The U.S. General Accounting Office (GAO) has released its report on the Tennessee Valley Authority (TVA), Financial Problems Raise Questions About Long-Term Viability (em a report that TVA strongly disputes. The report responds to Congressional concerns over TVA's nuclear program and its financial condition (em especially debt growth nearing the $30-billion ceiling established by Congress in 1979.According to GAO, TVA in 1994 was $26 billion in debt and had invested $14 billion in nonproducing nuclear assets, giving it far more financing costs and deferred assets than its likely competitors, and little flexibility to meet competitive challenges. GAO concludes that TVA's financial condition not only threatens its long-term viability and places the federal government at risk, but will require costly and painful resolution.
While TVA paid $1.9 billion (35 percent) of its 1994 power revenues for financing costs, similar expenses for neighboring utilities averaged only 16 percent of revenues. Also, despite having excluded its deferred assets, TVA's rates, while low, are not the lowest among neighboring utilities.
GAO noted, however, that TVA is protected from competition in the short run, because almost all of its 160 contracts with distributors require 10 years' notice of cancellation. Also, current legislation does not oblige TVA to give other utilities access to its transmission lines to provide service to TVA's customers.
Nevertheless, GAO disagreed with an April 1995 report commissioned by TVA, which concluded that TVA is well positioned to meet competitive challenges and recommended removal of legislative restrictions to render the power agency fully competitive. GAO believes the restrictions protect TVA from competition that could affect its long-term financial viability.