[Congressional Record Volume 143, Number 140 (Thursday, October 9, 1997)]
[Senate]
[Pages S10816-S10817]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            THE TENNESSEE VALLEY AUTHORITY MODERNIZATION ACT

 Mr. FRIST. Mr. President, when the Tennessee Valley Authority 
formed in 1933, the region suffered under the weight of economic 
despair and the unforgiving forces of nature. The great Depression and 
rural isolation served to keep much of the valley's population in 
poverty and without some of the basic tools to sustain even a marginal 
existence. The mighty Tennessee River and its tributaries, which have 
sustained life and commerce along their banks since prehistory, wreaked 
havoc on life and property as the unpredictable and uncontrollable 
floods rushed from the slopes of the southern Appalachians and 
Cumberland Plateau. Flooding and poor farming practices were of nearly 
epidemic proportions as loss of topsoil and low crop yields reached 
catastrophic levels. Access to electricity was both expensive and 
limited to only a few metropolitan areas, thus serving to even further 
widen the gap between the Tennessee Valley and the rest of the country 
as the already hamstrung national economy passed the region by.
  President Roosevelt designed the Tennessee Valley Authority as a 
unique Federal agency whose mission was defined by providing a range of 
essential services to the entire region

[[Page S10817]]

rather than fulfilling a single, specific function nationwide. TVA 
undertook many duties that other Federal agencies were actively 
pursuing in other parts of the country, just as it does today, but TVA 
also undertook services which addressed the economic and natural 
problems unique to the Tennessee River watershed. TVA's charter was 
very broad and designed to give the agency leeway to address the 
region's interrelated needs of flood control, improved farming methods 
and conservation, rural electrification, and economic development as a 
single coordinating and executing body.
  TVA undertook ambitious conservation, economic development, flood 
control, and electrification projects. The Tennessee River was tamed 
and became more readily navigable; topsoil loss and declining 
agricultural productivity had been stopped or even reversed; isolated 
families received electricity in their homes and workplaces; and the 
economy was expanding. By the 1950's the Nation's economy was strong 
and growing, and the economic gap between the Tennessee Valley region 
and the Nation as a whole was narrowing. By the 1980's, that gap no 
longer existed.
  In a region that boasted a strong independent tradition and a general 
skepticism about the benefits of the Federal Government, the TVA had 
become viewed as more than just a benevolent hand providing economic 
opportunity and security to the depressed region, it became an integral 
part of the region's identity. In the minds of Tennesseans, TVA was 
credited with bringing the region out of poverty, depression, and 
existence at the mercy of nature.
  Since its inception, TVA's mission has evolved, and the organization 
today is very different than in 1933. In 1959 the TVA Act was amended 
to fully separate the U.S. Treasury from the rapidly expanding TVA 
power program, which had seen an initial round of growth associated 
with the national security activities in Oak Ridge during the Second 
World War, but had continued to expand its size and revenues for 
regional industrial and residential consumption. TVA power would no 
longer rely on the support of taxpayers nationwide, but was thereafter 
dependent on the ratepayers and lenders to provide all operation 
expenses. TVA's power program far eclipsed the other original missions 
of conservation, flood control, and navigation from which had been 
separated. Today, TVA is one of the largest electric utilities in the 
world, with a revenue stream in excess of $5 billion per year.

  That's an impressive growth, but it didn't come without associated 
problems--some of them very serious. In the 1960's and 1970's, TVA 
began an ambitious nuclear powerplant construction program, borrowing 
heavily from public and private sources. Like other utilities that 
invested in nuclear power, TVA overextended itself badly as the costs 
of construction and fueling the plants rose dramatically and the 
regulatory bar moved ever higher. TVA continued to go further into 
debt, and today its liability now exceeds a truly staggering $27 
billion.
  TVA's benevolent role in the life of the region has also come into 
question. Decisions and behavior that many Tennesseans are now viewing 
as simply an extension of a grossly overgrown Federal bureaucracy in 
general, and a betrayal of the original benevolent mission envisioned 
for TVA in the formative act, served to end an era of trust between 
ratepayers and TVA. More worrisome, though, is that the errors in 
strategy and judgment have put the health, liability, and even the 
existence of TVA in jeopardy.
  At its root, I believe, is the fact that TVA was allowed to 
fundamentally change its mission and to begin operating as a self-
financing electric utility without the necessary structural changes. 
While TVA power grew rapidly as consequence, it still maintained the 
management and corporate structure of its original Depression-era 
mission of conservation, flood control, navigation, and economic 
development.
  Yesterday, I introduced legislation to address those problems, and to 
make changes in the decisionmaking body of TVA that will more closely 
reflect its needs and the demands of the ratepayers and taxpayers. 
These are changes which, in truth, should have been incorporated into 
the TVA Act the day TVA became a self-financing corporation in 1959.
  Under my TVA Modernization Act, the board of directors will grow from 
three full-time members to nine part-time members, and each member must 
have corporate management or a strong strategic decisionmaking 
background. My bill also shortens the members' terms from the current 9 
years to staggered 5-year terms.
  The expanded board would establish long-range goals and policies for 
TVA, as well as approve the annual budget and conduct public hearings 
on policies that have a major effect on ratepayers in the valley. The 
board will also determine electricity rates and ensure that independent 
audits of the corporation's management are conducted.
  But unlike the current board, the expanded board will not be involved 
in the day-to-day management of TVA. Instead, it will appoint an 
independent chief executive officer to manage the corporation--much 
like businesses of its size throughout the country have done for 
decades.
  While the President will retain the sole authority to appoint new 
board members, my bill will ensure that candidates have the business 
background necessary to take this $6 billion corporation into the 21st 
century and a new era of deregulation. By requiring that no more than 
five members come from a single party affiliation, it will also help 
ensure that the board never becomes politicized. Together with an 
independent CEO, we can help avoid the type of decisions and missteps 
that have saddled TVA with more than $27 billion in debt over the 
years.
  Once enacted, the bill would take effect on May 18, 1999--exactly 66 
years after the original TVA Act took effect. Current board members 
whose terms don't expire until after 1999 may remain on the board as 
part-time members, along with the President's seven new appointees. 
Part-time board members will receive an annual stipend and per diem pay 
for their services, the total of which will not exceed $35,000 per 
year. And instead of having a Presidentially designated chairman of the 
board, members will elect their chairman.
  TVA has experienced enormous growth over the years, from a 
Depression-era conservation and public works program to a multibillion-
dollar electric utility. It's time we give TVA and ratepayers in the 
valley a management structure that's more responsive and stable and 
that can help this important agency face the upcoming dramatic changes 
in the electric utilities industry as effectively and efficiently as 
possible.

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