Revision History - Jerry Post

$25 billion constitutes the bulk of the $26 billion debt (mostly public bonds) of TVA, but the
nuclear plants generated only 14 percent of TVA’s total power supply in 1994. In 2004, TVA
announced plans to reopen Browns Ferry 1 at an anticipated cost of $1.8 billion [Hampton
and Ichniowski 2004]. If it opens on time in 2007, it will be the first new U.S. nuclear plant
since 1996.
TVA in the 1990s
TVA is under federal mandate to fund its electricity production from ongoing operations.
By its internal accounting methods, TVA is meeting this mandate; however, $14 billion
of the nuclear construction debt is not being financed from current operations. In 1995,
TVA had a total debt of $26 billion, with financing costs of $1.9 billion a year (35 percent of
its power revenues). TVA faces a Congressionally imposed debt ceiling of $30 billion, and
TVA expects to increase its debt to about $28 billion by 1997—in part to cover final production
costs at Watts Bar, in part to cover interest payments on its debt. As a federal agency,
TVA cannot sell stock (like most traditional utilities), so all funds must be raised from bond
sales. Although these sales are not guaranteed by the federal government, some investors
believe that the federal government will not allow TVA to default on the bonds. Consequently,
TVA has a slight advantage over potential competitors in terms of interest rates.
Similarly, TVA does not pay federal income taxes.
TVA also anticipates the need for substantial expenditures to improve existing hydroelectric
and coal-fired plants. Additional expenses will also be incurred in bringing all of
the coal-fired plants into compliance with the Clean Air Act. Based on preliminary estimates,
TVA anticipates spending between $1.1 and $1.6 billion between 1995 and 2015 (in
constant 1994 dollars). By 2003, TVA was still reporting total debt of about $25 billion [annual
report].
In public statements, TVA repeatedly emphasized that they had not raised electricity
rates in nine years, and they are trying to hold them stable for at least 10 years. Nonetheless,
TVA is not the lowest-cost producer in the area. However, for the immediate future,
other firms are prohibited from selling electricity to TVA’s customers.
As part of the Energy Policy Act of 1992, TVA is conducting an integrated resource
planning (IRP) process—largely to determine future goals, changes in production and operations,
and the least-cost means of providing power. TVA is conducting the plan with several
interdisciplinary teams:
• Issues and Values Translation Team
• Evaluation Criteria Team
• Load Forecasting Team
• Existing Capabilities Team
• Supply-Side Options Team
• Customer Service Options Team
• Environment Team
• Rankings Team
• Strategy Development Team
• Uncertainties Team
• Integration Team
Each of these teams is responsible for identifying problems, making forecasts, and
presenting and evaluating alternatives. Many of the teams use statistical and computer
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