Obama Administration could consider selling TVA

Reform TVA.

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.

WASHINGTON (WVLT) -- President Barack Obama's new budget proposal has raised red flags all over Capitol Hill, but one single paragraph could bring big changes to East Tennessee. In it, the White House said it plans to consider the future of the Tennessee Valley Authority (TVA). It even opens the door to possibly selling the electricity giant.

The Administration claims the federally-owned and operated agency has fulfilled its original mandate and the TVA doesn't need the federal government to be involved any longer. Sen. Lamar Alexander (R-TN) disagreed though, calling the proposal "one more bad idea in a budget full of bad ideas."

"(T)here 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," warned Alexander.

Sen. Bob Corker (R-TN), on the other hand, seemed less optimistic about the government's ability to make a sale work, "While unfortunate but true, TVA as a going concern today is probably worth less than its debt and its rates have become increasingly less competitive, so if the goal is deficit reduction, I doubt this idea gains much traction.”

TVA called the in inclusion of language regarding a strategic review "unexpected"

“At this point we don’t know what the strategic review might include or what options might be explored. In the meantime, we will continue operating TVA in a sound financial manner in support of the people of the Tennessee Valley and the interests of the Federal Government,” said Bill Sansom, TVA Chairman of the Board.

The budget noted that the TVA's current capital investment plan of $25 billion in expenditures over the next decade will likely push it past the $30 billion statutory cap on debt. Given those debt worries and the effect taking on more debt would have on the government's debt load, the Administration said it would "undertake a strategic review of options for addressing TVA's financial situation." (See below for full excerpt)

TVA does not receive taxpayer money, but it's debts do count against the federal government's totals.

“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," argued Alexander.

“We are part of the Federal government and we will follow their direction. I anticipate over the next several months, we will be working with the Office of Management and Budget to provide the information they request regarding the strategic review,” said Bill Johnson, President and CEO.

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