TVA 'sale' is budget theater, but wake-up call to leaders

TVA 'sale' is budget theater, but wake-up call to leaders

April 14th, 2013 in Opinion Times

The TVA building is in downtown Chattanooga.

Photo by Dan Henry /Times Free Press.

The discovery by lawmakers Wednesday that President Obama had tucked away a proposal in his new budget to sell off TVA understandably hit TVA officials, workers and some area lawmakers like a bomb - or, depending on the lawmaker, at least like a pesky mosquito.

Yet the odds against a sale actually happening are immense. This isn't the first time privatization of TVA has been proposed in Washington: It's a set piece of periodic political football, and it surely will not be the last. But since there is really nothing to gain by selling off TVA and plenty to lose, the best that can come of this proposal is that it may shake TVA's leaders out of their lethargic status-quo management style.

TVA does need some rejuvenation. Though it has trimmed its debt to $24 billion, its operational flaws have remained obvious and unresolved over the years.

Nuclear operations and building programs are usually over budget, behind schedule and regularly flagged for safety violations. Competitiveness in rate costs vis-à-vis other Southern utility giants has been slipping for years. Pension costs are ballooning. Innovation, energy conservation and renewable energy programs remain weak. And despite the arrival of a new CEO, there's scant sense of new energy and improved vision in TVA's management.

This isn't to dispute that TVA remains one of the region's most important assets. Nor is it to say that the venerable federal agency is not doing its basic jobs of energy production, river and resource management, and economic partnership with local governments and industry. There is much that TVA does well.

And though its debt seems enormous, it is not a financial liability of the federal government. TVA's ratepayers, by law since 1958, pay all of TVA's bills and bonds. All TVA gets from its federal status is a marginally lower interest rate on its borrowing because of its implied federal backing.

Breaking up the agency and selling off its assets - the transmission and power-generating systems would likely be broken up in any liquidation scenario - would leave ratepayers, and possibly Washington, stuck with a $5 billion loss, according to one well-placed source. It also would leave ratepayers stuck with the higher rates of investor-owned utilities anxious for a profitable payback on their purchase.

The Obama administration's symbolic budget proposal aside, Democrats in the nine-state TVA service region wouldn't support that, nor would the South's red-state Republican infrastructure due to their loyalty to fellow lawmakers in the TVA region.

Yet it obviously remains a political foil, one with wind-up legs whenever the federal budget is tight and a president needs to show where it would whack different wads of debt that show up on the Treasury's debt ledger, as TVA's ratepayer debt always does.

Northern and Midwestern investor-owned utilities and their congressional hand-holders have periodically demanded the privatization of TVA over the years, simply because they have always resented the idea that the iconic FDR New Deal-era birth of a government utility and resource giant had proven so effective at outshining them.

They've continually been embarrassed that TVA not only operated at a much lower costs than their rapacious for-profit utilities. It also proved that a combined government resource management agency - which tamed the flooding of the Tennessee River with a series of big dams, restored the land, managed forests, helped improve farming techniques and electrified rural areas of Tennessee and parts of either other states - could do so well and prove so useful.

There are two possible reasons that the Obama Administration slipped the idea of putting TVA on the block into his new budget proposal. One is that it will safely show-up Republicans who demand debt reductions, but ultimately won't go for an asset-sale idea that easily fits their usual private-capital agenda. Another is that it's a symbolic slap by Obama at Republican senators for their recent refusal to confirm Dr. Marilyn Brown, an internationally known expert in renewable energy, to a second term on the TVA board.

If Obama wants more focus by a federal agency on renewable energy and energy efficiency - two of his major goals - that should get their attention to his renomination of Brown.

Yet it's not likely that Obama would pick a fight with Republican senators over the latter reason. That suggests it's just a budget gesture, one that will quickly be set aside. Still, it should spur TVA's leaders to higher performance. They will remain under scrutiny.