Article: Privatizing the Tennessee Valley Authority

Excellent article from the Cato Institute documenting the many benefits of ending TVA.

https://www.downsizinggovernment.org/privatizing-tennessee-valley-authority#_edn43

Here is an extract of key points:

"TVA does not pay federal, state, or local income, property, or other taxes."

"With the advantage of taxpayer funding and federal legal power, the TVA bullied private power producers out of the way, removed more than 15,000 people from their land, and grew by selling power through municipal power distributors, which were also subsidized by the government."

"neighboring states with private power grew just as fast as Tennessee did in subsequent decades, and they also extended power to rural communities as fast as the TVA did within its region."

"The government-owned TVA has become an anachronism, as the global trend for more than two decades has been to privatize electric utilities. In the United States, private-sector corporations dominate the electric generation and transmission industries. There is no theoretical or practical reason why the TVA should not also be private."

"If the TVA had performed better than private utilities over the years, there might have been an argument for government ownership. But it has performed poorly on both financial and environmental management. Privatizing it would create an institutional structure that would improve efficiency, reduce costs, create more transparency, and allow for better environmental oversight."

"The TVA has another problem with capital investment: as a government entity, it cannot tap equity markets for financing, so it relies heavily on debt. The company is able to borrow at artificially low interest rates because it is part of the government, but that has created an incentive to borrow excessively. As a consequence, the TVA has built up a high debt load compared with private utilities, which makes its financial structure unstable."

"On top of a large debt, the TVA has large unfunded obligations in its retirement plans. At the end of 2014, the TVA's pension plan was only 61 percent funded. A 2014 analysis found that the average pension funding level of six comparable private utilities was 96 percent. The utility also has a large unfunded obligation for postemployment health benefits."

"TVA has a poor environmental record...Private businesses also make mistakes that harm the environment. But over the decades, the TVA has been particularly irresponsible. As a government entity, it has been less transparent about its environmental and safety activities than private companies and more immune from outside criticism."

"In the early years, federal taxpayer dollars heavily subsidized the TVA, allowing it to charge artificially low rates. But rates have risen substantially over the decades, partly because of the TVA's expensive mistakes. A 2014 study...found that the utility has somewhat higher rates than utilities in nearby states today, despite the tax and regulatory advantages that it enjoys."

"Another study compared the TVA's operating and maintenance costs (other than fuel costs) with 18 other utilities and found that the TVA's costs were the highest.33 Apparently, the TVA's government-conferred cost advantages end up being consumed by the company's general bloat and mismanagement."

"TVA is compensating employees as if it were a very successful private company, but it is delivering the performance of a government bureaucracy."

"privatization would raise billions of dollars. An analyst for the investment research firm Morningstar figured that the TVA might sell for $30 to $35 billion. Ken Glozer estimated a similar figure, between $30 and $40 billion. He noted that Duke Energy purchased Progress Energy in 2012 for $32 billion, and Progress had somewhat lower revenues than the TVA."