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Should the Federal Government Sell TVA? by Dr. Mary English


On April 10, 2013, President Barak Obama released his proposed FY 2014 budget. In the budget’s
chapter on “Creating a 21st Century Government,” under the heading “Reform TVA,” there is a one paragraph
discussion of the Tennessee Valley Authority. It concludes with this statement: “Given TVA’s debt constraints and the impact to the Federal deficit of its increasing capital expenditures, the Administration intends to undertake a strategic review of options for addressing TVA’s financial situation, including the possible divestiture of TVA, in part or as a whole.”

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A number of divestiture scenarios are possible. For example: (1) TVA could be acquired by a single
investor-owned utility (IOU). This scenario is unlikely, especially if the IOU operates in the Southeast,
because the Federal Energy Regulatory Commission (FERC) probably would object to its stifling effects
on wholesale electricity competition. (2) TVA could be divided up among IOUs in the Southeast. This is
more likely to be acceptable to FERC. (3) TVA could remain a wholly-owned federal corporation, but
some of its assets could be sold to IOUs and/or independent power producers. This is also a plausible
scenario. If pursued, the main issue would be which assets and with what effect on what remained of
TVA.

The possibilities are numerous, and it is premature to speculate about the outcome of the Obama
administration’s review. Therefore, this policy brief mainly summarizes factors that should be taken into
account in that review. The brief begins with background information. It ends with a list of key points
relevant to the prospective decision about TVA.


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