Tennessee Valley Authority:
Financial Problems Raise Questions About Long-Term Viability
AIMD/RCED-95-134, Aug 17, 1995
Pursuant to a congressional request, GAO reviewed the Tennessee Valley Authority's (TVA) financial condition, focusing on the implications for TVA and the federal government in light of the increasingly competitive electric utility market.
GAO found that: (1) TVA is $26 billion in debt and has invested $14 billion in deferred assets that are not included in its electricity rates; (2) TVA has little flexibility to meet competitive challenges due to more financing costs and deferred assets than its competitors; (3) the federal government is at risk for some of TVA debt, since TVA cannot compete effectively to improve its financial condition; (4) TVA troubled financial condition has been caused by construction delays, cost overruns, and operational shutdowns in its nuclear program; (5) TVA current rates are too low to recover its relevant costs, since TVA has excluded the costs of its deferred assets from its electricity rates for a long period; (6) TVA will have to raise its current rates, since it anticipates spending billions more dollars to complete its nuclear construction activities and modernize its coal and hydroelectric plants; (7) although TVA is currently protected from competition by legislation and its customer contracts, it will have to compete with other utilities in the long run; and (8) TVA financial condition threatens its long-term viability and places the federal government at risk, and resolving its financial problems will be costly and require difficult decisions.