Opinions Opinions Opinions

TVA dictating its own rules

 November 27, 2008

The more I read and write about the TVA the more I am convinced that formerly independent thinking Southerners in TVA’s massive 80,000 square-mile territory have all but given up their sovereignty and independence by relying too much on the federal government.

As an anomalous appendage of the U.S. Constitution, the TVA rules. It not only is self-regulating it also is the enforcer of its own rules. If that does not sound like the style of a dictatorship I do not know what else does.

A 20 percent TVA rate increase followed by a $500,000 salary increase for TVA’s CEO smacks of greed and contempt of the people it is supposed to serve. Then comes the great compromise – a 6 percent reduction in the “fuel” charge come January 1, 2009.

Recently TVA’s CFO Kimberly Greene stated that “their crystal ball is not working”. The only thing I get from that is that TVA management has no idea of how to manage a $10 billion agency in reliance only on a “crystal ball”. Of course, the federal government never has managed well any kind of economic enterprise and the TVA stands out as the perfect example.

Editorially and in some news reporting, many writers have succumbed to the spell of TVA’s “crystal ball” economics and seem to joy in self-flagellation, in hat-in-hand obeisance.

“Oh, it’s the drought that’s causing all the problems; those profiteering suppliers raised their costs more than we anticipated; and our operation and maintenance budget keeps climbing”. All typical TVA management excuses.

So TVA wants to cut its weed clearance costs, but by doing so TVA violates its stewardship charge to maintain all of the rivers, lakes and tributaries it owns. One solution would be for the TVA to return all such properties to the states’ in which they reside; the states then would become stewards of the “weeds”.

A reasonable good faith effort for TVA management would be to cut the half-million dollar raise to CEO Tom Kilgore (voluntarily) and to cut out all bonuses to TVA employees for at least the next year.

TVA is reacting to our present economic downturn which affects practically everyone in America just like any other government bureaucracy – raise taxes and salaries too.

TVA was supposed to be as nimble as a business in responding to the crises that come from time to time. Far from it, the TVA hunkers down and tries to protect its own existence at the cost of representing the people.

The callous 20 percent raise in TVA rates is a recent example; there are many others. TVA cannot get its financial reporting straight even while paying top dollar for its own internal and two external auditors. TVA’s financial reporting to the Securities and Exchange Commission dating back to 2006 cannot be relied upon according to the TVA; management does not know when the updated reports will be submitted.

In an obvious attempt to keep information from the public by not posting its video of its October 30 board meeting, the TVA appears to be hiding something, and is not forthcoming.

In addition, the previously scheduled TVA board meeting of December 2 has been cancelled.

I have contended for a long while that the TVA has grossly been mismanaged and that drastic steps must be taken soon to prevent its entire collapse under a huge $25 billion debt and error after error in management judgments.

For a compilation of my articles on the TVA see http://norsworthyopinion.com also see http://norsworthyattheshoals.blogspot.com

Ernest Norsworthy

emnorsworthy@earthlink.net

TVA – too big to fail?

November 16, 2008

When the TVA decides to “cut” the cost of de-weeding, a relatively minor cost in their $10 billion budget, you know there’s trouble right here in River City and the Music Man is standing in the wings ready to serve the papers.

If the suddenly cost-conscious TVA budgeteers want to cut out some fat, especially after raising rates by 20 percent in October (more than 30 percent this year), they can start with the $500,000 raise for CEO Tom Kilgore. And add all of the lesser bonuses and raises the Board authorized in October.

TVA management claims it is supposed to operate the Tennessee Valley Authority like it was a business. And that has been a fallacy for 75 years. The TVA cannot ever be something other than a federal government agency with supra authority (no other federal agency has as much latitude) and it never can operate with a “profit and loss” statement. The federal government is not supposed to operate at a profit, it is supposed to “break even”, income and expenses being equal.

But it certainly can operate at a loss with a $25 billion debt. Besides being anti-free enterprise, TVA gets other perquisites such as low bond rate financing. But maybe not as competitive as a triple “A” rating anymore. Credit markets are sucking wind after the Fannie Mae and Freddie Mac debacles, those two mortgage backing government sponsored enterprises (GSE’s) that have broken world financial markets. By a trillion dollars? No, let’s make it trillions of dollars of worthless (toxic) paper.

