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
Tuesday, September 23, 2008
Tuesday, June 24, 2008
TVA and the corn crop
Sometimes it takes a while to realize when you’ve been duped, when you realize it is far too late to do much about it.
The federal government – yes, that one we call ours – sold our ancestors a bill of goods when they promised a new kind of fertilizer all could afford; to bring back to life the worn out soil in the South. Particularly the farmland in North Alabama.
You remember where to find that promise. Look no farther that the TVA Act of 1933. The words still are there. (Partial quote of Sec. 5).
The Board is hereby authorized—
(b) To arrange with farmers and farm organizations for large-scale practical use of the new forms of fertilizers under conditions permitting an accurate measure of the economic return they produce.
(c) To cooperate with National, State, district, or county experimental stations or demonstration farms, with farmers, landowners, and associations of farmers or landowners, for the use of new forms of fertilizer or fertilizer practices during the initial or experimental period of their introduction, and for promoting the prevention of soil erosion by the use of fertilizers and otherwise.
(d) The Board in order to improve and cheapen the production of fertilizer is
authorized to manufacture and sell fixed nitrogen, fertilizer, and fertilizer ingredients at Muscle Shoals by the employment of existing facilities, by modernizing existing plants, or by any other process or processes that in its judgment shall appear wise and profitable for the fixation of atmospheric nitrogen or the cheapening of the production of fertilizer.
(e) Under the authority of this Act the Board may make donations or sales of the product of the plant or plants operated by it to be fairly and equitably distributed through the agency of county demonstration agents, agricultural colleges, or otherwise as the Board may direct, for experimentation, education, and introduction of the use of such products in cooperation with practical farmers so as to obtain information as to the value effect, and best methods of their use.
(f) The Board is authorized to make alterations, modifications, or improvements in existing plants and facilities, and to construct new plants.
What happened to that dream of a healthy, productive farming community in the valley? The law still is there but the TVA chooses to ignore it to the detriment of farmers and agriculture in general.
I envision a vast crop-growing farmland area almost as large as the San Joaquin Valley in California. True, the soil in that valley is richer than most of the farmland in the South but it could have been a different story if the TVA had followed through with their charge to improve farming and agriculture as stated in the present TVA Act.
There is one major difference between the San Joaquin Valley and the Tennessee River Valley. And that is water. And it appears that water will become very scarce in the San Joaquin Valley in the not too distant future. Already some lands lay fallow for lack of enough water.
The Tennessee River and its tributaries have never run dry although the flow has slowed with the present drought conditions.
If irrigation had followed the enrichment of Southern soil with improved and cheap fertilizer (as called for in the TVA Act) it would not be hard to imagine a Southern “breadbasket”.
I do hope the corn crop is abundant and that their prayers for more rain would be answered with an irrigation system using Tennessee River water.
Ernest Norsworthy
emnorsworthy@earthlink.net
Sometimes it takes a while to realize when you’ve been duped, when you realize it is far too late to do much about it.
The federal government – yes, that one we call ours – sold our ancestors a bill of goods when they promised a new kind of fertilizer all could afford; to bring back to life the worn out soil in the South. Particularly the farmland in North Alabama.
You remember where to find that promise. Look no farther that the TVA Act of 1933. The words still are there. (Partial quote of Sec. 5).
The Board is hereby authorized—
(b) To arrange with farmers and farm organizations for large-scale practical use of the new forms of fertilizers under conditions permitting an accurate measure of the economic return they produce.
(c) To cooperate with National, State, district, or county experimental stations or demonstration farms, with farmers, landowners, and associations of farmers or landowners, for the use of new forms of fertilizer or fertilizer practices during the initial or experimental period of their introduction, and for promoting the prevention of soil erosion by the use of fertilizers and otherwise.
(d) The Board in order to improve and cheapen the production of fertilizer is
authorized to manufacture and sell fixed nitrogen, fertilizer, and fertilizer ingredients at Muscle Shoals by the employment of existing facilities, by modernizing existing plants, or by any other process or processes that in its judgment shall appear wise and profitable for the fixation of atmospheric nitrogen or the cheapening of the production of fertilizer.
(e) Under the authority of this Act the Board may make donations or sales of the product of the plant or plants operated by it to be fairly and equitably distributed through the agency of county demonstration agents, agricultural colleges, or otherwise as the Board may direct, for experimentation, education, and introduction of the use of such products in cooperation with practical farmers so as to obtain information as to the value effect, and best methods of their use.
(f) The Board is authorized to make alterations, modifications, or improvements in existing plants and facilities, and to construct new plants.
What happened to that dream of a healthy, productive farming community in the valley? The law still is there but the TVA chooses to ignore it to the detriment of farmers and agriculture in general.
I envision a vast crop-growing farmland area almost as large as the San Joaquin Valley in California. True, the soil in that valley is richer than most of the farmland in the South but it could have been a different story if the TVA had followed through with their charge to improve farming and agriculture as stated in the present TVA Act.
There is one major difference between the San Joaquin Valley and the Tennessee River Valley. And that is water. And it appears that water will become very scarce in the San Joaquin Valley in the not too distant future. Already some lands lay fallow for lack of enough water.
The Tennessee River and its tributaries have never run dry although the flow has slowed with the present drought conditions.
If irrigation had followed the enrichment of Southern soil with improved and cheap fertilizer (as called for in the TVA Act) it would not be hard to imagine a Southern “breadbasket”.
I do hope the corn crop is abundant and that their prayers for more rain would be answered with an irrigation system using Tennessee River water.
