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America on the Grid

Today, a hundred years after the quest for rural electrification began, massive portions of our grid are in disarray.

Energy crisis in Germany
A high-voltage power line stands out against the morning sky, which is discolored by the sunrise. (Photo by Julian Stratenschulte/picture alliance via Getty Images)

High Tension: FDR's Battle to Power America by John A. Riggs (2020, Diversion Books), 320 pages.

Powering American Farms: The Overlooked Origins of Rural Electrification by Richard F. Hirsch (2022, Johns Hopkins University Press), 400 pages.

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Over the summer, the California and Texas electric grids teetered on the precipice of failure. The North American Electricity Reliability Corporation published a report that warned most of the country had become vulnerable to blackouts. How did the wealthiest country in the world end up with such a fragile grid? Looking at how we got wired in the first place might help us understand how we got here.

Two recently published books offer a parallax view of the power business as it reached maturity. High Tension by John Riggs gives the standard hagiography of the New Deal: America's farmers fell like damsels in distress into the arms of progressive government, which rescued them from the malicious neglect of the crooked “Power Trust.” Powering American Farms by Richard Hirsh provides a corrective by delving into what the utility industry thought and did about the “rural question” in the decades leading up to the New Deal. It turns out they had accomplished a fair bit.

Once Westinghouse’s alternating current beat out Edison’s stubborn commitment to direct current, the electricity industry expanded with momentum. A.C. allowed for electrons to zip longer distances with less line loss. It served as the keystone for the vertical structure, pioneered by Samuel Insull, whereby utilities owned the generation, transmission, and distribution of power. Utilities grew quickly by means of technological improvement, savvy ratemaking, holding company shenanigans, and a regulated monopoly status that sheltered them from competition. By the 1920s, the “great white way” of artificial light cleaved the night in two in America’s major cities—but stopped at the outer dark of rural America.

Bringing kilowatts to America’s farmers proved a tough nut to crack. Some utility captains saw farmers as backward bumpkins unworthy of their efforts. More to the point, as Hirsh argues, making money off of the American farmer was a steep challenge. Cities were densely populated, so utilities had more customers per mile of transmission, which meant they recouped their investments faster. People were leaving the farm and moving to the city, draining an already thin customer base. Hirsh points out that the 1920 census marked the first time in history that more Americans lived in urban than rural areas.  

Plus, electricity was a cutting edge technology at the time. Farmers didn’t know how to use it beyond lighting their homes. Accustomed to thin margins, farmers were skeptical of newfangled investments, especially if they were pricey. “You must show the farmer where he will get back $6.00 for every $5.00,” one utility executive wrote. 

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But many in the industry weren’t content to let the situation lie there. When Insull bought a house in Libertyville, Illinois, he brought electricity to his rural neighbors. “Insull found that the peak seasonal demand in rural areas came in midsummer, when farmers used power for agricultural machines. That maximum occurred as the cities’ use for power declined, only to rise again in the winter,” Hirsh writes. Insull saw serving both town and country was a win-win.

The other major advocate for rural electrification was Grover Neff, a manager at Wisconsin River Power Company. Neff saw financial possibility and moral duty in the prospect of rural electrification. He also knew it would help the industry’s public image. To figure out how best to help farms, he convinced his colleagues in the National Electric Light Association, the major industry trade group, to form the Committee on the Relation of Electricity to Agriculture.

CREA partnered with agricultural engineers at the nation’s land grant colleges to investigate rural electrification. If farmers could prove themselves reliable consumers of power, utilities would have reason enough to link them up. CREA’s first attempt was the Red Wing project in Minnesota. Partnering with the University of Minnesota’s Agriculture Engineering Department, and the local utility, Northern States Power, CREA “extended a distribution line about six miles to eight farm customers near the town of Red Wing, Minnesota, with power flowing initially on Christmas Eve” in 1923. They also supplied the farmers with various electrical devices, like water pumps, laundry equipment, and heat pumps.

The results were stupendous. Farmers quickly adopted the new technology and found it spared their animals the cold and dark, decreasing mortality and increasing yields, among other benefits. Inspired by Red Wing’s success, CREA went on to form state committees all over the country to collect more data and share with farmers the benefits of electrified life. Home economics was a major focus. Utilities and appliance manufacturers showed rural Americans how washers, dryers, electric irons, and vacuum cleaners could improve the lot of women.

The trend of private rural electrification, “if continued unabated, would lead to 1 million electrified farms by the end of 1932 and 3 million by 1938,” one industry report forecast in the late 1920s. For reference, about 6 million farms existed in America at the time. But obstacles remained that kept many players out of rural areas. “Unlike city folk who lived in incorporated entities holding the right to issue franchises, ruralites generally inhabited unincorporated areas managed by larger administrative entities such as counties,” Hirsh explains. In many places, the local government did not possess the authority to offer franchises to the industry. 

