published Friday, February 7th, 2014

Obama administration's study on sale of TVA nears end

The fiscal 2014 budget proposed a year ago by President Obama didn't go far in a Congress with many Republicans upset about lingering federal deficits in the spending plan.

But the White House's budget planners are still studying one proposal in the budget that might cut the debt, even though many Republicans in the Tennessee Valley object to the idea.

The Office of Management and Budget, which prepares the president's budget each year, is still studying a proposal advanced in last year's budget plan to consider selling the Tennessee Valley Authority to help pay down the federal debt.

TVA President Bill Johnson said utility officials and outside consultants hired by TVA have submitted financial data and "all of the analytic work is done" for the Office of Management and Budget, which recommended last April that a study be done on privatizing TVA. But Johnson said OMB has yet to issue any final report or conclusions about the future of the federal utility.

TVA is the largest government-owned utility and, although it is a self-funded federal agency, the agency's $26 billion debt is included in the federal debt total counted by OMB.

TVA was created in 1933 as part of President Franklin Roosevelt's New Deal and has survived over the past 81 years despite repeated attempts to privatize or sell the agency.

Johnson, who has previously questioned the value of selling the publicly owned utility, said his staff "has been engaged in a good process with OMB and others in the government.

"We've had a series of discussions, questions and answers and I think we're in the process of trying to figure out how to conclude this," Johnson told industry analysts this week during a conference call on TVA's financial condition. "I hope and expect that in the next short little while that we get to some conclusion."

What that conclusion will be remains unclear. OMB officials did not respond to requests for information about the ongoing study of TVA and its possible sale.

The White House is scheduled to release its budget plan for fiscal 2015 on March 4 and the document is likely to include language about the future of the Tennessee Valley Authority.

U.S. Sen. Lamar Alexander, R-Tenn., criticized the OMB plan last year, claiming that a sale of TVA wouldn't do much to pay down the federal debt but even floating the idea of privatizing the federal utility threatens to raise borrowing costs and ultimately rates for TVA and the 9 million people it serves.

"It will probably cost the federal government money to sell it, after you deduct the TVA debt, and it will probably raise electric rates in the Tennessee Valley, which is the last thing that we need," Alexander said last year.

TVA reported this week that it did cut its debt during calendar 2013 by $271 million and narrowed its first quarter loss entering the new fiscal 2014.

With power growth slowing, TVA expects to reduce its net borrowings over the next decade, TVA Chief Financial Officer John Thomas said.

TVA also is cutting its staff this year under a voluntary reduction-in-force program offered to most of its 12,000 employees through Feb. 18. The program is part of an effort to cut $500 million from the utility's annual operating and maintenance spending by the end of 2015.

Johnson said he did not have an estimate yet of how many employees have volunteered to retire early or resign from the agency.

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.

about Dave Flessner...

Dave Flessner is the business editor for the Times Free Press. A journalist for 35 years, Dave has been business editor and projects editor for the Chattanooga Times Free Press, city editor for The Chattanooga Times, business and county reporter for the Chattanooga Times, correspondent for the Lansing State Journal and Ingham County News in Michigan, staff writer for the Hastings Daily Tribune in Nebraska, and news director for WCBN-FM in Michigan. Dave, a native ...

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