The establishment of the TVA marked the first time that an agency was directed to address the total resource development needs of a major region. TVA was instructed to take on the problems presented by devastating floods, badly eroded lands, a deficient economy, and a steady outmigration—all in one unified development effort. The act provided for the integrated development of the whole Tennessee River basin, an area of about 41,000 sq mi (106,200 sq km) that covers parts of seven states. The TVA is governed by a three-person board of directors. The fact that its main offices are located in the region, rather than in Washington, D.C., allows the TVA to maintain a close working relationship with the people of the region.
In 1998 the TVA generated more electricity than any other U.S. utility, supplying 8 million residents. The most noteworthy feature of TVA is the system of multipurpose dams and reservoirs that have contributed greatly to the economic life of the area. There are some 50 dams in the hydroelectric system with an installed capacity in excess of 6 million kW. To meet the growing demand for power over and above the hydroelectric capacity of the system, the TVA began in 1940 to construct steam-generating facilities. By the late 1990s, 62% of the TVA's installed capacity was provided by coal-burning steam plants.
Steadily mounting power demands encouraged TVA to add nuclear power plants in the early 1970s. Design and management flaws and a 1975 accident at Browns Ferry resulted in plant closures and construction delays, but by 1996 three facilties (Watts Bar, Sequoyah, and Browns Ferry) were open and operating.
Electric power from all sources is allocated with a view to promoting the widest possible use of electricity throughout the area—with local municipalities, state and federal agencies, and farmer cooperatives receiving priority over private utility companies and industries. The availability of low-cost electricity has attracted large numbers of businesses and industries to the area, and a 630-mi (1,014-km) navigation channel extending from the mouth of the Tennessee River to Knoxville, Tenn., has been responsible for an enormous increase in river traffic, chiefly in coal, construction material, grain, petroleum, chemicals, and forest products.
Other TVA activities, carried out in cooperation with local authorities, include land conservation; environmental research; tree planting; malaria control; the development of fish, wildlife, and mineral resources; social and educational programs; and the establishment of recreational facilities along the banks of its reservoirs, including the Land Between the Lakes, in W Kentucky and W Tennessee.
Throughout much of the history of the TVA, opponents of the authority have argued that it is too costly and that government should not compete with private enterprise. In 1959, Congress authorized the TVA to issue bonds and notes to be used in financing needed additions to power system capacity. The power system became self-financing and by the early 1990s had paid back more than $2.5 billion into the U.S. Treasury. Congressional funding of the TVA's nonpower programs was phased out in the late 1990s, leaving it totally self-supporting.
By the 1960s many of the regional problems of underdevelopment had been overcome, per capita income had increased dramatically, and rapid outmigration had ended. However, the TVA continues to seek ways to make the largely rural area an attractive alternative to overcrowded cities. In the late 1960s and early 70s the TVA began to place greater emphasis on environmental protection as industrialization and rising living standards resulted in greater demands on the environment. In the conflict between economic and environmental objectives the TVA sought a suitable balance, particularly in its power program. Despite the TVA's environmental protection efforts, the agency has been criticized principally by environmental groups. Controversial issues have involved construction of the Tellico Dam and Reservoir on the Little Tennessee River, the nuclear power program, and the TVA's purchase of pollution credits from Wisconsin Power and Light in 1992.
See P. J. Hubbard, Origins of the TVA (1961, repr. 1968); J. Moore, ed., The Economic Impact of TVA (1967); N. Callahan, TVA: Bridge over Troubled Waters (1980); W. U. Chandler, Myth of TVA: Conservation and Development in the Tennessee Valley, 1933-1983 (1984).
The TVA's jurisdiction covers most of Tennessee, parts of Alabama, Mississippi, and Kentucky, and small slices of Georgia, North Carolina, and Virginia. It is a political entity with a territory the size of a major state, and with some state powers (such as eminent domain), but unlike a state, it has no citizenry or elected officials. It was the first large regional planning agency of the federal government and remains the largest. Under the leadership of David Lilienthal ("Mr. TVA"), the Authority became a model for American efforts to modernize Third World agrarian societies.
As a supplier of electric power, the agency was given authority to enter into long term (20 years) contracts for the sale of power to government agencies and private entities, to construct electric power transmission lines to areas not otherwise supplied and to establish rules and regulations for electricity retailing and distribution. The TVA is thus both a power supplier and a regulator.
