The Tennessee Valley Authority Act is the 1933 New Deal statute that created the Tennessee Valley Authority, a federal corporation charged with managing the Tennessee River system and developing the surrounding region. President Franklin D. Roosevelt signed it on May 18, 1933. The law still governs one of the largest public power systems in the country, which serves roughly 10 million people across parts of seven southeastern states through 153 local power companies.
What the Act Was Created to Do
The opening section, codified at 16 U.S.C. § 831, lays out a broad set of goals. TVA was created to improve navigation on the Tennessee River, control destructive flooding in both the Tennessee and Mississippi River basins, and support agricultural and industrial development in the region.1Office of the Law Revision Counsel. 16 Code 831 – Creation; Short Title A companion section directs the President to recommend legislation advancing flood control, navigation, hydroelectric generation, reforestation, productive use of marginal lands, and the economic well-being of residents throughout the drainage basin.2Office of the Law Revision Counsel. 16 USC 831v – Legislation to Carry Out Purposes of Chapter; Recommendation by President
What made the law unusual in 1933, and still does, is the integrated approach. Most federal agencies handle one problem. TVA was told to handle all of them at once inside a defined geographic region, because flood control affects navigation, navigation affects power generation, and power generation affects industrial development.
A Federal Corporation, Not a Typical Agency
The TVA is not a cabinet department or a standard federal agency. Under 16 U.S.C. § 831c, Congress gave it a corporate structure with business-like powers. The corporation can sue and be sued in its own name, enter into contracts, adopt and amend its own bylaws, and purchase or lease real and personal property needed for operations.3Office of the Law Revision Counsel. 16 USC 831c – Corporate Powers Generally; Eminent Domain; Construction of Dams, Transmission Lines, Etc. The statute also includes a catch-all: any powers necessary to carry out the purposes of the Act.
The design was intentional. Congress wanted an entity that could move with the speed of a private business while serving a public mission. TVA operates its own power system, manages its own real estate portfolio, and issues its own debt.
Who Runs the TVA
A nine-member Board of Directors oversees the TVA. The President of the United States appoints each member, and the Senate must confirm them. Members serve staggered five-year terms, and a member whose term has expired may continue serving until a successor takes office, though not beyond the end of that congressional session.4Office of the Law Revision Counsel. 16 USC 831a – Membership, Operation, and Duties of the Board of Directors
To qualify, a candidate must be a U.S. citizen with management expertise in a large corporate, government, or academic organization, and cannot already be a TVA employee. Two additional requirements shape the board’s character: each member must fully disclose to Congress any investment or financial interest in the energy industry, and must affirm support for TVA’s objectives, including its role in technological innovation, low-cost power, and environmental stewardship.4Office of the Law Revision Counsel. 16 USC 831a – Membership, Operation, and Duties of the Board of Directors The statute requires disclosure of energy-industry investments, not an outright ban on holding them.
TVA also has its own Office of Inspector General with jurisdiction to investigate fraud, waste, abuse, and employee misconduct across TVA programs, contracts, and personnel, including contractor fraud, environmental crimes, conflicts of interest, and whistleblower retaliation involving TVA contractor employees.
Power Sales, Preference Customers, and the Service Boundary
Electricity generation is TVA’s most visible function today, even though the Act’s original emphasis was on navigation and flood control. The statute tells TVA who gets priority when it sells power. States, counties, municipalities, and nonprofit cooperative organizations that supply electricity to their own citizens or members receive preference over other buyers.5Office of the Law Revision Counsel. 16 USC 831i – Sale of Power to States, Counties, Municipalities, and Nonprofit Organizations TVA functions as a wholesale power supplier, selling electricity to local distribution companies that then deliver it to homes and businesses.
To finance power infrastructure, TVA can issue bonds, notes, and other debt instruments up to $30 billion outstanding at any one time. Proceeds fund construction, acquisition, improvement, or replacement of generating plants and transmission facilities.6Office of the Law Revision Counsel. 16 USC 831n-4 – Bonds for Financing Power Program The power program is designed to be self-financing: bond repayment comes from power revenues, not taxpayer appropriations.
The Fence
TVA cannot sell power wherever it wants. Beginning in the late 1950s, Congress restricted the agency to customers it was already serving as of 1957. This boundary, commonly called “the fence,” was a compromise between TVA and private utilities that feared continued expansion at their expense. TVA can serve new customers within the fence but cannot cross it to compete with investor-owned utilities in neighboring territory.
Eminent Domain and Land Acquisition
The TVA can take private land for public use through eminent domain. Under 16 U.S.C. § 831c(h), the agency exercises this power in the name of the United States, and all condemned property is titled to the federal government rather than the corporation itself. TVA then manages the land as the government’s agent.3Office of the Law Revision Counsel. 16 USC 831c – Corporate Powers Generally; Eminent Domain; Construction of Dams, Transmission Lines, Etc.
