[Congressional Record Volume 144, Number 96 (Friday, July 17, 1998)]
[Extensions of Remarks]
[Pages E1332-E1333]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                PUBLIC UTILITIES IN A DEREGULATED MARKET

                                 ______
                                 

                             HON. ZACH WAMP

                              of tennessee

                    in the house of representatives

                        Thursday, July 16, 1998

  Mr. WAMP. Mr. Speaker, as the Chairman of the bicameral and 
bipartisan Tennessee Valley Authority Caucus in the 105th Congress, I 
submit the following:

Remarks by Craven Crowell, Chairman, Tennessee Valley Authority, to the 
  Institute of Economic Affairs, European Electricity '98 Conference, 
                    July 7, 1998--Brussels, Belgium


  The Role of the Public Power Company in the Deregulated 21st Century

       Thank you for that very kind introduction, and good 
     morning, ladies and gentleman. It is indeed a great pleasure 
     and an honor to be here today and I'm grateful for this 
     opportunity to discuss--from the American perspective--some 
     of the issues surrounding deregulation with experts from 
     Europe, and around the world. I'm going to want to talk about 
     the role of public utilities in a deregulated economy--and 
     I'll try to keep my remarks general--but I'm most familiar, 
     of course, with the Tennessee Valley Authority, where I serve 
     as Chairman. So I hope you'll forgive my spending a little 
     time about about TVA.
       I'm certain that many of you are already familiar with the 
     Tennessee Valley Authority but for those of you who are not, 
     let me offer just a brief sketch of TVA's history--or at 
     least that part of our history that's relevant to the issues 
     we're discussing today. We are a public utility--100 percent 
     government owned--and we're the largest supplier of 
     electricity in the United States. We're also a major 
     employer, with over 14,000 employees. We were created by the 
     United States Congress in 1933 under the administration of 
     President Franklin Delano Roosevelt. In fact, TVA was created 
     just 37 days after FDR took office, so I think it's clear 
     that the mission of TVA had a high priority for the newly 
     elected president.
       FDR said that the Tennessee Valley Authority was to be ``a 
     corporation clothed with the power of government but 
     possessed of the flexibility and initiative of a private 
     enterprise.'' So you can see, from the start, that TVA had 
     something of a dual identity--public ownership and public 
     responsibilities, but the expectation that the company was to 
     be fast on its feet, nimble and flexible, like a private 
     corporation. TVA was created at a time when America and much 
     of the world faced enormous hardships. The Great Depression--
     remember, this was 1933--was challenging whatever optimism 
     remained after the tragedy of the Great War. But leaders like 
     FDR believed that human will, properly channeled, and 
     organized on a grand scale, could conquer hardship and 
     adversity. Human will, harnessed by large-scale government 
     works programs could--the ``New Dealers'' believed--reclaim 
     the land, rebuild the shattered economy, and restore hope.
       These bureaucrats--I guess that's what we'd call them 
     today--believed that a public corporation like TVA could save 
     the poor and the destitute of the Tennessee Valley. So TVA 
     was not created principally to provide electric power to the 
     Appalachian farmers who lived in the remote hills of the 
     Tennessee Valley--in fact, electric power was not even part 
     of its original mission. TVA was created to rebuild a broken 
     society, and that's exactly what it did. Farmers needed to 
     rebuild a broken society, and that's exactly what it did. 
     Farmers needed to learn new methods of conservation so they 
     could restore fertility to their barren farmland. 
     Agricultural experts from TVA taught them. The rivers, prone 
     to flooding and hazardous to navigate, needed to be tamed so 
     they could serve the people who lived in their valleys.
       Engineers from TVA tamed the rivers. TVA trained tens of 
     thousands of poor farmers and gave them new skills. They 
     built huge hydroelectric dams and sent electric power lines 
     into parts of America that had never seen an electric light 
     or used an electric appliance, and when electricity became a 
     part of everyday life, experts from TVA helped teach energy 
     conservation to the consumers of the power TVA produced.
       Think about that. Long before conservation became 
     fashionable, TVA was teaching people how to use less of what 
     we make--not exactly part of a standard commercial business 
     plan, but part of what we see as our public responsibility. 
     Back in the '30s, TVA served the public good in thousands of 
     ways and, most people would agree, helped break the 
     stranglehold of the Great Depression.
       I like to think that TVA played a significant part in 
     creating the modern economy of the United States and the 
     prosperity we've enjoyed in the second half of this century. 
     But what about the next century? What will be the role of a 
     public utility like TVA and public power companies in general 
     in the deregulated 21st century? Public power now supplies 
     24.4 percent of the kilowatt-hours consumed by individuals 
     and industries in the US. Will we continue to supply a 
     quarter of the nation's electricity under deregulation? And 
     what about rates? The cost of electricity in the United 
     States can vary between 4 cents per kilowatt-hour in 
     Kentucky, to nearly 12 cents in New Hampshire. The political 
     pressure to level the national rate structure will be 
     enormous. What role should public utilities play in that 
     debate?
       As we wrestle with all of these questions, I believe the 
     challenge for the public utilities will be to continue to 
     embrace the dual identity Franklin Roosevelt envisioned 
     sixty-five years ago. Public in fact, private in behavior--
     solid and responsible, yet creative and competitive. In this 
     way TVA, and public utilities like ours, will set a standard 
     for public responsibility against which private companies can 
     be measured . . . even as we continue to provide our core 
     product--wholesale electric power--at competitive prices.
       What will this mean in practice? Well, if we've learned 
     anything in the United States in this last decade it is that 
     deregulation does not automatically mean consumer benefit. We 
     deregulated our telecommunications industry and, while we'd 
     hoped to see new competition result in lower rates, the 
     results--so far at least--have been mixed.

