Obama budget hints at TVA sale

Obama budget hints at TVA sale

April 11th, 2013 by Pam Sohn and Chris Carroll in Local Regional News

Tennessee Valley Authority headquarters and TVA logo

Photo by Miranda Harple

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POLL: Should TVA be privatized?

WASHINGTON - U.S. Rep. Mo Brooks of North Alabama grabbed his glasses to scan page 51 of President Barack Obama's budget request Wednesday and turned red as he absorbed a seven-sentence proposal that could put TVA in private hands, alter rates for 9 million customers and jeopardize 12,000 employees.

Tucked under a heading of "Creating a 21st Century Government" in the president's nearly 230-page fiscal 2014 budget document is a the section that states:

"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."

Brooks wasn't the only congressional lawmaker shocked by the idea -- especially since TVA's power programs have been completely ratepayer funded since 1959.

It's correct that TVA's roughly $24 billion in debt is carried as part of the federal deficit, but ratepayers pay TVA's debt, not taxpayers.

"There is today no federal taxpayer subsidy for TVA, period," stormed U.S. Sen. Lamar Alexander, R-Tenn. "There is by law no federal taxpayer liability for TVA debt. And after deducting its debt, selling TVA would probably cost taxpayers money."

Alexander issued the statement shortly after the proposed budget was released.

"This is one more bad idea in a budget full of bad ideas," he said.

John M. Thomas III, TVA executive vice president and chief financial officer, said the utility -- which makes electricity for 9 million residents in seven states -- has a federally mandated debt limit of $30 billion, and changes in that debt are included in calculations of the federal deficit.

"But all of our bills are paid for by the ratepayers in their electricity bills ... and our debt is not backed by the federal government," Thomas said.

TVA does enjoy a better credit rating -- and cheaper interest that ratepayers repay -- because it is a federal entity. That lower expense helps TVA, a nonprofit agency, put more money into electricity and its other services.

"And even the nonpower activities that we provide -- management of the river system, maintenance of campgrounds -- are solely funded by electricity sales," Thomas said.

He said he did not know how much the cost of looking after the river could raise taxes if another federal agency such as the Corps of Engineers has to pick up that task.

But the question was on the minds of others Wednesday.

Even Stephen Smith, executive director of Southern Alliance for Clean Energy and a longtime critic of TVA and the conservative lawmakers who often defend it, was puzzled by the budget surprise.

"There's a lot of devil in the details," he said. "Dam safety, water quality, all of that would have to be farmed out to another federal agency, and right now it's being paid by ratepayers. It's [TVA's current structure] good for taxpayers."

It isn't the first time TVA's federal status has been under fire, but it's the first time it has been placed on the cut list by Democrats.

While the president's budget request often is treated as a wish list to Congress, the document does set financial guidelines for the administration's broader policy goals.

This time, its content appeared to blindside TVA personnel.

"At this point we don't know what the strategic review might include or what options might be explored," TVA Board Chairman Bill Sansom said in a statement that referred to Obama's idea as "unexpected language."

Emails rocketed through TVA employees' accounts, with at least one manager notifying co-workers of the change. He said he had "no additional information to provide at this time."

"We are part of the federal government, and we will follow their direction," program manager Eddie Ricks said to a batch of undisclosed recipients in a message obtained by the Chattanooga Times Free Press.

Even Tennessee Democrats weren't consulted on the idea before it surfaced.

"I didn't see that," said U.S. Rep. Steve Cohen, a Memphis Democrat.

Once lawmakers found out, several were critical of the idea, citing political inconsistencies, no advance notice and fears that electricity rates could spike for residents in seven Southern states. There was a touch of irony involved, as many were Republicans who have criticized Obama for a perceived lack of faith in private industry.

U.S. Sen. Bob Corker, who said in October that "the federal government is going to destroy TVA," criticized Obama's proposed handoff.

"TVA as a going concern today is probably worth less than its debt and its rates have become increasingly less competitive," the Tennessee Republican said in a statement. "So if the goal is deficit reduction, I doubt this idea gains much traction."

Contact staff writer Pam Sohn at psohn@timesfree press.com or 423-757-6346.

Contact staff writer Chris Carroll at ccarroll@times freepress.com or 423-280-2025.