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SUGGESTIONS ON THE REORGANIZATION OF THE TENNESSEE VALLEY AUTHORITY

(By Arthur E. Morgan)

Prepared for the Joint Congressional Committee on the Investigation of the Tennessee Valley Authority, November 1938

The present organization of the Tennessee Valley Authority has proved to be not satisfactory. A three-man board, administering widely separated groups of activities, is strong incentive to unfortunate alinements. If any one member is inclined to bargaining and strategy in the board or with the staff, effective administration becomes very difficult.

The activities of the Tennessee Valley Authority are an accidental combination which have no necessary reason for being united in a single administration. Their separation into natural divisions would do no violence to the Tennessee Valley Authority program, and in some respects would greatly help efficient administration. The manner of dealing with the situation should be influenced by the nature of the activities of the Tennessee Valley Authority as defined in the Tennessee Valley Authority Act, and as actually carried on.

The present Tennessee Valley Authority organization might well be divided into three parts as follows:

1. RIVER CONTROL

The program of unified river control should be administered by a single or ganization with a single administrator, and a part-time board of directors which would include specialists in the field; or by a board of five or seven men, with a general manager in charge of administration. The first-mentioned arrangement would be preferable.

The unified river-control program should provide and administer navigation facilities, including lock operation, but should not include the operation of barge lines or other transportation systems.

It should provide for and administer generation of power, including tie lines to make a single generating system of all the Tennessee Valley Authority power plants; but should not otherwise distribute, transmit, market, or sell power, except wholesale power directly from its generating system, or possibly on one or a very few trunk lines to main outlets.

2. THE MARKETING OF POWER

The power-sales program should be separately organized and administered by a power authority or a power administration, with a single administrator and a board of part-time directors. It should purchase Tennessee Valley Authority power at wholesale, and should distribute, market, and sell it.

3. FERTILIZER AND AGRICULTURE

The fertilizer and agricultural program should be assimilated into the Department of Agriculture.

RESEARCH AND EXPERIMENT

The functions of research, demonstration, and experiment now provided for in the Tennessee Valley Authority Act should be distributed among the various appropriate agencies.

REASONS FOR THIS PROPOSED REORGANIZATION

The following is a statement of reasons for reaching the foregoing conclusions: There are four major divisions of the Tennessee Valley Authority program. They are, first, the unified control of the Tennessee River system for all useful purposes, especially navigation, flood control, and power generation; second, the distribution and sale of power; third, the fertilizer and agricultural program; and fourth, the general social and economic studies, experiments, and demonstrations for the information of State and local governments.

Unified river control.-The major responsibility of the Tennessee Valley Authority as set out in the act is the unified control of the Tennessee River system. This is a clearly defined purpose which should be planned and administered as a single project under a single management. The unified river

control program of the Tennessee Valley Authority represents a great advance n engineering practice. For the first time in history a great river system is being developed and administered as a unit for all useful purposes. This program has been carried out with effectiveness, economy, and speed. The onstruction program has set a high-water mark in efficient Government adminstration. Notwithstanding all the criticism of the Tennessee Valley Authority, there has been Nation-wide recognition of the economy and effectiveness. of that program. The completion of that program in an orderly manner, under direction that is competent in that field, and with clear and adequatereports, is essential.

There is no reason why this administration must or should be combined with any other of the major purposes of the Tennessee Valley Authority. Taken by itself, unified river control ought to include the following functions: A. The general planning and execution of unified river control as a whole, and the determination of the part to be taken by navigation, flood control, power development, and other uses such as industrial water supply, fisheries, and recreation, so that the greatest total value will be secured: As the system is developed, this over-all service also should serve as control and arbitrator between the various uses, to insure that the operation of the system shall serve all purposes equitably. The keeping of stream-flow and other records and theforecasting of floods also would come under unified river control.