Ernest Norsworthy
emnorsworthy@earthlink.net
Friday, June 6, 2008
Alabama Legislature as Confused as TVA
TVA has Alabama legislature chasing its tail
Idiocy has been described as doing the same thing over and over expecting a different outcome.
But maybe the Alabama legislature is just being sly like a fox. I still call what they have been doing with TVA’s payments idiocy, “bribes” in lieu of taxes from the Tennessee Valley Authority.
Looking at it one way, every year TVA provides about $450 million of free handout money (5 percent of gross sales) throughout its far-flung, 80,000 square-mile territory. And there is a scramble for some of it wherever it shows up.
Several years ago, dry Geneva County, at the bottom of Alabama on the Florida line, doled out some TVA money to the little town of Eunola, population 182 at last census. The problem was that the town of Eunola had not had an election in 40 years. Later, Alabama’s attorney general ruled it too small for re-incorporation.
There is no indication that TVA is concerned how their money is used once they give it away. I could not find out what happened to Eunola’s largess.
Idiocy has been described as doing the same thing over and over expecting a different outcome.
But maybe the Alabama legislature is just being sly like a fox. I still call what they have been doing with TVA’s payments idiocy, “bribes” in lieu of taxes from the Tennessee Valley Authority.
Looking at it one way, every year TVA provides about $450 million of free handout money (5 percent of gross sales) throughout its far-flung, 80,000 square-mile territory. And there is a scramble for some of it wherever it shows up.
Several years ago, dry Geneva County, at the bottom of Alabama on the Florida line, doled out some TVA money to the little town of Eunola, population 182 at last census. The problem was that the town of Eunola had not had an election in 40 years. Later, Alabama’s attorney general ruled it too small for re-incorporation.
There is no indication that TVA is concerned how their money is used once they give it away. I could not find out what happened to Eunola’s largess.
North Alabama feels short-changed
Now, North Alabama legislators believe their part of the state is being short-changed because a number of dry counties in Alabama outside TVA’s territory receive TVA payments. Some of those dry counties depend on the TVA handout to balance their budgets. Crunch time for them if a new Alabama law cuts them off next year.
Today it is conservation, conservation, conservation
The craziness of TVA’s whole giveaway scheme is compounded by an entirely new direction for the TVA – conservation, cutting back on demand for electricity. Presently, TVA takes 5 percent of gross electricity sales and gives it “back” in what they call “payments in lieu of taxes”.
But TVA suddenly has changed directions and wants their 8.8 million customers to use less electricity.
The other part is that not a single TVA customer, those who produce the rebate amounts, ever directly get a part of that rebate. These slush funds go to state and local governments who decide without further input from the ones who enabled the rebate just how to spend this free money. The money is free because nothing has to be done to qualify for it. It’s just there. Obviously, you do not have to live in TVA’s territory to qualify.
Change to conservation means changes in rebate system
First, TVA must change its method of a 5 percent usage payment to state and local governments to a 5 percent incentive payment, or a combination of the two, to the customers who conserve the most electricity.
The incentive would go directly to customers who cut back on electricity usage during peak demand for power, usually in the summer and some in the winter. Those who conserve the most electricity would receive a direct payment or a credit to their monthly electricity bills.
If this method combines the two kinds of rebates and any portion of the 5 percent incentive rebate to customers is remaining for each month, that money would be distributed in the usual manner to state and local communities as in the past, a “payment in lieu of taxes”.
Because this scheme would operate primarily during peak demand periods, the TVA would not have to purchase as much power from outside suppliers said to have cost a billion dollars last year.
One of the main features of this plan is that reward follows conservation, not reward following excessive use. TVA has stated that it would not increase electricity rates to induce less use of it.
Another advantage is that TVA already budgets for these payments and borrowing may not be required.
Reasons plan will not work
There are at least two reasons this plan would never make it through TVA management. First, it would show the nimbleness and innovation of management to meet immediate economic circumstances, traits never thus far exhibited by TVA; and secondly, it makes too much sense.
Ernest Norsworthy
emnorsworthy@earthlink.net
http://norsworthyopinion.com
http://norsworthyattheshoals.blogspot.com
Saturday, May 24, 2008
In Opposition to the TVA
In Opposition to the TVA
Why do I oppose the TVA, some have asked. And why do I continue unceasingly writing about it. I started writing about the TVA when we moved for a time to the Shoals area about five years ago. And I was startled to see an irresolute community in despair. Many fewer jobs compared with 40 years earlier in my visits. In an attempt to find out why such a change, all evidence led to the TVA, how the TVA had whip-lashed the community and then deserted it. Fortunately, the Shoals economy is looking up a bit but still has a long way to go.
Just where is the principal office of the TVA? Pointed out last week in a Times Daily article, the TVA pulled the rug from under the Shoals at the very beginning by not establishing the principal office of TVA in Muscle Shoals, Alabama, as required in the TVA Act. Oh, TVA has a post office address in the TVA Reservation, you know, like a Mail Boxes Etc. franchise. It is a sham to say that TVA’s “principal office” is in Muscle Shoals, Alabama.
Here, from personal experience I’ll relate an unpleasant fact. Most of the things we do daily such as opening a door, driving a car or working in the kitchen all are designed for use by right-handed people. Now right-handed people see all of these things as perfectly ordinary and are usually aghast when it is pointed out that left-handers tend to see things differently and usually more analytically.
I think some of this might be at play regarding the TVA. I do see the TVA differently, not from anger, vengeance or any of the other reasons some people like to impute to me (I am left-handed).
I tried to explain the reasons why I believe the TVA should be abolished in much earlier TD Forum posts. It might help to re-read some of them. But here, I will try again, as concisely as I can, to express my reasons.
