§ 831n-4. — Bonds for financing power program.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 16USC831n-4]
TITLE 16--CONSERVATION
CHAPTER 12A--TENNESSEE VALLEY AUTHORITY
Sec. 831n-4. Bonds for financing power program
(a) Authorization; amount; use of proceeds; restriction on contracts for
sale or delivery of power; exchange power arrangements; payment
of principal and interest; bond contracts
The Corporation is authorized to issue and sell bonds, notes, and
other evidences of indebtedness (hereinafter collectively referred to as
``bonds'') in an amount not exceeding $30,000,000,000 outstanding at any
one time to assist in financing its power program and to refund such
bonds. The Corporation may, in performing functions authorized by this
chapter, use the proceeds of such bonds for the construction,
acquisition, enlargement, improvement, or replacement of any plant or
other facility used or to be used for the generation or transmission of
electric power (including the portion of any multiple-purpose structure
used or to be used for power generation); as may be required in
connection with the lease, lease-purchase, or any contract for the power
output of any such plant or other facility; and for other purposes
incidental thereto. Unless otherwise specifically authorized by Act of
Congress the Corporation shall make no contracts for the sale or
delivery of power which would have the effect of making the Corporation
or its distributors, directly or indirectly, a source of power supply
outside the area for which the Corporation or its distributors were the
primary source of power supply on July 1, 1957, and such additional area
extending not more than five miles around the periphery of such area as
may be necessary to care for the growth of the Corporation and its
distributors within said area: Provided, however, That such additional
area shall not in any event increase by more than 2\1/2\ per centum (or
two thousand square miles, whichever is the lesser) the area for which
the Corporation and its distributors were the primary source of power
supply on July 1, 1957: And provided further, That no part of such
additional area may be in a State not now served by the Corporation or
its distributors or in a municipality receiving electric service from
another source on or after July 1, 1957, and no more than five hundred
square miles of such additional area may be in any one State now served
by the Corporation or its distributors.
Nothing in this subsection shall prevent the Corporation or its
distributors from supplying electric power to any customer within any
area in which the Corporation or its distributors had generally
established electric service on July 1, 1957, and to which electric
service was not being supplied from any other source on the effective
date of this Act.
Nothing in this subsection shall prevent the Corporation, when
economically feasible, from making exchange power arrangements with
other power-generating organizations with which the Corporation had such
arrangements on July 1, 1957, nor prevent the Corporation from
continuing to supply power to Dyersburg, Tennessee, and Covington,
Tennessee, or from entering into contracts to supply or from supplying
power to the cities of Paducah, Kentucky; Princeton, Kentucky; Glasgow,
Kentucky; Fulton, Kentucky; Monticello, Kentucky; Hickman, Kentucky;
Chickamauga, Georgia; Ringgold, Georgia; Oak Ridge, Tennessee; and South
Fulton, Tennessee; or agencies thereof; or from entering into contracts
to supply or from supplying power for the Naval Auxiliary Air Station in
Lauderdale and Kemper Counties, Mississippi, through the facilities of
the East Mississippi Electric Power Association: Provided further, That
nothing herein contained shall prevent the transmission of TVA power to
the Atomic Energy Commission or the Department of Defense or any agency
thereof, on certification by the President of the United States that an
emergency defense need for such power exists. Nothing in this chapter
shall affect the present rights of the parties in any existing lawsuits
involving efforts of towns in the same general area where TVA power is
supplied to obtain TVA power.
The principal of and interest on said bonds shall be payable solely
from the Corporation's net power proceeds as hereinafter defined. Net
power proceeds are defined for purposes of this section as the remainder
of the Corporation's gross power revenues after deducting the costs of
operating, maintaining, and administering its power properties
(including costs applicable to that portion of its multiple-purpose
properties allocated to power) and payments to States and counties in
lieu of taxes but before deducting depreciation accruals or other
charges representing the amortization of capital expenditures, plus the
net proceeds of the sale or other disposition of any power facility or
interest therein, and shall include reserve or other funds created from
such sources. Notwithstanding the provisions of section 831y of this
title or any other provision of law, the Corporation may pledge and use
its net power proceeds for payment of the principal of and interest on
said bonds, for purchase or redemption thereof, and for other purposes
incidental thereto, including creation of reserve funds and other funds
which may be similarly pledged and used, to such extent and in such
manner as it may deem necessary or desirable. The Corporation is
authorized to enter into binding covenants with the holders of said
bonds--and with the trustee, if any--under any indenture, resolution, or
other agreement entered into in connection with the issuance thereof
(any such agreement being hereinafter referred to as a ``bond
contract'') with respect to the establishment of reserve funds and other
funds, adequacy of charges for supply of power, application and use of
net power proceeds, stipulations concerning the subsequent issuance of
bonds or the execution of leases or lease-purchase agreements relating
to power properties, and such other matters, not inconsistent with this
chapter, as the Corporation may deem necessary or desirable to enhance
the marketability of said bonds. The issuance and sale of bonds by the
Corporation and the expenditure of bond proceeds for the purposes
specified herein, including the addition of generating units to existing
power-producing projects and the construction of additional power-
producing projects, shall not be subject to the requirements or
limitations of any other law.