But these sterling examples of government sponsorship carry the good faith and credit of the federal government, in other words, American taxpayers are left holding a bag full of worthless paper.

Not so with TVA; in an oddity of financial sleight of hand the U.S. Government explicitly does not guarantee TVA’s bond financing. Up until now, the buyers of such bonds have indicated they do not believe what their agreements say in very plain English – no guarantees – even if it is the federal government.

As an indication of TVA’s very weak financial situation, they have entered into an agreement with the Bank of America to borrow at prime rate $1 billion for one year. The cost of this money can fluctuate according to the market.

A most unusual part of the agreement is the clause “Now, therefore, In consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged …” This is boilerplate language in securing a loan. Can the TVA put the U.S. Government in hock?

The question is, does this commit the federal government to give up the “premises” if the loan is not paid (in default)?

In light of TVA’s stated financial situation that sales of electricity are declining and probably will do so the next year, where is the money coming from to repay this Bank of America loan and any other bond payments that may come due.

TVA management should come clean and state clearly how they plan to not only reduce their $25 billion debt which they have pledged to do numbers of times but also how will they repay the billion dollars they borrow from the Bank of America in one year?

The creaking ship known as the “TVA on the Shoals” has come to its inglorious end and should be scuttled before it crashes in on itself.

Ernest Norsworthy

emnorsworthy@earthlink.net

http://norsworthyopinion.com

P.S.

Why wait until January 1 to reduce the “fuel charge” by 6 percent? Why not now?

EN

TVA's weeds of destruction 

November 14, 2008

Time, tide and weeds wait for no one, particularly those weeds in Alabama’s Guntersville Lake. Weeds will not wait for a meeting with the TVA two months from now (changed to December 17) only to be “urged” to take responsibility for its mandate of stewardship of the lake which it owns.

The real issue is not whether but when will the TVA do its required job of maintaining the ecological health of all of the rivers and tributaries it owns and for the health and safety of citizens in the federal territory it controls.

It takes only a spark to start a wildfire that is uncontrollable such as the one today in Santa Barbara, California. A hundred homes are gone with a thousand more in danger.

Maybe it’s weeds that spark a bonfire of opposition to the TVA and its heavy-handed policies that are approved by not a single elected state or local government body in seven Southeastern states. TVA’s rule is absolute.

TVA management has made many grievous and costly mistakes over the years and maybe the last straw was when after boosting electricity rates by 20 percent the Board-of-Seven gave TVA CEO Tom Kilgore a $500,000 raise. Ah, but the sop will be a 6 percent rate reduction (“fuel adjustment”) come January. Talk about a straw man to knock down.

I believe the people are beginning to see behind TVA’s dissembling weeds of destruction and are ready stand up against their own government (“We the people . . .”) and to kill the weeds that have us in a stranglehold.

Ernest Norsworthy

emnorsworthy@earthlink.net

http://norsworthyopinion.com

TVA weeds hide real financial problems

November 13, 2008

Where there are weeds, there usually are lost golf balls; in this case, the TVA seems lost in a sea of irate lake dwellers at Guntersville Lake in Alabama. They are demanding that TVA not “cut” its weed reduction on the lake.

Alabama state senator Lowell Barron, ready to fight for his constituents, has formed a committee and promises “to urge” the TVA next January not to stop its weed largess program. Weeds do not wait, not that Barron’s committee could change TVA’s monolithic mind unless it wanted to, a very rare occurrence.

That’s the problem with a federal agency, there’s no way you can make it change its own tune without making a “federal case” out of it. And everyone knows the TVA marches to a different drum beat.

So don’t “cut” the weed cutting money? Why not get at the root of the matter and “cut out” the TVA entirely?

That agency has so dominated the Southeast that their paternalistic handouts seem normal.

TVA is a federal agency in deep financial trouble and weed whacking from here to Columbus (any Columbus) only pricks at their bottom line.

Wouldn’t a better question be to ask the TVA; “who owns Guntersville Lake?” If TVA owns it (I believe they do), they should maintain it. Period. They’re acting like a golfer looking for a lost ball in deep weeds.

