Statement on Budget Proposal to Sell TVA

Guest Blog | April 11, 2013 | Press Releases

SACE Media Statement, from Executive Director Dr. Stephen A. Smith, regarding the Obama Administration’s budget proposal for a strategic review of a possible divestiture, in part or in whole, of the Tennessee Valley Authority:

In this time of great anxiety about federal deficits, we understand the need to consider all options for debt reduction. However, the sale of the Tennessee Valley Authority (TVA) will not lead to tax-payers’ savings nor significant budget reductions. From its inception, TVA has had a multi-faceted mission of which power production is only one piece. Since TVA stopped receiving federal appropriations for ‘non-power functions’ in 1998, TVA ratepayers have borne the costs of what is arguably federal responsibility for dam safety, flood control, river navigation and public land management. The sale of TVA would shift those burdens back to the federal taxpayer to the tune of tens of millions of dollars each year. In addition, it is unclear that the sale of TVA’s assets would bring significant additional revenues to the federal coffers once its debt and ‘debt-like obligations’ are repaid. Therefore we believe it is extremely unlikely that this proposed strategic review will lead to any real desire by the Obama Administration to pursue selling TVA.

The concept of selling TVA also raises a couple of significant ethical issues. First, most of the land owned by TVA was consolidated by eminent domain from private citizens to be held and managed for the public good. Secondly, Tennessee Valley citizens, through their power distributors, have paid hundreds of millions of dollars in rates over the years and should have some equity share in the power assets that TVA currently owns. Furthermore, ratepayers in the Tennessee Valley would also be hurt by such a sale because what is now a ‘non-profit entity’ would likely incur financial obligations to private shareholders if a regulated utility were to purchase the assets. In addition, there would be financial pressure on Tennessee’s government because the state would have to develop a regulatory structure staffed with competent professionals in order to regulate a privately-held electric utility. The existing Tennessee Regulatory Authority (TRA) does not, at present, have that capacity. While there is always room for improvement in how TVA is run and managed, there would be significant ‘devils in the details’ considerations by trying to radically change the ownership and oversight of the Tennessee Valley assets in this way.

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