TVA may face debt cap

TVA's debt now totals about $25.2 billion. The agency has been able to cut its debt by more than $2.5 billion since 1997. Still, this leaves less than $5 billion for new capital projects.

Two former TVA chairmen, S. David Freeman and Craven Crowell, worry that the federal utility will be forced to ask Congress to raise the debt ceiling if it decides to build new reactors at the Bellefonte site in Alabama and undertakes new pollution controls for its fleet of coal-fired power plants.

“It's not an immediate (issue), but I think it's going to have to be looked at,” current Chairman Bill Sansom told the Chattanooga Times Free Press. “Right now, we're trying to pay down as we build back and our debt is staying pretty even. But we're still working on nailing down our projections for the future.”

Freeman helped convince Congress in 1979 to double TVA's previous debt cap. The Knoxville-based agency 'made a solemn promise to Congress that was all the debt that we were going to incur,' he said.

“That debt cap is the one major remaining control Congress has on TVA spending, and I don't think they will give that up lightly,” Freeman said.

TVA hasn't received federal funding of any kind for more than a decade. The agency survives on electricity sales to 159 distributors serving 8.8 million consumers across Tennessee and in parts of Mississippi, Alabama, Kentucky, Georgia, North Carolina and Virginia.

Crowell, who helped limit TVA's then-growing debt in the 1990s, said raising the debt limit now could be difficult in the wake of congressional bailouts for other government-sponsored agencies, such as mortgage giants Fannie Mae and Freddie Mac.

“The debt of TVA is a serious problem, and raising the cap above the current $30 billion limit would be difficult, if not impossible, in the current environment,” Crowell said. The process “would be a highly politicized debate and would bring out people that don't like TVA and utilities who don't like TVA competing against them for economic development.”

TVA currently is spending $2.5 billion to complete a second reactor at the Watts Bar station near Spring City, Tenn. Building new reactors at the Bellefonte site in Hollywood, Ala., is projected to be nearly twice as expensive.

In its strategic plan, TVA said it wanted to retire debt on its existing assets and try to limit TVA's overall debt to no more than 70 percent of the value of its assets.

But Sansom said, “If you are running a company that is continuing to grow, that changes the way you look at that $30 billion cap…. If you are growing, it doesn't mean your debt shouldn't grow relative to your worth.”

Sen. Lamar Alexander, R-Tenn. and chairman of the TVA congressional caucus, said he would hope to see no change in TVA's debt limit. “For it to be a reasonable request, it would have to be part of a long-term plan,” he said.