Experience in the federal government. I learned a lot more about my employer and about American history. The basis of America comes from our founding documents (and don’t let anybody fool you into believing that the U.S. Constitution is “a living document” subject to the whims of change; legislating from the bench).
And that is one of the reasons I believe the TVA is unconstitutional. After much researching of the TVA, I concluded that the TVA exists on very shaky legal grounds. Every ruling that I found about the TVA was divided. A final Supreme Court ruling on its constitutionality is yet to be made. (See Ashwander vs. TVA that dodged the constitutionality question).
TVA Act ill conceived. And it was given a charge to be something it never could be: An organization with all the power of the federal government to take property against the will of the owner and at the same time act like a usual corporation. Repeatedly TVA has proved that the two cannot be mixed no matter how much rhetoric is applied. TVA in the past was given almost free rein but the Congress and several administrations have considerably tightened those reins.
View of the original TVA Act. With amendments (http://www.tva.gov), it shows that TVA has strayed far from its original charter, moving in whimsical directions under triumvirate leadership for 72 years. I will not recount the very many ways that TVA management has fallen well below the mark. Let’s just say there have been multi-billion dollar mistakes and no one has been held accountable for those mistakes. Ratepayers are left holding the bag or is TVA’s $25 billion debt the taxpayers’ responsibility?
Federal price controls. When the TVA sets rates and “fuel cost adjustments”, it is doing so without the normal checking and approving/disapproving those increases by each states’ public service commission. TVA’s decision on rates is absolute and unassailable. I believe this is an infringement on the basic right of citizens in the seven states in TVA territory to have their own elected or appointed representatives make electricity rate determinations.
TVA territory huge, unmanageable. It covers 80,000 square miles, as large as Great Britain and larger than many other countries. Its size also has proven to be one of its weaknesses. (See GAO Security Report http://www.gao.gov/new.items/d08526.pdf ).
TVA finances unsustainable. Particularly with the new thrust to conserve electricity, TVA wants its customers to conserve at a point and place that is convenient to the TVA; customers’ habits are hard to change without significant incentives and it is unlikely they will change much without significant ones. TVA’s indebtedness is going up while its revenues will be coming down if conservation works. And billions of dollars more in the near term will be required to fund nuclear construction.
TVA as model for U.S. electricity production. Viewing the TVA as a national model for electricity production would be similar to a European style of a government-owned and run public utility that would set electricity prices throughout America. Another name for that is Socialism and I do not believe Americans want to travel that road.
TVA revenues, restrictions. TVA, a federal government agency, collects about $9 billion annually from electricity sales. its only source of income; there is no “profit and loss” statement. All revenues are returned to operations of its power facilities, maintenance, new construction, and for non-power uses. There are no congressional appropriations. Instead of filtering through the economy like sales and expenses of a regular corporation, the federal government controls all $9 billion of it.
You may be sure that an investor-owned utility would redistribute those billions of dollars differently to everyone’s betterment including more taxes paid to all levels of government, i.e., state, local and federal.
So you see, it is not out of anger or any other emotional reason but out of principle in support of the basic free-enterprise system of opportunities available to all Americans that I oppose the TVA.
Founding documents. I would like us to follow the precepts in our founding documents; nowhere in any of them is there an inking of the idea of the TVA. It was contrived for political expediency; it lives today a thorn in the side of our Constitution and a blight on our free-enterprise system.
(Why should TVA management resign? Read my article on this current issue at http://norsworthyopinion.com )
Ernest Norsworthy
May 24, 2008
emnorsworthy@earthlink.net
Why do I oppose the TVA, some have asked. And why do I continue unceasingly writing about it. I started writing about the TVA when we moved for a time to the Shoals area about five years ago. And I was startled to see an irresolute community in despair. Many fewer jobs compared with 40 years earlier in my visits. In an attempt to find out why such a change, all evidence led to the TVA, how the TVA had whip-lashed the community and then deserted it. Fortunately, the Shoals economy is looking up a bit but still has a long way to go.
Just where is the principal office of the TVA? Pointed out last week in a Times Daily article, the TVA pulled the rug from under the Shoals at the very beginning by not establishing the principal office of TVA in Muscle Shoals, Alabama, as required in the TVA Act. Oh, TVA has a post office address in the TVA Reservation, you know, like a Mail Boxes Etc. franchise. It is a sham to say that TVA’s “principal office” is in Muscle Shoals, Alabama.
Here, from personal experience I’ll relate an unpleasant fact. Most of the things we do daily such as opening a door, driving a car or working in the kitchen all are designed for use by right-handed people. Now right-handed people see all of these things as perfectly ordinary and are usually aghast when it is pointed out that left-handers tend to see things differently and usually more analytically.
I think some of this might be at play regarding the TVA. I do see the TVA differently, not from anger, vengeance or any of the other reasons some people like to impute to me (I am left-handed).
I tried to explain the reasons why I believe the TVA should be abolished in much earlier TD Forum posts. It might help to re-read some of them. But here, I will try again, as concisely as I can, to express my reasons.
Experience in the federal government. I learned a lot more about my employer and about American history. The basis of America comes from our founding documents (and don’t let anybody fool you into believing that the U.S. Constitution is “a living document” subject to the whims of change; legislating from the bench).
And that is one of the reasons I believe the TVA is unconstitutional. After much researching of the TVA, I concluded that the TVA exists on very shaky legal grounds. Every ruling that I found about the TVA was divided. A final Supreme Court ruling on its constitutionality is yet to be made. (See Ashwander vs. TVA that dodged the constitutionality question).
