Some utility industry officials are lobbying lawmakers on privatizing federally-owned power projects like the Tennessee Valley Authority and the Bonneville Power Administration.
This is a horrible idea.
Almost 20 million electricity customers served by BPA in the Pacific Northwest and TVA in the Southeast get the nation’s cheapest and most reliable power from these not-for-profit government agencies that get no government funding but exist solely on their sales. Privatizing them would be a huge mistake, although it might make a few new American oligarchs.
In fact, privatization of government entities has never worked. It has only made a handful of businessmen very rich and has cost taxpayers a lot more money. Whether it’s prisons or the military, privatization has always increased costs, decreased quality and services, and encouraged corruption.
There is a myth that private companies are better than governments at building and operating things like power companies, roads or prisons. But William Lazonick, an economist at the University of Massachusetts, points out that the public, most economists and politicians misunderstand the true history of how the United States built the largest economy in the world.
The visionary entrepreneur and the courageous industrialist are not the originators of our economic system, but rather it is the product of the collective efforts of the people through their government. Our present situation demonstrates that running government is not like running a business.
America became great by huge government infrastructure builds and government R&D that was often freely given to the private sector. NASA, DOE, USGS and other agencies paved the way for industry and gave away the fruits of taxpayer dollars for almost nothing.
Whether it was the railroads, oil industry, universities, or the Golden Gate Bridge, government provided bonds, land grants or other kinds of support that never made it into the public eye.
Besides, TVA and BPA have always been seen as hugely successful. Hydropower was one of those amazing things that was new a hundred years ago and was one of those little-known factors that won WWII.
Hydropower was the main reason that TVA and BPA and other agencies were formed, and they provided much of the power to make enormous amounts of aluminum for airplanes, traditional munitions, and plutonium for the Bomb.
TVA also has a unique charter to support national defense. They could burn weapons-grade plutonium in their nuclear reactors and make tritium for NNSA - private companies can’t do that and don’t want to.
After WWII, these agencies took the long-view of generating and transmitting electricity in their regions, at as low a cost as possible, while generating no profit. As citizens, we paid for it all over the decades. TVA and BPA had greater flexibility to try new things and move quickly.
The undeclared falsehood in this privatization argument is that the government owns these assets in the traditional sense. TVA’s and BPA’s assets were paid for by the electric bills of customers over 80 years. These are government-controlled publically-owned assets.
So is it fair for the Federal Government to sell these assets just because they can?
TVA and BPA have a host of regional economic development functions separate from its energy side, including navigation, flood control, reforestation, agricultural improvements, recreation, water and air quality improvement, science and technology R&D, and even malaria prevention in its early days. These are not activities private companies do or want to do. They would have to be outsourced, at elevated cost to taxpayers.
As government agencies, TVA and BPA can have higher debt ratios and can borrow money at lower interest rates than private entities. Privatizing them would mean having to deal with that debt immediately, something a private company would also not want, meaning taxpayers would be stuck paying for it right now.
But the big reason for keeping BPA and TVA, as they are, is that they are not-for-profit. This is a huge advantage.
Fortunately, selling these assets off requires Congressional approval, and the proposal drew immediate condemnation from members of Congress.
‘This loony idea of selling TVA’s transmission lines seems to keep popping up regardless of who is president,’ said Senator Lamar Alexander (R-TN). ‘It has zero chance of becoming law.’
Indeed, the idea of selling off BPA and TVA is nothing new - for either party. Both the Clinton Administration and the Obama Administration floated this idea as well, which correctly got torpedoed by Congress.
Added Alexander, similar proposals in 2013 ended up undermining TVA’s credit, raising interest rates on its debt, and threatened to increase electric bills for 9 million Tennessee Valley ratepayers.
The American Public Power Association, which represents nonprofit, community-owned utilities, called the proposal ‘misguided’ and said it would ‘adamantly oppose’ any effort to privatize TVA and other public power assets like BPA, Southwestern Power Administration or Western Area Power Administration.
According to the independent, non-profit Economic Policy Institute, privatization of TVA would divide its electric power system into independent and no longer accountable, or coordinated, component parts. The new private owners of these assets would immediately raise electric power rates claiming there would be additional costs – yes, like profits. Right now, BPA and TVA sell power at cost.
The TVA’s and BPA’s reliability record—providing consistent, uninterrupted electric power—could be adversely affected as responsibility for system maintenance and decisions about expansion, upgrades, management, and repairs would shift from a single body to multiple independent private utilities.
Like the Civilian Conservation Corps, the SEC, the FHA, the FDIC, and Social Security, TVA and BPA were visions of President Franklin Roosevelt. TVA was initiated by Congress in 1933, and charged with improving the quality of life in a seven-state region through the integrated management of the region’s resources.
To help lift the Tennessee Valley out of the Great Depression, TVA built dams for flood control, provided low-cost power and commercial shipping, restored depleted lands, and raised the standard of living across the region. TVA’s power service area covers 80,000 square miles in Tennessee, North Carolina, Kentucky, Georgia, Alabama, Mississippi, and Virginia, serving 9 million electricity consumers.
Similarly, Congress created BPA in 1937 to deliver and sell power from Bonneville Dam. Major construction from the 1940s through the 1960s created networks and loops of high-voltage wire touching most parts of BPA's service territory in Idaho, Oregon, Washington, Montana and parts of California, Nevada, Utah and Wyoming.
During that time, Congress authorized BPA to sell and deliver power from more federal dams on the Columbia River and its tributaries, including the Grand Coulee Dam, which is the largest capacity power plant in the United States.
Destroying these proven American assets for some misguided idea of free market would be criminal. I hope Congress does not succumb to the allure.
