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Shouldn’t
the playing field be leveled for all electric utilities as the industry
is restructured?
The essence
of the question is whether all industry participants should be treated
the same. The fact is, the primary purpose of public-power agencies
like TVA is to serve and protect the public interest, while the primary
purpose of private utilities is to increase shareholder wealth. We believe
that electric industry restructuring should be designed to ensure fair
competition between public-power providers and private utilities, allowing
them to coexist with their differences.
Don’t forget
that most of the calls to “level the playing field” would
impose additional regulatory requirements or financial burdens intended
to protect or serve the public interest. But since TVA’s fundamental
mission is to serve the public interest, imposing additional requirements
and burdens on TVA would serve no purpose other than to increase prices
for TVA’s customers and slow economic growth within the Tennessee
Valley region.
In the future,
TVA’s rates and those of most competitors should be regulated by
the forces of a freely competitive marketplace.
But remember what
regulates TVA’s actions now: TVA, as a wholly owned government
corporation, is governed by a Board of presidential appointees who are
charged first and foremost with serving the public interest.
The President and
Congress have directed TVA’s Board to keep prices as low as feasible
for the power that TVA is charged with providing to the Tennessee Valley.
Why
are TVA’s electricity prices among the lowest in the nation?
There are several reasons, but none more important than the fact
that we run an extremely efficient power system.
Naturally, our
size—as the largest public power producer in the country—helps
spread fixed costs over a large business base.
Geography also
is important, for a couple of reasons. First, our service territory
is in the rapidly growing southeastern United States, which covers portions
of seven states, two time zones and two yearly peaking periods, winter
and summer, affording TVA optimum facility utilization. Second, the
southeastern U.S. has some of the nation’s lowest electricity prices
because of the low-cost coal mined in the area and the broad mix of
generation made possible by the variety of fuel sources (hydro, coal,
gas, and nuclear) available in the region.
I cannot leave
this question, though, without responding to critics who complain that
TVA’s low rates are the result of “subsidies.” Congress
has not provided TVA with any taxpayer funds for its power program for
nearly 40 years!
Shouldn’t
TVA have to pay taxes?
TVA
does pay taxes! People can be confused by labels, but in 1999 TVA made
payments of more than $300 million in tax-equivalent payments to the
states we serve and in which we hold power property. These payments
are similar to the property and state income taxes paid by private utilities.
As far as federal
income taxes are concerned, we are not obligated to pay a “share”
of our income to the federal government as private utilities must, because,
as our owner, the federal government is entitled to all our retained
income.
I say “retained
income” to distinguish this from the dividend-like payment we make
to the federal government each year, based on the government’s
original investment in TVA. To date, our payments to the U.S. Treasury
on its original $1.4 billion investment in TVA have totaled more than
$3 billion.
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