Uncle Sam's river

  @FortuneMagazine October 10, 2013: 8:01 AM ET
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(Fortune)

The Tennessee Valley Authority is the largest public power company in the U.S., a vast and sprawling bureaucracy that provides electricity to 9 million Americans in a part of the country where people like their government small, where the words "deeply" and "conservative" go together like "ham and biscuits," and where the irony of who keeps the lights on is acknowledged with an ambivalent smile.

It is a corporation owned by the federal government, which is just as confusing and contradictory as it sounds. The TVA is both populist and insular. It has the power of eminent domain and sets its own prices. It files 10-Ks. The interest paid on its bonds is taxed. It can't issue stock. TVA directors are nominated by the President and confirmed by the Senate. The process can take years. Its CEO has become the highest-paid federal employee, with a salary and bonus last year of $4 million, which is more than twice the combined pay of all nine Supreme Court justices.

Along with its 29 dams, 11 coal plants, 13 gas-fired stations, and three nuclear power plants, the TVA controls the Tennessee River -- all 650 miles, from tip to tail -- and manages 11,000 miles of shoreline. It is a platypus, part utility and part public-works project. The water that turns the turbines also helps cool the reactors, fills the shipping channels, and keeps the fly-fishermen happy. It's business and it's personal. One dam manager said that if the water isn't flowing on Saturday morning to move the fish, people start calling their congressmen to complain.

The TVA turned 80 this year, and there was plenty of celebrating the storied successes of this New Deal program, how it tamed the river, provided the power to help win World War II, and brought prosperity to what was one of the poorest regions of the U.S.

But heritage gets you only so far. The TVA of today is no longer a beloved symbol of innovation and the derring-do of an activist government. It is a victim of outdated rules and its own poor decisions. Its generating fleet is too old and still too dependent on coal, and its ability to build new nuclear plants is hamstrung by a federal debt limit that has been frozen for more than 30 years. Its board of directors has become just one more political football in Washington. A coal-ash spill five years ago that was blamed in part on inadequate maintenance is costing more than $1 billion to clean up. The list goes on.

The icing on the cake: President Barack Obama tucked a paragraph into his 244-page budget request on April 10 calling for a strategic review of the TVA with an eye toward divestiture. "Reducing or eliminating the Federal Government's role in programs such as TVA, which have achieved their original objectives and no longer require Federal participation," the request said, "can help put the Nation on a sustainable fiscal path."

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