(b) Bonds not obligations of or guaranteed by United States;
apportionment of proceeds
Bonds issued by the Corporation hereunder shall not be obligations
of, nor shall payment of the principal thereof or interest thereon be
guaranteed by, the United States. Proceeds realized by the Corporation
from issuance of such bonds and from power operations and the
expenditure of such proceeds shall not be subject to apportionment under
the provisions of subchapter II of chapter 15 of title 31.
(c) Sale; terms and conditions; method; limitation on amount; statement
in annual report
Bonds issued by the Corporation under this section shall be
negotiable instruments unless otherwise specified therein, shall be in
such forms and denominations, shall be sold at such times and in such
amounts, shall mature at such time or times not more than fifty years
from their respective dates, shall be sold at such prices, shall bear
such rates of interest, may be redeemable before maturity at the option
of the Corporation in such manner and at such times and redemption
premiums, may be entitled to such relative priorities of claim on the
Corporation's net power proceeds with respect to principal and interest
payments, and shall be subject to such other terms and conditions, as
the Corporation may determine: Provided, That at least fifteen days
before selling each issue of bonds hereunder (exclusive of any
commitment shorter than one year) the Corporation shall advise the
Secretary of the Treasury as to the amount, proposed date of sale,
maturities, terms and conditions and expected rates of interest of the
proposed issue in the fullest detail possible and, if the Secretary
shall so request, shall consult with him or his designee thereon, but
the sale and issuance of such bonds shall not be subject to approval by
the Secretary of the Treasury except as to the time of issuance and the
maximum rates of interest to be borne by the bonds: Provided further,
That if the Secretary of the Treasury does not approve a proposed issue
of bonds hereunder within seven working days following the date on which
he is advised of the proposed sale, the Corporation may issue to the
Secretary interim obligations in the amount of the proposed issue, which
the Secretary is directed to purchase. In case the Corporation
determines that a proposed issue of bonds hereunder cannot be sold on
reasonable terms, it may issue to the Secretary interim obligations
which the Secretary is authorized to purchase. Notwithstanding the
foregoing provisions of this subsection, obligations issued by the
Corporation to the Secretary shall not exceed $150,000,000 outstanding
at any one time, shall mature on or before one year from date of issue,
and shall bear interest equal to the average rate (rounded to the
nearest one-eighth of a percent) on outstanding marketable obligations
of the United States with maturities from dates of issue of one year or
less as of the close of the month preceding the issuance of the
obligations of the Corporation. If agreement is not reached within eight
months concerning the issuance of any bonds which the Secretary has
failed to approve, the Corporation may nevertheless proceed to sell such
bonds on any date thereafter without approval by the Secretary in amount
sufficient to retire the interim obligations issued to the Treasury and
such interim obligations shall be retired from the proceeds of such
bonds. For the purpose of any purchase of the Corporation's obligations
the Secretary of the Treasury is authorized to use as a public debt
transaction the proceeds from the sale of any securities issued under
chapter 31 of title 31, and the purposes for which securities may be
issued under chapter 31 of title 31 are extended to include any
purchases of the Corporation's obligations hereunder. The Corporation
may sell its bonds by negotiation or on the basis of competitive bids,
subject to the right, if reserved, to reject all bids; may designate
trustees, registrars, and paying agents in connection with said bonds
and the issuance thereof; may arrange for audits of its accounts and for
reports concerning its financial condition and operations by certified
public accounting firms (which audits and reports shall be in addition
to those required by sections 9105 and 9106 of title 31, may, subject to
any covenants contained in any bond contract, invest the proceeds of any
bonds and other funds under its control which derive from or pertain to
its power program in any securities approved for investment of national
bank funds and deposit said proceeds and other funds, subject to
withdrawal by check or otherwise, in any Federal Reserve Bank or bank
having membership in the Federal Reserve System; and may perform such
other acts not prohibited by law as it deems necessary or desirable to
accomplish the purposes of this section. Bonds issued by the Corporation
hereunder shall contain a recital that they are issued pursuant to this
section, and such recital shall be conclusive evidence of the regularity
of the issuance and sale of such bonds and of their validity. The annual
report of the Board filed pursuant to section 831h of this title shall
contain a detailed statement of the operation of the provisions of this
section during the year.
(d) Lawful investment; exemption from taxation
Bonds issued by the Corporation hereunder shall be lawful
investments and may be accepted as security for all fiduciary, trust,
and public funds, the investment or deposit of which shall be under the
authority or control of any officer or agency of the United States. The
Secretary of the Treasury or any other officer or agency having
authority over or control of any such fiduciary, trust, or public funds,
may at any time sell any of the bonds of the Corporation acquired by
them under this section. Bonds issued by the Corporation hereunder shall
be exempt both as to principal and interest from all taxation now or
hereafter imposed by any State or local taxing authority except estate,
inheritance, and gift taxes.
