la Power & light Company, lomplete Report Ob Controversies^ Darts N. C. Journal they ara ths raal roast at the metier ? It la necessary first IB raconstruct the (actual from which thoaa Ths slory begins back In the lals 1920s whan ths Aluminum Coonwy at America (ALCOA) decided id (o into the water rich coimtlea at Waatarn North Carolina and, through a ?agios at dams, harnesa the flowing rivers of dw area a> provide cheqt hydroelectric power for Its smelting and fabricating pint at Alcoa, in order to Dun a ate aeme It wee first necessary (hat the cotnpsty obtain the-right id use die powei of eminent do main In its land ecqiUsitlon program. This was essential. Without this power of con demnation. a handful of owners who refused at sell their land could block the company's dam construction program. Alcoa obtained the power of eminent domain by creating the Nantahala Power and Light Company. Nantahala, a 100 per cant wholly owned sub sidiary ?of Alcoa, was chartered as a public utility tattler North Carolina laws. This company was a> serve the power needs of all or parts of five Western North Carolina coin ties; Cherokee , Swain. Macon, Jackson and Graham. Between 1930 and 1995, Nmtahala, using the power of eminent domain In those in s twees where It was necessary, acquired 13 dams (11 gweratlng stations) on the Little Tennessee. Nantahala and Tnckaseegee Rivera. From the outset the Nan tahala Power and Light Com pany was a two - beaded operation. As a public utility It was required to meat the needs of Its customers in Western North Carolina. As an arm of Alcoa It was re quired id feed the power needs of the aluminum smelters. In the early years this presented no real prob lem silica the North Carolina customers required only about 10 per cant of the power, leav ing some 90 per cent for Al coa. In recant years, with the development of the area, the five counties have come to claim about 40 per cent of Nmtahala's power output, leaving a shrinking 60per cent for Alcoa. In short; the de mands of the company's two mas wra began to conflict. Car tain general comments concerning Nantahala's oper ation over tha post 30 years are necessary If you are to understand what has occurred within the past two years: The ares served by Nan tahala Is mountain back country. Nona of the mens In the srea (Franklin. Bryson City, Sylva, DUlaboro, An drews and Webster) has s population of as many as 2,500 people. It la an area of small ? most of them sub sistence ? farms, forests and magnificent scenery. It tra ditionally has bean ? and is today ? a depressed area marked by what traditionally have boon the lowest per capita Incomes In thla low par capita Income state. With one exception ? the MeadP^er Plant in Sylva ? f large Indus tries In " i*s fustome tome thing over 16^XX>? small but enthusiastic i of power. Oyer the paat 30ye?r?N?i inhale haa given lta cueaomere eervlce of the vary highest fuality at retee lower offered by any i power Gorupe Carolina or In dwSottlh Natakala haa mada a larfa (about $55 million) brveetment I tai that Investment It haa never failed to meat tbanaada at la North Carolina cta fairly mi wall. Aa a 1951, for example. iranhadNe.lt la North Carolina < mi Alcoa. At leaat until 1958 59 oalftar maaar euflered a .aowawgha ap flight mti the lowest poe la la an. Alco *i tt (Ttta la? (act waa w aeacad h a wuaaabiuMgii br*aMaadP?ar Co. tal*B ? prsMi a frcpoMd Naata haU raaa tarraiai. la ftat : af S?j _ on WMBT levels and flows ? powor.) It wasn't until 1955 - ?*?? Nanohala comptomd its last dam ?. that Ala company began is tabs a k?g. hard look at IA panpooalttiittea a la At that ttme.as John Archer, ?ays, up a As (act Aat As powar demands of la North Carolina cus tomers were growing at a raw (a- faster thai anyone had wdrtpaad. In Aa past decade Nantahala'a sales of powar a Its North Carolina customers 1 at an average o111 a year, (wall above national average) largely BUM of tho expanding purist industry in Ala area. "It became clear to us," Archer says, "that mlesa i generating fa r 1965Nantah dllties Aat by 196SNantahala would have exhausted its tip ply of "dependable, mincer nptable primary power." Because of that prospect the company was faced with two alternatives: 1. Expand its generating facilities to meet probable future needs. 