TVA facing uncertain future

Kingsport Times-News
Sunday, March 9, 1997

TVA facing uncertain future

By MATTHEW FRANCK
Times-News Staff Writer

It would make for the most pathetic of weather forecasts.
"It could rain, but then again it might not.
'Expect snow, but be prepared for a heat wave.'
But it's exactly the prognosis being offered to some 8 million Tennessee Valley Authority customers as they contemplate whether their rates will skyrocket or remain constant in coming years.
With the nation's power industry on the eve of a revolution, no one can say for sure what role the government-owned TVA might play in the next century.
One thing, however, is clear with just about everyone.
If TVA falls, it will tumble with a $26 billion debt that can't easily be mopped up.
"If you do the math, that means that 8 million ratepayers will be looking down the barrel of a debt that amounts to $4,000 a person," said Buddy Eller of the Southern Company, a private utility often at odds with the TVA.
That may seem the mere idle chatter of doomsayers, but policy makers in Washington are also talking seriously about the possibility of TVA customers footing the bill for that debt for years to come.
Especially if the utility is cornered into the dreaded "p-word," privatization.
"If (TVA) attempted to compete while privatized, valley ratepayers would likely see their rates skyrocket in order to pay down TVA's debt and finance the interest payment," said U.S. Rep. Bob Clement, D-Tenn., in a recent hearing in Washington.
The pressure to privatize comes as Congress is readying to remove virtually all of its regulation of the utility industry.
The reform measures could allow every homeowner in the country to select the power provider of their choice, making the nation a utility battleground where many say TVA does not belong.

"The fundamental issue, without throwing rocks at TVA, is should the federal government be in the process of producing electricity in a deregulated market?" Eller asks.

U.S. Reps. Bob Franks, R-N.J., and Marty Meehan, D-Mass., say they know the answer to that question and are currently peddling a bill that would privatize the utility by next year.

Their movement is fueled in part by a study suggesting that TVA enjoys more than $1.2 billion in government subsidies ranging from sales tax exemptions to preferred rates on hydroelectric power.

The TVA denies those subsidies exist; especially since the utility voluntarily makes payments to the state each year in lieu of taxes.

TVA Chairman Craven Crowell has also recently offered to have the only direct funds TVA receives from Congress terminated. Those $106 million go to funding non-power-generating programs that Crowell says could be managed by other federal entities.

"We dispute the $1.2 billion in government subsidies. I can make accounting numbers say almost anything," says Mark Medford, a TVA vice president. "We've compared the amount of taxes paid by large privately owned utilities, and the numbers have essentially been the same."

Many in Congress say that before TVA is allowed to leave its current parameters and compete with power suppliers, they would need proof that Medford and other TVA executives are correct.

"It would be inappropriate for a government subsidy to be in competition with private providers," says U.S. Rep. Rick Boucher, D-Va. "If TVA is ... paying all its costs, can sell that power competitively beyond its area and is receiving no government subsidy in the process, then it ought to be able to compete with everyone else."

Boucher says ideally, some solution can be worked out that allows TVA to continue as a government-owned entity, while still allowing its customers to shop around.

"I think that consumers in the TVA service territory should have the same choice that any other ... homeowner in the country has access to," he said.

The difficulty is in coming up with a scenario that makes it possible for other utilities to compete with TVA, while not crippling TVA to the extent that ratepayers are left to foot the bill.

Medford says as far as he can tell, that future will be one where TVA continues much as it has, but with the ability to grow.

"I envision that we will continue to be a government-owned utility," he said, adding that customers can rely on low rates to continue.

Eller and others see it differently.

"At some point you have got to envision much of this falling back on the taxpayers and the ratepayers," he said.

Stephen Smith, who heads the Tennessee Valley Energy Reform Coalition in Knoxville, says few questions regarding TVA and its future will be answered until the utility itself is more willing to involve the public in its preparation to enter the unexplored world of deregulation.

"I can't tell you what is the best thing for TVA — but that's because there is not enough information for people outside TVA to make decisions," Smith says.

Even Clement, who in addition to serving as congressman was a TVA director, says he is stumped.

"Let's be honest," he said. "None of us knows how to write a deregulation bill to protect TVA, given its unique circumstances."