In the actual administration of the river-control system there would need to be close collaboration with the administration of the Mississippi River as a whole for both flood control and navigation, and with the organization which distributes electric power, so that the best over-all results from the operation of the system may be secured. In this administration no single element of control should dominate over the others, but the Tennessee River control administration should mediate between all uses to secure the best total results. B. Development and administration of navigation facilities in the Tennessee River: The administration of navigation should include building dams with navigation locks; deepening channels where necessary; marking of navigation lines; planning and development of a system of navigation terminals; planning, licensing, and supervision of wharves and docks, and perhaps in some cases their ownership and operation; operation of reservoir for navigation purposes; and operation of the navigation locks. This last duty probably should be taken over from the Army engineers, since the present arrangement for lock operation represents some duplication and waste expenditures.

The administration of navigation need not, and probably should not, include the operation of public barge lines or other water-transportation systems. In practice the operation of such systems would extend beyond the limits of the Tennessee Valley Authority, and public barge lines should cover the whole rangeof the Mississippi River and its tributaries.

C. Flood control: The storage and release of water for flood-control purposes. is a proper function of the unified river-control program. There must be close cooperation with the administration of the Mississippi River as a whole for flood control.

D. Minor purposes not sufficiently important to justify separate organization, such as fisheries. recreation, and industrial water supply: Much of the work under these heads could be done through existing Government agencies.

E. The generation of power: The unified control of the Tennessee River should include power generation, with transmission tie lines connecting the individual power plants at the various dams, so as to result in a single coordinated powergeneration system; but it should go no further in the power field, except possibly to provide one or a few main outlets to general markets. The unified river-control administration should cooperate closely with a separate organization having in charge the distribution and sale of power, but the unified rivercontrol administration should have final authority in determining a program of the amount and time of power generation, so as to harmonize power generation with the primary needs of navigation and flood control.

The marketing of power.-Another major activity of the Tennessee Valley Authority is the distribution and sale of power generated at the dams. The field of power distribution and sale is not coterminous with the Tennessee Valley area, but extends over a much greater area. Except for power sold at wholesale directly from the Tennessee Valley Authority combined generation system or possibly from one or a few main trunk lines to get the power to a wholesalemarket, the distribution and sale of power generated by that system should beorganized and administered separately from the unified river-control program. 115943-39-pt. 11-32

A power-sales authority or power-sales administration should be created for that purpose. Such an organization should have advisory relations with the unified river-control program, but it should have no actual control over the amount of power generated at the Tennessee Valley Authority dams. If a powertransmission pool, such as that proposed by the President, should be created, it might take the place of such a power authority and might be the best solution.

This separation of unified river control from the distribution and sale of power is an extremely important issue-one of the dominant issues of the Tennessee Valley Authority. From a technical standpoint there is no reason in many cases why flood control and power development cannot be combined in the same dams and reservoirs. There is a marked tendency for these two purposes to conflict, and sometimes they cannot feasibly be united in the same control works, but so far as technical reasons are concerned often they can be so combined. I have vigorously defended the policy of combining flood control and power development in the same structures where that course is feasible from a technical standpoint. In taking this position I have been at variance with many American engineers, and in doing so I have assumed a very heavy responsibility to the American public.

Where the two purposes of flood control and power development are com bined in the same structures, there must be clear-cut recognition of the tendency of these two purposes to conflict, and there must be definite provisions to avoid such conflict. This tendency to conflict is increased by the very different ways in which the two purposes are served. Great floods occur at rare but unpredictable intervals, perhaps once in 25 to 50 years. During much more than 99 percent of the time the purely flood-storage capacity of the reservoirs must remain unused and ready to serve on the rare occasions when many thousands of lives and hundred of millions of dollars of property will rely on that flood-storage space for protection.

Storage for power development, on the other hand, brings its cash income each year. When desire for power or for public income is great there will be continuous pressure to use power storage to the utmost, and to encroach upon the empty storage space reserved for flood storage. When 10 or 15 years have passed without flood storage being used, the temptation to run the risk of a flood and to use that storage for power, in order to increase immediate income, will be hard to resist.