For some time, I have advocated the abolition of the TVA; it has failed its mission many times over and it is the epitome of a government agency where no one is held to account for its many misdeeds. There is no “local control” or federal oversight either. Even some TVA-congressmen seem aghast that TVA’s CEO would receive a half-million dollar raise on the heels of a 20% rate increase (about $2 billion). Glad they finally noticed.

The niggling weed problem is nothing in TVA’s 80,000 square-mile federal domain but it may be symptomatic of a deeply in debt agency. For example, TVA just signed an agreement with Bank of America for a potential “bridge loan” of one billion dollars for one year. A peek beyond the weeds reveals what the real problem is. TVA already has a $25 billion debt.

I have recommended that TVA congressional oversight committees investigate a number of areas of TVA’s mismanagement and plain incompetence.

See http://norsworthyopinion.com for a short list of them.

Ernest Norsworthy

emnorsworthy@earthlink.net

An open letter to TVA Congressional oversight committees

Visalia, California

November 6, 2008

The Honorable Barbara Boxer, Chairman

The Honorable James M.Inhofe, Ranking Member

U.S. Senate Environment and Public Works Committee

The Honorable James L. Oberstar, Chairman

The Honorable John L. Mica, Ranking Member

U.S. House of Representatives Transportation and Infrastructure Committee: Subcommittee on Water Resources and Environment

Suggested areas for Congressional investigation:

·      Salary increase of the Tennessee Valley Authority (TVA) CEO based on false assumptions

·      Explain TVA’s unsubstantiated 20 % rate increase while  increasing the CEO’s pay by $500,000

·      Failure of TVA management to adequately protect TVA’s electricity grid from potential cyber-hackers

·      Explain why Congressional oversight of the TVA has been woefully lacking for decades

·      Explain why the Congress and Administration have failed to appoint and confirm the TVA Board’s full complement of nine members

·      Explain why the supposedly independent TVA Office of the Inspector General (TVAOIG) is paid from TVA funds

·      Clarify why and how the TVA could lose track of 550 computers; how security measures were maintained

·      Explain why the TVA consistently fails to reduce its $25 billion debt and how and why that debt soon will exceed its statutory limit of $30 billion

·      Explain the TVA delay in providing latest-technology scrubbers for coal-fired power plants

·      Explain the rationale of TVA giving cash to industrial customers to retain their business

·      Explain how a consortium of buyers of TVA electricity can finance new power plants that are partially owned by the consortium and by the TVA, an agency of the federal government

·      Explain why TVA management receives bonuses when gross management errors go unpunished

·      Investigate circumstances where it appears that bonuses override safety rules

·      Executive Order 13406 appears to have been violated recently in favor of a congressman  

·      Recommend legislation that would correct the many problems of the TVA; explore the possibility of privatizing the TVA sooner rather than at some distant time. Cheaper, non-subsidized electricity already is available nearby for some customers

TVA is an overleveraged federal government agency that has no possibility of becoming the “break even” agency mandated by federal law. Unlike government sponsored entities such as Fannie Mae and Freddie Mac, TVA purportedly is a self-supporting and financially viable agency of the federal government but without government guarantees.

TVA’s mission is so greatly changed since its 1933 incipience it is difficult to match the law with its activities.

I would be glad to assist in the development of the above points into suitable categories for committee review.

Ernest Norsworthy

Visalia, California 93291

emnorsworthy@earthlink.net

For further review: http://norsworthyopinion.com

TVA Report . . . October 7, 2008

Can the TVA survive the market credit crunch?

The failure of major financial institutions in America was caused by overleveraging below prime market assets, some even to an unsustainable 100 to 1 ratio.  As long as the subprime market paper bubble was being stuffed by these worthless mortgages, no one had to pay them off.

But inevitably, the market always tries to correct itself. And when these worthless mortgages could not be paid off when due (that is, the debt was higher than income) there were few options. To be taken over by a stronger financier at a loss? Bankruptcy? Or simply to close the business and wait for the hyenas to devour the remaining carcass.

Apparently many large companies bought into the subprime scam, some were bailed out by the government. Your government and mine now own 80 percent of the private AIG insurance company among other bailouts.