2. Get out of the public ladllty business. The first alternative, while possible, was costly. Nan tahala controlled the two re maining hydroelectrie's sites in As area. But , because of prevailing land and construct ion costs, developing these Am would bo immensely ex pensive and the additional power obtained would bo any thing but cheap. The company could, aa most other power companies have done, nam from hydroelectric to steam generating plants. But this possibility was no ?tswer for Nentahaia. In the first place, the rail service In tba area was Inadequate to bring la the large amoimts of coal required by a steam plant at the low prices necessary to make such a plant economical. In the second place, a steam generating plant produces cheap power only when It is large ( say In the 200,000 Kilowatt class). Nwitahala could not Justify a steam plant of anything like that size. And the plant It could Justify in the 25,000 - 40.000 - Ki lowatt class - simply would not be economical even If coal were available, of these facts," John Archer says, "we came to the conclusion that It would be bast for us and for the area If we retired from the public utility field. We concluded that a large public utility could come Into this area and, over the long run. supply power at cheaper rates than we could do with our small operation." Lane in iyae Nantanaia began to negotiate with Dub Power. Early la 1959 the two companies entered into a con tract for (ale. Duke agreed to pay about M million for Nn tahala's distribution system. Nantahala would keep its dams and its generating plants. After the sale all of the power produced at those dams would go to Alcoa. (Archer says that the dams Kid generating pints were offered to Duke but that Duke did not wnt them, feeling thatlt could sim ply the area with power at cheaper rates from e steam generating pint Duke pro posed to build in South Carolina.) In the original agreement [hike said that its rates for the ftve-conty area would be based on the current schedules, Nntshala's or Duke's ? which-over were lowest in eech rate category. Later this was changed. Duke said that It would abide by Nantahala's eery low rates for three years. After thatDuke't higher rates would qply. When the two companies entered into this contract It was their Intention, after the completion of certain engine studies, to make a public it of their agree flle a formal ap witfa the North Carolina Utilities Commission for ^gcOral of the sale. But word of the contract leaked out. By late 1959 the See - county area was bum ming with protest. Stripped to Its essentials, foe protest stemmed from foe feet that the replacement of Nmtahala by Duke meant wer* substan tially higher electric bills for The two i surprised by of this protest. Instead of filing a formal ^pllca ttoe for " of foe sale, they id while they stalled a desirability of foe srfs. Public " gram, to sell foe I to full pegs POMT. CXilue, pointing a la record a Piedmont North nd South Carolina. said it would do a betar Job of bringing now Industry tnB the area. (dw one criticism leveled at Nantahala down dw years was that. In la COO csni owar supplying Alcoa wltt, stdfldeat power It had bean less than agresslvw a aeak lng aaw Industry.) The news papere wore filled with sta dsdca ? all of them con fusing ? on what as sale to Duke would mean a arms of Individual power bills. While this effort rallied soma support for the proposed sale _ about half dw asms aid counties a the arsa for mally agxovwd dw sale ? dw prowoa oonrtnnad. Duke wlNwitahals continued to postpone filing a formal ^>Ucation with the Utilities Commission for approval for the sale. As they stallsdansw factor ? the a pec ere of public power - came into the picture. Two rural electrification co operatives ? both then ser ving portions of Nantahala's six comty area - began to Indicate a lively interest in (1) purchasing ths Nantahala distribution lines and (2) ser ving those lines with power purchased from the Tennessee Valley Authority. This new thumb In the stew caused the power companies to get tough. On Nov. 30, 1960 Nantahala went to the State U til ties Com mission and requested a rate increase which averaged 32 per cent above the then pre vailing rates. In explaining this move John Archer says, "There was a possibility that the sale to Duke would not materialize. If that occurred, Nantahala would be forced to expand its generating facilities to meet the future power needa In the area. To do this would re quire a big Investment in new and expanded generating facilities. Nantahala had to have the new rates to build tq> its reserves and to estab lish a credit to enable it to build those facilities should they become