published Tuesday, February 15th, 2011

TVA expects to boost debt $962 million in 2012

The Tennessee Valley Authority will add $962 million to its debt next year, rising to nearly 90 percent of its authorized borrowing authority, according to utility projections released in the White House budget plan Monday.

Construction costs from building a second reactor at the Watts Bar Nuclear Plant near Spring City, Tenn., will add $440 million to TVA's debt in fiscal 2012 while the building of new gas-fired plants and air pollution upgrades on existing coal plants will cost an additional $1 billion.

When offset by paying down the debt on other facilities next year, TVA's total burden of statutory and debt-like instruments will rise to $26.9 billion by the fall of 2012. TVA began the fiscal year October with a debt of $25.8 billion.

TVA's debt remains far less than even the rounding error to the total federal debt now exceeding $14 trillion. But Congress imposed a $30 billion debt ceiling on TVA borrowing in 1979 and a more conservative, debt-wary Congress may be reluctant to raise that cap.

"TVA is getting closer to its debt cap and after the problems with federally backed agencies like Fannie Mae and Freddie Mac I don't think this Congress is in any mood to raise that debt ceiling," said Stephen Smith, executive director for the Southern Alliance for Clean Energy and a member of the advisory panel on TVA's Integrated Resource Plan. "This should give TVA pause about proceeding too rapidly with expensive new projects like building more reactors at Bellefonte (in Hollywood, Ala.)."

With more sluggish growth in power demand and increased conservation, TVA has already pushed back trying to finish any new reactor at the Bellefonte plant until 2020, at the soonest.

TVA spokesman Mike Bradley said TVA remains under its debt cap and continues to invest in new generation and pollution controls "to achieve our goal of becoming a national and regional leader in cleaner energy, nuclear power and energy efficiency."

TVA no longer receives any federal funding from Congress, although rating agencies give TVA a top rating because of the implied backing of TVA's debt by the federal government.

TVA will pay back to the federal treasury $44 million next year for its original appropriations that built the TVA system. Since its creation in 1933, TVA has paid back $3.6 billion in principal and interest on the government's original $1.4 billion investment, Bradley said.

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