Credit ratings giant Moody’s shot down the Trump’s administration’s proposal to sell off two federally owned electric utilities on Thursday, saying the action would result in a negative credit rating for the utilities and higher prices for electricity customers.
Trump’s fiscal 2019 budget request to Congress and infrastructure plan propose selling off the transmission line assets of the Tennessee Valley Authority, one of the largest federally owned public utilities, with the Bonneville Power Administration, a large federal electric utility in the Northwest.
“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,” Moody’s said Thursday.
“We also 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,” it said.
Similar proposals have been mulled over the past decade to sell off TVA’s assets, but none “has been seriously pursued by Congress, which has to agree to any such proposal and enact it into legislation,” Moody’s noted.
It said Trump’s fiscal 2018 budget also included language on selling Bonneville’s transmission assets, but “to date there has been no action taken on that proposal.”
The budget justification document released by the administration says the ownership of Bonneville’s and TVA transmission assets “is best carried out by the private sector, where there are appropriate market and regulatory incentives,” Moody’s said.
Although this “may be a fair consideration,” Moody’s said the utilities “have operated well from a reliability and cost standpoint” and do not require a transition to private ownership.
Moody’s assessment came after the top Democrat on the Senate Energy and Natural Resources Committee criticized the proposals as a “bad idea” for many of the same reasons addressed by the credit firm.
Sen. Maria Cantwell of Washington took special exception to selling the Bonneville Power Administration, which sells hydropower generated at federally owned dams in the Northwest.
Several presidents, including former President Ronald Reagan, have proposed to sell Bonneville, but Congress has repeatedly rejected the proposals.
“Selling off BPA’s transmission system and abandoning cost-based rates would raise electricity rates and throw sand in the gears of the Northwest economy,” Cantwell said.
“Northwest consumers already cover the full costs, with interest, of building and operating our region’s hydropower system,” she said, vowing to rally Northwest lawmakers to oppose the proposal.
“I will be working with all my Pacific Northwest colleagues to once again stop this bad idea in its tracks,” she said.
Trump’s infrastructure plan released Monday includes a proposal to privatize several federal power transmission assets. In addition to Bonneville and TVA, it also targets the sale of the Southwestern Power Administration’s and the Western Area Power Administration’s transmission assets.