[[Page E1333]]

       The same with banks. Deregulation has, theoretically at 
     least, made it easier for new banks to compete with 
     established banks. But while thousands of new banks have been 
     created, many of the big established banks have merged, 
     meaning, for many people, less consumer choice, not more. I 
     guess we shouldn't be surprised to find that the ``law of 
     unintended consequences'' applies to deregulation, just as it 
     applies to everything else.
       So, after about a decade of experience, we in the US have 
     learned, I think, to approach deregulation carefully. Rushing 
     headlong into a deregulated economy can, we have found, usher 
     in new problems, even as it solves some of the old ones. The 
     key to measuring the success of deregulation is, and will be, 
     of course, the degree to which regulatory change benefits the 
     public. Again, we come back to the idea of the public good. 
     But how will this benefit be measured? And what should we 
     look out for?
       I would suggest that one of the greatest services public 
     utilities can provide in a deregulated marketplace is vision, 
     especially in the context of the public interest. The 
     independently owned, private utilities might say that they 
     are the ones who bring ``vision'' to the utilities industry 
     but I would challenge that view. In fact, competition--
     especially in this era of ``just in time`` delivery--often 
     breeds a corporate vision that sees no further than the next 
     quarterly report, or today's closing share price on the New 
     York Stock Exchange, and this lack of vision, especially in 
     our industry, can have very serious consequences. Public 
     power's vision starts and ends with public responsibility.
       Let me give you an example. This summer, if we're unlucky--
     and let's hope we're not--we could actually find ourselves 
     short of power in one or more major American cities. Just 
     imagine the impact on computers and transit systems if that 
     were to occur.
       Now, private utilities also know that the American economy 
     is increasingly dependent on electrical power, but their 
     bottom-line calculations don't allow for the generation of 
     very much excess capacity just because we might, in a heat 
     wave, find ourselves running short. Right now, they would 
     argue, construction of another major generating unit would 
     not produce the return on investment their shareholders 
     demand. Surplus capacity is unsold inventory. It's 
     ``inefficient.''
       At TVA, of course, we don't have shareholders. We have the 
     public. So, while TVA does not build facilities for power 
     production greater than the requirements of our service area, 
     we do operate with a surplus to avoid a power shortage to our 
     customers. We provide this margin for unexpectedly high 
     demand and generation which is sometimes unavailable.
       In the past five years, we've seen load growth of about 3.9 
     percent per year in the Tennessee Valley and 2.7 percent 
     across the US--and the US Department of Energy projects load 
     growth of close to 2 percent nationally every year for the 
     next decade--so, frankly, it is our public responsibility to 
     continue to provide a margin for the Valley as the load 
     continues to grow. Which is not to say that we couldn't 
     actually run short of power in the Tennessee Valley this 
     summer. We could. There's no telling just how high the 
     temperature will rise, and for how long. (Someone else is in 
     charge of the weather.) But at TVA, we think long and hard 
     about these issues. It's our responsibility, because we're a 
     public utility.
       Let me offer another example of the vision of the public 
     utility. As far back as 1933, when TVA was created, it was 
     clear that the system of streams and rivers that feed the 
     Tennessee River--and the Tennessee River itself--could be 
     both friend and foe to the people in the valley. TVA was 
     charged with the responsibility of managing the river first 
     as a natural resource and second as a power resource. In 
     fulfilling this responsibility, our public utility has helped 
     reclaim thousands of acres of farmland and stem the tide of 
     seasonal flooding. Private utilities count on other 
     government agencies to handle land and river management--in 
     the US, that's usually the Army Corps of Engineers--but in 
     the Tennessee Valley, water resource management is the 
     responsibility of TVA, a public utility. Our public utility 
     has also helped industries in the Tennessee Valley grow and 
     prosper.
       We've helped arrange loans for small businesses, we've 
     helped locate industrial sites, and we've provided technical 
     expertise to start-up companies and major corporations who 
