Seeking to combat the ravages of the Depression by stimulating employment on the one hand, and by furthering the acceptance of public ownership and regulation of electric utilities on the other, the federal government after 1932 developed huge power projects in widely separated regions of the United States. Using Public Works Administration grants and loans, as well as Works Progress Administration labor and funds, the federal government helped districts and communities around the country either acquire privately-owned power properties or construct public electric facilities to compete with private companies. By the spring of 1939 more than a billion and a quarter dollars in public funds were distributed to more than 1,450 separate projects that established or improved public power facilities. Through Rural Electrification Administration loans, chiefly to farmers' cooperatives, the federal government brought electricity to 462,817 consumers in rural areas by 1940. With the completion of all these projects by 1940, close to nine million kilowatts of new electric generating capacity were added to the nation's generating capacity—approximately a 25 percent increase.
U.S. territory east of the northern Great Plains and above the border states, a region that contained more than half of the nation's electric generating capacity, as well as numerous consumers of electricity, was relatively lacking in major governmental endeavors in electric service. Attempts to develop the Passamaquoddy project in Maine, to produce power and improve navigation along portions of the Saint Lawrence River, to use the New York State Power Authority to harness the Niagara River, and to include power generation as a component of flood control activities in New England were never realized during the Great Depression.
During his 1932 campaign for the presidency, Franklin D. Roosevelt called for public power in a speech in Portland, Oregon: "When a community, a city, a county, or a district is not satisfied with the service rendered or the rates charged by the private utility, it has the undeniable right as one of the functions of government . . . to set up . . . its own governmentally owned and operated service." He further stated that "state owned or federal owned power sites can and should be developed by government itself." With this encouragement, many areas with high rates of electric consumption soon found themselves within transmission range of one or more public power projects. By the 1940s both Tennessee and Nebraska were considered all public-power states. Many of these projects competed with privately-owned electric utilities and provided a "yardstick" to measure rates. In some cases, privately-owned utilities entered into sales agreements that affected all or parts of their facilities.
Three major public power developments were fully launched during the Depression years: the Tennessee Valley Authority (TVA) in the southeastern United States, the Boulder Canyon Project in the southwest, and the Columbia Basin Project in the northwest. To further widespread public acceptance of such projects, the Roosevelt administration undertook the development of a National Power Policy to make electricity "more broadly available at cheaper rates to industry, to domestic, and to agricultural consumers." In furthering this goal the Army Corps of Engineers, the Bureau of Reclamation, and the TVA constructed projects for the public generation and transmission of electricity, and the federal government created agencies to assist states and their political subdivisions in financing acquisitions of existing private facilities, or in constructing duplicate facilities to compete with them.
By 1940 there were twenty-six public power projects sponsored by the federal government, 477 sponsored by the Public Works Administration, 362 by the Works Progress Administration, and 392 by the Rural Electrification Administration. Many of these projects aroused strong opposition from utility companies, southern congressmen devoted to states' rights, and many well-to-do citizens and other Americans fearful of what they called "creeping Socialism." Opponents to the development of public power facilities found an effective voice in the Liberty League, a conservative organization that opposed the New Deal. Much of the opposition focused on the fight of George W. Norris to further public development of the hydroelectric potential at Muscle Shoals in Alabama, which became the locus of the Tennessee Valley Authority with the advent of the New Deal. In addition, the Public Utilities Holding Company Act of 1935, which declared that pyramided holding companies beyond the second level were illegal, caused consternation for many private power companies.
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