Presidential Papers, Doc#979 <EM> To Rowland Roberts Hughes, 14 July 1954. In The Papers of Dwight David Eisenhower
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Document #979; July 14, 1954
To Rowland Roberts Hughes
Series: EM, AWF, Administration Series: Dixon-Yates ; Category:
The Papers of Dwight David Eisenhower, Volume XV - The Presidency: The Middle Way
Part V: Maintaining "a united defense"; April 1954 to August 1954
Chapter 11: The "men in the Kremlin are not to be trusted"

 

Memorandum for the Director of the Bureau of the Budget: A publishing friend has asked me for a concise memorandum of fact (as far as we know the facts) on TVA, beginning with the law establishing it.1

Of course the important part concerns the facts involved in the request to build new steam plants near Memphis.2

Could you give me a short paper?3

1 We have been unable to identify Eisenhower's publishing friend. The TVA was established on May 18, 1933, as part of Franklin D. Roosevelt's initial legislative program. Under its enabling act, TVA was authorized to build dams and power plants, aid in flood control, and develop the natural resources of the Tennessee Valley region. It was also to provide electric power and nitrogen fertilizers to the industries, individuals, and municipalities of the Tennessee Valley region at rates that were to be both reasonable and fair (U.S., Statutes at Large, vol. 48, pt. 1, pp. 58-72).

2 Eisenhower had wrestled with the issue of expansion of TVA power facilities for over a year (see no. 449). The President believed that the government should not hold a monopoly on power and worried that the mandate of the TVA would expand unless he took forceful action to curb it. With the cooperation of Congress, he succeeded in cutting out appropriations for new TVA steam plants from the FY 1955 budget.

These plants, however, had been recommended by TVA Chairman Gordon Clapp to present power shortages forecast for the Memphis, Tennessee, region. According to Clapp and power experts, the shortages would occur because of growing TVA commitments to supply power to the AEC's Paducah, Kentucky, facility. In October 1953 Clapp had suggested that if Congress did not authorize money for new steam plants, the TVA should be relieved of some of its obligations to the AEC. Two months later, Bureau of the Budget Director Joseph Dodge and AEC head Lewis Strauss discussed this proposal and decided to pursue negotiations with private utilities to supplement TVA power. Among the possible private contractors approached was James W. McAfee, whose company was providing power to the Paducah plant. (During the Truman Administration, the AEC had negotiated contracts with private utilities for the Portsmouth, Ohio, plant as well.) According to the account later made by Hughes, McAfee suggested that the Bureau contact Dr. Edgar Dixon, owner of the Middle South Utilities Company, and an experienced goverment contractor. When Eugene Yates, chairman of the Southern Company, also expressed interest in the contract, the Bureau suggested in January 1954 that the two propose a joint project. They submitted one in April (Hughes to Eisenhower, n.d., AWF/A: Dixon-Yates; Eisenhower, Mandate for Change, pp. 377-82; Aaron Wildavsky, Dixon-Yates: A Study in Power Politics [New Haven, 1962], pp. 31-49).

After an extensive study of the plan, Rowland Hughes, the new Director of the Bureau of the Budget, recommended to congressional and Administration leaders that the Dixon-Yates contract be adopted (Legislative Leaders Conference, June 14, 1954, AWF/LM). On June 16 the President directed the AEC to negotiate a twenty-five year contract with a private utility company to provide TVA with power. By making up TVA's power deficit from private sources, Eisenhower hoped to fend off a "power monopoly by TVA" (New York Times, June 18, 1954; Cabinet meeting mintues, July 9, 1954, AWF/Cabinet; Hewlett and Holl, Atoms for Peace and War, pp. 128-32).

3 Hughes's letter of transmittal regarding this short paper--but not the paper itself--is in AWF/A: Dixon-Yates. For developments see no. 985.

Bibliographic reference to this document:
Eisenhower, Dwight D. To Rowland Roberts Hughes, 14 July 1954. In The Papers of Dwight David Eisenhower, ed. L. Galambos and D. van Ee, doc. 979. World Wide Web facsimile by The Dwight D. Eisenhower Memorial Commission of the print edition; Baltimore, MD: The Johns Hopkins University Press, 1996, http://www.eisenhowermemorial.org/presidential-papers/first-term/documents/979.cfm

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