Testimony of Robert M. Hewett
President, Kentucky Utilities Company
Representing TVA Watch
Before the Senate Environment and Public Works Committee
United States Senate
October 6, 1999

Summary

The debate over TVA's future in an increasingly competitive electric power market is a difficult one. However, it is one that must be confronted and dealt with fairly. TVA Watch believes Congress must remain alert to the problem that led to the creation of the TVA "fence" in 1959. The problem was, and remains, unfair competition by the federal government.

Without the "fence," TVA would be able to gain market share not by virtue of its being the most efficient supplier, but because it could undercut the market based upon its governmentally-granted benefits. TVA has the ability to set its own wholesale and retail rates, is exempt from anti-trust laws and makes only "token" payments in lieu of taxes to local governments. No other entity in the country even comes close to having this type of authority or license. Yet, TVA has amassed a $27 billion long-term debt, far in excess of any comparably sized private sector utility. Moreover, TVA's progress in dealing with this enormous debt has been inadequate and has resulted in a sizeable potential liability for U.S. taxpayers.

The fact that TVA has such powerful tools while other utilities do not is the very reason Congress created the "fence" in 1959. The fact that TVA's financial health is impaired because of its long-term debt is another reason Congress should not increase the risk to U.S. taxpayers by lowering the "fence" without first bringing about fundamental reform to TVA. These concerns are especially valid today because, during the past four years, TVA has been carrying out a strategy to undermine and eliminate the "fence." As a result, several companies in TVA Watch have had to sue TVA to enforce the 1959 law that keeps TVA inside the "fence."

TVA Watch believes the following ground rules that apply to TVA's potential competitors must apply to TVA itself if the "fence" is to be removed:

1. Anti-trust laws that apply to private-sector utilities must apply with the same force and effect to TVA.

2. TVA must come under the jurisdiction of the Federal Energy Regulatory Commission (FERC) to the same degree as other utilities. This includes regulation not only of TVA's transmission system, but its power sales practices.

3. TVA must not be allowed to build new or expanded generation resources with the wide range of subsidies that are denied other utilities.

4. TVA must bear the same federal, state and local tax burdens as other utilities.

5. TVA should not have preferential access to power from other federal facilities at rates below fair market value.

6. TVA's exemption from open access transmission system requirements should be repealed.

Introduction

Mr. Chairman and Members of the Committee: my name is Robert M. Hewett. I am President of Kentucky Utilities Company of Lexington, Kentucky. Kentucky Utilities is a subsidiary of LG&E; Energy Corporation, a diversified energy services company with businesses in power generation and project development; retail gas and electric utility services; and asset-based energy marketing. In addition to Kentucky Utilities Company, which serves 77 Kentucky counties and five counties in Virginia, LG&E; also owns and operates Louisville Gas and Electric Company, which serves 16 Kentucky counties.

LG&E; also is a member of TVA Watch, a coalition of investor-owned utilities operating in areas adjacent to the Tennessee Valley Authority (TVA). TVA Watch is a political and judicial coalition of shareholder-owned utilities that was formed to serve two public policy functions: First, to ensure that TVA complies with the TVA Act. Second, to promote policy discussion regarding the proper role of TVA in a competitive marketplace. In addition, TVA Watch supports efforts to bring meaningful reform to TVA as America's electric power industry evolves into a more competitive market.

We appreciate your invitation to share with this committee the views of TVA Watch about the role of the Tennessee Valley Authority in a changing electric power industry.

In considering the future of TVA, there are three issues facing Congress. First, should TVA be allowed to compete against other utilities outside the fence that has limited the scope of its electric power operations since 1959? Second, if the answer to the first is affirmative, then under what terms and conditions should TVA be allowed to compete? Third -- and we consider this to be an especially important one regardless of whether TVA is allowed to compete outside its fence -- is TVA doing enough to address its poor financial condition resulting from its massive $27 billion debt?

These issues are difficult and must be approached with great care. But, before sharing the views of TVA Watch with this Committee, I want to emphasize at the outset that my company and others in TVA Watch have worked well with TVA under a provision of the 1959 law that allows our power grids to be interconnected for purposes of maintaining reliability and exchanging surplus power. Recent evidence of this positive working relationship came during this summer's heat wave when all of us worked to exchange power that kept our systems running. However, when we disagree with TVA, as we do in the case of how TVA should be allowed to compete with other utilities, we do so in the spirit of constructive debate.

To assist this Committee in evaluating TVA's future role, we should be mindful of where TVA came from and what it has become. As originally enacted in 1933, the TVA Act did not authorize TVA to build power plants or to sell power. This authority was added a few years later. TVA is merely "authorized," rather than instructed, to build power plants and maintain a power function. However, what began as merely a side function has become TVA's core business -- a $30 billion power utility enterprise that has become, by far, the biggest part of its business.

Until 1959, TVA was required to come to Congress for direct appropriations to pay for the growth of its power business. In 1959, Congress agreed to grant TVA the ability to issue revenue bonds to finance the growth of its generation business. In so doing, however, Congress erected the fence around TVA so that TVA could not use its unique powers in direct competition with other utilities in its region. Senator Jennings Randolph, the dean of the West Virginia Congressional delegation and a veteran of the New Deal Congress that created TVA, predicted in 1959 that "when memories have dimmed and new faces have come upon the scene" the purposes of the TVA Fence law might be lost.

As Senator Randolph stated in 1959, "it would be inadvisable to permit excessive competition by TVA to encroach on the areas served by... investor-owned public utilities, to siphon off their customers and to destroy the value of their properties."

Until recently, TVA continually reassured Congress about the value and importance of the fence. In 1979, for example, Congress amended the TVA Act to raise TVA's debt ceiling from $15 billion to $30 billion. (In 1959, TVA's debt limit was less than $1 billion!) The increase was actively championed by TVA. However, in response to concerns that it had aspirations to expand the scope of its service territory, TVA repeatedly stated it had no desire to compete in bulk power markets outside its territory, as demarcated by the 1959 Bond Act. Congress took TVA at its word. The Senate Report accompanying Public Law 96-97, stated:

"In reporting (the debt ceiling increase bill), the committee (Senate Environment and Public Works) is mindful of the repeated assurances of the present Board of Directors of TVA that the Corporation has no intention of acting in any manner, directly or indirectly, to expand its service area outside the boundary as fixed by the TVA Self-Financing Act of 1959. The utilities whose service areas adjoin the service area of TVA continue to need to be entitled to the protection of the provisions of the 1959 Act. In now acting to increase TVA's debt authority from $15 billion to $30 billion, the committee reaffirms the provisions of the 1959 Act and accepts the assurances of TVA that it will continue to abide by those provisions."

Congress believed that because the rules for government and private utilities were different, TVA should only be allowed to sell or deliver power to two broad classes of recipients, and under limited circumstances:

"to local wholesale distributors within the area for which TVA was the primary source of electric power supply in July of 1957, and to certain end-users to whom it sold power at that time; and to electric utilities with which it was interconnected in July of 1957 for the continued cooperative 'exchange' of power between neighboring utility systems."

TVA's Departure from Its Agreement Not to Compete

In 1995, however, TVA departed from its previous pledge that it had no intention to compete outside the fence. TVA began pursuing a strategy to undermine the 1959 law so that it could compete against other utilities beyond the fence. For example:

In April 1995, TVA released a study stating that TVA is ready for competition.

In 1995, TVA began to advertise outside its service territory.

In 1996, TVA undertook steps to sell power outside the fence in violation of the 1959 Bond Act. This prompted the creation of TVA Watch and forced members of TVA Watch to initiate three lawsuits against TVA to force compliance with the law. TVA Watch member companies have prevailed in each action. This recent experience convinces us that continued vigilance over TVA is necessary to assure that the interests of consumers and taxpayers are protected.

If the Fence is to Come Down, There Must be a Level Playing Field

TVA Watch is mindful that some of TVA's distributors want Congress to bring more competition into the electricity industry and that removing the fence should be part of legislation to accomplish that goal. TVA Watch believes the desire on the part of TVA's customers should be taken seriously, but offers two observations: First, current law gives TVA the right to permit wholesale competition in the Valley and allows TVA means to adequately mitigate potential stranded costs by selling surplus power on a limited basis to neighboring utilities. Second, as Congress considers electricity restructuring legislation, issues surrounding the TVA -- its huge debt, substantial subsidies, exemption from basic laws, artificial competitive advantages, and its lack of accountability -- must be addressed before the fence can come down. Failure to do so will simply undermine the primary goal of fair and efficient competition.

In setting the ground rules by which TVA could be allowed to compete, TVA Watch believes the following rules that apply to TVA's competitors must apply to TVA itself:

1. Anti-trust laws that apply to private-sector utilities must apply with the same force and effect to TVA.

2. TVA must come under the jurisdiction of the Federal Energy Regulatory Commission (FERC) to the same degree as other utilities. This includes regulation not only of TVA's transmission system, but its power sales practices.

3. TVA must not be allowed to build new or expanded generation resources with the wide range of subsidies that are denied other utilities.

4. TVA must bear the same federal, state and local tax burdens as other utilities.

5. TVA should not have preferential access to power from other federal facilities at rates below fair market value.

6. TVA's exemption from open access transmission system requirements should be repealed.

We urge Congress to resist the temptation to pick and choose from among this list. The issue is whether or not we are going to have competition where TVA competes under the same rules as its potential competitors. It is not good enough to pick a few rules and conclude it's "close enough." Our position is that if TVA doesn't want to play ball under the same rules as everyone else, they should not be allowed into the competitive supply game. Close enough is not good enough.

TVA Wants Its Own Rules

TVA, however, strenuously disagrees that it must play by the same rules as other utilities. TVA argues it can compete fairly under a special set of rules, especially when it comes to setting its own electricity prices. TVA wants to retain its ability to set its own prices. In a December 31, 1998 letter to the Department of Energy the Chairman of TVA argues the TVA Board should retain sole control over setting its power rates rather than having its decisions reviewed by the Federal Energy Regulatory Commission (FERC). The letter said in part:

"We see no reason why another set of presidential appointees should be designated to do the job we were appointed to do.... The ability of the TVA Board to raise and lower rates as necessary is vital to TVA's financial health and its ability to keep the region's power supply costs as low as feasible. The reversal of a TVA Board decision by FERC could mean that TVA does not collect enough revenue to meet its financial obligations to bondholders, operate the power system economically, or ensure the safe operation of its nuclear plants.... TVA is not a private power company, and one cannot ascribe to it the same motivations that drive private power companies -- to increase market share and profits."

We would point out that the investor-owned utilities in our coalition have been subject to federal and state regulation for years and have always met their financial obligations.

Numerous "electricity restructuring" bills with provisions dealing with TVA have been introduced. TVA Watch commends Senators McConnell and Bunning for introducing S. 1323, the "TVA Customer Protection Act of 1999," along with Representative Baker's House companion bill, which both would go a long way toward assuring that any competition between TVA and other utilities would be conducted fairly and equitably.

TVA, however, has endorsed electricity restructuring legislation proposed earlier this year by the Clinton Administration (H.R. 1828/S. 1047). The Administration's bill would permit TVA to issue more debt to build and operate facilities anywhere in the country with only superficial changes in the rules that currently govern TVA. U.S. taxpayers would be placed at greater risk for any TVA business activity and consumers would be denied the benefits of fair competition.

The provisions in the Administration's bill dealing with TVA are largely derived from a 1998 report prepared by the U.S. Department of Energy following the completion of a special task force, the Tennessee Valley Electric System Advisory Committee (TVESAC). This advisory committee consisted of several interests, including TVA, TVA Watch, labor, environmental and consumer groups. While TVA Watch was pleased to participate in the TVESAC process, we emphatically disagree with assertions by TVA that the report (Report of the Tennessee Valley Electric System Advisory Committee, U.S. Department of Energy, March 31, 1998) represents a "consensus" among the various interests. If anything, the report points out the fundamental disagreements over how TVA should be regulated in an increasingly competitive market.

TVA Watch also wishes to state its deep concern about a legislative draft currently under consideration before the House Energy and Power Subcommittee. While the TVA title in that draft appears to create a more level playing, it really does not. The draft calls for certain regulation of TVA by the FERC and application of some antitrust laws. However, the draft contains a "savings clause" that none of these provisions could be implemented in a way that would undermine TVA's ability to pay its bondholders. This clause, in effect, "swallows" the other provisions and renders them useless.

We would point out that even though TVA supports the Administration's bill to remove the fence and allow TVA to compete with these lenient rules, TVA itself recently has stated it intends only to serve the electricity needs inside the Tennessee Valley. As we have stated above, the experience of the past means we should continue to monitor TVA's activities closely. We also should be frank to say that if TVA is permitted to compete outside the fence under terms such as those in the Administration's bill, the result would be to allow a financially impaired agency of the federal government to compete against other utilities under one set of rules while those other utilities would have to operate under more stringent rules. Not only would consumers be denied the economic benefits of fair competition, taxpayers would be at risk for even more debt.

TVA Is In Poor Financial Shape to Compete

Frankly, we believe TVA should concentrate on getting its financial house in order before -- not after -- it worries about whether it will be able to compete under its own set of lenient rules.

Since 1959, TVA has used its free reign to grow rapidly, particularly in the late 1960's and 1970's, obtaining congressional approval to increase its debt cap a number of times, from the original $750 million to the $30 billion authorization that exists today. TVA's financial performance has not been impressive. In a 1995 Report to Congress (GAO/AIMD/RCED-95), the GAO discussed TVA's lack of financial stability:

"TVA is $26 billion in debt and has invested $14 billion in nonproductive nuclear assets (called 'deferred assets') that are not included in its electricity rates. As a result, TVA has far more financing costs and deferred assets than its likely competitors have, which gives TVA little flexibility to meet competitive challenges. To the extent that TVA cannot compete effectively and improve its financial condition, the federal government is at risk for some portion of TVA's debt.... While no cash-flow crisis exists today, GAO believes that TVA's financial condition threatens its long-term viability and places the federal government at risk. Resolving TVA's financial problems will be costly and require painful decisions."

TVA issued a "10-year plan" in July of 1997. The 10-year plan called for lowering TVA's fixed costs by reducing its outstanding debt by about one-half, to about $14 billion by 2007 -- about $1.4 billion per year. The plan also provided for rate increases whereby TVA could start recovering from its customers nearly all of its $8.5 billion in deferred, nonproductive, assets. (These assets consist of nonproducing nuclear plants and other unamortized regulatory assets. As reported by GAO, "the balances of these items were $6.3 billion and $2.2 billion, respectively.").

TVA Watch was pleased that TVA issued this 10-year plan because it reflected an admission by TVA that it really has no use for its $8.5 billion nonproductive assets, and that it will have to amortize the debt associated with those assets at some point. It also reflected an acknowledgment by TVA that it can't sit on its mountain of debt forever, and that it will have to pay down that debt if it wants to be able to compete in the future.

TVA's Debt Reduction Plan Going in Wrong Direction

But it was too good to be true. The GAO (GAO/AIMD-99-142) recently reported that TVA is unlikely to meet the plan's objectives and needs to update its assumptions. Now, what was originally a ten-year plan seems more like a twenty or forty year plan. TVA expects to end the current fiscal year paying down its debt by $306 million. This is far short of TVA's needed debt retirement projected to be near the 10-year plan. At the rate of $300 million per year in debt retirement, it will take TVA over 40 years to reach their stated goal of cutting TVA debt in half.

Moreover, TVA already is already backtracking on its plan to cut its long-term debt in half. In recent weeks, TVA's leadership has issued press statements that they may need to issue up to $3 billion in additional debt to fund the construction of more power plants. This would run TVA's long-term debt right up to its $30 billion limit. We submit this is going in the wrong direction.

TVA issues its massive debt in the form of various types of bonds. These bonds are sold to private investors not just in the United States, but around the world, at rates just barely above the U.S. Treasury rate. TVA is able to borrow money at government rates because the investment community is convinced that the Federal government will bail out TVA, whenever push comes to shove. In an April 28, 1999, statement, Standard & Poor's said:

"The (AAA) rating reflects the U.S. government's implicit support of TVA and Standard & Poor's view that, without a binding legal obligation, the federal government will support principal and interest payments on certain debt issued by entities created by Congress. The rating does not reflect TVA's underlying business or financial condition."

TVA does little to dispels the perception held by investors that placing their money in TVA's hands is tantamount to giving it to Uncle Sam himself. In a classic understatement, TVA's Chairman testified before Congress (House Public Works and Transportation Committee, March 9, 1994), "...when you start looking at selling bonds, the fact that we're a government agency obviously is a big help."

The faith of the investors in TVA also is founded on the unrestrained ability of the TVA Board to raise electric rates if needed to pay the bondholders. Thus, the financial markets have afforded TVA an investment status equivalent to a government entity with authority to levy taxes. Even though its bonds are not expressly guaranteed by, or obligations of, the Federal government, TVA's debt obligations nonetheless are viewed as "risk-free."

What If TVA Were Rated As Other Utilities?

What would happen to TVA's debt rating if the Standard & Poor's benchmarks that are applied to investor-owned utilities were applied to TVA? TVA's rating would be lower than that assigned to junk bonds. For example, with a debt to capital ratio of more than 80 percent, TVA's rating would be lower than "B" while most investor-owned utilities have ratings of "A" or "BBB" with debt to capital ratios of about 50 percent. Also, with a pre-tax interest coverage ratio of 1x, TVA's rating would be lower than that assigned to a typical investor-owned utility. Still, because of its "AAA" rating resulting from its status as an agency of the federal government, TVA has a significant cost of capital advantage over its investor-owned neighboring utilities. TVA, therefore, is able to borrow funds at lower interest rates than other utilities because of that higher credit rating.

It is not surprising that TVA, whose capital structure is otherwise exceedingly risky (87% debt), can obtain such a low cost of capital relative to most investor-owned electric utilities. TVA's average cost of money is lower than the average for all IOUs, even though the financial conditions of private utilities are generally healthier. TVA also has enjoyed the financial advantages of avoiding writing-off certain nonperforming assets.

If TVA were regulated as an investor-owned utility, it is likely that under conditions of the Financial Accounting Standards Board (FASB) Statement No. 90 (Accounting for Abandonment and Disallowance of Plant Costs), TVA would have already dealt with the $5 billion in deferred and currently useless assets. Thus, once again, TVA's financial competitiveness is founded upon practices that would not be acceptable for any of its potential competitors.

Power Rates, Taxes, and Anti-Trust Laws

Let me focus briefly on three other important advantages that TVA wants to retain. First, TVA's desire to retain control over its power rates. Second, TVA's ability to make only token payments in lieu of taxes. Third, TVA's ability to escape penalties if it runs afoul of anti-trust laws.

Let's start with the rates paid by TVA's customers and those paid by the customers of other utilities. In defending its position that it should retain its ability to set its own rates, TVA maintains that it is a low-cost utility and that subjecting it to regulation by the Federal Energy Regulatory Commission (FERC) would force its rates up. But, let's consider the rate picture in Kentucky. Currently, TVA's rate to its wholesale distributors is $47.0/MWH. In contrast, the wholesale full requirements rate my company charges to our municipal customers is $29.4/MWH. In fact, by the year 2003, our wholesale full requirement municipal rate will be $29.1/MWH while TVA's will remain unchanged at $47.0/MWH.

If TVA is to be allowed to compete outside the fence, then Congress should ensure that it is required to follow the same rate regulations that all shareholder-owned utilities are required to follow. This not only would include wholesale power rates, but also open access transmission tariffs at FERC as are all shareholder-owned utilities. The purpose of those tariffs is to guarantee that any power market participant can gain non-discriminatory access easily and quickly to transmission services from jurisdictional utilities. Currently, TVA is not required to make such filings because the Commission does not regulate them.

Although FERC has attempted to impose reciprocity requirements on TVA, if a power seller seeks to move power across TVA, TVA's compliance is frequently obtained only by the seller requesting an order from FERC, which can slow a transaction by months, or even eliminate it. TVA's voluntary transmission "guidelines," for example, are, for the most part, "window dressing" which appear to be intended as much to persuade policymakers and the public that TVA will play by the same competitive rules that other utilities must obey, as to provide transmission access.

In addition to not being subject to FERC rate rules, TVA avoids payments to FERC and the costs of securing FERC licenses for its hydroelectric projects. Shareholder-owned utilities, on the other hand, pay FERC millions of dollars for the privilege of being regulated. In addition, shareholder-owned utilities spend millions of dollars -- not to mention upwards of seven years of regulatory proceedings -- to obtain FERC licenses for hydro projects.

Second, let us turn to taxes. TVA claims that it has no subsidy there because it has no income (so it would not have to pay income taxes anyway) and that it makes "payments in lieu" of taxes to local and state governments. However, with all respect to TVA, they miss the point. TVA's "payments in lieu" of taxes do not even begin to reach the amounts of taxes paid each year by shareholder-owned utilities.

The best way to consider this is on an "apples to apples" basis, total tax obligation as a percentage of total revenue. In 1998, TVA's total payment in lieu of tax obligation was 3.9% of its total revenue. In 1998, Kentucky Utilities' total tax payments accounted for 8.1% of total revenue. This disparity between TVA's payments in lieu of taxes and the tax burdens of investor-owned utilities is should be closely reviewed not only by this Congress, but by state and local authorities as well.

TVA Must Play By Same Rules As Its Potential Competitors

Finally, another key area that Congress must deal with is anti-trust laws. I cannot emphasize strongly enough that if TVA is not subject to basic rules that govern all other competitors, that exemption, coupled with its total discretion in rate-making, give TVA the power to "control the market" by engaging in predatory pricing or other anti-competitive activities.

TVA is clearly engaged in a commercial enterprise, the supply of electric power. There is no doubt that the activities of private sector companies in the commercial business of supplying electric power are subject to antitrust laws. This means that power suppliers, including members of TVA Watch, all are subject to lawsuits by private parties and by the government for violations of antitrust laws such as the Sherman Act, the Clayton Act and the Federal Trade Commission Act. For example, if a public utility were to supply power to somebody on the condition that the customer agree not to compete with that utility, the Department of Justice would probably file an antitrust lawsuit against that utility seeking treble damages and other penalties.

TVA insists the reason it should be allowed to compete either inside or outside the fence under a separate set of rules is that it lacks the "motivation" to engage in anti-competitive behavior because it is a "not-for-profit" agency. However, TVA Watch offers another reason for TVA's position: We believe the real reason TVA seeks to compete under a relaxed set of rules is because of its financial weakness. In other words, TVA very likely believes it could not succeed in a competitive market unless its financial weakness is compensated by a relaxed set of rules.

In response to calls that it be made subject to the antitrust laws and to treble damages for violations of those laws, TVA offers two general responses, both of which are inadequate. First, TVA claims that it is incapable of competing on an unfair basis because it was created solely to promote "governmental" and "public" purposes. Second, TVA claims that the antitrust laws are directed to eliminating the concentration of economic power in the hands of those who serve only their own profit-making interests, and because TVA is not operated on a "for profit" basis, it should remain exempt from the antitrust laws. Both of these arguments are easily dismissed.

TVA's power program - its sale and transmission of power at retail and at wholesale -- is a commercial enterprise. What this means is that TVA, in reality, is in the commercial business of selling electricity. Moreover, the absence of a "profit motive" is hardly grounds for immunity from antitrust laws. The antitrust laws contain no such "non-profit" exemption and the instinct of a drowning enterprise to survive gives it a more intense motive to suppress competition.

The Supreme Court has also recognized that the instinct of government to survive and thrive in a competitive environmental can lead to anti-competitive behavior. In the landmark case of City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 408 (1978), the Supreme Court noted that public corporations, such as TVA, are fully capable of competitive mischief:

"...the economic choices made by public corporations in the conduct of their business affairs, designed as they are to assure maximum benefits for the community constituency, are not inherently more likely to comport with the broader interests of national economic well-being than are those of private corporations acting in furtherance of the interests of the organization and its shareholders. . . When (government) acts as owners and providers of services, they are fully capable of aggrandizing other economic units with which they interrelate, with the potential of serious distortion of the rational and efficient allocation of resources, and the efficiency of free markets which the regime of competition embodied in the antitrust laws is thought to engender."

TVA's position that it can compete fairly under only certain antitrust laws simply does not serve the public interest because there will be no deterrent. If the remedy at the end of the proceeding is a slap on the hand, then no rational person would ever initiate the process. There must be a deterrent to keep TVA from committing anti-competitive acts in the first place. That deterrent can only come in the form of making TVA pay damages for the competitive injuries that result from violations of the antitrust laws. If TVA claims that it, a billion dollar commercial enterprise, can't afford to pay antitrust damages, we have one simple response: If you can't do the time, don't do the crime.

Conclusion

TVA Watch encourages this Committee, and indeed all of Congress, to consider carefully the ramifications on TVA's original mission, and the significant effects on the nation's debt and taxpayer's pockets, of enacting legislation allowing such competition from a taxpayer-supported Federal utility.

TVA Watch supports efficient competition that is not skewed by allowing TVA to escape legal or regulatory burdens shareholder-owned utilities must bear. This disparate treatment distorts competition.

We at TVA Watch are committed to working not only with this Committee, but with all others who are genuinely interested in reforming TVA. The plain language of the TVA Bond Act remains and its purpose has not been lost. TVA Watch hopes that this Committee, and Congress as a whole, will assure that the objective of encouraging more competition in America's electric power industry will be supported by making the right decisions about the future of TVA.