TVA’s obfuscating money game
August 27, 2009
When the TVA claims they receive no direct federal appropriations they, on the face of it at least, speak the truth. That defense, however, is shallow, as shallow as TVA’s continual evasion to get around their own TVA law.
When TVA says, as they did in last week’s board meeting, that instead of raising electricity rates the proclaimed 16% (which would put it over the “average” increase of other utilities); they instead chose to limit the base rate increase to 8% and to borrow a billion or so dollars to make up the difference. The borrowed money would be financed over 15 years, with interest. The result is that ratepayers eventually will wind up paying more than the 16% actually needed. I call that dissembling.
Who would actually lend the TVA a billion dollars? For starters, TVA already has worked out a deal with the Bank of America, (remember? The bank that received $45 billion in taxpayer funds a few months ago?) Now wait a minute, how is it the TVA, a federal agency, can in effect borrow money from a taxpayer funded bank, Bank of America? The smell is of rotting fish.
The question is, “What is the difference between TVA receiving a billion dollar appropriation as opposed to borrowing a billion dollars?”
I believe the difference is broad and startling. If TVA came under the scrutiny of congressional committees which has been missing until the Kingston disaster, those oversight committees may have picked up on TVA’s faulty management practices and the disaster might never have happened.
But that is not the only reason TVA steps over its ill-defined bounds, constraints that have become the loophole TVA uses to subvert the law. While claiming it is “completely self-financing” and does not need congressional appropriations, it uses backdoor financing (as in borrowing a billion more dollars) to achieve its aims. TVA received permission to do this from no one, no congressional input, no state or local advice, no, not from anyone but TVA’s own autonomous, non-elected group of presidential appointees. Now that’s a real abuse of power.
Surely, this is not the American way of doing business-like government operations particularly of TVA’s magnitude. Sorely lacking is oversight; there is no extra public eye, no watchdog to quell TVA’s voracious grab for more power, figuratively as well as in territory.
Just this last year, TVA extended its “fence” another 300 miles to 2800 miles without the approval of anyone except itself by purchasing distressed privately owned power facilities. Since the Congress first designated TVA’s “fence” would it not have been appropriate for the TVA to get approval from the Congress to expand it?
Another entrance to backdoor financing by TVA recently occurred when TVA along with the TVPPA, a non-profit group representing TVA’s 158 distributors, applied to the Department of Energy for a $200 million grant to develop a so-called “smart grid” using taxpayer “stimulus” funds. In terms of cost, it would be comparable to TVA upgrading or updating existing plants with pollution control devices. TVA gets no grants from the federal government for those kinds of things, the ratepayers must pay.
What’s going on here? Is TVA a “completely self-financing” electric utility or is it not? This looks like another instance of TVA receiving funds through the backdoor, evading the intent of federal law.
There is another group within TVA, the “Valley Investment Initiative”, which grossly discriminates against certain businesses not covered under TVA’s criteria for eligibility.
Here’s a TVA made up “frequently asked question” about the VII:
“What are the “targeted sectors” eligible to apply for this program?” This is not even a truthful statement because a “targeted sector” is everywhere but the excluded classification codes picked out by the TVA. Funny how they “excluded” mining, utilities and construction among other exclusions. These categories and a number of others would work counter to the TVA, not help it.
TVA’s depiction of its potential territory extends for a thousand miles from the Gulf of Mexico to the Great Lakes. See picture http://www.tvaed.com/index.htm
It is obvious that the TVA much prefers giving its industrial users an incentive to stay put and to sign a five-year contract. TVA’s 2010 budget includes $302 million in increased funding for the “new” Valley Investment Initiative that is not quite so new having begun last October. And it is obvious TVA does not understand business.
Says TVA, “The Valley Investment Initiative offers incentive awards to existing industries that demonstrate a long-term commitment to remaining in the Valley”. Just what is the incentive for this special group? Obviously, it is monetary. But isn’t that discriminatory against others?
In any event, there’s $302 million that could be dropped from the 2010 budget. And, oh yes, there were no more pretend FAQ’s, just the one.
The largest group of TVA electricity users, of course, is the some 8 million customers in a seven state area. Where’s their incentive money-wise from the TVA? Spreading its largess to state and local governments (and some other strange distributions) amounts to about a half-billion dollars annually. But that depends on the amount of electricity used; it’s down 8% from last year alone.
That money could be well spent on incentives to those who cut back on their usage year over year (monthly payout); it would eliminate the need for more capacity concomitant with corresponding reductions in expenses such as the outrageous bonus scheme. The concept of the whole bonus scheme is built on operations at maximum capacity all the time. That culture has resulted in lapses in safety for employees and communities around TVA facilities.
Some comments on TVA’s colorful charts. The chart on page 33, “TVA Weighted Average Age/MW”, is a particularly useless depiction of too many variables. If the point TVA is trying to make is that their production plants are older than Methuselah, it could have said that in a couple of sentences, no need to pick out other operations that may or may not be similar to TVA’s. So TVA’s plants are too old? Watch out! Here comes the big bucks request for billions more dollars to “upgrade” them. Forget that if they had been properly maintained their life could have been greatly extended.
I have from reliable sources that TVA has allow some plants to be run past best maintenance practices just to fulfill bonus incentives.
Then there’s the dandy chart on page 31, perhaps the most realistic one in the report, “Projected TVA Sales Worsening” that shows how far off TVA has been in its projected sales. Its budget estimates of course reflect these gross miscalculations. The chart would have been more meaningful if forecasts were compared with actual for the years since 2004.
But the real clinker is TVA’s failure to disclose what the comment in a tiny footnote “Excludes off-system sales” means. How much? How? To whom? TVA’s income is supposed to be from well defined sales of electricity. “Excluding off-system sales” is disconcerting to say the least and thoroughly needs explaining.
When TVA management does not see the imminent danger of overspending for many unnecessary things and now must depend on excessive borrowings to make up the shorted amounts and with a declining income, clearly it is time to replace TVA management along with the present board who allowed it.
Ernest Norsworthy
emnorsworthy@earthlink.net
http://norsworthyopinion.com