TVA fails Act test – power costs more than 4 regional electric companies

TVA fails Act test – power costs more than 4 regional electric co’s
February 24, 2011

At TVA’s board meeting in Murphy, N.C. on February 18, 2011, in the opening page, a rather glitzy promo piece of things to come, TVA captions “VISION” ‘One of the Nation’s Leading Providers of Low-Cost and Cleaner Energy by 2020’

Follows is a list of things it purports to be a leader in or to improve by 2020, that’s right, nine years from now. These are:

Low Rates; High Reliability; Responsibility; Cleaner Air; More Nuclear Generation; and lastly, Greater Energy Efficiency

“Acting to meet the region’s needs for the future, while improving our core business today” is the tag line. Except for a tiny TVA logo in the upper right corner there is nothing to lead the reader to believe this was any more than an investor-owned utility’s self-promotion piece.

So you see, TVA starts out in its usual fashion of not quite telling the truth, purposefully hiding the fact that the Tennessee Valley Authority is a federal agency formed by the TVA Act of 1933. TVA has no stockholders and the charade of being a stockholding company is complete on just the first page.

Dwelling on this point a moment, this is one of the key problems with the TVA, pretending it is something it never can be, a publically traded shareholding company. Unless, of course, the government sells it outright to the highest bidder; I doubt the new owners would like to carry the stigma of being a former federal agency, a confusing one at that.

Through its many statements and actions over the years TVA does not dispel the notion that it is not a stock holding enterprise. In fact, TVA promotes it by having two different website addresses, one with a “dot gov” suffix, the proper one and the other a “dot com” ending. The latter usage clearly is misleading. The wise should know the chasm of difference between dealing with the federal government and a regular commercial enterprise.

This has been such a source of confusion for over 80 years that only until recently have other federal agencies stopped deferring to TVA’s unusual status. They have been reticent to criticize TVA, after all, the TVA is a federal government agency. TVA gladly wears which ever hat that seems to fit the best at the time. A fraudulent example of that is TVA’s AAA credit ratings which it gladly accepts thereby getting lower financing rates than any other utility; it costs those utilities millions of extra financing dollars. See GAO report

TVA’s financing documents explicitly state that the U.S. government does not guarantee any of TVA’s financial instruments but the rating agencies, apparently believing in the tooth fairy, do not believe the government would allow TVA’s insolvency. P.S. – TVA already is insolvent on paper, maybe that’s why CEO Kilgore gloats a bit about TVA’s overwhelming debt obligations. It makes TVA a less attractive candidate to sell TVA’s assets.

Low Rates

Here we go again, misleading even in the header of TVA vs. “Regional Holding Companies”. It’s hard for TVA to spit it out, it’s TVA vs. Electric Utilities, it’s not just the more vague “holding companies”, it is electric utilities that are the companies, and those companies are in small print.

Notice that TVA has been misleading with the statement, “TVA’s electricity prices remain below the national average” (from an internal TVA memo to employees) yet it clearly shows on this chart that there are four regional electric utilities with rates lower than TVA’s rates and the adjacent Southern Company with about 1 cent per KWh higher. TVA should change that promotion statement to “TVA’s electricity prices remain above the regional average”.

Under the heading “Monthly Power Use”, TVA here tries to depict a steep increase and decrease of power usage by changing the chart’s ‘x’ and ‘y’ axis and including the highest peaks in one calendar year. If this information had been shown over the past five or more years, a different and more meaningful picture would have emerged.

The kWh peaks would be the same but usage would show the changes in the economy over a longer period. TVA does not explain the shades of red above about 1300 kWh average; there always have been peaks in electricity usage despite efforts to force a reduction in them. Here’s a suggestion of how to reduce those peaks through incentives. For those voluntarily reducing electricity usage during peak periods, offer a reduction in rates, not to force higher rate payments. Where does this money come from? TVA doles out about a half-billion dollars yearly to slush funds throughout TVA’s territory with their so-called payments in lieu of taxes.

TVA can change this very quickly but perhaps to the consternation of the suckling pigs who gulp down the “free” political money.

This colorfully shaded chart would have been very useful if it had shown what the increase in cost per kWh in the “red” areas that TVA plans to implement April 1. They plan to have their 155 distributors figure out what the individual customers’ rates will be, “some more than $3, some less $3 per month”. This is a clear violation of TVA rules which say all members of a class of users must pay the same rate.

TVA should be greatly embarrassed that with all its advantages it receives as a federal agency, there are four other electric utilities in the area with lower rates. These are stockholder owned utilities that obviously have been better managed even suffering from TVA forcing them to pay higher rates for their borrowed money and their having to pay fair taxes to each state they do business in. TVA pays no taxes and tries to substitute only a 30% payment of taxes due with the so-called payment in lieu of taxes ruse. And this money does not go through the regular tax paying process to these states, no, they are doled out to political slush funds that may or may not benefit the people. Rightfully, TVA’s so-called payments in lieu of taxes should be called “bribes” in lieu of taxes.

