Reports; H. Sennholz

Yet, bear in mind that TVA's to tal investment for all programs amounts to $2,581 million, includ ing a "non power investment" of $652 million. (p. 2) A bit later in the same report we find that "in the Tennessee Valley the operating costs per kil owatt-hour for producing, trans mitting, and distributing electri city are about half the average for the Nation's private utilities. These costs aTe unaffected by taxes and inteTest - factors some times given as the reason why rates are low in the Tennessee Valley." (p. 5, italics added) The preceding page, however, had seemed to say the very op posite in enumerating the TVA benefits to the Federal government: "Despite the fact that most of the power systems in the Ten nessee Valley region are exempt from Federal income taxes, the to tal financial benefits the Federal government receives from power operations are probably greater in this area than any other. Nearly half of all the power TVA sells goes to agencies of the Federal government, primarily the atomic energy plants at Oak Ridge and at Paducah. TVA's low rates, and the exemption of these Federal power sales from taxation by the states and counties of this region, result in large savings to the gov ernment and to taxpayers in all parts of the Nation who support these agencies." (p. 4) Taxes and Costs But the main reason for TVA's low operating costs, we are told, is yet another: the wisdom of its managers to charge low rates which in turn reduce costs! Here is the explanation by TVA's Di rector of Information: "The re gion does, of course, have low cost hydroelectric power. And large amounts of coal in or near the area. But more important are the economies that TVA and the distributors accomplish through the mass production that is achieved by giving primary con cern and constant attention to keeping rates as low as possible to 57 58 THE FREEMAN May encourage the widest and most abundant use of electricity. It is generally accepted that low costs can produce low rates. The oppo site also is true: low rates can produce low costs." (p. 5) There follows a table of com parison of TVA costs with inves tor-owned utilities. In operation and distribution TVA costs are said to be 45 per cent of investor owned utilities; in transmission and distribution, 35 per cent; in collection and customers account ing, 30 per cent; sales and demon stration, 25 per cent; administra tion overhead, 30 per cent; and finally, depreciation, 70 per cent.

Altogether, TVA claims to oper ate at 45 per cent of the costs of investor-owned utilities. To discover what accounts for this amazing comparison, we must understand the TVA method of cost allocation. TVA announces construction of "multiple-use dams" and then charges 22 per cent of the construction costs and 27 per cent of its common costs to "navigation," 14 per cent of con struction and 31 per cent of over head to "flood control," and only 64 per cent and 42 per cent re spectively to "electric power." (p. 10) Investor-owned companies, how ever, have no way to remove mil lions of dollars from cost account ing. They build dams whose purpose is flood control, and yet every penny spent constitutes power cost. "A Competitive Challenge" This competitive challenge to individual enterprise is empha sized throughout the pages of Facts about TVA Operations. The following passage is indicative: "The effects of competition by comparison are apparent beyond the limits of the Valley region.

Adjacent utility companies found that rate reductions which they initiated because of TVA's influ ence helped to bring rapid in creases in the home use of elec tricity. The closer private utilities are to the Valley area the lower their residential rates tend to be. Similarly, rural electric coopera tives pay lower wholesale rates for electric power the closer they are to TVA and to the most near ly comparable other area, the Pacific Northwest. Federal Power Commission figures show that the private utilities have been helped, not hurt, financially by low-rate policies. The common stock earn ings of all the large privately owned utilities in the U. S. multi plied about 4 times in the years 1937 to 1960; in the same period, nine large private companies ad joining the TVA area multiplied their common stock earnings more than 10 times." (p.7) 1965 TVA REPORTS 59 The truth is that in recent years most privately-owned utili ties have reduced their rates be cause of improved technology and rising productivity. Even in states where coal, oil, or gas have re mained the most economical fuel, electricity has become an effective competitor. And it should not be surprising that despite such rate reductions, most utilities now show higher earnings than pre vailed in the depression. years of the late thirties. Yet, TVA would take all the credit!

Perhaps the most enlightening of all the Facts about TVA Opera tions is to be found in. the con cluding passages. While the report claims exceptionally economical operation in all TV A endeavors and thus "justifies" the Federal expenditures through extraordin ary returns and benefits, it coneludes that the Tennessee Valley is entitled to this expenditure in the distribution of Federal funds. Why should New York, Pitts burgh, California's Central Valley enjoy Federal funds, and the Ten nessee Valley be without them? In fact, the Tennessee Valley is said to have received less than its proper share in the redistribution of wealth and income. "Is it fair," the report asks rhetorically, "that such states as Texas, Oklahoma, and Louisiana should enjoy low cost gas and oil, simply because their states are richly endowed with such resources, while people farther away must pay more dear ly?" (p. 14) This, presumably, is why the people of the Tennessee Valley deserve TVA. The princi ple of sharing-the-wealth through redistribution could not be stated more succinctly. ~ Socialized People IN THE FINAL ANALYSIS, this study concerns persons, and not things. When we speak of the socialization of the electrical industry, we are, of course, referring to persons. Electricity doesn't care who or what produces it. In a like manner, when we speak of controlled production or controlled prices, we really mean controlled persons. Under a controlled economy, it is persons - not things - who are told by government what they must or must not do. This coercion of individual citizens is the vital issue. And in the long run the individual consumers of electricity have just as much at stake in this matter as do the private producers of electricity.

DEAN RUSSELL, The TVA Idea A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN a IF READERS will pardon the pun, Paul Goodman, the author of Com pulsory Mis-Education (Horizon Press, $3.95), is a really good man. But, as we shall see, he mis takes his natural friends for ene mies, and he ends up by becoming lost between the two big camps that are contending for the con trol of the American educational system. Being a man who can use his eyes and ears, he knows that the country is not getting its money's worth for the fantastic sums that are being spent on education. Great funds go to support scien tific research, but in the past thirty years the average number of hours per week spent in class room work by science teachers has dropped from nineteen to six. In huge educational factories .such as the University of California at Berkeley a common complaint is that a professor never really sees a student's paper; it is usually 60 read by a paid student reader who mayor may not know what he is about. Yet a retired California English professor, George Stew art, who is a fine novelist and his torian, insists that the ratio of teachers to students at Berkeley is not bad; students can get coun sel and aid if they really ask for it. We must look elsewhere for the source of what is called the aliena tion of the student from the fac ulty. Hugh Kenner, who teaches at another branch of the Univer sity of California, the one at sun drenched Santa Barbara, says the trouble with American education is that our schools and colleges are filled with boys and girls who should not be forced to hang on in hopes of getting degrees. They are there merely to mark time, and they keep real students from learning. In short, we need more dropouts, not fewer.