President Donald Trump’s proposal to sell the transmission assets of the Tennessee Valley Authority and other federal power agencies faces a skeptical Congress unlikely to support divestitures of popular federal agencies.
But simply floating the idea in the White House budget plan, even if it is never accepted by Congress, could end up costing TVA extra to borrow money due to investor uncertainty about the future of TVA.
The credit ratings giant Moody’s concluded that selling off the assets of Tennessee Valley Authority and other federal power agencies could be costly for those relying upon such transmission assets.
“Such a sale would be credit negative for each entity because it would reduce transmission-related revenue, a stable revenue source and weaken federal government support, key considerations that support their respective ratings,” Moody’s said in a report about the proposed sale of the transmission systems owned by TVA and the Bonneville Power Administration in Washington. “We also believe that any divestiture is likely to raise transmission rates for BPA and TVA customers because the new private owners would have higher capital costs that would need to be recovered in rates.”
Trump’s fiscal 2019 budget request to Congress and infrastructure plan said the ownership of the transmission line assets of TVA “is best carried out by the private sector, where there are appropriate market and regulatory incentives.” TVA and other federal power agencies enjoy the implied backing of the federal government, giving TVA a top bond rating, even with more than $26 billion of debt and long-term financial obligations.