necessary. In the area ? where the pro test to the proposed new rates was Immediate and, this time, taianlmoua ? people openly said (and they still say) that the proposed rate increase was simply a club used to force through the sale to Duke. This claim Is based on the fact the rates requested by Nan cahala were substantially higher than Duke's system wide rates. Counties and towns which had gone on record as ^proving the sale to Duke opposed the new rate proposal. Meed Paper, which endorsed the sale to Duke, ponied ig> money to help finance the fight against the proposed new rates. Citizens groups organ ized to fight the new rates and, all things considered, the fat went on the fire. This move?one which con fronted the people in the area with the prospect of high rates If Nantahala sold a> Duke and even higher rates If Nantahala continued to serve the five counties ? spurred interest In obtaining cheap TV A power either through the co-ops or. If possible directly from TV A Itself. Hearings on the proposed rale increase were set and then poetponed several times. ( One postponement was grant ed ao that the state of North Carolina could Investigate Nantahala'a earnings.) Bight more months passed and, then. Nentahala. using a law passed during the mid 1930s, put Its new rates into effect on July 16, 1961. (The law under which this was done was passed to assist depression-hurt utilities. It permitted a public utility to raise or lower Its rates under hond. In the case of a rate Increase, If the Utilities Com mission later disallowed the Increase, In whole or part, the company could make the necessary refunds to Its cus tomers. Never before in his tory has a public utility used this lsw to put such a mas sive - 32 per cant on the average ? rate increase Into effect.) Finally In Saptambnr , 1961 mora lhan two years alter Duke and Nantahala entered In their contract ? the two com panies filed a formal ap plication with the State Utilities Commleelon re guiiHfi| approval of ite a ale of Nantahala'e distribution fadlltlea to the Duke Power Company. This occurred within a matter of weeks rfter the new rates went Into ef fect. The reas Nantahala put Into affect under bond hate now In effect more than one . While the ateraae ta was 32 per cant this proved ?> be bo more than id mum Manv cuDBmn la the area foieid that their bllla Inrrnaenrt by 90 par cant to 100 par cent and even more. Por Mead Paper Co, the iacreaae ? about $140^00 a year ? amotanad to 45 per cant. Motels and restaurants In the area vera hard hit. For the first time since it opened, ths Boundary Tpae Motor Court at Cherokee closed (bring the winter of 1961-62 because It could not rfford the pew costs of electricity. Dairymen t operating the 41 Grade A dairies In Macon Cotmty had to absorb what amounted to a doubling of their electric Mils. They could not pass the Increase on to their cummers under the eta la '? price fixing program for milk. There la no question but that many people In the area where hard hurt by the new rataa. In part, the hurt re sults from the fact this Is an area where dollars are abort. In part. It results from the fact this also la an area where customers have tended id use electricity In a prodigal fashion ( electric home bett ing for example) because of Nantahals's traditionally low I -- wno is saianeu Mid who la budgeted right down to the last dollar ? ?aid, "1 heat with electricity Before the Increase my electlc bill ran $30 - $35 a month. Since the Increase my bills have gone aa high as $100. I simply don't have the money to meet that Increase. I'll have to sell my home and that means a loss because no one wants an all-electric bouse with these new rates." John Archer, freely admit ting that Nantahala pulled a boner in falling to keep its rates up to date over the years argues that the new rates are Justified In terms of return on Investment. In net effect he says, "We spoiled the peo ple In the area by maintaining too low rates for too long. The customers simply must wake ig> to the fact that the old low rates are gone forever." But the people of the area have not wakened to that fact. They see another alternative: that of obtaining cheap TV A power for the area. (In all this talk of rates keep your eye on these facts: TV A rates are the lowest, Nantahala's old ratea are nextlowestJJuke rates come third and the rates Nantahala put Into ef fect under bond on July 16, 1961 are the highest.) Last month James B. Wat son director of power market ing for TV