Book Reviews

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN Government in the Power Business FIFTEEN, ten, or even five years ago Edwin Vennard's Government in the Power Business (McGraw Hill, $7.95) would have been an unpopular book. But not now. Its double-edged thesis is that private - or investor-owned - electric· pow er companies can deliver good service at the cheapest possible market prices where government owned and operated facilities can only give the consumer a competi tive edge at the expense of the taxpayer who is forced to make up for a hidden subsidy. In 1964, Barry Goldwater was hooted down for suggesting that the Tennessee Valley Authority steam plants and distribution systems, which have nothing whatsoever to do with navigation and flood control, should be sold to private investors. But even in 1964 the notion that ther(; is something inherently no ble and untouchable in public pow er was fast becoming a cliche. N0 body was out crusading for more TVAs.

Mr. Vennard, who is the Man aging Director of the Edison Elec tric Institute, does not mention politics as such. He accentuates thE positive,relying on careful cos1 studies which he sets forth n01 only in clear prose but in a serief of admirable tables and charts. } closely-knit chapter shows in de tail how the investor ...owned powel companies fought to change thl ideological climate by emphasizinJ such factors as quality of servici and price. The story more or less tells it self. In 1943 fifty-five per cent 0 the people favored government ownership of power stations; onl; 31 per cent were for private pow ere But the intensive sales an marketing efforts of the investol owned companies during the earl postwar years, coupled with good public information progran began to take hold in a slow bt sure manner. By the time th early fifties had rolled around, th curves on the graph had crosse( and by 1955 a survey showed th~ 46 per cent of the people had corr to favor investor-owned plants ~ against 40 per cent who were stj for government ownership. In 19( the figure for investor-owned sel 1968 GOVERNMENT IN THE POWER BUSINESS 759 timent became a majority figure, at 51 per cent. Those who were for government-owned power had declined to some 35 per cent, an ebb-tide figure which would have been incomprehensible to such old time public power enthusiasts as the late Senator George Norris of Nebraska. At this rate the TVA steam generation plants and trans mission lines, exclusive of some facilities which serve the Atomic Energy Commission's Oak Ridge nuclear development, may some day be sold to investor-owned power companies serving the southern Appalachian area.

In a long chapter on the TVA and other government ventures in the power business, Mr. Vennard proves that public power is usu ally a cheat. The word is mine, not Mr. Vennard's, but when a public project which pays no Fed eral income taxes claims "yard stick" value how can you describe it as anything other than dishon est? The TVA was born in du plicity, the excuse being that flood control, navigation, and "national defense" required a series of dams along the river system in ques tion. The sales of electricity gen erated at the dam sites were sup posed to be incidental to the main purposes of the development. But, as Mr. Vennard says, "within a year, Dr. Arthur E. Morgan, the first chairman of TVA, stated unequivocally to the Senate Appro priations Committee that power production was the major purpose of the Authority." In 1935, two years after the passage of the TVA Act, Commis sioner Stanley Reed, representing the TVA, told the Supreme Court that "the Act would be invalid"

unless it were assumed that the dams were primarily to improve navigation. Nevertheless, in spite of the Constitution, the TVA even tually went into the power busi ness with a vengeance, building steam plants to supplement its water power and competing with investor-owned companies. The TVA has made certain pay ments in lieu of taxes to state and local governments, but never in the same amounts that have been exacted from the purely commer cial suppliers of electricity. "On the average," says Mr. Vennard, "electric companies pay 2.33 per cent of their gross plant invest ment in state and local taxes yearly. This is about two-and-one half times the rate paid by TVA." Moreover, the investor-owned com panies pay on the average 2.64 per cent of their gross investment in Federal income taxes to TVA's zero amount. When you figure that the cost of money to a Federally owned power installation is much less than what private companies have to pay in the capital market, 760 THE FREEMAN December the argument that the "public"

benefits from government-owned facilities stands exposed for the sham that it happens to be. In the West, the needs of irriga tion may provide a comprehensible reason for building big dams at the taxpayers' expense.. Certainly the reason seemed compelling in the thirties, when capital was scarce and only the government seemed willing to dam rivers in Texas, in Arizona, and in the Pa cific Northwest. But the attempt to blanket the nation with seven regional authorities along. the lines of the TVA died a prolonged death in Congress. The feeling de veloped that a small group of politicos were bent on using the TVA method to bring about gov ernmentcontrol of the economy without ever letting the people vote directly upon it. Norman Thomas, the veteran socialist, gave the show away when he said that the TVA is "the only genuinely socialistic act" in the New Deal. It was in the thirties, too, when it seemed reasonable for farmers to ask for government help in the for'11 of the REA-financed generat ing plants and transmission lines.

But now that the nation's farms are thoroughly electrified, the REA has been trying to expand into densely populated areas, us ing 2 per cent money to do it. Mr. Vennard is not the sort of person to say he is outraged by this, but he lets the reader know how he feels by a measured display of statistical proof that the taxpayer is being cheated again. In the last analysis it might be said that the public power ideo logues have lost the battle because they have been outflanked. Time was when a seemingly good case could be made out for municipal power plants. But the technology of long-distance power transmis sion kept improving, and whole regions were benefited by inter connected grids which could sup ply their needs at constantly de creasing prices for volume use. The lone municipal station couldn't keep up with the parade. So the political steam went out of the public power movement.

Mr. Vennard has great hopes for the future of investment owned power companies, for the percentage of government-owned, power-producing capacity, which grew so rapidly in the thirties and the forties, has recently been level ing off. People are becoming aware of their stake in an enterprise system. The day of cheap atomic power is dawning, and good dam sites are running out. All of this means that the demagogues are running out of excuses for power socialism. ~ THE FREEMAN-Volume 18, January-December1968 Prepared by BETTINA BIEN of the Foundation staff NOTE: In page references, the number preceding the colon designates the month, the number following the colon refers to pages. All articles have at least three entries-author, subject, and title, except in a few cases .when title entries seemed repetitive. Books reviewed are listed on page 768. ACCESS to the press: who decides? (Merrill) 1:48-53 ADAMS, John Quincy, 1767-1848 (Thornton) 1: 18-19 ADAMS, Paul L.