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TVA responds to possibility of privatization

11:32 PM, Apr 10, 2013   |    comments
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Could the Tennessee Valley Authority be put up for sale?

The Obama administration's 2014 budget is calling for a strategic review of TVA, opening the possibility that the federally owned utility could be sold.

The section of the budget that discusses TVA says the utility's anticipated capital needs, which include expansion of nuclear power, are likely to quickly exceed the agency's $30 billion statutory cap on indebtedness.

The proposal reads, "Reducing or eliminating the Federal Government's role in programs such as TVA, which have achieved their original objectives and no longer require Federal participation, can help put the Nation on a sustainable fiscal path. Given TVA's debt constraints and the impact to the Federal deficit of its increasing capital expenditures, the Administration intends to undertake a strategic review of options for addressing TVA's financial situation, including the possible divestiture of TVA, in part or as a whole."

TVA officials seem to have been caught off guard by the budget proposal.  Board Chairman Bill Sansom issued a statement saying the utility doesn't know what options the review will consider.

TVA's Chief Financial Officer John Thomas also weighed in on what could happen if TVA were to be privatized.

"It could be like an investor owned utility that issues stock and then there'd be shareholders that we'd have to provide a return too," he said. "So, typically those are higher costs than what you would have with TVA."

U.S. Senator Lamar Alexander spoke out strongly against the proposal.

"This is one more bad idea in a budget full of bad ideas," Alexander said. "There is today no federal taxpayer subsidy for TVA, period. There is by law no federal taxpayer liability for TVA debt. And after deducting its debt, selling TVA would probably cost taxpayers money."

Alexander continued, "Finally, there is no assurance that selling TVA to a profit-making entity would reduce electric bills in the TN valley - which should be the overriding objective - and it could lead to higher electricity rates. While TVA management prefers a flexible debt cap, it has assured me that it can live within the current debt limit if necessary."

Billy Stair, who worked for ORNL and Governor Ned McWherter's office, is knowledgeable on TVA issues.  He said this is not the first time a politician has brought up selling the company.

"When others come in from the outside [from East Tennessee], like Barry Goldwater in 1964 when he ran for president, or Ronald Reagan when he ran even in 1976, they say why shouldn't we sell this government enterprise," he said.

But, he said it would like take some time for most East Tennesseans to adapt to rapid change at TVA.

"There's virtually no one alive today in Tennessee who can remember a time without TVA," he said.

Obama administration budget proposal:

 

Since its creation in the 1930s during the Great Depression, the federally owned and operated Tennessee Valley Authority (TVA) has been producing low-cost electricity and managing natural resources for a large portion of the Southeastern United States. TVA's power service territory includes most of Tennessee and parts of Alabama, Georgia, Kentucky, Mississippi, North Carolina, and Virginia, covering 80,000 square miles and serving more than nine million people. TVA is a self-financing Government corporation, funding operations through electricity sales and bond financing. In order to meet its future capacity needs, fulfill its environmental responsibilities, and modernize its aging generation system, TVA's current capital investment plan includes
more than $25 billion of expenditures over the next 10 years. However, TVA's anticipated capital needs are likely to quickly exceed the agency's $30 billion statutory cap on indebtedness. Reducing or eliminating the Federal Government's role in programs such as TVA, which have achieved their original objectives and no longer require Federal participation, can help put the Nation on a sustainable fiscal path. Given TVA's debt constraints and the impact to the Federal deficit of its increasing capital expenditures, the Administration intends to undertake a strategic review of options for addressing TVA's financial situation, including the possible divestiture of TVA, in part or as a whole

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