In 1937 LCRA completed Hamilton Dam, renaming it for U.S. Rep. J. P. Buchanan, a key Congressional supporter. That same year it broke ground on Mansfield Dam, which would serve as the valley's flood-control structure. In 1938 it completed construction of Inks Dam, immediately downstream of Buchanan Dam.

Rep. Buchanan died in 1937 and was succeeded by Lyndon Johnson, a protege of Wirtz. Johnson realized the potential LCRA and its dams offered the region. He persuaded LCRA to use the electric power from its dams to benefit Central Texas communities and rural areas. LCRA manpower strung the lines that brought electricity to customers of the region's first two electric cooperatives, Pedernales and what is today Bluebonnet.

In 1938 LCRA faced its first critical test, when heavy flooding swept the basin. Critics charged LCRA had worsened the flood by its operation of Buchanan Dam, prompting an investigation by the Texas Senate. The investigation not only exonerated LCRA but also determined that LCRA needed to extend the height of Mansfield Dam by an additional 80 feet to its current height of 278 feet to provide more protection to Austin and downstream communities.

By 1939 LCRA had acquired a service area surrounding Austin from private utilities and began a campaign to convince communities to purchase their local distribution systems and buy power from LCRA. Almost all communities did — and saw retail electric bills drop almost by half from what private utilities had charged. LCRA also sponsored "electric fairs" with local merchants to introduce residents to the benefits of electric appliances.

In 1940 LCRA completed reconstruction of Tom Miller Dam, owned by the City of Austin. The dam had twice been destroyed by floods. The following year, months before the United States entered World War II, LCRA completed Mansfield Dam.

Post-war boom
The years following World War II saw unprecedented growth for the Central Texas area, and LCRA struggled to keep up with the demand for electricity. In 1947 it leased a power plant in New Braunfels, its first non-hydroelectric generation source.

A year later, work began on two smaller dams between Inks Dam and Lake Travis to increase LCRA's hydroelectric capacity. LCRA completed Wirtz Dam in 1950 and Starcke Dam a year later. The chain of reservoirs created by LCRA's six dams became known as the Highland Lakes.

In the late 1940s the region encountered what is known as its "drought of record" — a decade-long period infrequently interrupted by significant rains. A flood in 1957 finally broke the drought.

As LCRA dealt with electric and drought issues, U.S. Rep. Lyndon Johnson challenged the organization to fulfill one of its charter responsibilities. At his urging, LCRA launched an aggressive basinwide soil-conservation program in 1947. LCRA conducted education programs, loaned farming equipment, and established "example farms" to demonstrate effective techniques. It phased out the program in the mid-1950s as the federal government became more involved in soil conservation.

LCRA expanded another of its charter operations in 1960 with the purchase of the Gulf Coast Water Company, which provided irrigation water to farmers in Matagorda County near the Gulf Coast. Irrigation interests had been some of the strongest proponents for the creation of LCRA, and the acquisition of Gulf Coast provided LCRA with additional Colorado River water rights.

By the early 1960s, demand for electricity had grown so that LCRA needed additional generating capacity. There were no suitable sites on the river for LCRA to build more hydroelectric dams, so it turned to a new fuel source — natural gas, which was at the time one of the cheapest, most abundant fuels available. By the end of the decade LCRA had built three units at the Sim Gideon Power Plant site in Bastrop County. In the early 1970s LCRA began planning a similar complex at what would become the Thomas C. Ferguson Power Plant in Llano County.

See: An era of changes — and challenges
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