TVA Act ill conceived. And it was given a charge to be something it never could be: An organization with all the power of the federal government to take property against the will of the owner and at the same time act like a usual corporation. Repeatedly TVA has proved that the two cannot be mixed no matter how much rhetoric is applied. TVA in the past was given almost free rein but the Congress and several administrations have considerably tightened those reins.
View of the original TVA Act. With amendments (http://www.tva.gov), it shows that TVA has strayed far from its original charter, moving in whimsical directions under triumvirate leadership for 72 years. I will not recount the very many ways that TVA management has fallen well below the mark. Let’s just say there have been multi-billion dollar mistakes and no one has been held accountable for those mistakes. Ratepayers are left holding the bag or is TVA’s $25 billion debt the taxpayers’ responsibility?
Federal price controls. When the TVA sets rates and “fuel cost adjustments”, it is doing so without the normal checking and approving/disapproving those increases by each states’ public service commission. TVA’s decision on rates is absolute and unassailable. I believe this is an infringement on the basic right of citizens in the seven states in TVA territory to have their own elected or appointed representatives make electricity rate determinations.
TVA territory huge, unmanageable. It covers 80,000 square miles, as large as Great Britain and larger than many other countries. Its size also has proven to be one of its weaknesses. (See GAO Security Report http://www.gao.gov/new.items/d08526.pdf ).
TVA finances unsustainable. Particularly with the new thrust to conserve electricity, TVA wants its customers to conserve at a point and place that is convenient to the TVA; customers’ habits are hard to change without significant incentives and it is unlikely they will change much without significant ones. TVA’s indebtedness is going up while its revenues will be coming down if conservation works. And billions of dollars more in the near term will be required to fund nuclear construction.
TVA as model for U.S. electricity production. Viewing the TVA as a national model for electricity production would be similar to a European style of a government-owned and run public utility that would set electricity prices throughout America. Another name for that is Socialism and I do not believe Americans want to travel that road.
TVA revenues, restrictions. TVA, a federal government agency, collects about $9 billion annually from electricity sales. its only source of income; there is no “profit and loss” statement. All revenues are returned to operations of its power facilities, maintenance, new construction, and for non-power uses. There are no congressional appropriations. Instead of filtering through the economy like sales and expenses of a regular corporation, the federal government controls all $9 billion of it.
You may be sure that an investor-owned utility would redistribute those billions of dollars differently to everyone’s betterment including more taxes paid to all levels of government, i.e., state, local and federal.
So you see, it is not out of anger or any other emotional reason but out of principle in support of the basic free-enterprise system of opportunities available to all Americans that I oppose the TVA.
Founding documents. I would like us to follow the precepts in our founding documents; nowhere in any of them is there an inking of the idea of the TVA. It was contrived for political expediency; it lives today a thorn in the side of our Constitution and a blight on our free-enterprise system.
(Why should TVA management resign? Read my article on this current issue at http://norsworthyopinion.com )
Ernest Norsworthy
May 24, 2008
emnorsworthy@earthlink.net
Wednesday, April 16, 2008
TVA's definition of "spend" and "save" in the same sentence
How does TVA say “save” and “spend” in the same sentence?
As usual, TVA is travelling in parallel universes; one says, “We have to conserve energy use to reduce the amount of electricity during peak demands usually in the hottest and coldest times of the year”.
TVA already is travelling under the likely assumption that “peaking demand” cannot be met because they are moving ahead with the development of multi-billion dollar nuclear plants. This means that TVA will have to continue paying higher prices for that extra electricity from outside sources. TVA also is continuing to gobble up “at surplus” privately owned plants in preparation of peak demand needs as early as this summer.
In other words, TVA does not believe their efforts to help customers reduce electricity needs will be sufficient. Anyway, TVA really does not want customers to reduce their use of electricity, especially at the higher rates customers are now paying because every dollar a consumer saves reduces TVA’s income by a dollar. And TVA’s cost per unit of production correspondingly goes up.
So TVA is playing the “pull the rope” game, at one end are the true conservationists whom TVA says they support, those who would rather see alternate forms of energy to reduce air pollution, and at the other end, TVA and its adherents to raise even more TVA’s rates to keep from borrowing even more money to pay interest on TVA’s outstanding debts.
Unfortunately, “you can’t have your cake and eat it too”.
To add to TVA’s bad economic news, sales are down and costs are up (TVA April Board meeting www.tva.gov ).
TVA has an interesting concept of budgeting, “As long as it’s in the budget, it can be spent” regardless of whether there is enough income to pay for it.
The irony of trying to reduce consumption only during peak demand periods shifts those periods to another peak period, which too must be reduced and so on.
TVA unfortunately finds itself in a box with a very deep hole in it. And borrowing even more money (which they are authorized to do, up to $30 billion from present debt of $25 billion) will not solve the problem because TVA continues to borrow billions just to pay interest on debt now coming due.
For years, TVA has gotten away with its backdoor financing scheme of borrowing and borrowing more money but the income, now even lessening, cannot even keep up with the spending just for debt repayment.
I do not know anyone who thinks that TVA could not cut its budget drastically, at least ten percent for starters, better to bring TVA in line with reasonable debt to income ratios.
Of course, for some time now, I have advocated the dissolution of the TVA, a federal agency, for constitutional reasons and for its anti-competitive stand against our free-enterprise system. TVA’s recent acquisitions of corporately owned electricity plants is just one example of TVA’s anti-competitiveness.
If TVA is serious about conservation (and I believe they are not) a more positive and immediate result would be to stop payments in lieu of taxes to state and local governments and instead make those “payments” in the form of credits to users of TVA electricity based on LESS power consumed, that is, an incentive to cut down on electricity usage.
