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|  | MAY 14, 2004
David Lilienthal: Seats of Power The onetime head of the Tennessee Valley Authority and the Atomic Energy Commission, he helped define the U.S. public utility Some of the forgotten, but most ferocious, battles of the early New Deal years pitted the Roosevelt Administration against the nation's big private utilities. The inordinate reach of these conglomerates was a special area of interest for President Roosevelt, who had written his senior thesis at Harvard on the future of the U.S. power supply. In 1933, Roosevelt and a Democratic Congress alleged that runaway utilities -- such as Wendell L. Willkie's Commonwealth & Southern Corp. and Samuel Insull's empire consisting of 300 steam plants and 200 hydroelectric generating plants -- ran corporate pyramiding schemes, sold watered-down stock, and colluded on pricing. The result, according to Roosevelt, was prices for electricity that were much higher than they needed to be during the Depression. The Public Utility Holding Company Act of 1935, which enabled states to regulate parent companies, not just the local shell company, was passed to address such abuses. But Roosevelt knew that he needed help in the trenches if he was going to create genuine public utilities that produced affordable power for Americans. HIGH-COURT TRIUMPH. One of his greatest allies in this endeavor and the most influential American in the rise of the public utility was attorney David Ely Lilienthal. In a 20-year public career as head of the Tennessee Valley Authority (TVA) and later as first chief of the Atomic Energy Commission, Lilienthal was the personification of public service: He fought special interests, do-nothing state legislatures, the U.S. Congress, and, quite frequently, his own superiors. He did all of this with almost no concern for his own standing or wealth. In fact, his salary as full-time head of the Atomic Energy Commission in 1950 was $10,000. Son of Czechoslovakian immigrants who ran a small store in Morton, Ill., Lilienthal was born on July 8, 1899. He followed a DePauw University undergraduate career by earning a law degree from Harvard and taking a job at a Chicago law firm. Lilienthal emerged from a prosperous obscurity when he argued a landmark Chicago telephone rate case in 1930 before the Supreme Court -- and won. Lilienthal quickly parlayed this surprising victory into a term as a Wisconsin public service commissioner, where he first tested his mettle against such holding companies as AT&T and Wisconsin Power & Light. "He grew to be quite a hated man by many influential people in Wisconsin," says Steven M. Neuse, history professor emeritus at the University of Arkansas and author of the Lilienthal biography, The Journey of an American Liberal. "What he was really crusading against was these distant holding companies that had no accountability to state regulators." BATTLE FOR CONTROL. Roosevelt soon recognized Lilienthal as the firebrand he needed at the TVA, which at that time was the most ambitious partnership between local municipalities and the federal government ever attempted. FDR's stated rationale for the TVA was to plan and direct projects throughout the Tennessee River Valley that would help the region's poverty-stricken citizens. According to Neuse, though, the TVA was also Roosevelt's signature gambit to prove that government could produce electricity more cheaply than the private utilities. Once recruited for the TVA, Lilienthal clashed right away with Arthur Morgan, the authority's prickly, conservative chairman, some 20 years Lilienthal's senior. Morgan wanted the TVA to enter into an agreement with the same private utilities that Roosevelt abhorred. Their battle for control of the TVA's mission, during which Lilienthal suffered and recovered from a nervous breakdown, ended when FDR fired Morgan in 1938. With Morgan gone, Lilienthal had free rein to do battle with the utilities. One tactic he used was building TVA power plants that duplicated those of private utilities, forcing them to come down in their prices. Lilienthal went on to steer the TVA throughout World War II. In 1943, as the U.S. war machine produced ships, tanks, and airplanes at an unprecedented rate, Lilienthal called the TVA the "the largest producer of power for war in the Western Hemisphere." NUKE FIGHT. After President Truman recruited Lilienthal away from the TVA and appointed him to his position at the Atomic Energy Commission in 1946, Lilienthal used his bully pulpit to advocate civilian control of the U.S. nuclear arsenal. Along the way he alienated such a diverse group as Congress, the Russians, and President Truman himself. Lilienthal and Manhattan Project leader J. Robert Oppenheimer famously disagreed with Truman about whether to develop the hydrogen bomb. Lilienthal thought the U.S. should instead continue to concentrate on atomic bomb production, lest the U.S. fall behind the Russians in that area. Still a young man when he left government service in 1950, Lilienthal entered private business, first as a consultant at Lazard Freres and then as CEO of Development & Research Corp., which offered emerging nations a one-stop resource-development package, akin to what the TVA did for the Southern U.S. Lilienthal died in 1981 in Princeton, N.J., as the Cold War was entering its endgame. The Soviet Union is no more, and the Atomic Energy Commission was eventually folded into the Energy Dept., but the TVA is still going strong, a fitting legacy for a man who was first and foremost a public servant.  By Mike Brewster in New York
BW MALL
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