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Moody's: Trump's proposed sale of TVA, BPA transmission assets credit negative

Moody's described the Trump administration's proposal to divest the federally owned transmission assets of the Tennessee Valley Authority and Bonneville Power Administration as credit negative to both entities.

On Feb. 12, President Donald Trump made his fiscal-year 2019 budget request, which included his proposal to sell transmission assets of the Tennessee Valley Authority, or TVA; Bonneville Power Administration, or BPA; as well as the Southwestern Power Administration and the Western Area Power Administration.

In a Feb. 14 report, Moody's said that for TVA and BPA, the sale would "reduce transmission related revenue, a stable revenue source and weaken federal government support, key considerations that support their respective ratings."

Proponents of the sale assert that the private sector would best carry out the ownership of the transmission assets to take advantage of appropriate market and regulatory incentives.

"While this may be a fair consideration, we believe that TVA's and BPA's assets have operated well from a reliability and cost standpoint. 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," Moody's countered.

The credit ratings agency also noted previous proposals under other administrations to divest TVA in the last 10 years, and none have been "seriously pursued" by Congress.