Goodbye, New Deal: Obama Proposes Selling the TVA

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Buried on page 51 of President Obama's new budget proposal is a short section titled "Reform TVA" — where "reform" is likely to mean "privatize." It's the quiet beginning of a late chapter in the story of the New Deal, made necessary in part by Obama himself.

The Tennessee Valley Authority provides electricity to some 80,000 square miles of the Southeast. It operates nuclear, coal, and natural gas electricity generation systems; it runs a series of dams, some of which produce hydroelectricity. The only two things that differentiate it from any other massive electricity company are that it is owned by the government, and that it has a deeply significant history.

The 1933 project had a number of ambitious goals: managing flooding on the Tennessee River, restore regional farmland and forests, and, most significantly, produce electricity for a largely rural area. For President Roosevelt, who signed it into law, it offered value far beyond what it did for the region. It created an enormous number of construction jobs and projects for the Civilian Conservation Corps during the Great Depression. It provided a case study in the power of large-scale government investment. In FDR's words, the project created "a corporation clothed with the power of government but possessed of the flexibility and initiative of a private enterprise."

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Those are words that could have come from Obama himself. Earlier this month, he called for increased partnerships between the public and private sectors to improve American infrastructure. His push to take the TVA out of the government's portfolio isn't a political one. It's economic.

Obama's budget document articulates the argument. "TVA’s anticipated capital needs are likely to quickly exceed the agency’s $30 billion statutory cap on indebtedness," it reads, later stating that the government will therefore "undertake a strategic review of options for addressing TVA’s financial situation, including the possible divestiture of TVA, in part or as a whole."

In an oblique way, it's Obama's fault that the TVA's debt obligation is so high. Several of the agency's eleven coal-burning power plants predate components of the Clean Air Act meant to regulate air pollution — and are therefore exempt from many of its components. As the EPA revises pollution standards to further limit emissions — such as its proposals on mercury and soot proposals — those older facilities increasingly need costly upgrades, or to be replaced entirely. In 2010, the agency indicated it would need to increase that $30 billion cap in order to accommodate those improvements — authority it never received.

There are two reasons the proposed sale might not happen. The first is that regional members of Congress are likely to balk at the idea, as noted by Senator Lamar Alexander of Tennessee has already indicated his opposition.

The second reason is that it's not clear that private entities will be eager to assume that burden. Last year, Exelon Energy tried to sell three of its Maryland coal-powered plants which similarly needed upgrades. Exelon ended up selling the facilities at a steep discount.

The TVA helped mark a new era of American industry and regional and national economics. Powered by cheap electricity, the area around its facilities blossomed. But the era is ending. The spirit with which Roosevelt launched the massive government project has eroded; the full costs of that cheap electricity have become obvious in public health costs. That it is a staunchly Democratic president who is holding the door as that America departs is not entirely a coincidence.

Photo from TVA Web Team on Flickr.

This article is from the archive of our partner The Wire.