TVA debt, accounting practices criticized
WASHINGTON (AP) — House lawmakers criticized the Tennessee Valley Authority on Thursday for its debt management and accounting practices.
TVA’s traditional debt is estimated at nearly $25 billion. It’s underwritten with TVA bonds and is limited to a $30 billion ceiling set by Congress.
However, Rep. Richard Baker, R-La., repeated a charge made recently by the White House that an additional $1.3 billion in low-cost alternative financing deals made by TVA should count toward the company’s debt. That would require congressional legislation, something Baker says he plans to introduce.
The alternative financing deals involve long-term lease payments the agency is making on peak-power turbine generators.
In addition, Baker said a TVA deal in which it pre-sold $1.5 billion in electricity to Memphis Light, Gas & Water Division at a discounted rate should count as a TVA liability.
TVA used the money from the sale to pay off its traditional debt.
“It lowers our cost of capital and gives us flexibility,” TVA Chairman Glenn McCullough said Thursday.
But Baker said TVA now has a long-term obligation through 2018 to Memphis Light and Gas to provide the power. He said that is a new liability for the quasi-governmental agency.
It’s as if TVA “paid off the current note, and paid it with a credit card,” Baker said.
He wasn’t the only lawmaker critical of TVA at a hearing before a panel of the Committee on Transportation and Infrastructure.
Rep. John Duncan Jr., R-Knoxville, said he has always been disturbed by TVA’s debt and criticized bonuses TVA has given its executives. TVA paid $7.5 million in bonuses to 138 executives and other managers last year.
TVA is considering reductions in staff to save money, and McCullough said Thursday the company was “taking a look at compensation as well.”
However, he defended the use of bonuses. “You’ve got to pay for performance,” he said.
Duncan also asked McCullough about reports TVA might be considering outsourcing jobs to foreign workers. McCullough said he would look into that and report back to Duncan.
TVA has set a goal of cutting its debt by $3 billion to $5 billion during the next 10 to 12 years.
Baker said Thursday lawmakers should consider whether to push legislation that would require TVA to meet specific debt-reduction goals.
He said it is important for TVA to reduce its debt so it can compete effectively if wholesale electric deregulation comes to the Tennessee Valley, something many lawmakers say is inevitable.
Baker, a longtime advocate of TVA reform, chairs the House Subcommittee on Capitol Markets and also has pushed for reform of the government-sponsored enterprises Fannie Mae and Freddie Mac.
TVA, created in 1933, provides electricity and flood control in the Tennessee Valley, and is the country’s largest publicly owned utility. It provides electricity to more than 8 million people in Tennessee, Kentucky, Virginia, North Carolina, Georgia, Alabama and Mississippi.
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On the Net:
TVA: http://www.tva.gov/
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