Today, those payments are based on how much electricity is consumed and the less consumed the less payments that are made to the seven states and localities, just one more reason TVA works at cross-purposes with itself.
Since TVA makes the rules about this sort of thing, arcane though they may be, they also can change the rules at their discretion. Any rule favoring the ones paying electricity bills could only place the TVA in a more favorable light. But the words of the TVA Act and the deeds of TVA management seldom coincide; one does not have to look too far to find other pitfalls the TVA finds itself lurching toward. The present direction of the very flexible Strategic Plan 2007 is sure to bump into the cold reality that financial resources are extremely limited and will be for quite some time. There isn’t even a “half-price” lunch, much less a “free one”.
And now, just now, at the April Board meeting, and after two years in existence, the board has clarified that the board makes TVA policy and the CEO carries out those policies. Huh? Much too late in closing the barn door.
Suggestions on developing the
Dissolution Plan
for the
Tennessee Valley Authority
White Paper
by
Ernest Norsworthy
December 2006
Now that the TVA land policy dust* is somewhat settled don’t believe for a second it was just “we listened, we heard” from the more than 5000 comments received that convinced the TVA to adopt a comprehensive and permanent land policy. Presidential Executive Order 13406 clearly states that all federal agencies, including the TVA, must not sell or lease acquired property for private uses.
Perhaps this clarification of how TVA-owned lands will be handled will help sort out the eventual privatization of TVA’s electrical production and transmission lines. For years, TVA has talked about privatization and for years, TVA has practically ignored doing anything about it.
The strategy could go something like this but not necessarily in order:
Open TVA’s transmission grid (“open access”) to all power suppliers willing to pay a competitive fee. This act alone will bring TVA into compliance with the Federal Energy Regulatory Commission (FERC) order to open up a section of TVA’s transmission lines to East Kentucky Power Cooperative, Inc. (See TVA vs. FERC, US District of Columbia Court of Appeals.) TVA’s exclusive grid and service area impedes the flow of commerce between the seven states under control of the TVA and through and between states in the Eastern Grid not just for “seasonal power exchanges and reliability.”
Group some of the less desirable power properties with better ones in auction/bid lots. This should ensure that all power production facilities would be removed from federal ownership. Stage the auctions over a period of months to liquidate as much as possible TVA’s huge $25 billion debt and to keep disruptions at a minimum.
Immediately release distributors from their long-term contracts with TVA if they so desire. This will allow those distributors to seek lower cost electricity from other presently available sources. TVA requires a minimum five-year notice; a number of distributors have already given notice.
Immediately cease buying even more surplus power units for use only during peak power needs. Additional nuclear power soon will be coming on line; TVA is on the verge again to be overbuilding electrical capacity.
Immediately allow suppliers offering cheaper electricity rates to use TVA transmission lines.
Cease immediately the paternalistic requirement that TVA approve all nonpower expenditures by TVA distributors. (See TVA Office of the Inspector General report www.tva.gov/oig )
By Executive Order of the President, bring in executive level staff from other federal and state departments and agencies to be headed by a non-government liquidation firm. This team, a Task Force, Commission or some such organization, would develop a phased plan of dissolution with the goal of abolishing the TVA. The Team itself would be closed down by a date certain. Part of the Plan would include finding jobs for displaced TVA employees for those not transferring to private utility companies; a union representative also would be included to receive grievances.
The Dissolution Plan would be devised to be the least disruptive to market forces and to TVA distributors for a smooth transition period. Many of 8.6 million users of TVA electricity would have for the first time the ability to choose among electrical suppliers.
Financial aid to states and communities as payments-in-lieu-of taxes would continue at the present rate for two more years then stopped. Other long-term financial agreements with the TVA (other than bonds) will be negotiated for completion within six months of the beginning of the Dissolution Plan.
All health and retirement plan obligations will be transferred to the appropriate federal agency or agencies.
Form a special unit in TVA’s Dissolution Plan to deal with the many legal wrangles that are sure to come since the new Land Policy was issued. Fold in the suits now pending in which TVA is a litigant.
The Dissolution Plan should have at its core a time line of activities with their planned and actual completion dates.
Assign the various parts of TVA to appropriate federal agencies such as the surplus 293,000 acres to the National Park Service for future national park expansion. Some properties should be allotted to the states for development of state parks.
Direct loans or grants from TVA such as the Economic Development Loan Fund should cease immediately; those loans currently in effect will either be transferred to the appropriate federal agency or be negotiated to an early settlement. TVA was never intended to be a lending agency or a bank.
TVA should ramp up its installation of scrubbers and other clean air devices on all its coal-fired plants. Long ago, TVA should have taken the lead as a federal agency to make our air as clean as currently possible.
There should be no more TVA funds used for experimentation. Other agencies and sources have a far deeper involvement in anything TVA has viewed as “experimental.”
Refrain from using the statement that TVA is “self-financing” because it requests no appropriations from Congress. It is misleading and some consider it a false statement because TVA goes through the backdoor for financing its operations through the sale of bonds “…and (TVA) is required to be self-supporting from power revenues and proceeds from the issuance of debt” (underline supplied.) TVA’s debt is now estimated at $25 billion.
Summary
In summary, it is past time for the federal government through its agent the TVA to get out of the way and allow consumers more freedom of choice between electricity suppliers; to open up for the first time the 17,000 miles of TVA transmission lines to permit normal commercial traffic over them; to let competitive markets prevail and to return to each of the seven states in which TVA operates their rightful control of public utilities. TVA has just hiked its electricity rates again and not one public watchdog agency (PSC’s) in the seven states involved can do anything about it.
---
As usual, TVA is travelling in parallel universes; one says, “We have to conserve energy use to reduce the amount of electricity during peak demands usually in the hottest and coldest times of the year”.
