The Howard H. Baker Jr. Center for Public Policy announced Monday that a policy brief by fellow Mary English provided the official UT stance on a proposed reform of the Tennessee Valley Authority.
Tucked away inside President Obama's 2014 Federal budget lies a 212-word paragraph that has the potential to change many lives around Knoxville.
TVA was established by President Franklin D. Roosevelt in 1933 as a way to create cheap electricity for the South, mainly through hydroelectric dams, while also providing much needed economic development to a region that was mostly rural and poor.
Since that time, TVA has evolved into a major player in the region's economy, serving nine million residents, directly employing 12,000, and taking credit for assisting with 48,000 private sector jobs. TVA's model is unique in that it is a self-sufficient government agency, enjoying some degree of autonomy.
But the small mention of TVA in the Federal budget speaks of a potentially major structural change inside the provider of cheap electricity for Rocky Top and much of the SEC. The entire text may be found online, and it gives the impression that the government is no longer interested in seeing TVA remain a completely government-owned company, and that it would save money to divest.
The federal corporation is $25 billion dollars in debt and will need to spend roughly the same amount over the next 10 years to bring it up to more stringent Environmental Protection Agency standards.
According to Duncan Mansfield, a spokesman for the TVA, they must completely bring off-line 18 of TVA's 59 coal fired plants by 2018. While Tennessee is known for its hundreds of miles of waterways, hydroelectricity now only makes up about 12 percent of its overall power, with coal supplying 40 percent of its energy, the most of any resource. As most of these plants are older, they must be either decommissioned or have new scrubbers installed.
All of this ends up being quite expensive, which is where the $25 billion dollars comes from. However, TVA has a budget cap of $30 billion, which has been in place since 1979.
"We have very high standards and good performance, and I believe we are in the Top 5 in utilities when it comes to green energy," Mansfield said.
Although TVA has not received any congressional funding since 1999, the President's brief plan is to immediately create a proposal for the possibility of federal divestment of TVA and the complete or partial privatization of its business.
As a federal corporation, TVA has no stocks to sell to investors as a means of raising capital. Instead, the organization sells bonds to cover most of its budget. While its roughly $12 billion annual revenue covers the cost of its operations and more, the company still must plan for the retirement of plants and construction of new ones.
According to a policy brief written by Mary English, a Fellow of the Howard Baker Jr. Center for Public Policy, TVA's outstanding debt is not backed by the Federal government, meaning that in the event of a default, only TVA would be responsible, not the taxpayers. However, the $25 million debt is still counted in the federal deficit, making up .2 percent of the government's outstanding $16.8 trillion in loans.
"Eliminating TVA's debt would make a miniscule dent in the Federal deficit," English said.
According to an information sheet provided by Mansfield to The Daily Beacon, the debt belonging to TVA has actually gone down from its high of nearly $28 billion in 1996.
In English's policy brief, she has pointed out that a complete sale of TVA to a single utility would be unlikely, as "the Federal Energy Regulatory Commission probably would object to its stifling effects on wholesale electricity competition."
According to English, this would leave the selling of TVA assets to several other private utility companies in the region.