The process begins with a voluntary offer. TVA’s Board sets what it considers a fair and reasonable price. If the landowner refuses to sell, the agency can initiate condemnation proceedings to acquire dams, reservoirs, transmission lines, powerhouses, and other structures along the Tennessee River and its tributaries.3Office of the Law Revision Counsel. 16 USC 831c – Corporate Powers Generally; Eminent Domain; Construction of Dams, Transmission Lines, Etc. TVA may also acquire property by voluntary purchase or lease.
What Displaced Residents Are Owed
When TVA acquisitions displace people from their homes, the Uniform Relocation Assistance and Real Property Acquisition Policies Act, codified in 42 U.S.C. Chapter 61, applies to any federal entity with eminent domain power, TVA included.7Office of the Law Revision Counsel. Uniform Relocation Assistance and Real Property Acquisition Policies for Federal and Federally Assisted Programs Displaced residents are entitled to payment for moving expenses, replacement housing assistance for homeowners and tenants, relocation advisory services, and housing of last resort if no comparable replacement dwelling is available on the private market.
These payments are excluded from federal income tax and do not count against eligibility for Social Security or other federal assistance programs.7Office of the Law Revision Counsel. Uniform Relocation Assistance and Real Property Acquisition Policies for Federal and Federally Assisted Programs Accepting relocation money does not affect your benefits.
Section 26a Permits for Shoreline Construction
One of the Act’s lesser-known provisions has a direct effect on anyone who owns property along the Tennessee River or its tributaries. Before building, modifying, or maintaining any structure in, along, or across these waterways, a property owner needs a Section 26a permit from TVA.8Tennessee Valley Authority. Shoreline and Dock Permits Docks, seawalls, boat ramps, intake pipes, bridges, and similar structures all fall under this requirement.
The permit process ensures that private construction does not interfere with TVA’s management of the river system for flood control, navigation, and power generation. As of October 1, 2025, TVA accepts Section 26a applications only online; paper applications are no longer accepted.8Tennessee Valley Authority. Shoreline and Dock Permits Property owners who skip this step risk having their structures removed at their own expense.
Fertilizer and Standby Defense Production
The Act did not start as a power bill. Its origins trace to the government-owned nitrate plants at Muscle Shoals, Alabama, built during World War I to produce explosives. The TVA Act placed those plants under TVA’s control and directed the agency to use them for fertilizer research and production.9National Archives. Tennessee Valley Authority Act (1933)
The Act authorized TVA to manufacture and sell fixed nitrogen, fertilizer, and fertilizer ingredients at Muscle Shoals, and to contract with commercial producers when government plants could not meet demand. A national-defense provision required TVA to keep Nitrate Plant No. 2, or its equivalent, in standby condition for explosives production in the event of war or national emergency unless Congress voted to release that obligation. The Secretary of War or Secretary of the Navy could also requisition the plants to manufacture explosives at cost.10National Archives. Tennessee Valley Authority Act (1933)>
Wages and Labor Relations
TVA’s workforce operates under rules distinct from most federal employees. For laborers and mechanics performing construction, maintenance, or repair work on buildings, dams, locks, and other projects, the Act requires wages no lower than the prevailing rate for similar work in the area. When determining those prevailing rates, the statute directs TVA to give “due regard” to rates established through collective bargaining between employers and employees.11Office of the Law Revision Counsel. 16 USC 831b – Officers and Employees; Wages of Laborers and Mechanics; Application of Employees’ Compensation Provisions The rule applies both to TVA employees directly and to work performed under contract.
That collective bargaining language made TVA one of the earliest federal entities to formally recognize the role of unions in setting worker pay. Most federal employees gained collective bargaining rights decades later.
How the Money Works
Because TVA is a federal entity, its land is exempt from state and local property taxes. To offset revenue that local governments lose, the Act requires TVA to make annual payments in lieu of taxes to states and counties where it operates power property. The rate, set by 16 U.S.C. § 831l, phased down over the first decade and settled at 5 percent of gross proceeds from power sales for fiscal year 1948 and every year since. A floor provision guarantees that no state receives less than the two-year average of ad valorem property taxes that were levied on the same property before TVA acquired it, with a minimum of $10,000 per year for any state where TVA owns and operates power property.12Office of the Law Revision Counsel. 16 USC 831l – Payments in Lieu of Taxation TVA also pays counties directly based on the two-year average of county property taxes collected before the federal acquisition.
The broader financial design pushes TVA toward self-sufficiency. Power revenues, not congressional appropriations, fund the bulk of operations, and the $30 billion bonding authority lets TVA borrow against its own revenue stream rather than draw from the federal budget. Congress still appropriates money for certain nonpower programs such as environmental stewardship, but the power system is expected to carry its own weight.