White House floats again the age-old idea of getting rid of TVA

The Tennessee Valley Authority, one of the largest power generators in the U.S., said April 10 that President Barack Obama’s new fiscal year 2014 budget proposal indicates that a “strategic review” is planned for the agency.

“President Barack Obama released his fiscal year 2014 budget earlier today,” said TVA. “It includes unexpected language about TVA in the chapter entitled, ‘Creating a 21st Century Government.’  According to the information in the budget, the Administration intends to undertake a strategic review of TVA.”

“We will be working with the Office of Management and Budget to provide the information they request regarding the strategic review. While we do this, our employees will stay focused on doing their jobs, serving our customers and the people of the Tennessee Valley,” said Bill Johnson, TVA President and CEO.

Even though TVA is owned by the federal government, it does not receive taxpayer dollars and its debt is not taxpayer funded, the utility pointed out. According to John Thomas, the agency’s CFO:“TVA is the lowest cost business model and the best value for the region.  We remain financially healthy.”

The budget document that TVA pointed to says: “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.”

The document added: “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.”

Presidential administrations in the past have looked at privatizing TVA, in whole or in part, but the question of who takes on the agency’s massive debt load has always been a key roadblock. TVA is also a major social service agency outside of its power generating and river management functions, since it was after all an outgrowth of President Franklin D. Roosevelt’s New Deal, so the politics of any change in its status have always been tricky.

Said TVA’s November 2012 annual Form 10-K report: “Power generating facilities operated by TVA at September 30, 2012, included 29 conventional hydroelectric sites, one pumped-storage hydroelectric site (all units were out of service at September 30, 2012 but one unit returned to limited service on October 24, 2012), 11 coal-fired sites, three nuclear sites, 14 natural gas and/or oil-fired sites (with six units temporarily out of service), two diesel generator sites, 16 solar energy sites, digester gas cofiring capacity at one coal-fired site, biomass cofiring potential (located at coal-fired sites), and one wind energy site (out of service).”

The net summer capability that TVA had available as of the end of September 2012 included 13,605 MW of coal, 6,710 MW of nuclear, 5,447 MW of hydro and 9,242 MW of oil and gas-fired capacity. It is in the midst, as the budget document indicated, of a massive capital spending program that includes the shutdown and retrofit of much of its coal capacity, completion of long-delayed nuclear facilities (including Watts Bar Unit 2) and paying for a very expensive cleanup of a coal ash spill at its Kingston power plant in Tennessee.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.