On TVA dissolution, some suggestions January 5, 2009 ______ Suggestions on developing the Dissolution Plan For the Tennessee Valley Authority White Paper By Ernest Norsworthy December 2006 Now that the TVA land policy dust is somewhat settled don’t believe for a second it was just “we listened, we heard” from the more than 5000 comments received that convinced the TVA to adopt a comprehensive and permanent land policy. Presidential Executive Order 13406 clearly states that all federal agencies, including the TVA, must not sell or lease acquired property for private uses. Perhaps this clarification of how TVA-owned lands will be handled will help sort out the eventual privatization of TVA’s electrical production and transmission lines. For years TVA has talked about privatization and for years TVA has practically ignored doing anything about it. The strategy could go something like this but not necessarily in order: • Open TVA’s transmission grid (“open access”) to all power suppliers willing to pay a competitive fee. This act alone will bring TVA into compliance with the Federal Energy Regulatory Commission (FERC) order to open up a section of TVA’s transmission lines to East Kentucky Power Cooperative, Inc. (See TVA vs. FERC, US District of Columbia Court of Appeals.) TVA’s exclusive grid and service area impedes the flow of commerce between the seven states under control of the TVA and through and between states in the Eastern Grid not just for “seasonal power exchanges and reliability.” • Group some of the less desirable power properties with better ones in auction/bid lots. This should ensure that all power production facilities will be removed from federal ownership. Stage the auctions over a period of months to liquidate as much as possible TVA’s huge $25 billion debt and to keep disruptions at a minimum. • Immediately release distributors from their long term contracts with TVA if they so desire. This will allow those distributors to seek lower cost electricity from other presently available sources. TVA requires a minimum five-year notice; a number of distributors have already given notice. • Immediately cease buying even more surplus power units for use only during peak power needs. Additional nuclear power soon will be coming on line; TVA is on the verge again to be overbuilding electrical capacity. • Immediately allow suppliers offering cheaper electricity rates to use TVA transmission lines. • Cease immediately the paternalistic requirement that TVA approve all nonpower expenditures by TVA distributors. (See TVA Office of the Inspector General report www.tva.gov/oig ) • By Executive Order of the President, bring in executive level staff from other federal and state departments and agencies to be headed by a non-government liquidation firm. This team, a Task Force, Commission or some such organization, would develop a phased plan of dissolution with the goal of abolishing the TVA. The Team itself would be closed down by a date certain. Part of the Plan would include finding jobs for displaced TVA employees for those not transferring to private utility companies; a union representative also would be included to receive grievances. • The Dissolution Plan would be devised to be the least disruptive to market forces and to TVA distributors for a smooth transition period. Many of 8.6 million users of TVA electricity would have for the first time the ability to choose among electrical suppliers. • Financial aid to states and communities as payments-in-lieu-of taxes would continue at the present rate for two more years then stopped. Other long-term financial agreements with the TVA (other than bonds) will be negotiated for completion within six months of the beginning of the Dissolution Plan. • All health and retirement plan obligations will be transferred to the appropriate federal agency or agencies. • Form a special unit in TVA’s Dissolution Plan to deal with the many legal wrangles that are sure to come since the new Land Policy was issued. Fold in the suits now pending in which TVA is a litigant. • The Dissolution Plan should have at its core a time line of activities with their planned and actual completion dates. • Assign the various parts of TVA to appropriate federal agencies such as the surplus 293,000 acres to the National Park Service for future national park expansion. Some properties should be allotted to the states for development of state parks. • Direct loans or grants from TVA such as the Economic Development Loan Fund should cease immediately; those loans currently in effect will either be transferred to the appropriate federal agency or be negotiated to an early settlement. TVA was never intended to be a lending agency or a bank. • TVA should ramp up its installation of scrubbers and other clean air devices on all its coal-fired plants. Long ago, TVA should have taken the lead as a federal agency to make our air as clean as currently possible. • There should be no more TVA funds used for experimentation. Other agencies and sources have a far deeper involvement in anything TVA has viewed as “experimental.” Refrain from using the statement that TVA is “self-financing” because it requests no appropriations from Congress. It is misleading and some consider it a false statement because TVA goes through the backdoor for financing its operations through the sale of bonds “…and (TVA) is required to be self-supporting from power revenues and proceeds from the issuance of debt” (underline supplied.) TVA’s debt is now estimated at $25 billion. Summary In summary, it is past time for the federal government through its agent the TVA to get out of the way and allow consumers more freedom of choice between electricity suppliers; to open up for the first time the 17,000 miles of TVA transmission lines to permit normal commercial traffic over them; to let competitive markets prevail and to return to each of the seven states in which TVA operates their rightful control of public utilities. TVA has just hiked its electricity rates again and not one public watchdog agency (PSC’s) in the seven states involved can do anything about it. _______________________________________________ Footnote January 2009 – When the above White Paper was written in 2006, I did not believe that conditions and events surrounding the TVA hardly could worsen; I was badly mistaken. Since then, in the latest of major TVA management blunders and more; TVA has allowed what some consider the worst preventable environmental disaster in U.S. history at the coal-fired Kingston plant in Tennessee at an undetermined cost, possibly in the billions of dollars. The TVA board and management increased electricity rates by 20% and at the same time increased the CEO pay to a potential $3.7 annual salary; both in the midst of a severe economic downturn. For a list of possible criminal investigations of the TVA, click on link “Criminal investigations of TVA dam debacle?” It looks like the erstwhile congressional oversight of the TVA including that of Tennessee senators Corker and Alexander and a long list of congressmen in seven states have long forgotten their own responsibilities. One of those responsibilities was to have reacted with a much earlier “wake up call” from these watchdogs of congress, to have initiated much earlier the necessary reforms of the TVA including its eventual dissolution. Now they themselves might find they are targets of criminal investigations for malfeasance in office, for their “look the other way” attitude regarding egregious TVA actions. With some misgivings that it will not happen, the Senate Hearing on the TVA January 8, 2009 still should be as broad as it is deep. January 5, 2009 _________________________________________ In two and one-half years since the above footnotes, more disasters have befallen the TVA. The debt now owed by TVA’s ratepayers is now pushing its $30 billion limit and surely will exceed it by billions more if all the items in the pipeline are constructed. The court cases against TVA and others concerning the Kingston disaster are to be heard in September. The estimated cost to ratepayers already goes past the billion dollar mark. The Green Power Switch program falls $3 million short in providing the payoff to consumers for premium sales of solar electricity back to TVA. In other words, TVA ratepayers are short in voluntary GPS payments for the Generation Partners program for which it never was intended. The GPS program was intended since 2000 to help pay for “green” projects such as wind, bio, solar and other renewable products. Generation Partners is a straightforward solar subsidy program that was devised long after the GPS program. Now TVA says the GPS is not enough to subsidize the Generation Partners by some $3 million this year alone. The problem is that TVA cannot account for all of the money paid into the GPS account. It appears that some of the money was used for other purposes. TVA will not or cannot clarify this. April 2011 storms decimated TVA’s grid structure and it is estimated to cost $200,000,000 to repair it. Another cost to TVA ratepayers among other very spurious projects. Apparently TVA is eyeing ways to beef up the fragile TVA grid. More costs to ratepayers. With the almost certain down rating of TVA’s credit line by several rating agencies, the extra cost of borrowing money goes directly in the lap of ratepayers. When all of these extra costs to ratepayers are totaled, the cost of electricity to them will go dramatically up. #end# Ernest Norsworthy August 3, 2011

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