Message-ID: <20520445.1075846391530.JavaMail.evans@thyme> Date: Mon, 11 Oct 1999 01:54:00 -0700 (PDT) From: jeffrey.keeler@enron.com To: cynthia.sandherr@enron.com, steven.kean@enron.com, joe.hillings@enron.com, chris.long@enron.com, christi.nicolay@enron.com, james.fallon@enron.com, ben.jacoby@enron.com, david.delainey@enron.com, barbara.hueter@enron.com Subject: Senate TVA hearing Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: Jeffrey Keeler X-To: Cynthia Sandherr, Steven J Kean, Joe Hillings, Chris Long, Christi L Nicolay, James B Fallon, Ben F Jacoby, David W Delainey, Barbara A Hueter X-cc: X-bcc: X-Folder: \Steven_Kean_Dec2000_1\Notes Folders\Tva X-Origin: KEAN-S X-FileName: skean.nsf EESI Environement & Energy Weekly -- October 11, 1999 Senate EPW panel hears differing views on changing TVA=20 The federally owned Tennessee Valley Authority was put on the defensive at = a=20 Senate Environment and Public Works Committee hearing last week as its=20 adversaries mounted an offensive against the power agency for its huge $27= =20 billion debt and unaccountability.=20 With a bill (S. 1323), introduced by Sen. Mitch McConnell (R-Ky.), serving = as=20 the backdrop, the need for changing TVA=01,s role in an emerging competitiv= e=20 electricity market was reviewed.=20 TVA is one of the biggest power producers in the country, and it enjoys=20 certain unfair privileges, according to investor-owned utilities, which are= =20 seeking changes to TVA to level the playing field in a competitive=20 electricity market.=20 McConnell=01,s bill is touted as making TVA more accountable by subjecting = the=20 power agency to, among other things, antitrust laws and to the jurisdiction= =20 of the Federal Energy Regulatory Commission. McConnell, who was present at= =20 the hearing, questioned TVA on its claim of providing low-cost power and wh= y=20 it should not be brought under FERC authority.=20 Supporting the position of S. 1323, Robert Hewett representing TVA Watch, a= =20 coalition led by Duke Energy and other private utilities, decried the=20 privileges TVA is endowed with. Hewett said TVA has the ability to set its= =20 own wholesale and retail rates, is exempt from anti-trust laws and makes on= ly=20 "token" payments in lieu of taxes to the local government. "No other entity= =20 in the country even comes close to having this type of authority or license= ,"=20 said Hewett.=20 Hewett wants TVA to be subjected to antitrust laws and FERC jurisdiction. I= n=20 addition, TVA must be restricted from building new generation capacity and = it=20 should not have preferential access to power from other federal facilities = at=20 rates below fair market value, Hewett recommended.=20 Richard Munson, executive director, Northeast-Midwest Institute, continued = on=20 the same stream as Hewett, calling TVA a national problem. Munson said TVA= =01,s=20 inspector general in a recent report has highlighted "TVA=01,s most serious= =20 problem =01* its unaccountability." Decisions by TVA=01,s board of director= s are=20 not reviewed by state regulators or federal agencies and the power agency= =20 enjoys a monopoly in its service territory so it is not accountable even to= =20 market forces, according to Munson. Stating that TVA has been propped up by= =20 enormous taxpayer subsidies, Munson said, "The giant utility is exempt from= =20 hundreds of federal and state laws and regulations, it pays no federal or= =20 state taxes, and it obtains low-cost loans because of Washington=01,s =01+i= mplied=01,=20 support."=20 But Mark Medford, TVA executive vice president, cautioned that proposals su= ch=20 as S. 1323 may risk compromising the low-cost, reliable electricity availab= le=20 to the Tennessee Valley region.=20 Medford said S. 1323 would place new restrictions on TVA and expand=20 regulation of TVA activities, which seems unusual in the context of a=20 discussion of "deregulation" of the electricity industry.=20 Medford also argued against FERC and state regulation of TVA prices and FER= C=20 determination of the need for new generation capacity. He said responsibili= ty=20 for fulfilling those missions is placed on the three-member TVA board=20 nominated by the president and confirmed by the Senate. Superimposing a=20 higher regulatory body, such as FERC, "to pass judgment on the decision of= =20 the TVA board in these areas seems both duplicative and inappropriate."=20 Medford also did not think that antitrust laws should be applied to TVA=20 because it would be unfair to TVA ratepayers. "When a private utility=20 violates the antitrust laws, its stockholders bear the cost. However,=20 governmental entities like TVA have no stockholders, and the financial cost= s=20 of such penalties have to be borne by the people who are supposed to be=20 served," said Medford.=20 Medford asserted that investors now hold all of TVA=01,s debt that finances= the=20 power program. He said TVA debt is neither backed by the federal government= =20 nor is it supported by mortgages on TVA plant property and equipment. It is= =20 secured solely by the financial operation of TVA as well as bond covenants= =20 and the provisions of the TVA Act, Medford said. Also, Medford said TVA has been on the path of debt reduction in the last= =20 three years, bringing down the debt by $1 billion.=20 Austin Caroll, representing the Kentucky Managers=01, Association, a group = of=20 municipal and rural electric cooperative utilities, did not totally agree= =20 with the principles of S. 1323, though it did want some changes to be made = to=20 TVA.=20 Preceding the examination of S. 1323 was a hearing on the nomination of TVA= =20 board members -- Skila Harris and Glenn McCullough.=20 Harris served until recently as the executive director of the Secretary of= =20 Energy Advisory Board, managing the work of the Tennessee Valley Advisory= =20 Committee, which comprises of representatives from groups interested in the= =20 future of TVA.=20 McCullough previously served on the executive committee of the Mississippi= =20 Municipal League and as the director of the Mississippi office of the=20 Appalachian Regional Commission.=20 The TVA board of directors has three members serving nine year staggered=20 terms.