Today the TVA is the nation's largest public power company, providing electric power to nearly 8.5 million customers in the Tennessee Valley. It acts primarily as an electric power wholesaler, selling to 158 retail power distributors and 61 directly served industrial or government customers. Power comes from dams providing hydroelectric power, fossil fuel plants, nuclear power plants, combustion turbines and wind turbines.
During the 1920s and the Great Depression years, Americans began to support the idea of public ownership of utilities, particularly hydroelectric power facilities. The concept of government-owned generation facilities selling to publicly owned distribution utilities was controversial and remains so today.
Many believed privately owned power companies were charging too much for power, did not employ fair operating practices and were subject to abuse by their owners (utility holding companies), at the expense of consumers. During his presidential campaign, Roosevelt claimed that private utilities had "selfish purposes" and said, "Never shall the federal government part with its sovereignty or with its control of its power resources while I'm president of the United States." By forming utility holding companies, the private sector controlled 94 percent of generation by 1921, essentially unregulated. (This gave rise to Public Utility Holding Company Act of 1935 (PUHCA)). Many private companies in the Tennessee Valley were bought by the federal government. Others shut down, unable to compete with the TVA. Government regulations were also passed to prevent competition with the TVA.
On the other hand, there were economic libertarians who believed the government should not participate in the electricity generation business, fearing government ownership would lead to the misuse of hydroelectric sites. The TVA was one of the first federal hydropower agencies, and today most of the nation's major hydropower systems are federally managed. Other attempts to create TVA-like regional agencies have failed, such as a proposed Columbia Valley Authority for the Columbia River.
Regional power consumers may benefit from lower-cost electricity supplied from TVA's network of 29 power-producing hydropower facilities. Supporters of the TVA, though, note that the agency's management of the Tennessee River system without appropriated federal funding saves federal taxpayers millions of dollars annually. Opponents, such as Dean Russell in The TVA Idea, in addition to condemning the project as being socialist, argued that the TVA created a "hidden loss" by preventing the creation of "factories and jobs that would have come into existence if the government had allowed the taxpayers to spend their money as they wished." Defenders note that the TVA is overwhelmingly popular in Tennessee among conservatives and liberals alike, as Barry Goldwater discovered in 1964, when he proposed selling the agency.
One study says that public utilities are inadequate on maintenance. They note that federally owned power systems spend significantly less than private systems on this. They report that the TVA "spends only five percent of its revenues on maintenance." And, they say that as a consequence, ability to produce power suffers. Privately owned dams produce 20 percent more electricity than federally owned dams. They also report that the TVA charges its preferred customers (publicly owned utilities and cooperatives) more than private utilities charge the same class of customers. Also, they note when the public purchases bond issues from the TVA, they do not have an eye on the viability of the project but are, rather, basing their investment decision on the fact that repayment is guaranteed via taxation. (CBO, Should the Federal Government Sell Electricity)
The Supreme Court of the United States ruled the TVA to be constitutional in Ashwander v. TVA, 297 U.S. 288 (1936). The Court noted that regulating commerce among the states includes regulation of streams and that controlling floods is required for keeping streams navigable. The war powers also authorized the project. The argument before the court was that electricity generation was a by-product of navigation and flood control and therefore could be considered constitutional.
Even by Depression standards, the Tennessee Valley was in sad shape in 1933. Thirty percent of the population were affected by malaria, and the income was only $639 per year, with some families surviving on as little as $100 per year. Much of the land had been farmed too hard for too long, eroding and depleting the soil. Crop yields had fallen along with farm incomes. The best timber had been cut, with another 10% of forests being burnt each year.
The TVA was designed to modernize the region, using experts and electricity to combat human and economic problems. TVA developed fertilizers, taught farmers ways to improve crop yields and helped replant forests, control forest fires, and improve habitat for fish and wildlife. The most dramatic change in Valley life came from TVA-generated electricity. Electric lights and modern appliances made life easier and farms more productive. Electricity also drew industries into the region, providing desperately needed jobs.
None of this was easy. The development of the dams displaced more than 15,000 families. This caused resentment and anti-TVA sentiment in some rural communities. Many local landowners were suspicious of government agencies. But the TVA successfully introduced new agricultural methods into traditional farming communities by blending in and finding local champions.