A, told Ate five members of the State Utility Commission that TV A is ready, willing and able to sell power to Nantahala. This brings the third alternative into the plctrue; Instead of ex panding and staying In the business, or getting out of the business by selling to Duke Nantahala can. without expanding, purchase any excess power It needs from TV A and then retail that power to its customers. That, then. Is the complex story of how this case has un folded. Let's turn, now, to a consideration of the Issues that are presented by these facts. I. The Moral Question. In order to harness the rivers of Western North Caro lina. Alcoa had to have the power of eminent do ml an. I acquired that right by creat ing the Nantahala Power and Light Co. As Governor Terry Sanford said In a letter to John Archer, "Thus Alcoa entered the utilities business through Its wholly owned sub sidiary, Nantahala. as s part of the price It was required ?> pay to acquire dam sites needed d peseta Alcoa." Now, having acqtdred this property, Nantahala proposes a> sell Its (UstrlbuHoa lines ( in effect, sell its customers) while keeping all of its power - generating facilities for the sole use of Alcoa. This, it Is contended. Is morally Improper. In his letter to Archer, Governor Sanford said. "The course taken by Nantahala gives the Impression of a company In terested In dropping Its obli gations to the public, Ikseping die fruits of the resources which originally beloogsd to the people and (through th e new rates put Into affect under bond) taking a last-minute In creased profit as a gatng-sway The argument here Is that the people of West Carolina an true ted lopment of one of feelr great est natural resources-flow ing water ? to Nantahala In the expectation that they would profit from 4m arrangement through fee cheqp power gan eratsd from that water. Now from Comparison of Residential Rates TVA Duke Naatahala PAL Co. Baric Power Preoeflt Proposed Bito Co. Rate Rate* WataBom $0.75 $0.00 $1JU $1.00 Kwk lactate 1 $5 10 15 00 Kwh per moot) U $0.75 $1M $1.75 $0.00 M 1.30 1.07 M0 0.M 100 tM 3.30 4.10 4.40 !N 0.00 0.30 0.M 7.15 500 TJ0 ?Jl 0.50 10.M MM 0.00 14.51 1M0 10.40 ?Now la effect < 1 i ? give it, tw?Md 0 ? VI w 0 pay ? charged by OtAaPo This moral qusatlnn ? aa Walmar Jones, adlmr at the FrsnUln Press, has said time aa ? la As root of Aa controversy, hollering about rsBs ra the battle. The question of the propriety of Nmtahala wlthdr swing from Aa utility field, while still tecpAni all of its gsntritlng facilities for the uaa of Alcoa, represents the war. Spokesmen for Duhs and Nantahala have never ans wered this moral question squarely. John Archer's ans wer runs along this line: The only obligations Nan tahala owes m the are are: ? To meat Aa area's power ?To provide the area's fu ture power needs. ? And 0 do ho A at rates that are fair 0 the area and 0 the Investment Alcoa has mads In the area. Archer continues: "In the long run Duke, not Nantahala Is In a better position ? meet these obligations. If Nan tahala stays In the field it's going to mean higher rates for the customers than would be necessary if Duke took over. This results from the long-range difference in the operating costs of a very small and a very large public utility." Archer points out that the sale to Duke will not necessarily mean that the generating facilities belonging to Nantahala (or. More accurately, Alcoa) will be lost to the people of North Carolina. "Under the law," he says, "the state or any public utility chartered by the state to serve the area can take over these dams by condemnation. To do this all they have to show is that there is a need in the area for the power produced at these facilities." Archer Is lmpadentwlth the fact the moral argument is raised largely by those who oppose the sale to Duke. "Peo ple who favor bringing TV A power into the area don't rely on this argument," he aays. "What they want is cheap power and they want that, even though the power Is produced with a government subsidy and in competition with private enterprise. They don't really care what we do with our generating facilities if they get cheap power." In the opinion of this re porter ? and In this contro versy opinions come at a dime a dozen ? the moral Issue can be boiled down to one observation and one question. The Observation: It would be Improper for Alcoa, using Nantahala to do the job, to acquire these dams though the state - granted power of eminent domain and then. Im mediately after having acquired the last of the dams, to retire from the utility field and keep all of the power gen erated by those dams. The Question: Does the fact Nantahala has waited seven years ? the last dam was completed In 1955 ? to do this alter that conclusion? If, as this reporter believes, the answer to the question Is "No", then you must conclude that the sale to Duke is Im proper. But if you reach that con clusion, have the people of the area won anything more than a Pyrrhic vtctory7Such a con clusion would compelNan utility field, la Be long na It la oat likely that a company aa small eaN?