Then the rush by the Treasury secretary to throw another $700 billion into that black hole with another $100 billion in pork did nothing to stanch the bleeding. The following Monday, October 6, 2008, came the lowest one-time drop in the market of 800 points before recovering to about a negative 350 points.

World markets are shaky and the free flow of market credit liquidity has all but ceased. Lenders are not sure they will get their money back.    

It appears that this whole series of dominoes falling started with the out of control government sponsored enterprises, Fannie Mae and Freddie Mac. Their catastrophic impact on financial markets in the United States was forewarned three years ago and if heeded, this severe crisis could have been avoided.

How does the failure of those two GSE’s affect TVA’s financing? First, TVA is part of the federal government, not just sponsored by it. The buyers of the worthless mortgage paper knew that it was backed up by the federal government and that they had nothing to lose.

Buyers of TVA bonds have no such guarantee; in fact, the government explicitly states that it does not back TVA’s bonds. But the buyers of TVA bonds discreetly have stated they do not believe the federal government would let one of its agencies go bankrupt. This is confirmed by the rating companies (AAA).

TVA is coming to a place this fall in its financing scheme where it will have to float bonds to pay off existing debt interest. (“Rolling over”, refinancing debt).

The question then is, in light of the present turmoil in financial markets, will TVA still receive favorable interest rates? Or worse, no buyers of their financial instruments?

TVA’s declining sales (their only source of debt refinancing besides borrowing more money) combined with increases in TVA’s expenses do not bode well for the agency in its ambitious plant expansion scheme. 

Borrowing more money up to about the $5 billion statutory cap set by Congress just to finance debt would mean fewer dollars available to complete its multi-billions of new construction now planned. And this does not take into account the huge costs of refurbishing and updating fossil fueled plants to reduce excessive air pollution.

The reasonable course for the present Administration would be to liquidate TVA’s assets; to turn over the hundreds of thousands of unneeded acres of TVA land to the Department of Interior for further disposition; for the Corps of Engineers to assume complete responsibility for the Tennessee River and its tributaries (an agency with the longest and most capable experience in the history of the United States); and to return appropriate government functions to others including the Small Business Administration in the Commerce Department and the Fish and Wildlife bureau in the Interior Department..

Future construction, maintenance and financing of new power plants of all description would then be in the hands of the free, competitive market, a place it never should have been wrested from by an anti-competitive government in 1933.

In a timely (but maybe later judged very untimely), the TVA submitted to the Securities and Exchange Commission a report, “Other Events”, dated October 6, 2008. www.sec.gov  

This report briefly outlines TVA’s stated procedure for selling off part of a power plant in Mississippi totally owned by the TVA to a subsidiary of the Seven States Power Corporation its wholly-owned subsidiary, Seven States Southaven LLC (“SSSL”). SSSL paid TVA approximately $325 million and purchased an undivided 69.69 percent interest in the facility.  Funding for the purchase was provided through loans obtained by SSSL.  The loans (collateralized?) were provided by JPMorgan Chase Bank, N.A., CoBank, ACB, and Branch Banking and Trust Company.

The SSPC exercised an option to buy almost 70 percent of the power plant with a further option to acquire up to 90 percent by next May. TVA will in turn lease back SSSL’s interest in the plant. www.tva.gov

The obvious questions are:

·      Can the federal government (TVA) sell just a part of a total entity (a power plant) they presently own? This would be comparable to selling off say, one-inch squares of the Washington Monument. A hefty amount probably could be raised; the buyers would own a “Piece of the Rock”.

This puts TVA back into the “leaseback” position they            were in previously but now considerably muddies up ownership even more.

·      What would TVA’s lease payments be? Enough for the SSSL to pay off its loans?

·      How would this unsavory and overleveraged arrangement affect ratepayers? Do they become “part owners” also?

·      Do affected citizens (all 8.4 million of them) get a chance to vote on whether their rates are increased because of a “partial ownership” of the Mississippi plant and if so, by how much? A proration?

·      How does this new financial arrangement affect payments in lieu of taxes?

·      Since TVA will include electricity produced by this plant on their grid, it becomes fungible and inseparable from any other power flowing through TVA’s 17,000 miles of transmission lines. Does this mean the SSSL would own a fraction of TVA’s total production by virtue of SSSL’s ownership of 70 percent of the Mississippi plant?

