Tennessee Valley Authority:

Debt Reduction Efforts and Potential Stranded Costs

GAO-01-327: Published: Feb 28, 2001. Publicly Released: Mar 7, 2001.

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If the Tennessee Valley Authority (TVA) were to lose its legislative protections today, its high level of debt and corresponding high financing costs would be a competitive challenge. This competitive challenge would be even greater if it were at the same time attempting to recover costs of deferred assets through rates. Despite having reduced its debt and deferred assets over the past three years, TVA still compares unfavorably to its likely competitors in these areas. In addition, TVA is revising its goals for reducing debt and deferred assets downward significantly. Whether or not the deferred assets will contribute to stranded costs that are recoverable from customers depends on the specific requirements of any legislation that might remove TVA's legislative protections and TVA's ability to retain its current competitive advantages in a restructured environment. In addition, the longer that TVA has to prepare for competition, the longer it will have to reduce debt and recover the costs of its deferred assets and position itself more competitively. Ultimately, TVA's ability to be competitive will depend on the future market price of power, which cannot be predicted with any certainty.

Dec 8, 2016

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