Scholars assess the TVA as a blueprint for publicly owned utilities in the green energy transition.
As the effects of climate change become more severe, experts recognize the need to accelerate the transition to carbon-free energy. Some scholars argue that publicly owned utilities could “rapidly, affordably, and reliably” decarbonize energy production. But others point to the shortcomings of the United States’ largest publicly owned power company—the Tennessee Valley Authority (TVA)—and claim that utilities that follow the TVA’s public ownership model are “historical relics” destined to fail.
In a recent article, three energy policy experts argue that the TVA’s “decidedly mixed” record is the result of fixable institutional design choices rather than failures intrinsic to public ownership. Shelley Welton and Levi Phillips of the University of Pennsylvania Carey Law School and Nikki Luke of the University of Tennessee contend that the TVA mixes organizational elements from federal agencies and corporate boardrooms, creating a “hodgepodge” that is “incoherent, ineffective, and deficient” at guiding climate-resilient development in the Tennessee Valley. But with targeted reforms, they suggest the TVA could become a blueprint for public utility ownership in the green energy transition.
Welton, Phillips, and Luke argue that “corporatization”—the inclusion of corporate governance mechanisms into the TVA—has eroded its accountability to the U.S. Congress, President, and local stakeholders, creating an institutional identity crisis given the agency’s public roots. President Franklin Delano Roosevelt envisioned the TVA as the gold standard “yardstick” by which private utilities would be measured, ensuring that electrification served the public.
Congress gave the TVA the authority and funding to drive development in the Southeast, with a mandate to control flooding, improve navigable waterways, and address poverty stemming from the Great Depression. From 1933 to 1953, the TVA fulfilled this mission by building dams and electrifying the region.
Welton, Phillips, and Luke contend that the TVA’s accountability to public officials decreased when legislation in 1959 and 1998 made it financially independent from Congress. The TVA no longer received federal funds and was prohibited from selling energy outside the Tennessee Valley. Yet, it was required to fulfill its non-energy obligations—such as flood control—using only revenue.
In 2005, Congress converted the TVA’s full-time three-member board into a part-time nine-member board and required that it appoint a CEO to oversee operations. Welton, Phillips, and Luke claim that the TVA’s lack of federal funding, combined with its corporate governance structure, made it akin to a private utility and created an impossible obligation in the process.
Welton, Phillips, and Luke argue that despite a complex mandate to fund public works through private energy sales, the TVA has “performed reasonably well” in comparison with private utilities by slashing debt, maintaining competitive rates, and generating 53 percent of its power from carbon-free sources. But they also note that the TVA is “not just another utility”—it was created to serve the Tennessee Valley while remaining democratically accountable to residents. Democratic accountability through congressional funding and presidential board appointments was limited by Congress’s amendments, and in recent years, opportunities for local engagement with the TVA have also declined.
Most public utility planning involves extensive stakeholder input. But Welton, Phillips, and Luke describe how the TVA excludes discussion of ratepayer issues, such as reliability and affordability, by accepting public feedback only when it relates to potential environmental impacts. Discretionary public hearings on the TVA’s proposed decisions supplement limited comment opportunities, although greater access to information requires that the public file a request under the federal Freedom of Information Act. And recent proceedings show that the TVA’s nine-member board is willing to delegate important, locally relevant decisions—such as how to phase out coal plants—entirely to its CEO, with no outside input.
Welton, Phillips, and Luke argue that the TVA’s lack of shareholders exacerbates some of the issues that stem from its quasi-corporate structure. Without shareholders, the responsibility to question its decision-making falls on local power companies that operate without “any substantial leverage” from constituents. This lack of leverage stems from the TVA’s regional monopoly—its ability to legally exclude competitors from its transmission lines weakens local power companies and leaves little room for pushback.
Local power companies, which are the TVA’s primary customers, allege that this monopoly also encourages unfair business practices and forces them to forgo cleaner, cheaper energy options.
Welton, Phillips, and Luke cite data showing that the TVA lags behind privately owned utilities in adopting solar power, ignores the economic benefits of clean energy, and performs poorly on energy-efficiency metrics. In addition, nearly all of the 153 local power companies that do business with TVA have signed “never ending” contracts with a 20-year term and a 20-year cancellation notice, which require them to source 95 percent of all of their energy needs from the TVA.
But Welton, Phillips, and Luke contend that with targeted reforms, the TVA could still become a “clean energy laboratory and yardstick” that could influence a “national decarbonization strategy.” They identify the need for a more engaged and politically accountable board with its own dedicated staff, increased transparency in decision-making, and a clear congressional mandate. To transform the TVA into a cutting-edge public energy laboratory, the authors argue that federal funding is necessary to insulate local ratepayers from the economic risks associated with untested technology.
They conclude by offering three lessons learned on the role of public utilities in the energy transition: Public entities must establish clear priorities to maximize public interest; they must be guided by independent, dedicated boards; and they must maintain democratic legitimacy through transparency and accountability. Welton, Phillips, and Luke argue that if public utilities such as the TVA can internalize these lessons, they could serve as a green energy “yardstick” capable of delivering affordable, reliable, and carbon-free electricity.
