Tuesday, September 23, 2008

TVA finances cannot be "fixed"

September 23, 2008
TVA finances cannot be “fixed” (Times Daily editorial 9/23/08)

Your editorial today on “Fixing finances” greatly misses the real point.

Government deregulation did not cause today’s fiscal crisis, it was not the free-enterprise system that caused it, as you aver.

No, it was the federal government who insisted that mortgages be issued to people that could not, would not ever pay off those mortgages.

Fannie Mae and Freddie Mac are not lenders but buyers of sub-prime mortgages, which turned out to be billions of dollars of worthless paper. Estimates to bailout these two federally sponsored entities vary from $700 billion to over a trillion dollars.

No one knows the value of this worthless paper until it is put up for auction. Meanwhile the American taxpayers will own that debt, maybe more than a trillion dollars worth. With carrying charges, this could significantly degrade America’s financial systems, its creditworthiness.

There were chances to avoid the sub-prime mortgage crisis offered by the Republicans the last six years but all were rejected by the Democrats.

Homeownership for all, even for those who cannot pay for it, is the tragic false hope fostered by liberals, i.e., that there is a “free lunch”.


Closer to home is the Tennessee Valley Authority’s unsustainable debt, now at $25 billion. The same carrying charges and increased outside purchases of fuel in a declining electricity market parallel the Fannie Mae and Freddie Mac debacle.


Also in today’s paper is a good example of how citizens in North Alabama are unable to take advantage of the people’s advocate, the Alabama Public Service Commission, in utility rate increases.

Residents in TVA’s territory are faced with a 20 percent rate increase and industrial users for up to 50 or 60 percent. Alabama Power Company requested rate increases for residential and industrial users by 14.6 percent and nearly 25 percent respectively.

But through negotiations, Alabama Power agreed to scale back its rate increases to 8.2 percent for residential and 14 percent for their industrial customers.

On the other hand, there are no negotiations between the TVA and any of the public service commissions in the seven states where TVA exercises its unassailable controls.

Alabama Power figured out a way to extend payments for its extra fuel costs and the TVA did not. One is an investor-owned company that pays taxes and the other is the federal government which cannot pay any taxes. Its poor substitute of “payments in lieu of taxes” falls far short of actual taxes paid by free-market companies.

No question that energy costs are going up, but ingenuity by market economy utilities will keep those increases to a minimum as shown in the Alabama Power example.

The Associated Press article in the Times Daily contributed.

Ernest Norsworthy
emnorsworthy@earthlink.net
http://norsworthyopinion.com