Press Releases

News from EPI Privatizing the Tennessee Valley Authority Would Increase Costs and Hurt Reliability

The Obama administration is currently considering whether to divest part or all of the federally-owned Tennessee Valley Authority (TVA) as a means to pay down the U.S. debt. Privatizing the TVA, which accounts for about 3 percent of U.S. electricity capacity and serves over 9 million people, would have far-reaching consequences, not only leading to increased power rates and less reliable service, but also threatening the TVA’s renewable energy research and economic development initiatives. In If It Ain’t Broke, Don’t Fix It! Potential Impacts of Privatizing the Tennessee Valley Authority, Joel S. Yudken, principal of High Road Strategies, LLC, examines the possible impacts of privatization on the TVA’s ability to provide reliable and affordable electricity to regional stakeholders, as well as the effects on its non-electricity functions, which include river and land management, environmental stewardship, and economic development.

“Over its 80-year existence, the TVA has had an excellent track record in almost every area of its operation, and its success has delivered substantial benefits throughout the Tennessee Valley,” said Yudken. “TVA is addressing its serious financial problems and its new leadership is preserving its capabilities as a system that provides wide-ranging benefits to the region and people it serves.”

Privatization of the TVA would divide its electric power system into independent and no longer accountable or coordinated component parts. The new private owners of the TVA’s electric power assets would significantly increase electric power rates compared those typically charged by the TVA because there would be have additional costs. The TVA’s reliability record—providing consistent, uninterrupted electric power—could also be adversely affected as responsibility for system maintenance and decisions about expansion, upgrades, management, and repairs shift from a single body to multiple independent private utilities.

“Instead of a single authority with responsibility for planning, implementing, and governing its various functions, privatization would lead to many competing entities that may or may not coordinate effectively in carrying out their missions,” said Yudken. “It’s difficult to see how selling off part or all of the TVA would provide its stakeholders with any greater benefits than the system already provides them in terms reliable and affordable electricity, economic development and innovation in nonrenewable energy.”

Privatization also threatens the benefits the TVA has delivered in areas other than electric power generation since the 1930s. It is unknown whether or not new owners would make a similar commitment and scale of investment as the TVA in renewable energy research initiatives and in non-hydroelectric renewable energy generation. The TVA’s economic development initiatives provide a variety of incentives and services to attract and retain companies and give communities economic growth opportunities, the future of which would be uncertain if the TVA is privatized.