>tihala cao pro vide power ta this faa (growing eree aa cheaply aa a major utility Ilka Duke. In ant efTe t therefore, you compel Nan tahala B Ilea ip b la moral obligation. but you do ids at me price of maximum power hie la the pro batatllty, the people la the area are caught In a Mad. The leaders .. don't Ilka to talk about the other alternative ? (bat of sippiylng the area with TV A power. They don't like ? ba la a position of favoring government aubsidlasd electric power ?ear power produced by private enterprise. So they soy, "I'm for ?iy solution that will give the area the cheap power rams It needs to develop But the cheap power rales they have In mind ? rates as low as Nantahala charged up B one year ago ? are simply not In ths cards If the area la B be served by a privately owned public utility. Those rates are possible only if TV A cornea Into the picture and serves the area with government - subsidized elec tric power. That brings us n> the second great Issue in this controversy.... II Public Versus PrtvaB Power. uoth Uuke aid Na have made It plain that they would look on any extension of TV A power (either through RE A co-ops or through TV A selling power directly to Nsntehala) as "a matter of national concern." Carl Horn. Duke attorney, made that plain when, during hearings on Nantahala's new rates, he said, "Anyextension of TV A power will be fought bitterly, not only by our own utility company but by every utility company in the United States and by many other bus inesses which are vitally interested in protecting our capitalistic free enterprise profit system." If the two RE A co-ops, as has been proposed, pur chased Nantahala's dis tribution lines and then served the area with TV A power, this would be a clear extension of the REA principle. RE A was created to bring power to rural area which had little or no power. The Nantahala ter ritory is 100 per cent electrified To permit the co-ops to take over the Nan tahala territory would repre sent a baste expansion of the policy limitations now placed on REA. Duke, bached by every utility company in the nation, will fight such an extension for reasons too bovlous to need underscoring. The question of TVA's ser ving the area Is not so clear cut. In 1959, when It passed the TV A revenue Bond Issue Act; Congress specifically ruled that TV A was prohibited from expanding Into any area where It or la dlstrlbutiors, were not "the primary sources of power supply on March 1, 1957." Duke contends that If TV A Is permitted to serve the Nan tahala area with power, ltwlll be In plain violation of this 1959 law. To support that contention, Duke attorneys point out that TV A officials, TV A annual reports and TV A power-system maps make it clear that TV A was not the primary source of power in the Nantahala territory either i Scoot fc Clsv County Mora or atncs March 1.1*97. Duke attorneys a ay, "tend July 19, 19*2 - whan TV A (lrat offered a> aall poaai at Nantahala. TV A aevar had dalihfl that hi* area waa a part ot the TV A power system In (act, thay have specuuaiu aald that the Nantahala area waa not a part of that ayatam." On lta part TV A point* to the (act that alnce 1949 TV A has, under an agreement with Nantahala, operated all Nan tahala dama aa a part at the TV A ayatam. All power pro duced at thoee dama wont lna> the TV A ayatam ao^Nantahala waa repaid. Ulowaa (or kilo watt. (or that potior. Dufea repiiea that this simply la a "swapping agree ment" that was made to enable TV A B use Nantahala dama as a part of lta Hood control navigation-water quality con trol program; that in terms of power service the Nantahala ?res U not, and never wee, a part at the TV A ays tarn. This is a question of fact that undoubtedly will go into die courts for decision. In the opinion of this reporter the decision reached by the courts will not be based so much on the evidence as it will be based on the policy