The Tennessee Valley Authority Project was designed and operated by the federal government. The generation of electricity by the federal government's flood-control dams became a legal issue with the private business sector. The legal ramifications centered around the government's involvement in the sale of electricity and competition with the private power industries. In the United States Supreme Court case Tennessee Electric Power Company et al. v. Tennessee Valley Authority, arguing the constitutionality of the TVA Project, the court found in favor of TVA, because the generation of electricity was viewed as a by-product of the TVA's flood control system. The court's decision clearly stated that TVA could dispose of its by-product electricity in any manner.
The Tennessee Public Service Company was the electric utility company for Knoxville and the surrounding region.(1) In order to benefit from TVA's low power rates, the citizens of Knoxville voted by a wide margin to turn out the private company in November 1933. They proposed to build or purchase a power system for public operation. Knoxville offered to buy the existing TPS's private power plant, but TPS refused on the grounds that it would break up its integrated system extending into surrounding counties. Because a purchase agreement could not be reached by TPS and Knoxville, the Tennessee Valley Authority offered to buy out TPS and then resell the urban facilities to Knoxville. An agreement between TPS and TVA was finally reached, and the Tennessee Public Service Company was purchased by TVA for 7.5 million dollars. The acquisition of TPS by TVA was achieved in September 1938.
The Tennessee Valley Authority Property and Acquisitions Collection contains correspondence, blueprints, maps, equipment and property inventories, statistical reports, and purchase contracts involved with the purchase and acquisition of the Tennessee Public Service Company. The papers reflect the information TVA needed to finalize the take-over and are not the actual TPS records of operation. The Tennessee Public Service Records were returned to National Power and Light, the holding company for TPS.
1. The Tennessee Public Service Company was owned and operated by National Power and Light, which also owned Memphis Power and Light and several other southern utilities. The National Power and Light Company was in turn owned and operated by the holding company, Electric Bond and Share. The large holding companies of these private utilites were the prime instigators of TVA's legal difficulties.