     have chosen to make the Valley their home. But as the 
     deregulation debate heats up in the months and years ahead, 
     I'm sure that some will question whether TVA or any public 
     utility should continue to manage such a broad portfolio of 
     public service. ``That was fine during the 1930s,'' some will 
     argue, ``but we're a long way from the Great Depression. We 
     don't need a TVA for the 21st century.'' I would argue, in 
     fact, that we will need public utilities more than ever. Even 
     if deregulation succeeds in lowering electricity costs for 
     most Americans (and I think everyone agrees that it's 
     unlikely to reduce electricity costs for all Americans), 
     there are still questions about the overall benefits of 
     deregulation to the public.
       But let me be clear here. TVA is pro-deregulation and pro-
     competition. The US government, in a Comprehensive 
     Electricity Competition Plan published by the Administration 
     last March, calculates that retail choice deregulation will 
     cut electricity costs by about 10 percent, or about $100 
     dollars per year for a family of four. That's a significant 
     savings and, again, as a public utility, we're in favor of 
     cutting energy costs for the American people.
       Deregulation has the potential to save billions in energy 
     costs for commercial customers, which will make American 
     industries more competitive in the global marketplace. This 
     will benefit the entire American economy and, as a public 
     utility, we support lower energy costs for business and 
     industry, and let me be clear about one more important point. 
     Public responsibilities will not--and should not--absolve 
     public utilities of the requirement to operate efficiently 
     and to compete fairly in the deregulated marketplace.
       At TVA, we're proud of the fact that our production costs 
     are second lowest among the nation's top 50 utilities, and 
     we're hard at work, every day, finding new ways to bring 
     those costs down even lower. But lower electricity costs 
     along are not the sole measure of the public good. If energy 
     companies degrade the environment to produce cheaper 
     electricity, is that a net gain, or loss, for the people who 
     use the power, and live on the land?
       If a regional power company chooses to neglect its 
     responsibilities to its local customers so as to make a 
     bigger profit wheeling power to a distant market, it that a 
     net benefit, or loss, of the nation as a whole? These are 
     difficult issues now, and they will become even more 
     difficult in the deregulated future. Public utilities, which 
     serve the interests of the people--not just corporate 
     shareholders--will provide a benchmark by which the 
     performance of all power companies will be measured.
       They will help to define ``the public good'' as it applies 
     to energy production and distribution. And for this reason 
     alone, they deserve their place in the deregulated 
     marketplace of the next century. I know that many of you are 
     wrestling with some of the same issues we are dealing with 
     now in the United States. Deregulating electric utilities 
     will lower energy costs for our citizens and our industries 
     and it is our responsibility to work together--public 
     utilities and independent providers, industry executives and 
     political leaders--to achieve this goal. But if our 
     experience is of any value. I would suggest that you approach 
     deregulation thoughtfully, and with careful deliberation. 
     Above all, I would suggest that you measure the success of 
     your efforts in more than just francs, or marks--or euros--
     saved.
       I would suggest that you measure your ultimate success 
     against the higher standard of the public good. A final 
     thought. The political challenges of deregulation may cause 
     some of us, at various points in the process, to question 
     whether it is a course worth pursuing.
       I believe that it is, and that we must stay the course, and 
     do it right. I take my inspiration, again, from President 
     Franklin Roosevelt. The day before he died, FDR wrote remarks 
     for a Jefferson Day lecture he was to deliver the following 
     day. He wrote . . . but never said . . . ``The only limit to 
     our realization of tomorrow will be our doubts of today. Let 
     us move forward with strong and active faith.'' And as we 
     move forward, ladies and gentlemen, let us remember to 
     balance our commitments to our various boards and 
     shareholders with a commitment to the constituents who matter 
     most: the publics we serve. Thank you all very much for your 
     kind attention, and thank you to the IEA for inviting me here 
     to Brussels for this excellent and most interesting forum.

     

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