The Tennessee Valley Authority will need Congress to boost its borrowing authority if the federal utility is to replace its aging fleet of coal plants and meet future power demand in its seven-state region, TVA President Tom Kilgore said Thursday.
In response to a question following his speech to the Chattanooga Rotary Club, Mr. Kilgore said he has begun to talk with officials in Washington D.C. about raising the $30 billion debt ceiling Congress set for TVA in 1979 when TVA was granted the ability to borrow in the private market.
“As we build more plants and retire more older plants, we will need the debt issue addressed,” he said. “We’re not there yet, but we’re starting to talk openly to educate people about the eventual need.”
The decision to obtain more credit for future capacity is a reversal of what TVA outlined under a previous administration in the 1990s when White House budget officials urged TVA to cut its debt. In 1997, TVA pledged that by now its debt would be at least a third less than what it is today.
Tennessee’s U.S. senators said Thursday they are open to the idea of trying to raise TVA’s borrowing authority to keep pace with the utility’s increasing sales and assets. The 1979 debt cap, if adjusted for inflation, would be valued at more than $88 billion today.
“The assets of TVA and its revenue-generating capacity is much greater today than when the current debt limit and just adjusting for inflation the debt cap could be much higher,” said U.S. Sen. Bob Corker, R-Tenn.
But while Sen. Corker said he is willing to look at TVA’s request, he cautioned against granting too much borrowing authority to federal agencies such as TVA whose IOUs tend to enjoy the implied, if not implicit, backing of the federal government.
“The last thing that we need in our country’s evolution with all of the issues we’re having to de Mac and Fannie Mae (both federally backed home lenders).”
U.S. Sen. Lamar Alexander, R-Tenn., co-chairman of the TVA Congressional Caucus, said his support for any increase in TVA’s debt cap will depend upon the viability of the utility’s long-term plans.
“I’ll evaluate any proposal to increase TVA’s debt limit based upon the soundness of its 10-year plan,” he said.
TVA projects it will cost more than $4 billion each to build new nuclear reactors to replace old coal plants. TVA is already spending $820 million to build a combined-cycle, gas-powered plant to replace its coal plant near Rogersville, Tenn.
TVA also expects to spend up to $1.2 billion to clean up the coal ash spilled from its Kingston Fossil Plant in December 2008 in one of the worst industrial spills in American history. TVA also expects to spend up to $2 billion to convert other coal ash storage ponds to dry storage methods over the next eight to 10 years.
“We want to make sure that nothing like what happened at Kingston ever happens again,” Mr. Kilgore said.
TVA 2009 highlights
* Met a record winter peak demand last year of 32,572 megawatts in January 2009
* Produced power at an average residential price 15 percent below the average of its 23 utility neighbors
* Removed 2.3 million cubic yards of the 5.4 million cubic yards of coal ash dumped into the Emory River from the December 2008 ash spill
* Spent another $170 million on air pollution controls, bringing to $5.3 billion the amount spent to cut smog-causing emissions by 80 percent since the 1970s.
TVA debt
by the numbers
* $30 billion — Current debt cap for TVA set by Congress in 1979
* $22.8 billion — TVA’s statutory debt applied to the debt ceiling
* $25.2 billion — TVA’s total debt obligations, including long-term leases and contracts
* $88.6 billion — Value of what the debt ceiling would be if adjusted to inflation since it was set in 1979
Sources: TVA, Bureau of Labor Statistics
TVA president wants
higher debt ceiling