As part of the Consolidated Appropriations Act of 2005, TVA restructured its board to give it nine part-time members who serve five year terms -- a change from three full-time members who served nine-years. The law also required TVA to begin filing financial reports with the Securities and Exchange Commission. It also required TVA's new board to create an independent audit committee while forcing it to certify all financial statements under the Sarbanes-Oxley Act.

"TVA rates are well below the national average, and TVA is completely self-financed, receiving no federal funds," says John Molton, spokesman for TVA. "There is no reason to privatize TVA. TVA is providing affordable, reliable public power to a seven-state region just as the law creating TVA intended."

Bill Sansom is TVA's new chairman and the first one to be selected by his peers, as opposed to the president of the United States. He has reiterated the objectives of prior TVA boards, noting that TVA's debt is $5 billion less than 10 years ago with the expectation that it can be cut another $7 billion by 2015. But, he has emphasized that the utility's mission is to maintain low electric rates while keeping the capacity of its power generation and the reliability of its transmission up to date. Toward that end, TVA could construct new generation facilities and incur more debt as a result.

Those modifications to TVA's business processes are inadequate, say Senators Jim Bunning and Mitch McConnell, both Republicans representing Kentucky. Their newly introduced bill would let the Federal Energy Regulatory Commission oversee TVA as it does with private utilities. The practical effect of this would be to allow businesses and residents of Kentucky to buy their power from sources other than TVA. The proposal also calls for a study into whether TVA should be privatized.

TVA has contractual agreements with 158 distributors to deliver the electricity that it generates. Some of those distributors have filed notices letting TVA know that they will seek other options once their agreements expire. Under current law, TVA is forbidden to sell its power outside its territory while its competitors can't sell their electricity inside the TVA "fence." The distributors, meantime, are able to buy power from other providers. But, if they do, they would have to build their own transmission lines -- a move that effectively traps many distributors into an uneasy relationship with TVA.

"It sounds like Kentucky's senators are increasingly tired of their inefficient monopoly," says Richard Munson, head of the Northeast Midwest Institute.

Reasonable Assumptions

TVA was established in 1933 to improve navigation and to promote economic development. To that end, it started by building dams and hydropower facilities but has since diversified and constructed coal, nuclear and natural gas plants. Today, it sells electricity at wholesale rates to 158 retail distributors in Tennessee and parts of Alabama, Georgia, Kentucky, Mississippi, North Carolina and Virginia.

Until 1959, TVA received appropriations from Congress to finance its day-to-day operations and overall capital requirements. Lawmakers changed the law that year to enable TVA to use the revenues it collected from electricity sales to finance the management of the utility. It was also given the authority to issue bonds to pay for capital needs in excess of those funds generated through the daily operations.

Tennessee's representation in Congress has always been staunch defenders of TVA. Sen. Lamar Alexander, a Republican there now, said that the bill put forth by his colleagues from Kentucky would drive up the cost of power to the 8.6 million customers in the region. It would furthermore put the TVA on a path toward privatization and cause the eventual sale of its assets -- "effectively destroying" the utility, he adds.

The public power entity says that it is committed to running a tight ship. It plans to cut the additional $7 billion in debt over eight years by increasing its revenues, controlling the growth of operating expenses and limiting capital expenditures.

Altogether, TVA's power facilities have a capacity of 34,000 megawatts. But, one summer day last year it found itself 5,700 megawatts short. It was subsequently forced to buy power on the open market to meet its peak demand. As its region grows, TVA will have to build more plants. That reality, in combination with the uncertainties over fuel costs, environmental compliance expenses and future interest rates, could very well affect its debt restructuring plan.

"Overall, GAO's review found TVA's approach to developing its plan to reduce financing obligations reasonable," says a recent report by the General Accountability Office. "While these assumptions are reasonable, they carry uncertainty that is not reflected in the model."