Then the Depression brought its scythe to every industry, even reliable utilities. Worse, utilities ran into incredible scandals. The holding companies they had used to consolidate their empires were overleveraged. When the market foundered, they fell behind on their bonds and folded. Progressive Republicans and soon-to-be New Dealers sharpened their knives. They excoriated Insull and his colleagues, put on theatrical trials (Insull was acquitted of every charge), and passed the Public Utilities Holding Company Act, which brought greater discipline and more transparency to the industry’s pyramidal financial structure.  

Riggs’s book opens with FDR’s famous speech in Portland, Oregon, when he castigated the nine major utilities that controlled most of the nation’s power at the time. Roosevelt laid into the utilities for neglecting farmers who had already suffered so much. “In my trip across the country,” he told the audience, “I cannot find any farmer making money.” FDR had relied on farmers to scoop up the upstate vote when he ran for governor of New York, Riggs reminds us. He used opposing utilities as part of his strategy then, and he used it again when he ran for president.

FDR approved the Tennessee Valley Authority two months into his presidency with the backing of Republican George Norris, who had sought to keep the nearby Wilson Dam at Muscle Shoals from falling into the hands of Henry Ford. The dam had been built for the purpose of munitions production, but delays meant it reached completion years after men had unfixed their bayonets. Norris believed that if it had belonged to the people for munitions, then it ought to belong to them for power, too. FDR, thinking of his cousin Teddy’s bold public dam projects, agreed. Muscle Shoals was to provide power to the TVA.

Norris was a firebrand, a true believer in public power as a disciplining tool for the utilities. So was David Lilienthal, a lawyer who cut his teeth taking on utilities in the Midwest. Once appointed to the board of the TVA, Lilienthal went to war against fellow Hoosier Wendell Willkie, executive of Commonwealth & Southern, for the TVA’s rural service area. Riggs recounts their courtroom and backroom sparring with amusing detail, but he never vilifies Willkie, nor does he ignore where Lilienthal and he found common ground: loans for farmers to acquire electric devices. Eventually Lilienthal won, and in the late 1930s, the TVA started to supply power to nearby rural communities. Lilienthal had worked hard to get grassroots buy-in for the TVA, as he detailed in a self-serving history called Democracy on the March

Ironically, it was CREA’s research that helped make the New Deal’s Rural Electrification Administration so successful. The utility industry learned from the government’s experiments and applied what they could to their own rural electrification efforts. That’s not to say things were anywhere near amicable between the two. When the New Deal efforts began in earnest, utilities were faced with the prospect of losing potential customers forever. As the REA “cream skimmed” the best rural customers for its co-ops first, utilities rigged up “spite lines,” which wired the most prosperous farms in an area, neglecting the rest and spoiling the government’s ability to develop co-ops in the area.

In 1920, only 130,000 American farms had central station service. By the close of 1932, the count rose to 709,449 farms. In 1937, the REA acknowledged that around two-thirds of its wholesale power came from private utilities “from their existing sources and at a profit to them.” Yet in its 1968 annual report, the REA boasted that 98.4 percent of farms now had access to central station electricity, up from 10.9 percent when the agency was founded. “Not unexpectedly,” Hirsh observes, “the administrator failed to give credit to the private companies that had wired up about 40 percent of those rural customers.”

We can’t know if rural electrification would have taken off without the New Deal programs, though we do know, thanks to Hirsh, that the private industry played a larger role than most histories admit. Where does that leave us today?

Hirsh sets aside a chapter in Powering American Farms to take a look at the Delco-Light company, which sold individual generators to farmers. He sees it as an important lesson for developing countries looking to get electricity: they don't have to wait for central station power. (The generator mafia in Lebanon tells a different tale about that path.) What’s notable about Hirsh’s suggestion is that in America, the major private generator company, Generac, is doing gangbusters selling to those who can afford it in California and Texas. California’s backup diesel generator fleet is now 24 times the size of its battery fleet. 

All of this is downwind from a deregulation experiment that was supposed to undercut the vertical, central station model politicians and private enterprise fought so hard to build. The 1992 Energy Act, the hearings for which Riggs worked on as the House of Representatives Energy and Power subcommittee’s staff director, helped lead us here by making way for our deregulated electricity markets. Today, a hundred years after the quest for rural electrification began, massive portions of our grid are in disarray. Yet the TVA still delivers affordable, reliable power. That is a fact that can’t be ignored. 

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