The actual

Only if flood-control storage space can be held inviolate for that purpose can flood control and power be safely combined in a single structure. In view of the great responsibility I have assumed in promoting a single structure for combined flood control and power purposes, I have endeavored in the Tennessee Valley Authority to build up a policy, a program, and a tradition which would establish the inviolability of flood-storage space in reservoirs which have flood-control purposes. Those efforts on my part have been partly nullifled by Mr. Lilienthal, who, with the supporting vote of Dr. H. A. Morgan, has controlled Tennessee Valley Authority policy in this respect. policy of the Tennessee Valley Authority has been to treat flood control as a sort of smoke screen which, along with navigation, would justify power development, but not fully to meet the responsibilities of flood control. At times necessary precautions to protect the flood-control functions have not been taken, but have been definitely opposed. In 1936, in my temporary absence and over my persistent protest, a water-control administration program was set up which gave power generation altogether too dominant a voice in the management of the Tennessee Valley Authority storage reservoirs. In the actual operation, the proper rules for regulation in some cases were neglected or ignored. An improper course was taken in the following respects: A watercontrol organization was set up giving power an inordinate influence in determining reservoir regulation; in working out control policies only power engineers, who had little or no flood-control experience, were called as consultants. They recommended steps which largely would have destroyed the flood-control program. Rules for operating reservoirs were violated deliberately by those in charge of the power program. While power was presented in court as a byproduct, it was treated as the controlling issue in actual operation. Only when it was very sharply brought to the attention of the Tennessee Valley Authority legal department that the existing policy jeopardized the chances of the Tennessee Valley Authority in its suit with the utilties was the rule for

reservoir operation changed. Under present methods of control the Tennessee Valley Authority flood-control program is not adequately protected. Danger of abuse of this great responsibility by those in control of the Tennessee Valley Authority was one of the reasons why I found it necessary to take open issue with my fellow directors. If that abuse can occur in the early stages of the Tennessee Valley Authority, while the Tennessee Valley Authority is justifying its cause largely on the basis of flood control, the probability of greater abuse at a later date, when legal troubles are past, must not be overlooked.

As a step toward adequate protection I recommend that distribution and sale of Tennessee Valley Authority power, except for wholesale disposal from the Tennesse Valley Authority generation system, be administered by an organization entirely separated from the Tennessee Valley Authority, except for advisory relationships. Such administration should have no control over the amount of storage retained or the amount of power developed at Tennessee Valley Authority dams. The river-control administration should be free from any compulsion or coercion in that respect. It should be like a judicial body determining the distribution of storage and release of waters for the greatest over-all benefits to all interests concerned. Interests particularly concerned with navigation, flood control, and power should appear before this administration as various parties appear before a court or before a public-utilities commission. The water-control organization should set up and administer rules of operation impartially as between navigation, flood control, power, and other uses, in such a manner as to allow power-marketing organizations. Determination of general river-control policies would be made by the board of directors of the unified river-control administration, subject to principles determined by Congress, and subject also to such review as Congress might provide.

Contracts for sale of Tennessee Valley Authority power should not require violation of sound flood-control administration. A separately administered power sales authority should take such electric power as is made available to it by contract or otherwise under such an arrangement, with such long-time planning as is possible, and should dispose of it according to general principles established by Congress in legislation. The development of a regional power pool probably would make most efficient use of the Tennessee Valley Authority power, and be of greatest benefit to the region.

Fertilizer and agriculture.-The next general function of the Tennessee Valley Authority is that of fertilizer production and agriculture. This activity has no necessary administrative connection either with unified river control or with power. The Tennessee Valley Authority propaganda to persuade the public that soil management is vitally and practically associated with the administration of flood control is essentially a misrepresentation. Data presented by the Tennessee Valley Authority in that connection are partial and misleading. Public propaganda, as exemplified by the powerful moving picture, The River, produced and distributed at public expense, with a contribution of $10,000 from the Tennessee Valley Authority, is misleading the entire American public. So far as practical planning and administration are concerned, present flood-control plans cannot be materially modified by any program of soil management.

