INVESTIGATION OF TENNESSEE VALLEY AUTHORITY WEDNESDAY, DECEMBER 7, 1938 CONGRESS OF THE UNITED STATES OF THE TENNESSEE VALLEY AUTHORITY, The committee met, pursuant to adjournment, in room 357, Senate Office Building, at 9 o'clock a. m. Present: Senator Vic Donahey, chairman; Senators Schwartz, Frazier, and Davis; Representatives Barden and Wolverton. TESTIMONY OF J. A. KRUG Chairman DONAHEY. You may be seated, Mr. Krug, and give your name and address and other matters incident to this investigation to the reporter. Mr. KRUG. My name is J. A. Krug, K-r-u-g. I reside at Norris, Tenn., and I am chief power planning engineer of the T. V. A. QUALIFICATION AND EXPERIENCE OF WITNESS I would like to state briefly, first, my qualifications and experience. I graduated from the University of Wisconsin in 1929, majoring in economics, utility regulation, and utility management. The following year I went back and took graduate work on the same subjects and received a master's degree the following June. In June 1930 I accepted employment with the Wisconsin Telephone Co. at its main office in Milwaukee, Wis., and during the next year and a half engaged in analysis of operations, business research, and general estimating work with the telephone company. In November 1931 I was employed by the Public Service Commission of Wisconsin at Madison. I became research assistant to Dr. E. W. Morehouse, who was at that time chief of the Department of Rates and Research and who still holds that position. I was engaged for 4 years by the Wisconsin Commission and held successively the positions of senior rate analyst and chief of the depreciation section of the Wisconsin Commission. I left the Wisconsin Commission in December of 1935 to accept the position of public-utility expert with the Federal Communications Commission. During my period of employment with the Federal Communications Commission I directed the investigation of the long-lines department of the American Telephone & Telegraph Co. and presented reports to the Commission during that investigation. Late in 1936 I accepted the position of chief consultant and technical adviser to the Public Service Commission of Kentucky at Frankfort, Ky., and I spent the year 1937 directing the investigations of that commission, primarily the State Wide Kentucky Telephone case and the state-wide rural-electrification program inaugurated by Governor Chandler. In December of 1937 I accepted the position of chief power planning engineer with the Tennessee Valley Authority, but I did not officially take that position until Feburary I of this year. I should like to take just a moment to describe my work with these regulatory authorities. For the most part the work with the Wisconsin Commission was centered on their program of revitalizing utility regulation in Wisconsin. In 1931 the State legislature passed a comprehensive regulatory act, and the commission reorganized the staff and expanded the work, and during the following 4 years that commission conducted investigations of every major utility in the State of Wisconsin. I participated in the work on most of the larger companies, but in particular on the Wisconsin Telephone case, the Wisconsin Power & Light Co. case, and the case involving the Wisconsin Public Service Corporation. In 1933, I believe it was, the Wisconsin Commission centered its attention on depreciation, organized a staff to carry on extensive investigations, and in fact made investigations of the depreciation policies and accounting methods of each of the major companies. I directed part of that work. I explained the work with the Federal Communications Commission and with the Kentucky Commission. Unless the committee is interested, I won't go further into that at this time. Chairman DONAHEY. You may do as you please. Mr. KRUG. At the present time I direct the department of power planning of the Tennessee Valley Authority. That is one of the two departments for water-power utilization in the Authority. The other is the department of operations. The department of power planning, while a very small department, is responsible for most of the policy aspects of the Authority's power program, including the development of market, the fixing of rates, system planning, and the various special studies which the act indicates the Authority should carry on in connection with its power program. I have prepared a statement that describes in some detail the work of the department of power planning and of the department of operations, which is the other department. I will present this statement for the record. If the committee desires, I will read part of it. I think for the most part it is self-explanatory. Chairman DONAHEY. It seems to me the committee is interested in the power question more than anything else. Don't you think so? Senator SCHWARTZ. Yes; that is the reason we are here. Mr. KRUG. Perhaps it would be best if I leaf through this and hit the high spots. Senator SCHWARTZ. How does this relate to the summary statement? Does the summary statement express what you have said? Mr. KRUG. No; that will come a little later. Chairman DONAHEY. You may proceed with such matters as you desire, and file copies with the reporter. Mr. KRUG. The new organization of the departments for waterpower utilization which carry on the power activities of T. V. A. results from the reorganization of the Authority's personnel in July of last year when we adopted the general-manager plan and divorced the responsibility for direct administration from the Board of Directors and centered it in a general manager. We have now two departments as I explained. The organization set-up contemplates that a chief power economist will coordinate the activities of those two departments. So far, that position has not been filled, and we coordinate between the departments directly, and in cases of controversy if any arise, the general manager's office acts as the coordinating agency. I might say that so far we have been able to conduct our affairs without any undue difficulties, and the general manager has been relieved of most of that coordinating work. ORGANIZATION OF DEPARTMENT OF OPERATIONS I would like to outline briefly the organization set-up of the department of operations and what it does, and then perhaps something more about the department of power planning than what I have given. The department of operations is under the direct supervision of a manager. At the present time, Mr. Sullivan is acting manager, although no one has been permanently selected for that post. He has under him four functional divisions and four territorial divisions. The functional divisions are first the division of engineering and construction. At the present time, this is one of the most important divisions as we are carrying on extensive construction activities. Second is the division of power operations. This division ultimately will be extremely important, as it has the complete responsibility for operating and maintaining the entire power system, power plants, the transmission lines, and the substations, and all of the related activities, and for extending and improving those facilities. The third division is the division of telephone and communication plans. This is a rather small, but at the same time an extremely important division, as it provides