TVA effectively pays two-thirds less of their fair share of state and local taxes compared with other nearby utilities. TVA determines the amount it pays through its own devised system of “payments in lieu of taxes” and not from tax rates prescribed by individual states and local communities, rates that are approved by states’ public service commissions.

TVA’s “vision” of low rates has long ago faded into a past memory; today’s rhetoric only makes TVA more of a laughingstock.

High Reliability

This series of slides* other than being colorful, are particularly meaningless. The first one, “Interruption Duration” shows a brilliant orange chart dating to 1982. The obvious reason for going back that far is to show the great variation between 1982 and 2010. In the recent era beginning in 2002, it appears that power failures spiked in 2003 and again in 2008 decreasing slightly in 2010.

Interruption Frequency – There is no way a customer can relate to this chart particularly when “Connection Point” is not defined.

Reliability 2011 – Another colorful but incoherent chart. What do the different colors mean? The statement “System Minutes” of Load-Not-Served is meaningless to a lay person. Can’t tell whether it is “good” or “bad”. And why did it start at zero October 1, 2010, was there no history of this information before then? Does it start at zero at the beginning of each new fiscal year? What does the squiggly red line depict?


“Meeting Our Responsibilities” – An explanation of how TVA failed to meet its responsibilities would have been a good preface to this section or at least to elaborate on just what TVA’s responsibilities are. It is irresponsible to shade over TVA’s real responsibilities with “the latest on TVA’s Integrated Resource Plan”.

That effort has been particularly meaningless when after all of the many, many meetings (some of them in secret) there is not even a consensus on which direction TVA should take. It’s like a football coach asking the players “should we punt?” TVA already has punted on this one.

Interesting that TVA states “Last of river ash was removed
from Kingston on December 1, 2010” under Meeting our Responsibilities instead of saying that TVA was responsible for the Kingston ash dam disaster and they’re still working on repairing the damage. “And by the way”, dear ratepayers, “I’m charging you a billion and a half dollars for TVA’s mistake.”

Yes, it was irresponsible for TVA to “partner” with the Environmental Protection Agency to contract with a sanitary fill owner out of Atlanta to dump tons and tons of toxic ash on Perry County Alabama, a particularly impoverished area. And with that same EPA partnership, deciding to stop hauling away the ash and replacing it right where it was as a “dry” pond. And the poor of Perry County are left “high and dry”.

This shows TVA has reached the heights of irresponsible management.

If TVA wants to talk about being responsible, please explain why TVA management let their power production equipment run out because of poor maintenance practices; or how TVA’s dams are silting up lessening the capabilities of the cheapest and environmentally cleanest form of electricity there is – hydroelectricity.

It is irresponsible for TVA to contract for wind powered electricity from hundreds of miles away with no consideration given to the ones who must pay extra for it, the ratepayers. As if TVA could find no other claim for “meeting its responsibilities”, listed is a government sponsored award for one of the “best” websites of a federal agency.

Obviously it is the glitz that dazzled them, not the content of TVA’s site; it is most difficult to track down information that may be in there somewhere but it is not arranged easily to be retrieved. Try it yourself, put in “TVA budget” and you’ll come up empty handed. Of course, there are some things that TVA does not want anyone to know too much about.

It is irresponsible for TVA to claim meeting its responsibilities includes “The trail system at Raccoon Mountain”. How about the flowers and trails around the Colbert steam plant too?

“Measuring Our Reputation” must be a hard one for TVA to take. Besides not showing any source of their opinion poll or who and how the survey was made and the questions asked, a rating of “79.3%” must be quite galling. The first and logical question is why does the TVA believe it must have a survey for a “Public Opinion Favorability Rating” at all? Must have been a lot worse in the past. What does it prove?

The present administration in Washington has a very low approval rating and that is more believable because the polling companies mostly are very reliable. Maybe one of those companies should do the next opinion poll on the TVA.

Under “Jobs and Capital Investments” there are no sources shown for any of these figures so they all must be questioned. And “Economic Development Highlights” equally are suspect.

In a two month period (which period?) is claimed “$642 million in total investments, 4,300 jobs retained, and 500 jobs added”. There is no source for these figures especially suspect is the “4,300 jobs retained”. Looks like sky hook estimates to me.

The chart titled “Capturing Fuel Costs” depicts far too much information to be understandable. There is no narrative explaining it; Mr. McBride even wanted to know what it meant. That question alone shows that TVA has some kind of different motive in mind. This appears to be a kind of “shuffle” which is not explained very well by TVA staff.

The remaining charts are just about as unintelligible. If TVA were clearer in why it is doing things, the real reasons why, then maybe some of their initiatives might be palpable. Right now, all of their moves remain suspect.

Ernest Norsworthy

*These charts are good examples of “How to Lie with Statistics”, written by Darrell Huff some 50 years ago. This small book is suggested reading before looking at any graphical charts or figures provided by the TVA.


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