Obama considering destruction of a New Deal gem: TVA

Joel Yudken, Economic Policy Institute  - The Obama administration is considering whether to divest all or part of the federally owned Tennessee Valley Authority as a means to pay down the U.S. debt. The selling off of all or part of the TVA to private ownership would have far-reaching consequences, especially for the 9 million people in the 80,000-square-mile region—encompassing parts of Tennessee, northern Alabama, Mississippi, Kentucky, Georgia, North Carolina, and Virginia—to whom the TVA provides electricity and other services.

Conservatives have long opposed the TVA on the grounds that it is an illegitimate government intrusion into the marketplace. The Obama administration’s fiscal year 2014, 2015, and 2016 budget proposals have called for reducing or eliminating the federal government’s role in programs such as the TVA “which have achieved their original objectives or no longer require Federal participation.” Worried that the TVA’s bond debt, then at $26 billion, could exceed its $30 billion statutory cap and thus impact the federal debt, the administration has suggested ending federal ties in order to “help mitigate risk to taxpayers” and “put the Nation on a sustainable fiscal path”

Opposition has been broad-based, from conservative congressional lawmakers from states and districts in the TVA service area; to the municipally owned and cooperative local power companies and the Tennessee Valley Public Power Association, which represents these distributors; to labor unions representing TVA employees.

The TVA is a corporate agency of the United States, governed by a nine-person board appointed by the president and confirmed by the Senate. Its operations have been self-financed since 1999, requiring no taxpayer money. The TVA operates one of the nation’s largest utility systems, accounting for about 3 percent of U.S. electricity capacity. .

Even though electric power generation and transmission is the TVA’s dominant function, it remains integral to and integrated with the TVA’s nonpower responsibilities, including river and land management, environmental stewardship, and economic development.

Opposition to divestiture received a major boost from a government-commissioned study prepared by Lazard Frères & Co. in 2014 Lazard examined a range of options including privatization, public-sector spinoff, and status quo alternatives. It concluded that, although it had “recommended for privatization in other situations in the U.S. Power & Utility Industry,” several factors led it to “recommend against pursuing a divestiture of TVA.”