Soil management is a highly valuable public function, justified in its own right. There is no necessary reason why the fertilizer and agricultural programs of the Tennessee Valley Authority should not be administered by the Department of Agriculture. The problems they deal with are not peculiar to the Tennessee Valley Authority region, but are met in many parts of the United States. To treat them as a regional issue, peculiar to the Tennessee Valley Authority, is confusing.

The fertilizer program of the Tennessee Valley Authority is only by chance associated with control of the Tennessee River. As developed, its administration has been almost entirely separate, except that to some degree the same staff members have kept books, issued publicity, and cared for employment needs. There has been practically no functional connection.

The fertilizer and agricultural program is largely administered by the landgrant college organization and by the Department of Agriculture. Its connection with that governmental department has been far closer than with the other functions of the Tennessee Valley Authority. Dr. H. A. Morgan, in administering that program, has consulted with Department of Agriculture and land-grant college officials, and not with his own Board. Except in the most general way, the Tennessee Valley Authority Board has not been kept informed as to that program. The annual reports to Congress, testimony before Appropriations Committees, and reports to the Tennessee Valley Authority give no clear accounting of that program. Almost its only supervision is by

men trained by the Department of Agriculture. Under the Department of Agriculture the program could have the necessary discipline and would be in its proper field.

With western and Florida phosphates constituting more than 95 percent of the American supply, and with the Tennessee Valley area providing only 2 or 3 percent of the supply, this is a national and not a regional issue, and should be nationally administered.

Research and experiments.-The fourth general activity of the Tennessee Valley Authority is that of studies, experiments, and demonstrations, as provided for under sections 22 and 23 of the Tennessee Valley Authority Act. Such activities are characteristic of many Government departments and agencies. Each organization into which the Tennessee Valley Authority might be divided should carry on such activities of this nature as are normal and necessary to its duties. Coordination could be through a national or regional planning council. No separate organization is necessary.

Qualifications.-In this statement I have omitted some qualifications for the sake of simplicity. For instance, navigation storage does not greatly conflict with power storage and is not discussed. To some extent power and flood control can be provided for in the same storage space by seasonal regulation, but this qualification does not materially affect my statement.

Separate organizations desirable.-The Tennessee Valley Authority as at present constituted is a union of activities that do not need to be combined, and which could better be carried on by these separated organizations. Taken altogether, the Tennessee Valley Authority as it now exists is too varied and far-flung to be well administered by a single administrator or by a single general manager under a board. If it were divided into two organizations, with the fertilizer and agricultural features absorbed by the Department of Agriculture, the more simplified organizations could be administered, each by a single chief officer, perhaps with a board of five or seven part-time directors who are specialists in the field and who would advise on general policies, somewhat as do the directors of a private corporation.

In some respects this division of activities is a matter of practical convenience. However, in respect to separating unified river control from the detailed distribution, marketing, and sale of electric power, the matter is not just one of convenience, but of vital public safety. Unified river control for all useful purposes is a great advance in engineering and in public safety. The Tennesse River project can mark the way for unified treatment of other river systems. It would be a matter of regret to see that undertaking ahandoned or deformed. Yet its success depends on the utmost integrity of administration, and on the fullest assurance that flood-control storage space shall be inviolate for flood control and shall not be infringed upon for im mediate power profits.

In Tennessee Valley Authority administration this necessity has not been fully respected. The drive for public power has deliberately shirked very grave responsibilities in this respect. I repeat, my own promotion of combined power and flood-control projects has been against much of the responsible engineering opinion of the country. Unless evidence can be provided that this responsibility is clearly realized, and is being met by the Federal Government, it seems to me that American engineers will be justified in the position that, regardless of the technical economies of unified control, public administration is not sufficiently responsible to justify it.

Mr. BIDDLE. May we have a 5-minute recess while I get the next witness?

Chairman DONAHEY. We will call a recess for 5 minutes.
Bring forth the next witness, Mr. Biddle.

TESTIMONY OF SHERMAN M. WOODWARD

Chairman DONAHEY. Will the witness state about how much time he will require?

Mr. BIDDLE. The witness states that he thinks 2 hours will be ample.

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