TVA – spend more, borrow more on less income
August 20, 2009
Sometimes the proboscis is difficult to discern when the emphasis is on the bottom end, that is, as plain as the nose on your face.
Could anyone really be surprised that TVA’s base rate was increased? By only 8%? They acknowledged it probably should be twice that but here comes that old bugaboo again, “let’s borrow our way out of debt!” Debt ceiling? When the debt service on borrowed money eats up a billion or more dollars a year, where’s the money for badly needed upgrading and repair of production plants?
TVA, a 76 year-old “clunker”, just proves that government in any generation doesn’t know “clunk” about managing anything remotely resembling a free-enterprise business. So what does the Department of Transportation know about the automobile business? God forbid, Americans own 60% of General Motors without any idea of what to do next. They fired the CEO and now the President of the United States is in charge. The DOT can’t even get a simple “clunker” rebate plan off the ground.
TVA is not much more complex in operation but try as they might, TVA management still does not understand the basics of a business operation, of how to run a business. Bureaucrats do not have the mindset of business people. Bottom line to them is how big their executive chair is and the size of their office.
Today’s board meeting points up clearly that TVA’s interests do not place much of a priority on cutting costs across the board, of slimming down staff. TVA, when faced with another crisis, hires more people to be sure and cover the bases they badly missed. Just the opposite reaction of an investor-owned utility where “heads will roll” for major mistakes. TVA does not even own a guillotine.
There was no mention of TVA’s outrageous bonus structure; the why and how it should be eliminated.
No one knows yet exactly where the cliff edge is that TVA is about to fall off but it can’t be too far away. The light at the end of the tunnel has now been turned off; the sound you hear is the tunnel collapsing.
TVA was flawed from the start and it reinforces daily just how seriously flawed. Giving a federal government agency the power of eminent domain, exemptions from many regulations including an exemption from paying taxes, the free rein to charge whatever electricity rates it chooses with no appeal, has resulted in an out of control federal agency. You don’t have to know much about physics to understand that “what goes up mussed, mussed comes down.” And that applies to all sorts of things besides rockets.
CEO Tom Kilgore thinks Congress probably should look at raising TVA’s borrowing cap above its present $30 billion. But the numbers don’t add up. The more that is borrowed, the more interest on that debt eats into operating funds. That’s about 10% now. So the debt limit is raised. To what figure? When TVA today cannot figure out a repayment schedule that makes sense, borrowing more money only brings the inevitable sooner – receivership or liquidation. The latter once was recommended by the Government Accountability Office (GAO).
There is some question whether GAO would hold the same position today in TVA’s much worse financial condition. It seems that the person in the Washington office of the GAO most familiar with TVA’s operations has now been transferred to the TVA OIG office in Knoxville. This same person signed the OIG report that mildly chastised the TVA. No referrals for civil or criminal investigations, no penalties to TVA.
Somewhere in this mix is the question of the OIG’s loyalty as an independent watchdog. The OIG staff is paid from TVA funds; this questions the credibility of any OIG report about the TVA.
Ernest Norsworthy
emnorsworthy@earthlink.net
http://norsworthyopinion.com