TVA Fraud – a preview

In my forthcoming book, TVA Fraud, read the first two chapter for free. If you have any comments please write me.

Ernest Norsworthy

emnorsworthy@earthlink.net

 

Chapter 1
First, the pre-beginning…

The story of the Tennessee Valley Authority tells of hardships and delusions, of help and destructions, of directions from Washington. It all started before the first TVA dam was ever built. A senator from Nebraska, of all places, somehow thought that his services fit better in the South than the flood prone Missouri River in Nebraska.

Sen. George W. Norris (R) held a powerful chairmanship and apparently had his eye on the Tennessee Valley and its capability to produce hydro electicity, but he thought it was best to be handled by the federal government, not private industry. Anyway, he must have thought, besides, the property in question already belonged to the federal government.

Pres. Woodrow Wilson had bought property in Muscle Shoals, Alabama to produce electricity for munitions factories to support the war effort during WWI. This was in 1918; suddenly the war ended leaving a partially built dam and some munitions buildings. Further construction immediately stopped and the property was declared surplus.

Only an entrepreneur could see the possibilites and two of them, Thomas Edison and Henry Ford, envisioned something of gigantic proportions. Ford would build what was, he speculated, as the “Detroit of the South,” and Edison would supply the electricity. This was in the early 1920s but the property was owned by the federal government and had to be approved by Norris’ committee who thought the government could better handle the development of the area.

Sen. Norris blocked every offer the two entrepreneurs presented and finally they just gave up. The land and buildings lay fallow, the dam still incomplete. Ford and Edison had earlier visited the Shoals area and speculation that Ford was coming to build a factory escalated land prices enormously all up and down the Valley in Alabama and Tennessee.

Basic structures were even built in Muscles Shoals, including a fire station and school. I first saw the abandoned “city” in 1965; the streets were still laid out in a grid pattern with tumbleweeds rolling by. This was a city built on pure speculation. The narrow lots were not even buildable, but the boom never came. That was in the 1920s and Sen. Norris used his powerful blocking position and sat on the property.

Alabama had an “adverse possession” law of forty years and clear title was almost impossible for many years. Eventually land titles were cleared and the town of Muscle Shoals began.

Growing slowly, north Alabama became the center for federal operations including rockets for the space program in Huntsville. The huge rockets were barged down the Tennessee River, the Mississippi, around Florida to Cape Canaveral on Florida’s east coast. The “Rocket City,” Alabama’s most famous city, alas, is nothing more than a tourist stop today.

As predictable with the federal government, projects like the start of the space program, began because of political considerations, are now rusting remembrances of days gone by. Dotted throughout north Alabama are the stains of failed or discontinued federal projects. Count TVA as one of them; Muscle Shoals was supposed to be the headquarters, but again, alas, politics moved it to Knoxville, TN and a sub-headquarters Chattanooga.

Built as strong as Ft. Knox, the TVA has grown in plant size to challenge any private business in Tennessee. Most of these assets and the many dams, coal plants and nuclear reactors have been built on the backs of TVA’s ratepayers, who, having no representatives governing TVA’s policies, are still required to carry TVA’s massive debt of about $30 billion.

The residue of many of TVA’s fits and starts of ill conceived programs and half-cocked ideas of what the federal agency should do in the name of TVA, is a good example of why the TVA should be abolished.

 

Chapter 2

How FDR organized the TVA…

The Tennessee Valley Authority was organized with ideas from Sen. Norris whose basic input was that TVA was to be controlled by the federal government, not private enterprise. FDR conceived the “neither fish nor fowl” concept of how it should be organized.

Disclaiming knowledge of how the TVA should work (a doubtful assumption,) FDR named three directors, two of them from the north, to run it. Control of the direction of TVA was, at first, controversial and FDR fired the “troublemaker.” Apparently, they hadn’t read the fine print; the Act calls for agreement of the directors to ascribe to the idea of TVA.

Until 1959 when TVA stopped getting Congressional appropriations and became “self-supporting,” TVA financing became trickier and trickier. Ever since then, TVA said it would pay down its debt with pledges to GAO and others. That never happened and TVA’s debt has grown to nearly $30 billion with amounts exceeding that cap in the next few years.

TVA has used some rather exotic ways to try and get around that $30 billion limit by; selling an asset and leasing it back (this apparently does not count against the $30 billion,) and “off the books financing.” The way TVA has operated financially to avoid having to ask Congress for more money is to borrow money long-term. It’s called “backdoor financing” and gives TVA an immediate source of cash but, of course TVA has to pay for that money with interest.

One of the reasons TVA has kept up with this charade is that while the federal government specifically denies guarantee of TVA bonds, the rating companies do not believe the government will let the TVA go broke and falsely gives TVA their best rating, AAA. No other utility has this advantage. Correspondingly, TVA bond buyers feel their money is secure although at a lower interest rate.

With the administration’s talk of selling TVA, the rating companies are a bit more wary of their assumptions.

TVA likes to claim it is comparable in organizational structure with private utilities and often compares itself with other stockholding companies. But that’s like calling a duck a goose; similar, they both have wings, but think of all the differences between TVA, a federal agency, that originates from a completely different branch of government with all of the baggage that comes with it and a privately run utility who has to cope with the many regulations mandated by that same federal government. Many requirements are waived for TVA.

An example of this misguided, perhaps illegal comparison of salaries, was when TVA tried to justify higher salaries by comparing a number of utilities’ salary scales with those proposed for TVA management. All of them were higher, some of them were much higher. The Board of Directors still opted for lower salaries for TVA management. Why? Because they thought TVA’s salary scale was not really justified?

Of course, TVA has no stockholders to direct the salaries of top management. TVA seems never to be satisfied with their organization and recently spent millions on trying to correct the uncorrectable.

Since the contractor for this latest management iteration guaranteed TVA would save X, Y, and Z, and failed to do so, TVA tried and failed to get a refund.

 

A lot more is coming, please reserve your place to see excerpts from time to time. Send your email. Thanks!

EN