Evening star., 1938-07-23
.L|L|ENTHAL CALLS
RATES NO GUESS
7. V. A. Charges Sound, Is
His Answer to DR.. Morgan
in Quiz on 'Yardstick.'
BACKGROUND

BACKGROUND
In the congressional commit
tees Investigation OF T. v. A.
and its administration tollouing
charges by. its former head. DR..
Arthur Morgan, the chief emana-
tions hare been accusations bu
DR.. Morgan against his colleagues.
One OF the main charges he made
in Jour days OF testimony this
1reek Uas that T. V. AS "ydrd-
stick" rates, Which were to be
standard OF comparison for fair
charges By prioate concerns, were
set not By experience and study,
but by "guessUork"
By the Associated Press.
KNOXVILLE, Tenn, July ga
congressional committee investigating
activities OF the Tennessee Valley Au-
thority sought additional information
today from Director David E. Lilien-
thai on the theory of rate making by
which the T. v. A. power "yardstick"
was developed.
Mr.. Lilienthal testified yesterday
that the rate-making policy had the
approval of President Roosevelt and
the Federal Power Commission. He
told the committee T. v. A. rates are
sound and are in fact too high.
The directors statements marked
the opening phase of his defense
against charges of Dr. Arthur E. Nor
gan, deposed chairman of the Federal
agency. who testified earlier in the
| week.
Mr.. Lilienthal accused DR.. Morgan Of
a campaign of defamation" against
him and the present chairman, Har.
court A. Morgan.
Denies Rates Guess"
The witness denied DR.. Morgan's as
sertion that the basis for T. v. A. rates
had never been revealed and that he
(LilienthaD once referred to them
as little more than a guess" He
declared also there was no foundation
for the statement that "T. V. A. is SELL
ing power without knowing what that
power costs"
The misunderstanding over rates,
Mr.. Lilienthal said, was caused largely
by Arthur Morgans failure to un-
derstand the theory proposed"
The director asserted that in a
memorandum to the T. V. A. board
in 1896 he recommended in fixing
wholesale rates "the liquidation of the
actual total investment devoted to
power purposes, fixed charges on that
investment, and all operating
expenses be accepted as the minimum
below which those rates should not be
permitted to 60.
THE actual rates, clearly recon-.
mended, should be determined with
reference to other factors: The COM
petitive sources of supply, for example:
the social desirability Of the wide use
Of electricity, and the importance
of substantial repayment to the Fed
eral Treasury. In establishing the
actual rates those factors and others
would be considered in addition to
the mentioned fixed and direct costs,
but those costs would determine the
level below which rates should not
fall
This was known as the "by-product
theory" he said, since T. V. A. power
is regarded as by-product of the
aood-control and navigation dams.
The T. v. AS delay in reporting to
Congress on cost ALLEGATION OF dam
and reservoir projects was not, he
said, as DR.. Morgan charged, "a
deliberate effort = to keep Congress
and the public from knowing what
these costs are, and the way in which
T. v. A. rates were established"
This delay Lilienthal said, was part
ly due to DR.. Morgan's lack of con-
| fldence in the persons and the groups
to whom the work was assigned, and
the maladroitness of his administra-
tive methods"