·      Is this TVA’s way of selling off assets by relieving it of debt without relinquishing the power to maintain and operate those assets?

Clearly, this is nothing more than a scam by the TVA to take the Mississippi plant and possibly many others from a debt position that would affect its $30 billion cap and put it under “long term liabilities”. In this case, another $325 million to play with, all without congressional oversight or approval.

For these reasons and many others the SEC should immediately launch an investigation into the practices of the TVA to determine if the TVA is operating within the law, and whether or not TVA’s actions are designed to subvert the law.

Ernest Norsworthy

emnorsworthy@earthlink.net

TVA Report . . . September 21, 2008

TVA bailout could jumpstart Valley economy

To be fair, while the federal government is bailing out every failed government agency and many private ones, isn’t it time for the government to bailout the Tennessee Valley Authority?

TVA is in an impossible financial position that time and again after many promises says it will change its irresponsible financial ways.

In 1997 when their bold ten-year plan was announced, TVA said it would reduce its $27.6 billion debt by half by 2007.  And, oh yes, it said it would reduce electricity rates by 15 percent by the same time.

Today, TVA’s debt is $25 billion with stated plans to increase it by billions more, perhaps as much as $7 billion more. It is not the first commitment TVA has broken.  And interest on that debt is about to eat up much of its revenues, revenues coming from the electricity users in the Tennessee Valley.

The latest 20 percent increase in rates to consumers is due October 1 in a time where gas and other energy costs are crippling many American families.  Folks inside TVA’s 2500-mile fence (the kilowatt curtain) just took another hit with the increase and the realization that TVA’s bailout takes that huge $25 billion debt off of their backs.

The quickest and surest way to be released from the federal yoke is for the feds to liquidate TVA, pay off as much of its debt as possible and to return the business of operating and maintaining electricity plants to the private sector.

If the TVA becomes the responsibility of the federal government of which it already is a part, it would relieve the ratepayers of the responsibility of paying off any remaining debt owed by the TVA which could be considerable.  Even though TVA is a federal agency and the federal government explicitly does not put the full faith and credit behind TVA bonds, it would be doing so in a bailout.

Better start ringing the bailout button now for a chance for the TVA to be included in today’s bailout fury.

Ernest Norsworthy

emnorsworthy@earthlink.net

http://norsworthyopinion.com

TVA Report . . . September 19, 2008

“FOR SALE - overleveraged public utility – great stock potential if managed well – large customer base – growth possibilities exceed surrounding competition when not under federal control”

This ad or something similar could appear in business want ad sections if the federal government follows through on its stated plan to liquidate inefficient, costly and poorly managed government supported entities.

For too long Fannie Mae and Freddie Mac were allowed by the congress to continue their irresponsible and wildly costly ways which ultimately could cost American taxpayers untold billions of dollars. But TVA is not a sponsored government enterprise; it actually is part of the federal government. (TVA Act 1933)

Other major private companies also have been bailed out by the federal government which, of course, is broke and must pay those bills with fiat money by simply printing more and more of it.  The dire result is abundantly clear by looking at what happened to the German and Italian economies as precursors to WW II.  No patch up jobs here, the federal government must be reorganized head-to-foot.

If the TVA continues its parlous present direction, it will require the congress to raise TVA’s debt limit from $30 billion to a much higher figure.  The critical problem today is that the finance charge on $25 billion rapidly is eating up TVA’s liquidity.

Raising TVA rates this year by more than $2 billion dollars only pays for the increases in fuel and other costs. It is not at all clear that TVA factored in a larger than normal voluntary electricity usage reduction because of the imposed higher rates but also did not sufficiently consider overall usage reductions from a declining economy.

TVA’s own prediction of “flat” revenues next year should be enough warning that TVA’s financial system could collapse on itself sooner than later.  Then another “bailout” cry would be heard.

TVA today still suffers from egg-on-the-face poor management decisions in the 1980s and true-to-form, appears to be headed toward another layer of egg facial.

It also is interesting to note that the TVA has some of the highest paid federal employees in government with more than adequate “golden parachutes”.

