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Obama budget raises possibility of sale of TVA


April 12, 2013

By Robert Varela
Editorial Director
President Obama’s proposed budget for fiscal 2014 calls for "a strategic review of options for addressing [the Tennessee Valley Authority’s] financial situation, including the possible divestiture of TVA, in part or as a whole." 

Sen. Lamar Alexander, R-Tenn., called the suggestion "one more bad idea in a budget full of bad ideas." 

Privatization of TVA "would undoubtedly result in higher rates for all classes of ratepayers" receiving electricity from TVA, said Philip Burgess, communications director for the Tennessee Valley Public Power Association.

The budget said TVA probably will exceed the $30 billion statutory cap on its 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," according to the budget. The administration said it would undertake a strategic review, "given TVA's debt constraints and the impact to the federal deficit of its increasing capital expenditures." 

The budget proposal "reflects a fundamental misunderstanding of how TVA is funded," Burgess told Public Power Daily. "The federal government and taxpayers are not responsible for TVA's debt and all costs of TVA's power operations are paid for by electric customers." A major concern with the budget proposal is that ratepayers in the region have paid for TVA's facilities, but they would see no benefit from a sale, he said.

TVPPA's goal "is to be the voice of the ratepayer in this process," Burgess said. If a review is undertaken, "we want to be sure to represent ratepayers and we want policymakers in Washington to fully understand the implications of their proposals for ratepayers."

"There is today no federal taxpayer subsidy for TVA, period," Alexander said. "There is by law no federal taxpayer liability for TVA debt. And after deducting its debt, selling TVA would probably cost taxpayers money." While TVA management would prefer a flexible debt cap, "it has assured me that it can live within the current debt limit if necessary," he said. 

TVA said the budget language was unexpected, but it would work with the Office of Management and Budget "to provide the information they request regarding the strategic review," said President and CEO Bill Johnson. "While we do this, our employees will stay focused on doing their jobs, serving our customers and the people of the Tennessee Valley." The utility added that it does not receive taxpayer dollars and its debt is not taxpayer-funded.

"TVA is the lowest cost business model and the best value for the region," said CFO John Thomas. "We remain financially healthy."



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