Evening star., 1938-12-05
T.V. A. Annual Loss
0f$3,157,00oSeen
By DR.. A. E. Morgan
Holds 'Yurdstick' Rotes
Do Not Represent
True Cost

BACKGROUND
DR.. Arthur E. Morgan ,Das
onsted as chairman of the Ten
nessee Valley authority by Presi-
dent Roosepelt after months OF
squdbbling among members OF
the thyee-mnn board. Later
= Congress decided to inpestiQate
the 1Dhole T. v. A. set-up and the
private utilities operating in the
T. v. A. area. The inquiry opened
IN Tennessee and yas later
shifted here.
By the Associated Press
DR.. Arthur E. Morgan, ousted
Chairman OF the Tennessee Valley
Authority, estimated today that T.
v. AS power sales would result in
an annual loss of $3,157 600 il pres
ent rates are continued when the
proposed system Of dams is COM
pleted.
Testifying before the Congress
sional Committee investigating the
agency, DR.. Morgan also charged:
i. That the "yardstick rates" of
communities buying power from T..
v. A. did not represent the true cost
OF generating the power and in some
Instances involved hidden subsidies.
One Of the purposes in creating
T. v. A. was to establish a yard
stick with which the Government
could measure the fairness of rates
charged by private power COM
panies
2. That the prospective revenue
return to T. v. A. had been mis-
represented to Congress and the
public.
3. That T. v. A. wages, in some
communities, were about the low
est in America in that field"
4. That the agency had been
"irresponsibly managed"
Valuable in Many Respects.
The elderly, former college presi-
dent, emphasizing his statements
with frequent gestures, testified he
believed'T. v. A. was in many re-
spects most valuable part of the
Government"
But II T. v. A. is "to be saved" he
said, 1T has to be open and above
board"
He proposed that the agency be
reorganized, placed under a single
administrator and some of its pres
ent functions turned over to other
agencies.
Estimating what he said was the
prospective operating loss, DR.. Nor
gan testified that If the entire po-
tential power was generated, when
the seven dams already built or
under construction are in operation,
annual expenses will be about $l3,-
076,00O.
Assuming that the power Is sold
at present rates, he said the annual
income would be S9,919.000.
He added. however, that present
rates probably would be reduced.
The annual deficit OF $3,157 900,
he said, leaves out a considerable
number Of expenses that in my
opinion should be included"
Charges Litigation Favored.
The former chairman said it had
been claimed that T. v. A. lost
large sums because of litigation ex-
penses. He said he had tried at the
beginning to obviate litigation but
that lin my opinion there was a
preference (on the part Of other
members Of the T. v. A. board for
conflict and litigation rather than
agreements"
The other members are David Lii
1enthal and DR.. Harcourt A. Morgan.
The latter succeeded DR.. Arthur
Morgan as board chairman.
In the T. V. A. ''yardstick" pro-
gram, under which the agency sells
power to communities wholesale and
they in turn retail it, DR.. Morgan
said such items as interest on con-
struction, financing expense, water
control costs and interest on work.
ing capital were mot taken into
account"
DR.. Morgan said yardstick rates
had been represented to the public
and Congress, on one occasion, as
sumcfent to cover an annual charge
OF 9,4 per cent, but that the annual
revenue amounted to less than 6.6
per cent.
Discusses Concealed Subsidies
Discussing what he called con-
cealed subsidies" DR.. Morgan said
Iupelo. Miss, had been allowed to
operate profitable power connections
With industrial consumers. When
the community had made enough
from them to pay the cost. T. v. A.
sold the connections to Tupelo for
50 500. he added.
Another concealed subsidy, he said,
was IN the form of T. v. A. agricul-
tural activities and aid to Land grant
colleges.
Earlier DR.. Morgan proposed a
single administrator for T. v. A. in
= long memorandum he gave the
committee.
1t suggested reorganization of the
agency so that the administrator
would be divorced from the sale of
power. This. he said, would eliminate
friction such as there was on the
board when he was a member.
He suggested, too, that agricul-
tural activities of T. v. A., including
fertilizer production, be placed under
the Agriculture Department.
DR.. Morgan also disputed testimony
he said had been given the COM
mittee that T. v. A. paid prevailing
wages, asserting that in some COM
munities T. " A. wages were about
the lowest in America in that field"
Meanwhile, Democratic members
OF the committee said they would
ask for testimony from Senator
Norris, independent, of Nebraska,
known as the father of T. v. A."
and Representative John E. Rankin,