Presidential prerogatives – forget TVA
December 27, 2008
Executive Orders of the President can and have had a pushing forward effect of an exiting Administration which may block or thwart an incoming president all without the benefit of congressional action.
For example, President Bush issued EO 13406 which narrowed the meaning in the Constitution of “taking property” more closely to the founder’s original intent. The Tennessee Valley Authority had grossly misinterpreted that clause until EO 13406 was issued. TVA was the usurper of the right of the people to not expect the federal government to compete in the market place.
TVA gleefully did this often and was paid hundreds of thousands of dollars in land sales and questionable land swaps. In addition, TVA is anti-competitive in the marketplace of electricity sales.
It would be reasonable for an incoming administration to put more meat on the bones of EO 13406 rather than trying to undo it.
Americans are undergoing a crisis of government credibility caused by the failure of several administrations to check the illegal piling up of debt in the trillions of dollars through federal government guarantees of worthless Fannie Mae and Freddie Mac paper.
Failure of the government to quell these loans has precipitated a world financial crisis the depth of which has not been reached.
In a much smaller but comparable way, the federal government has failed to stanch the flow of borrowed money by the Tennessee Valley Authority now at $25 billion with promises by TVA management to far exceed its statutory borrowing limit of $30 billion.
TVA whose financing already is on the brink of collapse has resorted to a one-year “bridge loan” of one billion dollars from the Bank of America. Not only is this outrageous, it is deceitful if not illegal for the federal government to borrow money from a private, stock-held banking source while propping up other financial institutions with a $700 billion “bailout”.
TVA’s books show assets well exceeding their debt but these probably are greatly overestimated based on TVA’s known experience to squeeze dollars the way they want them. Most of the coal-fired plants are over 50 years old and many of them may have reached their useful life. About 60 % of TVA generated power comes from these plants.
Though not known until actual liquidation, a more reasonable estimate of TVA assets is probably no more than $15 or $20 billion if that much. Balance of the debt would inure to TVA bondholders or to the “ratepayers” since the federal government does not even guarantee its own money obligations of the TVA.
The TVA has muddled through mismanagement after mismanagement greatly underperforming its charge in the original 1933 legislation. Instead of being the innovator and facilitator of new and breakthrough technology, TVA lags behind the utility industry in every major area and has defaulted on its obligations in other areas.
One of the causes of TVA’s misguided ways is its system of performance bonuses. I have plenty of anecdotal evidence of where TVA either cut corners in maintenance or its failure to perform under duress for fear of affecting bonus amounts.
The failure of an earthen dam at the coal-fired Kingston Plant in Tennessee December 22, 2008, is an apt and recent exhibition of TVA’s dilatory actions. TVA’s 8K report to the Securities and Exchange Commission of this “incident” is so watered down as to be yet another confusing and ambiguous TVA statement. It seems clear the TVA does not want to rattle bondholders’ chains.
Some have suggested the TVA as a model for “putting people to work” aping the old New Deal era.
This would be a major tactical error resulting in the exacerbation of the problem. If, however, the great ingenuity and boundless energy of the free market were to be let loose on the major problems confronting today’s society, meaningful and real jobs would result, not the make-work kinds of jobs in the 1930s.
This approach would help re-build America’s industrial base and reverse the decline in job exportation.
Americans can do it “better, faster, and cheaper” if the government stands aside to let Adam Smith’s “invisible hand” go to work.
Ernest Norsworthy
emnorsworthy@earthlink.net