Obama Proposes Privatizing TVA

Published July 16, 2015

As part of his federal budget proposal, President Barack Obama is proposing to study privatizing or devolving the operation of the Tennessee Valley Authority (TVA).

TVA is a government-owned electricity production and public works corporation created in 1933 as part of President Franklin Roosevelt’s “New Deal” reforms.

‘A Staid, Federal Ownership’

Bill Newman, a former executive of a similar government monopoly turned private corporation, the Consolidated Rail Corporation, says other presidents have proposed returning the TVA’s functions to the private sector.

“This isn’t the first time the sale of TVA has been proposed,” Newman said. “When Conrail was privatized in 1987, Reagan reportedly thought about it then.”

Newman says there are several options for getting the federal government out of the electric power business.

“They could sell it into the private market, they could sell it to another state, [or] they could have the employees own it,” Newman said. “I think, at that point, you begin to see the combination of the market and the imagination and the creativity take over what has been a staid, federal ownership.”

Fighting Progress

Newman says TVA’s history of mismanagement complicates any return to the private sector.

“The bottom line [is TVA] keeps very little of the revenue that it raises, it has a pension plan that is underfunded, and it has a workforce that is bloated compared to other utilities,” Newman said. “It is this way because it is a monopoly.”

“[TVA’s] management is dead-set against this, and every which way they can, they try to stop discussion about it,” Newman said.

‘A Socialist Joke Gone Bad’

Ken Glozer, a former White House Office of Management and Budget analyst who oversaw the dismantling of several former federally owned companies during his tenure—including Conrail—says TVA is “a socialist joke gone bad.” Glozer is also a policy advisor for The Heartland Institute, which publishes Budget & Tax News.

“Why should the people of Tennessee live off the federal taxpayers?” Glozer asked. “That should end. It should be sold off for whatever you can get for it, and the people of Tennessee [should be allowed to] buy their power … from private sector, federal-taxpaying companies.”

Glozer says the era of New Deal public works programs such as TVA is nearing its end.

“In 2015, why is the federal government in the electricity business at all?” Glozer said. “The technology is developed. It’s something that [should be a] private sector function.

“TVA is so overhead-laden and pension-burdened that [its] power now costs more than [that of] every other surrounding investor-owned utility that pays federal income taxes and doesn’t get a dime of subsidy,” Glozer said. “If this were in the private sector, people would be locked up for what’s going on.”

Elizabeth BeShears ([email protected]) writes from Trussville, Alabama.

Internet Info

Douglas Houston, “Privatization of the Tennessee Valley Authority,” Reason Foundation: https://www.heartland.org/policy-documents/privatization-tennessee-valley-authority/