Summary: Greater competition arising from the restructuring of the electricity industry has caused wholesale electricity prices to fall in many parts of the country. This increased competition prompted management at the Tennessee Valley Authority (TVA) to develop a 10-year business plan to make TVA more competitive. Among other things, the plan seeks to reduce TVA's high debt-servicing and other fixed costs. Because of concerns about TVA's ability to meet the plan's objectives by 2007--when competitive pressures are likely to be greater and when many of TVA's long-term contracts could expire--GAO looked at whether TVA will be able to reduce debt as envisioned in the plan and whether its goals and assumptions about capital expenditures and revenues and expenses are achievable or reasonable. Drawing on the findings of an earlier report (GAO/AIMD-99-142, Apr. 1999), this testimony discusses (1) whether the plan's objectives address the key issues confronting TVA, (2) the major costs that were not included in the plan, (3) whether the goals and assumptions in the plan are achievable or reasonable, and (4) TVA's plans to formally update the plan for significant changes.
