Energy coalition: Ratepayers will suffer in deregulated world

The Oak Ridger 4/2/96
STATE
Energy coalition: Ratepayers
will suffer in deregulated world
by Tom Sharp
Associated Press

KNOXVILLE — A TVA
watchdog group has charged the
utility with making decisions that
could eventually force ratepayers to
pick up a disproportionate share of
the agency's $27.2 billion debt.
The Tennessee Valley Energy
Reform Coalition, a group of 18 re-
gional environmental and consumer
advocacy groups, said Monday it
has obtained a copy of a report sup-
porting its contention that TVA's
debt will be crippling in an age of
deregulated utilities.
"A major debate about TVA's
future is happening without over-
sight or public input," said Steve
Smith, executive director of the
coalition. "This debate should be
happening in a fish bowl for all to
see."
The coalition's argument centers
on a report prepared by Burns &
McDonnell for the Tennessee Val-
ley Public Power Association,
which represents TVA's 160 power
distributors.
There are two other recent re-
ports about TVA's position relative
to private utility companies under
deregulation. One of them, by the
General Accounting Office, the in-
vestigative arm of Congress, says
TVA's debt could hurt it in compe-
tition with private companies.
The other, commissioned by
TVA and done by Palmer Bellevue,
is more favorable to TVA's posi-
tion.
TVPPA commissioned the
Burns & McDonnell report to get
help interpreting TVA's Energy Vi-
sion 2020 — the agency's energy
plan for the upcoming quarter cen-
tury.
Smith and the coalition say the
Burns & McDonnell report sides
with GAO and indicates TVA is
headed in the wrong direction.
Smith said the coalition believes
TVA would lose at least some of its
big industrial customers to rival
utilities in a deregulated world,
leaving TVA's residential cus-
tomers to pay a greater share of
TVA's costs, including its debt.
"The industry is going to be-
come much more competitive,"
Smith said. "Those utilities that are
lean, mean and don't have a high
level of debt are going to be highly
competitive. Those carrying large
amounts of fixed costs are going to
be in trouble. TVA is the latter
case."
TVA spokesman John Moulton
said Smith's charges are faulty
speculation.
"TVA has no reason to believe
industries would go to other power
producers, because TVA right now
is very competitive," Moulton said.
"The Burns & McDonnell study
said our average power cost in 1993
was among the lowest of any re-
gional utility. Quite the opposite
could be true."
Moulton said TVA will be ready
to compete with investor-owned
utilities as industry deregulation
evolves.
"That's what we're doing, get-
ting TVA ready for that time when
there will be a deregulated environ-
ment," he said.
Jerry Campbell, executive direc-
tor of the TVPPA, said the Burns &
McDonnell report is considered an
internal working document at this
stage, and TVPPA hasn't yet taken
a position on its conclusions.
He said he would not interpret it
as Smith does, however.
"I think the report reiterates
what GAO found and everybody
knows, that TVA has a heavy debt
burden and may not be as flexible
as some other utilities might be,"
Campbell said.
"Frankly we're trying to look at
the positive side of what TVA is
doing in this new environment. We
think it's colossal that they've gone
nine years without a rate increase.
We're also very impressed that
they've gone through a painful
downsizing, and imposed a debt
ceiling on themselves."
Congress limits TVA's debt to
$30 billion; TVA has adopted a $28
billion ceiling. The agency also has
cut its employment from about
34,000 in 1988 to 16,500 today.