The Obama administration's 2014 budget is calling for a strategic review of the Tennessee Valley Authority, opening the possibility that the largest U.S. public utility could be sold.
TVA officials seemed to have been caught off guard by the budget proposal released Wednesday. Board Chairman Bill Sansom and President and CEO Bill Johnson said the proposal was unexpected.
"At this point we don't know what the strategic review might include or what options might be explored," Sansom says in a statement. "In the meantime, we will continue operating TVA in a sound financial manner in support of the people of the Tennessee Valley and the interests of the Federal Government."
Although TVA does not receive taxpayer appropriations, the utility's expenditure of borrowed funds does count in the federal deficit.
The budget section titled "Reform TVA" suggests the utility likely will have to exceed the $30 billion debt cap allowed by law in order to upgrade its aging infrastructure, meet new environmental regulations and produce enough power to meet future demand. That includes scrapping or upgrading some coal-fired power plants and expanding the use of nuclear power.
"Reducing or eliminating the federal government's role in programs such as TVA, which have achieved their original objectives and no longer require federal participation, can help put the nation on a sustainable fiscal path," the budget reads.
The idea is one of the few energy proposals in the budget that researchers at the conservative Washington-based Heritage Foundation like.
Jack Spencer, a senior research fellow in nuclear energy policy, said the whole concept of a federal utility is "sort of antiquated. It's time to do something different."
But Republican Sen. Lamar Alexander, of Tennessee, called the possible sale a bad idea.
He notes that there is by law no federal taxpayer liability for TVA debt and says that privatizing the utility could lead to higher electrical costs for the more than 9 million people it serves in the states of Alabama, Georgia, Kentucky, Mississippi, North Carolina, Tennessee and Virginia.
"While TVA management prefers a flexible debt cap, it has assured me that it can live within the current debt limit if necessary," Alexander's statement reads.
Richard Caperton, the managing director for energy with the liberal Center for American Progress in Washington, said the proposal seems to be aimed purely at keeping the government from taking on more debt and is not a reflection of any problems with the utility.
"TVA is a success story," he said. "It has provided affordable, reliable power to millions of people for years. It's working very well for taxpayers and consumers of electricity."
He said the idea of selling TVA would probably be very unpopular in the Southeast.
TVA was created in 1933 to deliver low-cost electricity, control flooding and improve the economy.
TVA had $24.6 billion in debt as of Dec. 31, 2012, according to the utility. TVA's debt for capital projects is underwritten by power sales revenue, not taxpayers.
The suggestion of selling TVA has emerged before. Ronald Reagan promoted the idea before he became president, but he never seriously pursued it.