Evening star., 1934-11-01
PRESIDENT FACES
I. Y. A. DEAL BAN
Will Decide Government
Right to Destroy Private
Competition.
BY DAVID LAWRENCE,

to buy a going concern, and then,
when the courts block the sale, turn
around and, through another govern
mental agency, use public funds to
destroy that company?
This is the issue which faces
President Roosevelt today. For, when
ever there is conflict between differ.
ent agencies of the Government, the
Chief Executive has to decide the
question.
Here is the series of events which
give rise to the problem:
/. The Federal Government through
the Tennessee Valley Authority, often
called the T. v. A, offers to buy an
electric light and power company at
Knoxville, Tenn, known as the Ten
nessee Public Service Co.
2. The private company doesn't
want to SELL but is threatened with
the competition of municipal power
plant by the City of Knoxville, to be
built with funds furnished by the
Federal Government through the
Public Works Administration, often
called the P w. A.
Contract for Sale.
J. The private company makes a
contract to sell its properties to the
T. V. A., and, while the bondholders
are to be paid off in full no provision
is made by the Federal Government
In the purchase price to take care of
the preferred stockholders or the
common stockholders. The reason
given by the T. V. A. is that the prop
critics aren't worth any more than
the price offered or that the stock
holders didn't put in any real capital
originally, or that there was watered
stock.
4. Federal Trade Commission re-
ports are made public showing that
all Of the preferred stock was paid in
and that at least Sl,300,000 was paid
in by common stockholders, thus
representing an actual investment.
5. Preferred stockholders start suit
to block the sale by the private COM
pany OF its properties to the r. V. A.
Representatives of ice and coal COM
panies, which feel they will be injured
by Government financing of water
power. thus reducing the uses of coal
to generate electric power, seek and
are granted permission by the courts
to intervene in the litigation.
6. Court orders are issued to block
the sale and requiring argument in
the higher courts of the State of
Tennessee and probably before the
Supreme Court of the United States
to decide whether a Federal agency
has the constitutional right to acquire
property and engage in the electric
light business in competition with ex-
listing companies.
Vote for Competition.
7. The T. V. A. authorities grow
restless and a new item appears in
the press generally this week stating
that the Power Committee of the city
of Knoxville "in conference with the
managing direction of the T. v. A."
voted to ask the Federal Government
through the P. w. A. to go ahead
with the promised loan for the con-
struction of a municipal power plant.
This would mean competition for the
private company and probably its de-
struction.
Just why the director of the T. v.
municipal authorities has not been
explained. 1t might be that the di-
rector was trying to dissuade the city
of Knoxville from going ahead with
its own power plant and it may be
that he was urging the city to an
nounce course of action which would
influence the private power company
to dispose of its properties notwith-
standing the court orders tending to
block such sale or transfer.
But will the Federal Government
now lend the money to the city of
Knoxville? 1t amounts to S2,600,000
The loan was originally turned down
by the State Board in control of public
works projects for the Federal Gov
ernment because of charge that the
city did not have good enough finan-
cial structure to repay the loan. Then
the P. W. A. in Washington, which
is presided over by Secretary Ickes,
approved the loan.
But, since the time the loan was
originally considered last year, the
private company agreed to sell its
properties and the loan was side
tracked as unnecessary. Will the
P. w. A. now revive the loan as orig
inally approved?
An important statement of policy
has been issued by Secretary Ickes
within the last 80 days which may
cause him to go slow about approx
ing the Knoxville application for a
loan.
Views by IckeS.
In that statement about loans with
which to build municipal power plants
in competition with private companies,
Mr.. Ickes said
We make it practice before ap-
proving the loan to give the company
an opportunity to put into effect
rates at least as low as those at which
the municipal system will be self
liquidating"
No such opportunity has been given
IN any formal way to the private COM
pany at Knoxville. The latter has
already agreed to sell its properties,
hence it would not now ask for such a
comparison. But it would not be sur
priSing if those who hold stock in the
Tennessee company would insist on
public hearing before the P. w. A. and
an opportunity to find out whether the
rates to be charged by the T. v. A.
are lower than the cost of production
and hence a gift by the taxpayers of
the Nation to one area, or whether
they are in fact lower than the rates
now charged, applying, of course, the
same basis of estimating costs for the
T. v. A. as for the private company
Usually, P. w. A loans are made
with 80 per cent grant, which gives
an advantage Immediately in total in
vestment Also, the T. v. A. doesn't
pay taxes and has recently announced
that it will not be governed by any
State commissions, since it is Federal
agency. There is no way of know
ing exactly how much Of the T. v. A.
investment or cost Is going to be
charged up to electric power produc-
ton and how much to navigation"
unless some public body makes such
an examination of all the factors en-
tering into the making of rates. T. v.
A. gets lower freight rates on the rail-
roads than private companies, sends