decision of whether or not It Is de sirable to enlarge the area in which public power competes with private power. TV A says that selling power to the Nantahala area will not aet a new precedent; that TV A presently is selling power to privately owned utilities in Bells and Franklin, Tenn. While that Is true. It scarcely provides an analogy ID Justify TVA's stepping into the Nantahala territory. The private utilities at Bells and Franklin are tiny as compared to Nantahala. The company at Bells, for example sold Its 617 customers 10 million killo watts ?f power In 1961 and that power was delivered to the customers over 10 miles of line. In 1961 Nantahala delivered 200 million kilo watts of power to its 16,000 customers over 1,800 miles of line. You can suck a pin In the fact that TV A power la com ing Into the Nantahala ter ritory by only one route and that la over Duke's dead body. Thin caae represents a major collision between the concepts of public and private power. In such a collision there Is, in the eyes of companies like Duke, no room for com promise. In terms of time spent In hearings ? more than ten weeks ? and In terms of testimony ? something like 7,00 pages ? this Is the long est and, perhaps, the most complex case ever to come before the State Utilities Com mission. It Is complex. In part, be cause this case mixes mat ters of principle with expediency. The first Issue ? the pro priety of Nantahala's retiring from the public utility field while retaining the fruits It originally obtained by entering that field -presents a question of principle. But, in this Instance, If you follow principle to Its logical conclusion, you end up deny ing Nantahala the right to re tire from the utility field and, in so doing, you saddle the people of the slx-coimty area with the maximum possible lower rates. (Just bow high those rates Progress. Itei. Aw. 16.1965 ultl manly My. M?ycUlmteywMlda?t bs as MjfcasN mtahaU's prw Archer, ho?mi. My* I r mm will I tf da* boodetf ran* now in Mfoct ara 100 par caat w provad by fcs UtUitl** Com otopayvflli 1965. It should ba ra ihat juat what la a fair ran of ratura for Nm stdsradons: first, Mm aat Nantahala now malms oa la amortized ( for tax purpoaaa) amount Alco Mm year* through [ large block* of vary, wary cheap power from Nantahala. There ara two sldss of Ike cola and fat preaentlac la com for higher rana, Nantahala hM ended a praeentonly one aide ~d? flrat ? of dnt ooln.) Thla fact ? that kseofns Nantahala In Mm utility field will mean maximum ran* for the area ? hM cauaad many leaders in the area ( moat of them who are loath ? favor public over private enterprise) to look a Mm expedient solution; thatof bringing cheap TV A power. Whether that la a dealrabte solution depends on Mm ans wer you give a s simple - - although nationally important question ... "Is It wis*, as a matter of policy, B expand or restrict Mis arse la which government?financed power operations like TV A aid RE A are permitted a compete with Ivete power Industries like IT! privet Duto? Andrews Boys To Receive Uniforms Monday Andrews Coach Hugh Hamilton an nounces he will Issue foot ball equipment on Monday at the A. H. S. dressing room At 9 a.m. Monday , equlpt ment will be Isaued a> boys who played last year. Boys coming out for first time are ashed ?> meet Coach Hamilton at 1 p. m. for their oquipnmu Physical examinations will be given on Tuesday. Practice will begin on Wed nesday at 9 a.m. US IN MIND THE NEXT TIME YOU MOVE FrM astimata, fraa lood AH?, fraa Moving Doy Kit if yoo'rt planning to novo. Complota tarvka to all SO jtotti. Call vt today. PALMtR BROS. Murphy, M.C. VE 7-3113 KM Wb&MfM She. LOMOJ>l?TMIC? MOVI NO J.H. Duncan Tire Co. presents on unprecedented double-header for car owners! WWWffTBTIPE PROVED SALE I $ NEW NYLONS WITH TUFSYNI * No* a second or rofroodl * 15 MONTH Rood Moiord Guarantee! * Hot Goodyear's now durabk synthetic Tufiyn rubber in the tread! * No money down plus free mounting! 7.50 x 14 or 6.70 x 15 TUBELESS JUST *2 MORE I good/Steak $1,000,000 "LUCKY LICENSE" SWEEPSTAKES HURRY! STOP IN TODAYI Your Kcotm plot* it your Hckot. ? Evory wook Ml Sop*. 15, f You may win on* of 119,220 pritot valuod at $1 million. Each wttk for six wttici, i Grand 9ri?o ? ? wook't notation If you own o roQitforod cor, you'ro in *12 ollm prin ctrttjorin... wMfi ovor |f*? 100 l > lit! now .. .and i Nothing to Buy I Nothing to Wrttml 119,220 PRIZES I 6 WEEKS OF WINNERSI GOOD/VeAR SEES J.H. DUNCAN TIRE 00. V E 7-2821 Mtrphy H ???