Ernest Norsworthy

emnorsworthy@earthlink.net

TVA Report . . . September 11, 2008

TVA – a little Fannie Mae/Freddie Mac?  (Where’s the lipstick?)

The federal government has placed Fannie Mae and Freddie Mac into conservatorship and has fired the two executives in charge of them (they still will get a $24 million “golden parachute”).  It is not bankruptcy but it is “similar to a condition of Chapter 11 bankruptcy”. (NPR 9/7/08)

It also is a clear example of the government’s inability to run things, any kind of business.  And every time the government overlays its federal mentality over private enterprise activities the result is just another bailout by federal taxpayers.

There is some discussion in Washington that Fannie Mae/Freddie Mac financing should be like the TVA, except placing some parts of it under direct appropriations and the rest secured by mortgages.  Squeezing a balloon only moves the air to a different part of it; the amount of air remains the same. All of the debt is still there but mostly “off budget”.  More smoke and mirrors.

TVA is moving to an unsustainable financial condition where financing its debt consumes far too much of its revenues and by necessity TVA must increase its rates more and more.  Already other utilities with lower rates than TVA’s are Georgia Power, Ohio Power, Kentucky Utilities, and Louisville Gas and Electric.  (TVA report 8/20/08)  Many other utility rates were not that much higher than TVA’s.

For the government to say there is comfort in TVA’s financing model is the same as saying the Emperor does wear clothes.  The TVA is not a stable financial entity.

The movement should be toward the liquidation of federal agencies such as the TVA and to let America’s entrepreneurial economy perform.  Believing in an empty suit is to believe there is an Emperor.  (Where’s that lipstick?)

Ernest Norsworthy

emnorsworthy@earthlink.net

TVA Report . . .   September 10, 2008

TVA rate hikes for North Alabama citizens cannot be changed by Alabama Public Service Commission

An Associated Press report (Times Daily 9/9/08) said the Alabama PSC members “hope to scale back Alabama Power Company’s request for a record rate hike of more than 14 percent for homes and nearly 25 percent for industries.”

Alabama citizens in TVA’s territory, however, will not get the benefit of their own public service commission to challenge TVA’s rate hike of about 20 percent.

TVA, a federal agency, has the unchallengeable authority to raise electricity rates in its 80,000 square-mile territory in seven Southern states whenever it chooses and for whatever rate it chooses.  Individuals need not appeal those increases.

For many years, TVA provided below market electricity rates until circumstances began to overcome its ability to continue successfully to finance its debt consistently.  Some distributors have decided to remove themselves from TVA’s territory and to at least give their customers a chance at lower rates; to be controlled by state regulators instead of the federal monolith.

Other utilities with lower rates than TVA’s are Georgia Power, Ohio Power, Kentucky Utilities, and Louisville Gas and Electric.  (TVA report 8/20/08)  Many other utility rates were not that much higher than TVA’s.

These are some of the reasons why it is so important to remove the federal government from the rate-making process, to enable citizens to be heard under the aegis of their own elected officials.

And it must be unsettling to investors in TVA's financial instruments with the following statement:  (www.tva.gov) 

“Cautionary Note Regarding Certain Previously Reported Financial Results:

Investors and others should not rely on TVA’s financial statements for the fiscal years ended September 30, 2006 and 2007, and the quarterly periods ended December 31, 2006, March 31, 2007, June 30, 2007, December 31, 2007, and March 31, 2008, due to errors in the estimation of unbilled revenues. The financial statements for these periods are being restated and will be filed with the Securities and Exchange Commission (the "SEC") when the restatement process is completed. These reports will be available from the SEC through www.sec.gov, and copies will be available from TVA's website. Please see TVA's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 5, 2008, for more information.”

Some of TVA’s statements missed by hundreds of millions of dollars.

Ernest Norsworthy

emnorsworthy@earthlink.net 

TVA Report . . . August 27, 2008

Fraud – TVA walks the fine line

When is an act fraudulent?  Is it when it is performed or when there is proof of injury?  

Definition of Fraud

All multifarious means which human ingenuity can devise, and which are resorted to by one individual to get an advantage over another by false suggestions or suppression of the truth. It includes all surprises, tricks, cunning or dissembling, and any unfair way which another is cheated.

