The Beginning of Dixon-Yates

GOVERNMENT The Beginning of Dixon-Yates After 14 months of confusion and controversy, Congress and the U.S. last week got a clear and sharp outline of the first steps that led to the Dixon-Yates power contract. Before Democratic Senator Estes Kefauver's special antitrust and monopoly subcommittee came Joseph Morrell Dodge, a tough-minded Detroit banker who served as President Eisenhower's first Budget Director, is now a special presidential assistant on foreign economic policy. Joe Dodge told the subcommittee who made the decision that led to Dixon-Yates: it was Joe Dodge.

Two Alternatives. In 1953, when he was working overtime to prune the budget, Banker Dodge found that the taxpayer's investment in the Tennessee Valley Authority was increasing at the rate of $276 million a year, would reach nearly $2 billion in 1954. Nevertheless, TVA was hard pressed to meet the priority needs of two atomic energy plants and keep pace with the mid-South population and industrial growth. Instead of ignoring TVA's needs (as had been done in the 1953 budget), Dodge decided that he could either 1) request $100 million in the 1955 budget for a new TVA steam plant, which Congress had already rejected twice, or 2) find ways to lighten TVA's load.

It seemed highly improbable in 1953 that Memphis. TVA's second biggest municipal customer, would withdraw from TVA and forfeit its substantial revenue from retailing TVA power. A more plausible solution would be for AEC, which was then gobbling up 25% of TVA's output, to buy power from a private utility (as it was already doing elsewhere). AEC Chairman Lewis Strauss agreed with Dodge that this was feasible. So did Electric Energy, Inc. President J. W. McAfee, whose Joppa, 111. plant was built to supply AEC's installation at Paducah, Ky.. and could have provided the additional 500-600,000 kw. needed by AEC. On the assumption that Electric Energy. Inc. would do the job, Dodge omitted the steam plant from his budget.

About the time the budget was submitted to Congress in January 1954, President McAfee decided against the plant expansion at Joppa. Instead, McAfee brought in Middle South Utilities. Inc. President Edgar H. Dixon (who was also Electric Energy, Inc.'s vice president). Dixon. with The Southern Co.'s Eugene A. Yates, eventually contracted with AEC to build a steam plant at West Memphis. Its 600,000 kw. were to be fed into TVA to replace the power drained off by the AEC, and thus would only indirectly have supplied the AEC plant at Paducah. Nonetheless, as crinkly-eyed Joe Dodge cracked: "When it comes out of the end of an electric power line, the source is not particularly noticeable."

"The Only Philosophy." Dodge, who took no part in the AEC-Dixon-Yates negotiations, and had no financial interest in the outcome, left the Budget Bureau seven months before the contract was signed. He told Kefauver's subcommittee that his decision on TVA power was not aimed to favor any philosophy or any utility. Said Joe Dodge: "The only philosophy I was interested in ... was getting the budget down."

Parrying questions from Kefauver. Dodge argued that his policy had benefited both TVA and the taxpayer. Kefauver conceded that if the original Electric Energy. Inc. contract had been signed, "you would never have heard one squeak out of any of us." But he insisted that the Dixon-Yates-AEC contract, as finally drawn, had gone "behind the back" of TVA.

When Witness Dodge left the stand, it was clear that, after all the furor, his aim of 1953 was now on its way toward realization. The city of Memphis' decision to build its own power plant, thereby making the Dixon-Yates plan unnecessary, will 1) ease the load on TVA, 2) save money in the federal budget.

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