Business: Choice at Knoxville

Last November the citizens of Knoxville voted to enter the power & light business in competition with Tennessee Public Service Co. The city secured a Public Works allotment to build or buy a distributing system, and Tennessee Valley Authority agreed to furnish the electricity from its projected plant at Cove Creek. With that Tennessee Public Service and the citizens of Knoxville became small digits in a larger number.

T. V. A., charged with the health & happiness of some 2,000,000 souls, began to dicker with huge Electric Bond & Share, top-rung owner of Tennessee Public Service. T. V. A. wanted to buy certain properties of the private utility, then sell them on easy terms to Knoxville and neighboring communities.

Last week T. V. A. Director David E. Lilienthal published his correspondence with Bond & Share's Chairman Groesbeck. Mr. Lilienthal had offered $5,250,000 for Mr. Groesbeck's Knoxville Electric properties. This Mr. Groesbeck flatly refused, declaring: "Entirely aside from its adequacy, the offer will not pay off the bonds. . . . The company is not a willing seller and if the Federal Government desires to have its agencies serve the area ... it should in all fairness return to investors the money which they have invested."

Mr. Lilienthal replied that he did not like Mr. Groesbeck's attitude. Nevertheless he upped his offer $1,300,000 on condition that Mr. Groesbeck throw in an important transmission line, gave him until this week to take it or leave it. Admitting that investors deserved a break, Mr. Lilienthal tartly observed: "You refer to the activities of the T. V. A. ... and P. W. A. very much as if those two agencies were outside interests plotting the destruction of your business. You seem to forget that both ... are instrumentalities of the people of the United States." If Mr. Groesbeck takes T. V. A.'s offer, his bondholders would get about 90¶ on the dollar. If he leaves it, Tennessee Public Service will suffer such cut-rate competition from a municipal system at Knoxville that bondholders would be lucky to get anything. No matter what his decision is, an important precedent for all future public-ownership programs in the Tennessee Valley will be created.