TVA already is travelling under the likely assumption that “peaking demand” cannot be met because they are moving ahead with the development of multi-billion dollar nuclear plants. This means that TVA will have to continue paying higher prices for that extra electricity from outside sources. TVA also is continuing to gobble up “at surplus” privately owned plants in preparation of peak demand needs as early as this summer.
In other words, TVA does not believe their efforts to help customers reduce electricity needs will be sufficient. Anyway, TVA really does not want customers to reduce their use of electricity, especially at the higher rates customers are now paying because every dollar a consumer saves reduces TVA’s income by a dollar. And TVA’s cost per unit of production correspondingly goes up.
So TVA is playing the “pull the rope” game, at one end are the true conservationists whom TVA says they support, those who would rather see alternate forms of energy to reduce air pollution, and at the other end, TVA and its adherents to raise even more TVA’s rates to keep from borrowing even more money to pay interest on TVA’s outstanding debts.
Unfortunately, “you can’t have your cake and eat it too”.
To add to TVA’s bad economic news, sales are down and costs are up (TVA April Board meeting www.tva.gov ).
TVA has an interesting concept of budgeting, “As long as it’s in the budget, it can be spent” regardless of whether there is enough income to pay for it.
The irony of trying to reduce consumption only during peak demand periods shifts those periods to another peak period, which too must be reduced and so on.
TVA unfortunately finds itself in a box with a very deep hole in it. And borrowing even more money (which they are authorized to do, up to $30 billion from present debt of $25 billion) will not solve the problem because TVA continues to borrow billions just to pay interest on debt now coming due.
For years, TVA has gotten away with its backdoor financing scheme of borrowing and borrowing more money but the income, now even lessening, cannot even keep up with the spending just for debt repayment.
I do not know anyone who thinks that TVA could not cut its budget drastically, at least ten percent for starters, better to bring TVA in line with reasonable debt to income ratios.
Of course, for some time now, I have advocated the dissolution of the TVA, a federal agency, for constitutional reasons and for its anti-competitive stand against our free-enterprise system. TVA’s recent acquisitions of corporately owned electricity plants is just one example of TVA’s anti-competitiveness.
If TVA is serious about conservation (and I believe they are not) a more positive and immediate result would be to stop payments in lieu of taxes to state and local governments and instead make those “payments” in the form of credits to users of TVA electricity based on LESS power consumed, that is, an incentive to cut down on electricity usage.
Today, those payments are based on how much electricity is consumed and the less consumed the less payments that are made to the seven states and localities, just one more reason TVA works at cross-purposes with itself.
Since TVA makes the rules about this sort of thing, arcane though they may be, they also can change the rules at their discretion. Any rule favoring the ones paying electricity bills could only place the TVA in a more favorable light. But the words of the TVA Act and the deeds of TVA management seldom coincide; one does not have to look too far to find other pitfalls the TVA finds itself lurching toward. The present direction of the very flexible Strategic Plan 2007 is sure to bump into the cold reality that financial resources are extremely limited and will be for quite some time. There isn’t even a “half-price” lunch, much less a “free one”.
And now, just now, at the April Board meeting, and after two years in existence, the board has clarified that the board makes TVA policy and the CEO carries out those policies. Huh? Much too late in closing the barn door.
Suggestions on developing the
Dissolution Plan
for the
Tennessee Valley Authority
White Paper
by
Ernest Norsworthy
December 2006
Now that the TVA land policy dust* is somewhat settled don’t believe for a second it was just “we listened, we heard” from the more than 5000 comments received that convinced the TVA to adopt a comprehensive and permanent land policy. Presidential Executive Order 13406 clearly states that all federal agencies, including the TVA, must not sell or lease acquired property for private uses.
Perhaps this clarification of how TVA-owned lands will be handled will help sort out the eventual privatization of TVA’s electrical production and transmission lines. For years, TVA has talked about privatization and for years, TVA has practically ignored doing anything about it.
The strategy could go something like this but not necessarily in order:
Open TVA’s transmission grid (“open access”) to all power suppliers willing to pay a competitive fee. This act alone will bring TVA into compliance with the Federal Energy Regulatory Commission (FERC) order to open up a section of TVA’s transmission lines to East Kentucky Power Cooperative, Inc. (See TVA vs. FERC, US District of Columbia Court of Appeals.) TVA’s exclusive grid and service area impedes the flow of commerce between the seven states under control of the TVA and through and between states in the Eastern Grid not just for “seasonal power exchanges and reliability.”
Group some of the less desirable power properties with better ones in auction/bid lots. This should ensure that all power production facilities would be removed from federal ownership. Stage the auctions over a period of months to liquidate as much as possible TVA’s huge $25 billion debt and to keep disruptions at a minimum.
Immediately release distributors from their long-term contracts with TVA if they so desire. This will allow those distributors to seek lower cost electricity from other presently available sources. TVA requires a minimum five-year notice; a number of distributors have already given notice.
Immediately cease buying even more surplus power units for use only during peak power needs. Additional nuclear power soon will be coming on line; TVA is on the verge again to be overbuilding electrical capacity.
Immediately allow suppliers offering cheaper electricity rates to use TVA transmission lines.
Cease immediately the paternalistic requirement that TVA approve all nonpower expenditures by TVA distributors. (See TVA Office of the Inspector General report www.tva.gov/oig )
By Executive Order of the President, bring in executive level staff from other federal and state departments and agencies to be headed by a non-government liquidation firm. This team, a Task Force, Commission or some such organization, would develop a phased plan of dissolution with the goal of abolishing the TVA. The Team itself would be closed down by a date certain. Part of the Plan would include finding jobs for displaced TVA employees for those not transferring to private utility companies; a union representative also would be included to receive grievances.