Source: Black’s Law Dictionary, 5th ed., by Henry Campbell Black, West Publishing Co., St. Paul, Minnesota, 1979.

Maybe it is the appearance of fraud that is most troubling.  It appears that the TVA mislead the public into believing that its accounts receivables far exceeded the true amount by hundreds of millions of dollars in a 2006 report.  Subsequent reports underreported the receivables.  TVA is now revising those Securities and Exchange Commission (SEC) reports from 2006 forward and does not know when they will be completed.

Two outside and independent auditing firms failed to recognize those misstatements.

From time to time, TVA puts up for sale it’s so-called “power bonds” usually a billion dollars worth.  It is clear that potential buyers of those bonds with the knowledge that TVA grossly misstated its accounts receivables, not on just one occasion but on several occasions, may give pause to a) the  accuracy of all of TVA’s financial statements and, b) the viability of TVA’s bonds.

This is particularly significant because the federal government does not provide its full faith and credit behind those financial instruments.  However, rating companies still give the TVA bonds a AAA rating because they do not believe the government would allow the TVA to declare bankruptcy.  

One of the elements of fraud also can be the omission of key facts in an attempt to “cover up” mistakes of management.  The TVA seems very reluctant to share information that may be important to bond buyers, vendors, and its own staff and to its customers.

It appears that TVA did not prepare for the deluge of criticism of its 20% rate hike October 1 brought on by its insufficient time for their customers to make their own preparations for it.  The TVA does have discretion in setting the timing of rate hikes and obviously, they have abused it.  TVA seems to have been caught unaware of spiraling fuel costs and had to resort to “panic” rate increases.

It is doubtful that the public service commissions in any of the seven states in TVA’s territory would have allowed such a steep rate hike all at once.  But the PSC’s there have to answer to their own electorate, the electricity users, and do not have the unilateral power the federal government does to mandate those rate increases.

The TVA Act represents a flaw in the representative form of  government provided in the U.S. Constitution, i.e., it is “We the people” who have the power over government, not the reverse of it as practiced by the TVA.

Fraudulent or not, the TVA continuously fights against rules  other utilities have to abide by and only with great reluctance upgrades it coal-fired plants with the latest pollution scrubbers.

It could have been fraudulently that TVA conspired with witnesses in their trial against the North Carolina Attorney General to claim that the TVA did not pollute past the North Carolina state line.  Apparently the bad air just disappeared at that point.  One TVA witness claimed that cutting the pollution from TVA’s coal-fired plants would most benefit the people of middle Tennessee and North Alabama.

Concealment and cover up probably, after the GAO report of May 21, 2008, “Weaknesses in Control Systems and Networks”, was released showing the serious vulnerabilities of TVA’s production and executive computer systems.  Their response?  “We’ve fixed it” and the usual “we’re working on it”. – “Security reasons” no doubt kept this major management mess up under wraps.

If not fraud, then a cover up of the major mishandling of 5,550 TVA computers that at first could not be accounted for.  Some apparently had been given away to a school (at least three of them); this brings up the question of whether government property disposal was handled within guidelines.

This may be no more that a major management debacle but it appears that fraud could be involved.

Part of TVA’s problem is its monolithic attitude and its undecipherable Web site.  Search subjects are so general that it may require looking at hundreds of entries that are not in chronological order but according some other arcane method of organization.

Is it fraudulent to claim that TVA’s “principal offices” reside in Muscle Shoals, Alabama?  The TVA Act says that is where it is supposed to be or in the “vicinity” of it.  Knoxville, Tennessee really stretches the word “vicinity”.

And is it a fraud for the TVA not to conform to the TVA Act in other respects such as its charge to develop new and cheap fertilizers and to assist in developing better farming techniques?  That stopped decades ago but the law has not changed.

Some of TVA’s land deals and swaps are highly questionable.  A recent one involved a North Carolina congressman who stands to profit greatly from one of TVA’s approvals.  And that congressman is part of the Congressional TVA Caucus, a body whose job it is to oversee TVA to prevent just these kinds of dealings.

Also, it appears that the transaction did not conform to the requirements of Executive Order 13406 which specifically prohibits such action.  If suit is brought against the TVA for improper practices, perhaps it too could be called fraud.

