The sale of TVA’s transmission assets, suggested by President Trump in his FY2019 budget proposal, “is likely to raise transmission rates for … TVA customers,” according to Moody’s.
“Such a sale would be credit negative for each entity because it would reduce transmission-related revenue, a stable revenue source and weaken federal government support, key considerations that support their respective ratings,” the credit-ratings agency said in a report issued following the President’s proposal, which included transmission assets belonging to the Bonneville Power Administration (BPA).
“We believe that any divestiture is likely to raise transmission rates for BPA and TVA customers because the new private owners would have higher capital costs that would need to be recovered in rates,” Moody’s said in its report.
Moody’s said TVA has “operated well from a reliability and cost standpoint,” and a sale is not justified. TVA officials have noted that, though similar proposals by past Presidents have failed without exception, the mere fact that those plans were included in White House Budget proposals stirred investor uncertainty that forced TVA to borrow money.
Trump asserted in his Budget proposal that the presence of “appropriate market and regulatory incentives” make the private sector the appropriate place for ownership of TVA and BPA transmission assets.