Energy:

The Tennessee Valley Authority's Benefits and Cost for Rehabilitating the Ocoee No. 2 Hydroelectric Project

RCED-84-143: Published: Jul 23, 1984. Publicly Released: Jul 31, 1984.

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Pursuant to a congressional request, GAO provided information on the Tennessee Valley Authority's (TVA) rehabilitation of the Ocoee Number 2 hydroelectric dam in Tennessee.

The Ocoee Number 2 dam generated power until 1976, when generation was stopped because of the deterioration of a wooden flume used to carry water between the dam and the power house. When generation stopped, water was released through the dam, which made conditions favorable for recreational rafting. In 1979, TVA decided to rehabilitate the flume and restart power generation. This created a controversy between TVA and recreational users of the river because, when water is diverted into the flume for power generation, it is not available to release into the river for rafting. GAO found that: (1) TVA replaced the flume after performing a cost/benefit analysis; (2) the cost to rehabilitate the facility was about $36.4 million; (3) power generated by the facility is expected to cost about 3.64 cents per kilowatt hour, which is less than the projected average cost for the TVA system; (4) the variable cost of generating power at the facility is lower than that for TVA coal-fired plants, which must generate power to replace that lost when the dam is not operating; (5) TVA projected about 100,000 recreational users of the river during 1983 and that such use of the river would contribute about $4.5 million to the local economy in 1983; (6) Congress passed a one-time appropriation to reimburse TVA for having to generate power from other sources when the dam is not operating; and (7) TVA agreed with the State of Tennessee to release water into the river for recreational purposes 116 days per year, while commercial rafters will pay TVA a fee based on the number of customers they serve.

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