The Tennessee Valley Authority wants to borrow money while interest rates are low to pay for expansions it’s planning. Officials say they could pass the savings on with lower electric bills. But TVA’s borrowing options are constrained because the power provider is close to its debt limit.
Right now TVA has about $23 billion in debt. Plans to add more nuclear power in the next few years could push that close to its limit of $30 billion. Officials are talking about replacing that hard ceiling with one that moves based on revenue. So when TVA does well, it could borrow more money.
Chief Financial Officer John Thomas says that’s appealing, given current low interest rates.
“Now the bonds that we issue are typically long-dated bonds – anywhere from 10- to 30-year. Last year we even did a 50-year bond. Once those interest rates are set, they’re locked in… So we’re essentially hedging or locking in those lower rates for a long period of time.”
And low rates matter when you’re paying nearly $5 billion to finish building a nuclear power plant, like TVA at its Bellefonte site.
Thomas says the switch to a moving limit comes with some risk. If demand falls it could take revenue with it, and ratepayers might get stuck making up the difference.
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One other way TVA has looked to raise money is by selling off facilities, and leasing them back. Thomas argues that’s not as cheap as using bonds, and he says customers ultimately bear the added expense. But he also points out changing TVA’s debt limit takes approval from Congress.