Finally, does the fact that the TVA Office of Inspector General is paid from TVA funds constitute fraud?  The OIG is supposed to be an arms-length independent reviewer of the TVA.  The question is, “Does the dog bite the hand that feeds it?”

Ernest Norsworthy

emnorsworthy@earthlink.net    

TVA Report . . . August 21, 2008

TVA’s raw-power anti-competitive money grab  

“With the swipe of a pen. . .”

A vestige of FDR’s New Deal socialism, the Tennessee Valley Authority, survives management blunder after management blunder.  How, you may say, does a $10 billion power facility survive in a competitive, free-market economy?

Well, it cannot unless some very large government strings pull the TVA out of the world of real competition.  But despite its financing advantage, lenders do not believe what the government explicitly says it will not do, that is, to give those lenders a guarantee of the full faith and credit of the United States government.  And financial rating companies give the TVA their AAA ratings with statements like “the government never would permit the TVA to default.”

Financing capital construction critically depends on the cost of that money.

Until recently, the TVA has been claiming “sovereign immunity” to thwart legal action against it, however, a federal judge ruled out that defense in an air pollution suit brought by the State of North Carolina.

TVA is in the midst of a paradoxical campaign – sell more electricity and conserve more electricity.  They are now predicting that income will be “flat” next year, yet they want to continue additional construction on two abandoned nuclear reactors (Bellefonte) in North Alabama.

With the need to purchase more and more power from outside the TVA “fence”, the federal agency is becoming more and more a broker of electricity instead of a producer of it.  And there is a net loss to TVA for it by at least 5 percent, the amount TVA is obligated to dole out to states and localities.  Some money, strangely, goes as far away as Illinois.

The out-of-control federal agency, fearless from congressional oversight or having to answer to any of the 8.8 million citizens whose electric bill just went up 20 percent “with the swipe of a pen” as one writer puts it, is unique in the federal government.

Here’s what a former TVA employee had to say about the rate hike, and more:

“With the swipe of a pen, TVA's annual revenue has increased 2 billion a year or close to 20%.  How can this travesty take place without some form of representation for the people of the Tennessee Valley?

I never fully understood the unconstitutional powers of TVA until I started reading your articles.  At (my) company, we must bring everything to the table in front of the PSC.  We are scrutinized inside and out and rightfully so.  Any ratepayer deserves a voice at a minimum.  I am speechless as result of the latest rate increase.  When will the people of this country open their eyes to the greatest mismanagement in federal government?

I don't think any arm of the federal government has as much power over the people as does TVA.  The happiest day in my life will be when the TVA is dissolved and the people are free. 

I think daily of the unethical, unsafe,  and dishonest business practices I was exposed to daily.  One day I hope to have my voice heard”.

Others are just as outspoken about the TVA but most are afraid to express publically their views for fear of retribution.

TVA’s unilateral authority over so many people to provide their electricity is unprecedented in America.  And, as is always the case, changes in the structure of our federal government must begin at the bottom, with the people themselves.

Ernest Norsworthy

emnorsworthy@earthlink.net

http://norsworthyopinion.com

TVA Report . . . August 12, 2008

TVA – how to justify the greatest rate hike in 75 years?

“As in pre-American Revolutionary days, an oppressive British government demanded a stiff tax on tea arriving at the port of Boston to be paid by American citizens to pay for an over-spent British administration.  Today, that demand is from the TVA and the increase is

to pay for the many extravagancies of the TVA administration”. Ernest Norsworthy 8/12/08   

Federal price controls in American do not work even though they have been tried repeatedly and in every case, they have materially disrupted the normal flow of our market economy.

It is time now to cease federal price controls of electricity provided to over 8 million households in an 80,000 square-mile federally controlled territory in the Southeastern United States.  Those households well could be considered to be behind an “iron curtain” 2,500 miles long and denied some of the basic rights guaranteed in the U.S. Constitution.

And now, this federal agency that controls prices in the Tennessee Valley tremendously is going to increase the prices (a tax) it levies for electricity on those 8 million consumers estimated to be 20 percent or even more on October 1, 2008.

Electricity in most of Tennessee and parts of Mississippi, Alabama, Georgia, Kentucky, No