The Dissolution Plan would be devised to be the least disruptive to market forces and to TVA distributors for a smooth transition period. Many of 8.6 million users of TVA electricity would have for the first time the ability to choose among electrical suppliers.
Financial aid to states and communities as payments-in-lieu-of taxes would continue at the present rate for two more years then stopped. Other long-term financial agreements with the TVA (other than bonds) will be negotiated for completion within six months of the beginning of the Dissolution Plan.
All health and retirement plan obligations will be transferred to the appropriate federal agency or agencies.
Form a special unit in TVA’s Dissolution Plan to deal with the many legal wrangles that are sure to come since the new Land Policy was issued. Fold in the suits now pending in which TVA is a litigant.
The Dissolution Plan should have at its core a time line of activities with their planned and actual completion dates.
Assign the various parts of TVA to appropriate federal agencies such as the surplus 293,000 acres to the National Park Service for future national park expansion. Some properties should be allotted to the states for development of state parks.
Direct loans or grants from TVA such as the Economic Development Loan Fund should cease immediately; those loans currently in effect will either be transferred to the appropriate federal agency or be negotiated to an early settlement. TVA was never intended to be a lending agency or a bank.
TVA should ramp up its installation of scrubbers and other clean air devices on all its coal-fired plants. Long ago, TVA should have taken the lead as a federal agency to make our air as clean as currently possible.
There should be no more TVA funds used for experimentation. Other agencies and sources have a far deeper involvement in anything TVA has viewed as “experimental.”
Refrain from using the statement that TVA is “self-financing” because it requests no appropriations from Congress. It is misleading and some consider it a false statement because TVA goes through the backdoor for financing its operations through the sale of bonds “…and (TVA) is required to be self-supporting from power revenues and proceeds from the issuance of debt” (underline supplied.) TVA’s debt is now estimated at $25 billion.
Summary
In summary, it is past time for the federal government through its agent the TVA to get out of the way and allow consumers more freedom of choice between electricity suppliers; to open up for the first time the 17,000 miles of TVA transmission lines to permit normal commercial traffic over them; to let competitive markets prevail and to return to each of the seven states in which TVA operates their rightful control of public utilities. TVA has just hiked its electricity rates again and not one public watchdog agency (PSC’s) in the seven states involved can do anything about it.
---
*- As of the April 2008 Board meeting, the dust still is swirling. It appears that the TVA has not conformed to the requirements of Executive Order 13406, which clearly states that property disposed of by the TVA (or any other federal agency) must be for public uses, not for “commercial”, “industrial” or for “private development”. There are a number of examples given in the EO for guidance.
Ernest Norsworthy
April 16, 2008
Sunday, April 13, 2008
TVA to states: Your Water Policy be Damned!
TVA to the states – “Your water policy be damned?”
So, the TVA controls the electricity for 8 million people. Let’s restate that. The Tennessee Valley Authority controls the electricity for 8 million people AND all the water in the rivers and tributaries in TVA’s 80,000 square-mile territory.
The governors of Tennessee, Georgia and Alabama can talk all they want to among themselves about critical water issues but the one irrefutable federal agency atop all that dammed-up water is the TVA. And the TVA is not answerable to any state or local government entity including all seven of the state governors in TVA’s territory.
Does that seem un-American? It does to me. Our federal government in 1933 established a supra-government called the TVA and it is unlike any other federal agency. It has the powers of the federal government to take property and until recently, thought it had the power to buy, sell and swap land for a profit.
Aside from having the power directly to compete with free-enterprise utilities, the TVA with its arcane rules and procedures, in effect, is a separate and uncontrolled federal agency.
The Congress refuses to exercise oversight of the TVA and the several states are powerless to make any changes in it. Still, at least three states under TVA’s jurisdiction, Tennessee, Georgia, and Alabama are developing their own water policies and presumably their own strategies in how to deal with a water crisis.
The last person now standing appears to be the TVA and they shouldn’t be standing in the mix at all.
Ernest Norsworthy
emnorsworthy@earthlink.net and http://norsworthyopinion.com
So, the TVA controls the electricity for 8 million people. Let’s restate that. The Tennessee Valley Authority controls the electricity for 8 million people AND all the water in the rivers and tributaries in TVA’s 80,000 square-mile territory.
The governors of Tennessee, Georgia and Alabama can talk all they want to among themselves about critical water issues but the one irrefutable federal agency atop all that dammed-up water is the TVA. And the TVA is not answerable to any state or local government entity including all seven of the state governors in TVA’s territory.
Does that seem un-American? It does to me. Our federal government in 1933 established a supra-government called the TVA and it is unlike any other federal agency. It has the powers of the federal government to take property and until recently, thought it had the power to buy, sell and swap land for a profit.
Aside from having the power directly to compete with free-enterprise utilities, the TVA with its arcane rules and procedures, in effect, is a separate and uncontrolled federal agency.
The Congress refuses to exercise oversight of the TVA and the several states are powerless to make any changes in it. Still, at least three states under TVA’s jurisdiction, Tennessee, Georgia, and Alabama are developing their own water policies and presumably their own strategies in how to deal with a water crisis.
The last person now standing appears to be the TVA and they shouldn’t be standing in the mix at all.
