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Financial News

Fortnightly Magazine - March 1 1995

total of about $13 billion [12.993] in capital assets that actually were producing revenue. TVA customers have paid for more canceled nuclear capacity by far than any other utility (em even prior to TVA's December 1994 announcement (em not counting the billions invested in the cold or incomplete units still in limbo. But if you consider the December announcement, and treat the three units TVA said it would not "complete alone" as de facto cancellations, then TVA's post-1994 total grows to 4608 megawatts (MW) canceled and exceeds the 4418-MW combined total of the other members of the "top 10" nuclear-capacity-cancelers, as shown in Figure 1.6

The extent to which TVA's nuclear investment has disfigured its balance sheet can be seen in Figure 2, which compares TVA's assets and revenues to those of the three large regional holding companies that border its service area (em American Electric Power (AEP), Entergy, and The Southern Company.7 Like TVA, Entergy and The Southern Company also built and canceled nuclear power plants; AEP is largely a coal-fired system. But here's the bottom-line comparison: TVA earns about 17 cents in revenue for each dollar of assets, while the other three systems earn about twice that.

In terms of plant operation, the TVA nuclear record is nearly as discouraging. As indicated in Table 1, two of TVA's five licensed reactors have not operated since 1986. The other three, at best, show spotty records. (The Nuclear Regulatory Commission [NRC] awarded its lowest mark in two of four categories during TVA's last review.8) TVA anticipates that one of its unlicensed reactors and one of its licensed-but-cold-since-1986 reactors will begin generating electricity within two years.

That TVA survives intact in the face of such sustained nuclear woe offers impressive evidence of the strength and resilience of its coal, hydro, and transmission sectors.

Has the Limit Worked?

Given the foregoing, it may appear odd to pose this rhetorical question. Nevertheless, this redundancy makes the point that for well over a decade, as TVA's nuclear program foundered, TVA's debt limit failed entirely as a mechanism for triggering external review or accountability (em despite the very fundamental changes that transpired since Congress pegged the debt limit at $30 billion in 1979.

All other control or accountability mechanisms have proven just as ineffectual and illusory. When, under prodding from Rep. Bob Clement of Tennessee (an ex-TVA Board member), the House of Representatives convened a one-day hearing on TVA's nuclear program in March 1994, it marked the first such Congressional hearing in six years. And even though almost all other utilities had halted their nuclear construction, neither OMB nor the U.S. Treasury's FFB ever evaluated the rationale for, or prudence of, the $17 billion the FFB automatically advanced to TVA prior to 1989 (when TVA left the FFB to borrow directly in private capital markets.)

External Control and Accountability

Franklin Roosevelt said TVA needed the power of government and the flexibility of a private business. So he gave it an autonomous three-member board appointed for nine-year terms to function without any oversight, save by Congress. In doing