A Tennessee farmer would not take advice from an official in a suit and tie, so TVA officials had to find leaders in the communities and convince them that crop rotation and the judicious application of fertilizers could restore soil fertility. Once they had convinced the leaders, the rest followed.
Beginning with its inception, the TVA was based in Knoxville, Tennessee in the old Federal Customs House at the corner of Clinch Avenue and Market Street. The building is now a museum.
During World War II, the U.S. needed aluminum to build airplanes. Aluminum plants required huge amounts of electricity, and to provide the power, the TVA engaged in one of the largest hydropower construction programs ever undertaken in the U.S. Early in 1942, when the effort reached its peak, 12 hydroelectric plants and one steam plant were under construction at the same time, and design and construction employment reached a total of 28,000. The largest project of this period was the Fontana Dam Project. After negotiations led by Harry Truman ("I want aluminum. I don't care if I get it from Alcoa or Al Capone."), TVA purchased the land from Nantahala Power and Light, a wholly-owned subsidiary of Alcoa, and built Fontana Dam.
Electricity from Fontana was intended for Alcoa factories. By the time the dam generated power in early 1945, the electricity was used for another purpose in addition to aluminum manufacturing. TVA also provided much of the electricity needed for uranium enrichment at Oak Ridge, Tennessee, as required for the Manhattan Project.
Marvin T. Runyon became chairman of the Tennessee Valley Authority in January 1988. He claimed to reduce management layers, cut overhead costs by more than 30%, achieve cumulative savings and efficiency improvements of $1.8 billion. He said he revitalized the nuclear program, and instituted a rate freeze that continued for ten years.
TVA has recently made news by again reducing its workforce and by beginning new campaigns to improve its public image. It has also received acclaim from pro-nuclear organizations for its work to restart a previously mothballed nuclear reactor at Browns Ferry Unit 1 (since completed). In 2005 the TVA announced its intention to construct an Advanced Pressurized Water Reactor at its Bellefonte site in Alabama (filing the necessary applications in November 2007), and in 2007 announced plans to complete the unfinished Unit 2 at Watts Bar. (TVA is the owner and operator of the Browns Ferry, Sequoyah and Watts Bar nuclear power plants.)
In 2004, TVA implemented recommendations from the Reservoir Operations Study (ROS) in how it operates the Tennessee River system (the nation's fifth largest).
There were several plants that were planned or in various stages of construction before they were halted and eventually canceled. Canceled nuclear facilities include Phipps Bend, Bellefonte, Hartsville, Yellow Creek, and the Clinch River Breeder Reactor.
When Democrats after 1945 proclaimed the TVA as a model for third-world countries to follow, conservative critics charged it was a top-heavy, centralized, technocratic venture that displaced locals and did so in insensitive ways. Thus, when the program was used as the basis for modernization programs in various parts of the third world during the Cold War, such as in the Mekong Delta in Vietnam, its failure brought a backlash of cynicism toward modernization programs that has persisted.
Then-movie star Ronald Reagan had moved to television as the host and a frequent performer for General Electric Theater. But he was fired by General Electric in 1962 in response to Reagan referring to the TVA as one of the problems of "big government". Reagan would subsequently reiterate his points at the 1964 Republican National Convention, in his speech "A Time for Choosing:
One such considered above criticism, sacred as motherhood, is TVA. This program started as a flood control project; the Tennessee Valley was periodically ravaged by destructive floods. The Army Engineers set out to solve this problem. They said that it was possible that once in 500 years there could be a total capacity flood that would inundate some . Well, the engineers fixed that. They made a permanent lake which inundated a million acres (4,000 km²). This solved the problem of floods, but the annual interest on the TVA debt is five times as great as the annual flood damage they sought to correct.
Of course, you will point out that TVA gets electric power from the impounded waters, and this is true, but today 85 percent of TVA's electricity is generated in coal burning steam plants. Now perhaps you'll charge that I'm overlooking the navigable waterway that was created, providing cheap barge traffic, but the bulk of the freight barged on that waterway is coal being shipped to the TVA steam plants, and the cost of maintaining that channel each year would pay for shipping all of the coal by rail, and there would be money left over.
The publicity Reagan gained in part from this speech paved the way for his election as Governor of California in 1966.
TVA continues to be a subject for popular culture: