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competitive marketplace.The PMAs also help to ensure market of its customers.Although TVA does currently have debt on its diversity and lower the risks associated with consolidation of books,this debt is not tied to the federal budget deficit.More- generation assets.Most importantly,they assist in keeping power over,the debt TVA holds currently is not unusual in the electric rates low for millions of electricity consumers. power industry,where power plants can cost in the billions of dollars,and are financed over 30 to 50 years. The President's budget instruction regarding TVA triggered Administrative and Congressional Action a great deal of negative feedback from TVA stakeholders in and outside of Congress.A June 2014 report by Lazard Freres& The Chu Memo Co.LLC(Lazard),a financial advisory and asset management On March 16,2012,then-Department of Energy(DOE) Sec- firm that was commissioned by OMB to conduct a strategic retary Steven Chu released a memo outlining proposed changes review of TVA,concluded that TVA's financial and operational to the PMAs structure.These proposals sought to incorporate plans were sound and that TVA should not be divested from several system-wide modifications to the PMAs to increase the the federal portfolio. Responding to this feedback,the Presi- integration of variable resources such as wind and solar power. dent's FY 2015 budget stated that"TVA has undergone a major In some cases,the PMAs were already undertaking several of the internal review and taken significant steps to improve its future proposed changes,but were doing so with customer input and operating and financial performance."However,the FY 2015 the regionally specific benefits identified.Forcing all customers budget also endorsed severing or reducing federal ties with TVA, to receive and pay for unnecessary system-wide"upgrades,"as possibly by transferring ownership to state or local shareholders. the DOE memo envisioned,would certainly have increased the APPA continued to educate the Administration on why divesti- cost of federal hydropower,resulting in cost increases for PMA ture of TVA would be unwise and we are pleased to report that, customers. for the first time in four years,the President's FY 2017 budget Congress reacted with strong concern to then-Secretary proposal made no reference of selling TVA. Chu's memo in a bipartisan,bicameral manner.In April 2012, 166 members of Congress from the House and Senate,Repub- Hydropower Cost Allocation licans and Democrats,sent a letter to Secretary Chu expressing Due in part to the continued tight federal fiscal environment, that concern.Hearings on the memo were also held in the full recent years have seen a growing trend of dam operating agen- House Natural Resources Committee.In addition,the House- cies (the U.S.Army Corps of Engineers and Bureau of Recla- passed Energy and Water Development Appropriations bills mation)attempting to shift more and more costs to hydropower for FY 2013 and FY 2014 included provisions to negate the customers without the concomitant benefits.The most notable ability of Secretary Chu to carry out the memo.Secretary Chu of these efforts was at two projects in the Cumberland System eventually abandoned most of the proposals in his memo,and in Southeastern Power Administration(SEPA) territory in 2015. APPA believes that DOE as a general matter now has a better Under the Dam Safety Act, 15 percent of dam safety costs are understanding of the important relationship between the PMAs deemed"joint costs"and assigned to authorized project benefi- and their preference customers.The Association,however, ciaries,which includes hydropower customers,and 85 percent remains vigilant in this regard,as past history has taught that are paid through the normal appropriations process.The U.S. adverse proposals regarding the PMAs can appear without prior Army Corps of Engineers(Corps)wanted to shift the cost of warning. the dam safety repairs to authorized project beneficiaries by incorrectly classifying them as"major rehabilitation,"meaning TVA Divestment that 100 percent of the costs would be considered"joint costs" President Obama's Fiscal Year FY 2014 budget directed OMB to and disproportionately borne by power customers.Shifting the examine ways to reform,and possibly eliminate,TVA through costs of dam safety improvements from the operating agency— divestiture.The President's budget proposal argued that"reduc- whether it be the U.S.Army Corps of Engineers or the Bureau ing or eliminating the Federal Government's role in programs of Reclamation—to not-for-profit customer-owned utilities is such as TVA,which have achieved their original objectives not only unfair,but contradicts the spirit of statutes,such as the and no longer require Federal participation,can help put the Flood Control Act of 1944 and the Reclamation Project Act of Nation on a sustainable fiscal path."The premises underlying 1939,which direct federally operated dams to market power to this budget instruction—that TVA is unnecessary and negatively "preference"customers(not-for-profit utilities get a right of first impacting the federal budget—are incorrect.TVA ceased receiv- refusal to purchase power from federal dams)at the lowest cost ing money from the federal government in 1959,is now fully possible consistent with good business practices.Moreover,such funded through electric sales and power bond financing,and a shift could make the emissions-free,reliable,and affordable has continually reformed itself to respond to the changing needs hydropower produced at these projects uneconomic. 28 PubllcPower.org 210