Obama backs off push to sell TVA, but still seeks limited federal role in agency

The Obama administration has backed off its previous push to sell the Tennessee Valley Authority after the federal utility took steps over the past two years to trim its spending and cut its long-term debt.

In the president's spending plan released Monday, budget planners with the U.S. Office of Management and Budget said they still would prefer that the federal government sell or transfer ownership of TVA to limit the financial risks for federal taxpayers. But the OMB praised TVA for taking "significant steps to improve operating and financial performance" and for bringing its debt under control.

The White House budget agency, which raised concerns in the past two budget plans about how TVA's $25 billion debt might hurt federal taxpayers, backed off of such criticisms in the fiscal 2016 proposal after completing a review of TVA finances.

FILE - In a Friday, Jan. 30, 2015 file photo, President Barack Obama speaks in the East Room of the White House in Washington. President Barack Obama’s budget will propose an ambitious six-year, $478 billion public works program of highway, bridge and transit upgrades, half of it financed with a one-time mandatory tax on profits that U.S. companies have amassed overseas, White House officials said. Obama will unveil a $4 trillion budget on Monday, Feb. 2, 2015. (AP Photo/Carolyn Kaster, File)

"The Administration supports TVA's ongoing initiatives and will continue to monitor TVA's performance, including the achievement of critical milestones contemplated in TVA's long-term financial plan and the pursuit of efforts to enhance governance and increase transparency of TVA's decision-making on important agency actions," the OMB said in its budget plan. "While the strategic review of TVA has concluded, the Administration continues to believe that reducing or eliminating the Federal Government's role in programs such as TVA, which have achieved their original objectives, can help mitigate risk to taxpayers."

U.S. Sen. Lamar Alexander, R-Tenn., on Monday welcomed the change in the OMB's assessment of TVA.

"I'm glad the Obama administration has abandoned its ill-advised proposal to sell TVA," Alexander said. "Now we can get back to letting TVA do what it was created to do: providing low-cost, reliable electricity to families and businesses in the Tennessee Valley."

Over the past two years, TVA has cut its annual operating budget by $500 million and expects to cut, rather than increase, its overall debt through 2020. TVA eliminated 2,000 jobs, deferred work on the Bellefonte Nuclear Plant and scrapped coal plants in Tennessee, Kentucky and Alabama since former Duke Energy CEO Bill Johnson was hired in 2012 to run TVA.

TVA is still spending about $3.5 billion this year to finish a second reactor at its Watts Bar Nuclear Plant and to start or continue building new gas-fired power plants in Tennessee and Kentucky. TVA's total debt is projected to increase in fiscal 2016 by about $800 million to $26.9 billion.

But TVA expects to reduce capital spending next year to $2.3 billion and to stay well beneath its $30 billion spending cap.

TVA is projecting relatively flat electricity sales next year to generate total revenues of $10.9 billion.

"TVA remains financially healthy and we continue to improve our overall financial metrics," Johnson said Monday.

TVA Chief Financial Officer John Thomas said he was pleased by the OMB budget review and insisted that TVA is not a risk to taxpayers.

"Although TVA is owned by the federal government, it does not receive taxpayer dollars and its debt is not taxpayer funded," he said.

Contact Dave Flessner at dflessner@timesfreepress.com or 423-757-6340.