Ernest Norsworthy
emnorsworthy@earthlink.net and http://norsworthyopinion.com
Wednesday, April 2, 2008
Comment on Trevor Stokes article on TD Forums
Mr. Robert Palmer, Editor
Times Daily
Florence, Alabama
March 24, 2008
Subject: Times Daily forum (article by Trevor Stokes 3/24/08); my suggested commentary
Trevor Stokes article about forums gets him an ‘E” for effort in trying to explain the forum phenomenon (as he said, it started a 1000 years ago in Rome) and he gets an “L” for loyally sticking up for the hand that feeds him but only a “C” in conclusions from his analysis.
One of the great failings of newspapers today, not just of the Times Daily, is their seeming inability to bring depth of reasoning, analyzing the subject matter and drawing conclusions based on them to the fore. At one time, that process was a pillar of practically every newspaper. And I think I know some of the reasons why it is missing today.
Since the 1980s when the Genie called the computer came out of the sand-bottle making the whole world interactive, the desire to talk, to be seen and heard through the Internet has exploded. And so has advertising in newspapers conversely imploded. Seen as the common enemy as did radio when TV moved ears and eyes to a small black and white screen, there was much ballyhooing about the death of radio, and the same death knell of newspapers is now at hand because of the computer.
A funny thing happened on the way to the forum – radio has never been larger and I think, in time, newspapers or some facsimile of them will again flourish, as will books and the written record of thousands of years. What if societies could not maintain the proper balance between zero’s and one’s and digitally speaking, they disappeared? There would not be a single trace left of the digital age except a few disintegrating pieces of hardware that itself would disappear in less than a thousand years.
So newspapers must figure out how to stay in the game and continue profitability. Computer ads, though less profitable, do produce revenues to help the media keep pace.
There will have to be a lot more work to make computer advertising pay off. Content-driven sites will attract the viewers who, like Americans in general, are very eclectic. Newspapers, because they play to diverse audiences, must place more emphasis on readability content to get their attention there in the first place.
While just about every business has a Web presence and mentions it in all of their advertising, I do not think the computer side of a newspaper ever will displace it. Like television was to the radio, they both captured increasing audiences.
The headline of Stokes’ article, which implied that forums might be dangerous to democracy, is not substantiated in the story, in fact; I believe the opposite to be true. While there is much, much misinformation on the Internet, its value to democracies all over the world is inestimable.
When a curiosity seeker, or researcher, or a student doing homework, has at their fingertips literally more than the great library of Alexandria with more and more information coming online every day, one cannot help but be in awe of the greatest wonder of the world, the Internet.
So Mr. Stokes’ article really could have no ending because there is not one smart enough (or stupid enough) to predict the final outcome. Today, there are forums for people to use pretty much as they like (how’s the fishing?) and tidbits about the community.
However, the tenor of some of the “discussions” on the Times Daily forum lead me to believe that some are not aware of the universality of the Internet and that what they say never will go away – until all zero’s and one’s are gone.
Ernest Norsworthy
Visalia, California
emnorsworthy@earthlink.net and http://norsworthyopinion.com
Times Daily
Florence, Alabama
March 24, 2008
Subject: Times Daily forum (article by Trevor Stokes 3/24/08); my suggested commentary
Trevor Stokes article about forums gets him an ‘E” for effort in trying to explain the forum phenomenon (as he said, it started a 1000 years ago in Rome) and he gets an “L” for loyally sticking up for the hand that feeds him but only a “C” in conclusions from his analysis.
One of the great failings of newspapers today, not just of the Times Daily, is their seeming inability to bring depth of reasoning, analyzing the subject matter and drawing conclusions based on them to the fore. At one time, that process was a pillar of practically every newspaper. And I think I know some of the reasons why it is missing today.
Since the 1980s when the Genie called the computer came out of the sand-bottle making the whole world interactive, the desire to talk, to be seen and heard through the Internet has exploded. And so has advertising in newspapers conversely imploded. Seen as the common enemy as did radio when TV moved ears and eyes to a small black and white screen, there was much ballyhooing about the death of radio, and the same death knell of newspapers is now at hand because of the computer.
A funny thing happened on the way to the forum – radio has never been larger and I think, in time, newspapers or some facsimile of them will again flourish, as will books and the written record of thousands of years. What if societies could not maintain the proper balance between zero’s and one’s and digitally speaking, they disappeared? There would not be a single trace left of the digital age except a few disintegrating pieces of hardware that itself would disappear in less than a thousand years.
So newspapers must figure out how to stay in the game and continue profitability. Computer ads, though less profitable, do produce revenues to help the media keep pace.
There will have to be a lot more work to make computer advertising pay off. Content-driven sites will attract the viewers who, like Americans in general, are very eclectic. Newspapers, because they play to diverse audiences, must place more emphasis on readability content to get their attention there in the first place.
While just about every business has a Web presence and mentions it in all of their advertising, I do not think the computer side of a newspaper ever will displace it. Like television was to the radio, they both captured increasing audiences.
The headline of Stokes’ article, which implied that forums might be dangerous to democracy, is not substantiated in the story, in fact; I believe the opposite to be true. While there is much, much misinformation on the Internet, its value to democracies all over the world is inestimable.
When a curiosity seeker, or researcher, or a student doing homework, has at their fingertips literally more than the great library of Alexandria with more and more information coming online every day, one cannot help but be in awe of the greatest wonder of the world, the Internet.
So Mr. Stokes’ article really could have no ending because there is not one smart enough (or stupid enough) to predict the final outcome. Today, there are forums for people to use pretty much as they like (how’s the fishing?) and tidbits about the community.
However, the tenor of some of the “discussions” on the Times Daily forum lead me to believe that some are not aware of the universality of the Internet and that what they say never will go away – until all zero’s and one’s are gone.
Ernest Norsworthy
Visalia, California
emnorsworthy@earthlink.net and http://norsworthyopinion.com
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