communication channels whereby our entire system is coordinated and operated. As I will explain later, integrated operation requires very close coordination of all the generating plants and substations. The fourth division of the department of operations is for electrical development. This is also a very small division. I think at the present time it has about 15 employees. They are engaged in promoting the utilization of electricity by the wholesale customers of the Authority. They do not have contacts with the ultimate consumer. They do go into the territory of our wholesale contractors and make suggestions which will help in the long run to build up the Authority's power load in that particular area. They contact dealers and the operators of the plants and try to give them ideas on what they might do, what program they might carry out to increase the use of electricity. The four territorial divisions follow our general system set-up. We have one that takes care of Mississippi and the western part of Ten nessee. We have another that takes care of the State of Alabama proper. We only operate in the extreme northern section, of course. The third operates the middle Tennessee properties. And the fourth operates the eastern Tennessee properties. These division managers are responsible for the operation and maintenance of the facilities in their respective areas. They also are the officers that answer direct inquiries from the public concerning the Authority's program, not only in relation to power but in other phases, and refer the public to the proper channels within the Authority for getting the information which they want. ORGANIZATION OF POWER PLANNING DEPARTMENT To return to the department of power planning, it is directed, as I have explained, by the chief power-planning engineer, who reports to the chief power economist in the ultimate plan, but at present directly to the general manager. The chief power-planning engineer is assisted by a technical staff and also several departments. The technical staff is available for consultation on work program, and they not only assist me but they help in other departments of the Authority, because at the present time we have in that section Mr. Llewellyn Evans, who has had a long experience in the operation of hydro plants and also in construction of properties. The four sections of the department of power planning are, first, a system studies division, which is responsible for the surveys for present and future power requirements and also for the development of the Authority's transmission system. The people in this division carry on the basic planning studies which lead to the extension of our transmission grid and also control the installation dates at the various dams for additional generating capacity. The second is the rate division, which makes the surveys and studies to develop appropriate rate procedures and schedules. It cooperates with the Authority's legal department in developing rate schedules for inclusion in the power contracts which we have with wholesale customers. I want to discuss those contracts in more detail later. The rate department employees are at all times trying to develop more satisfactory rate schedules and improve on what we have now. Only during the past year this section has developed a new rate for street lighting which has, we think, much greater flexibility than the schedule we had before. They have also developed new rate schedules for small commercial light and power use, and for large commercial light and power use. These new schedules we think improve the balance in the rate structure that we have had. The third division is responsible for our contracts with wholesale agencies. They participate with the legal department in drafting up the contracts for the sale of power, and they go out and negotiate these contracts where a municipality or cooperative or industry has indicated its desire for power. This department too is at the present time carrying on a very important work in our organization directing the investigations and appraisals necessary in connection with the acquisition program of the Authority and the public agencies in the valley. The fourth subdivision of the department of power planning is named surveys and investigations. The functions of this division in the past have been spread through our organization. This work has never before been centralized and various departments of both power planning and operations have carried on research work of one kind and another. We have not completed our organization of this staff, but we plan now to bring into one organization a group of people who will be responsible for making available to the public studies of our operations that should be helpful, and also should be useful to regulatory commissions in their studies of the utility situation. I am not going to explain in any detail the administrative set-up which led up to our present organization. It is included in this statement. I think it is self explanatory, and in order to save time for more important subjects, unless you are specifically interested, I would rather pass over that. We had before this a single department, the department of electricity. Everything was in that single department. Now, we have separated the planning function from the operating function. We think it works better. Mr. BIDDLE. Is the planning division and the operating division directed right into the general manager's office as separate depart ments? Mr. KRUG. At the present time they are directed right into the general manager's office. Ultimately we will have a chief power economist to coordinate our work. I have appended to this statement the Board resolutions creating the office of chief power economist, the department of power planning and the department of operations. I have also attached organization charts which show the present set-up of the department of operations and the department of power planning. I have had designated on these organization charts the key personnel of each department, and in the following sections I have provided a list of the principal employees and their salaries, also the total number of employees, and I have followed that up by a brief description of the experience and education of each one of the key employees. I think we go down to those receiving $3,500 or more. I understand we have not included a description of the experience or education of any except the key personnel, but if the committee is interested in any of the other employees I will be glad to furnish the same information. I have also included a chart for the organization of the department of electricity, which is the predecessor of these two new departments. And to give some idea of the budget requirements of these departments, I have included a statement of the budget estimates for the departments of water-power utilization covering the fiscal year 1939. Mr. BIDDLE. Mr. Chairman, at this point, I suggest that the first 10 pages of this, which is a brief summary, be spread in the record, and that the portion which contains charts and matters of that kind, starting at chart 5 be filed as an exhibit. Chairman DONAHEY. Without objection it is so ordered. (Whereupon, the document above referred to was received in evidence and marked "Exhibit No. 529.") |