIDDLE. Then your suggestion was not made as a practical one that could have been done in the past at any time under the T. V. A. Act? Mr. WILLKIE. Oh, yes; I think so. Mr. BIDDLE. Right? Mr. WILLKIE. No, no; now, wait a minute. You are trying to get me to say, or you think I said that the T. V. A. does not have the power to sell us the power for resale to customers? Mr. BIDDLE. No; I don't think anything of the sort. Mr. WILLKIE. What is it then? Mr. BIDDLE. Get this very clearly, I have asked it twice. You make the suggestion that your company buy the power at the switchboard? Mr. WILLKIE. Yes. Mr. BIDDLE. Under the present law, the provision now is that the resale of that power must be made to municipalities and cooperatives at rates fixed by the T. V. A. and those municipalities? Mr. WILLKIE. And which I do not agree to under the law. Mr. WILLKIE. Neither does the T. V. A. Mr. BIDDLE. You disagree about the law. Mr. WILLKIE. We had an agreement with the T. V. A. for a year and a half by which we bought power from them, and we distributed it. Mr. BIDDLE. You think where a municipality requests to have power, that the power can be sold to the municipality, and the rate not be fixed by T. V. A. and the municipality involved? Mr. WILLKIE. Not sold to the municipality? Do you mean the municipality, wholesale? Mr. BIDDLE. Yes, exactly. Mr. WILLKIE. You mean that a municipality that has its own distribution system-you are not talking about the rates we charge, you are talking about power rates Mr. BIDDLE. Rates charged to the municipality, wholesale rates? Mr. WILLKIE. You mean would we agree to transmit power for the T. V. A. where there was a municipal plant, and that that municipal plant arrives at its rates with T. V. A., is that what you mean? Mr. BIDDLE. Yes, that the rates must be fixed-I mean that you are buying the power wholesale from T. V. A. and reselling it to municipalities. Mr. WILLKIE. Wholesale? Mr. BIDDLE. Yes. Mr. WILLKIE. Wholesale? Mr. BIDDLE. Yes. Mr. WILLKIE. And in those situations? The only thing I am interested in in those situations, if I understand you correctly, is that we, under those circumstances, we would not buy the power at all probably, but we would get a fair price for the power we would sell to the municipalities, bought from the T. V. A. Mr. BIDDLE. Let's assume you are distributing power retail. The act would require that the rate be fixed by T. V. A. Mr. WILLKIE. That is where I disagree with you on the law. Mr. WILLKIE. We did it a year and a half. Mr. BIDDLE. You think the municipality and the T. V. A. don't have to fix the rates? Mr. WILLKIE. We had an agreement that covered this whole thing by which we bought great quantities of power from them. We distributed it at rates fixed by the State commissions. We are willing to have them fixed by a Federal body, any regulatory body of the Federal Government. Mr. BIDDLE. But not by the T. V. A. and the municipality? Mr. WILLKIE. Not by the T. V. A. and the municipality, by a contract between them to which we are not a party. But I will submit it to any Federal regulatory body. Representative THOMASON. When you bought from the switchboard who fixed your rates to the municipality? Mr. WILLKIE. The State commissions to the consumer. Mr. WILLKIE. Yes, that was in effect for a year and a half, so I don't agree about the interpretation of the law. Representative WOLVERTON. I don't know whether you want those figures that you asked for a moment ago? Mr. BIDDLE. Yes. Representative WOLVERTON. The memorandum I have here would indicate that on August 24, 1937, there was a loan granted to Chattanooga in the sum of $2,382,000 and a grant on the same date of $1,948,000, making a total of $4,330,000, and that on October 31, 1938, there was a further loan granted, but I am not able to say how much was a loan or grant, or whether it was all one or the other, amounting approximately I think to $3,279,000. Mr. BIDDLE. Yes, I think that is the record. Acting Chairman SCHWARTZ. Is this a good place to adjourn or recess? (Discussion had off the record.) Acting Chairman SCHWARTZ. The committee will stand recessed until 9:30 Friday morning. (Whereupon, at 4 p. m., the hearing was recessed until 9:30 a. m., November 25, 1938.) INVESTIGATION OF TENNESSEE VALLEY AUTHORITY FRIDAY, NOVEMBER 25, 1938 CONGRESS OF THE UNITED STATES, OF THE TENNESSEE VALLEY AUTHORITY, Senate Office Building, Washington, D. C. The committee met pursuant to adjournment in room 318 Senate Office Building, at 10 a. m. Present: Senator Schwartz (acting chairman); Senator Frazier; Representative Thomason, Jenkins, and Wolverton. Acting Chairman FRAZIER. The hearing will come to order. You may proceed. TESTIMONY OF WENDELL L. WILLKIE Resumed CORRESPONDENCE WITH ELECTRIC POWER BOARD OF CHATTANOOGA Mr. BIDDLE. Mr. Willkie, in Chattanooga evidence was given by Mr. Wilhoite of the power board. The hearings of the committee were approximately the 22d of August. Mr. Wilhoite introduced some letters, and in order to bring up to date the negotiations about which he testified, and about which you have testified somewhat, I want to introduce the letters. He wrote you a letter on August 24, of which I hand you a copy. Mr. WILLKIE. Will you get my reply to the letter? Mr. BIDDLE. Will you read that, and then read your reply, please? We had the correspondence up to this date. do you? Mr. WILLKIE. You don't want me to read these five pages, Mr. BIDDLE. If you will read the letter of August 24. I didn't count the pages. POWER BOARD'S ACTIVITIES RE CONSTRUCTION OF SYSTEM Mr. WILLKIE. All right [reading]: The Electric Power Board of Chattanooga has carefully considered the views transmitted in your letter of July 26, in response to the board's proposal of July 7, to purchase the local properties of the Tennessee Electric Power Co. and has directed the following reply. The hope, expressed in your letter, that the board "will refrain from taking any action toward the duplication of the existing utility system in Chattanooga' appears to ignore the facts with respect to the present and immediate future status of the board's program as set out in the board's proposal to you of July 7. As pointed out in the proposal of July 7, the board had, at that time, awarded construction contracts in the amount of $520,000, and had advertised for bids on further construction estimated to cost $540,000. And, pursuant to the board's plan, as outlined to you in the proposal of July 7, the board has, since that time, awarded contracts in the amount of $405,342, for the construction of substations and the building of distribution network designed to serve the city street lighting |