(e) Payment of excess power proceeds into Treasury; deferral
From net power proceeds in excess of those required to meet the
Corporation's obligations under the provisions of any bond or bond
contract, the Corporation shall, beginning with fiscal year 1961, make
payments into the Treasury as miscellaneous receipts on or before
September 30, of each fiscal year as a return on the appropriation
investment in the Corporation's power facilities, plus a repayment sum
of not less than $10,000,000 for each of the first five fiscal years,
$15,000,000 for each of the next five fiscal years, and $20,000,000 for
each fiscal year thereafter, which repayment sum shall be applied to
reduction of said appropriation investment until a total of
$1,000,000,000 of said appropriation investment shall have been repaid.
The said appropriation investment shall consist, in any fiscal year, of
that part of the Corporation's total investment assigned to power as of
the beginning of the fiscal year (including both completed plant and
construction in progress) which has been provided from appropriations or
by transfers of property from other Government agencies without
reimbursement by the Corporation, less repayments of such appropriation
investment made under title II of the Government Corporations
Appropriation Act, 1948, this chapter, or other applicable legislation.
The payment as a return on the appropriation investment in each fiscal
year shall be equal to the computed average interest rate payable by the
Treasury upon its total marketable public obligations as of the
beginning of said fiscal year applied to said appropriation investment.
Payments due hereunder may be deferred for not more than two years when,
in the judgment of the Board of Directors of the Corporation, such
payments cannot feasibly be made because of inadequacy of funds
occasioned by drought, poor business conditions, emergency replacements,
or other factors beyond the control of the Corporation.
(f) Rates for sale of power; application of net proceeds
The Corporation shall charge rates for power which will produce
gross revenues sufficient to provide funds for operation, maintenance,
and administration of its power system; payments to States and counties
in lieu of taxes; debt service on outstanding bonds, including provision
and maintenance of reserve funds and other funds established in
connection therewith; payments to the Treasury as a return on the
appropriation investment pursuant to subsection (e) of this section;
payment to the Treasury of the repayment sums specified in subsection
(e) of this section; and such additional margin as the Board may
consider desirable for investment in power system assets, retirement of
outstanding bonds in advance of maturity, additional reduction of
appropriation investment, and other purposes connected with the
Corporation's power business, having due regard for the primary
objectives of the chapter, including the objective that power shall be
sold at rates as low as are feasible. In order to protect the investment
of holders of the Corporation's securities and the appropriation
investment as defined in subsection (e) of this section, the
Corporation, during each successive five-year period beginning with the
five-year period which commences on July 1 of the first full fiscal year
after the effective date of this section, shall apply net power proceeds
either in reduction (directly or through payments into reserve or
sinking funds) of its capital obligations, including bonds and the
appropriation investment, or to reinvestment in power assets, at least
to the extent of the combined amount of the aggregate of the
depreciation accruals and other charges representing the amortization of
capital expenditures applicable to its power properties plus the net
proceeds realized from any disposition of power facilities in said
period. As of October 1, 1975, the five-year periods described herein
shall be computed as beginning on October 1 of that year and of each
fifth year thereafter.
(g) Power property; lease and lease-purchase agreements
Power generating and related facilities operated by the Corporation
under lease and lease-purchase agreements shall constitute power
property held by the Corporation within the meaning of section 831l of
this title, but that portion of the payment due for any fiscal year
under said section 831l of this title to a State where such facilities
are located which is determined or estimated by the Board to result from
holding such facilities or selling electric energy generated thereby
shall be reduced by the amount of any taxes or tax equivalents
applicable to such fiscal year paid by the owners or others on account
of said facilities to said State and to local taxing jurisdictions
therein. In connection with the construction of a generating plant or
other facilities under an agreement providing for lease or purchase of
said facilities or any interest therein by or on behalf of the
Corporation, or for the purchase of the output thereof, the Corporation
may convey, in the name of the United States by deed, lease, or
otherwise, any real property in its possession or control, may perform
necessary engineering and construction work and other services, and may
enter into any necessary contractual arrangements.
(h) Congressional declaration of intent
It is declared to be the intent of this section to aid the
Corporation in discharging its responsibility for the advancement of the
national defense and the physical, social and economic development of
the area in which it conducts its operations by providing it with
adequate authority and administrative flexibility to obtain the
necessary funds with which to assure an ample supply of electric power
for such purposes by issuance of bonds and as otherwise provided herein,
and this section shall be construed to effectuate such intent.
(May 18, 1933, ch. 32, Sec. 15d, as added Pub. L. 86-137, Sec. 1, Aug.
6, 1959, 73 Stat. 280; amended Pub. L. 86-157, Aug. 14, 1959, 73 Stat.
338; Pub. L. 89-537, Aug. 12, 1966, 80 Stat. 346; Pub. L. 91-446, Oct.
14, 1970, 84 Stat. 915; Pub. L. 94-139, Sec. 1, Nov. 28, 1975, 89 Stat.
750; Pub. L. 94-273, Secs. 2(30), 35(a), Apr. 21, 1976, 90 Stat. 376,
380; Pub. L. 96-97, Oct. 31, 1979, 93 Stat. 730.)
References in Text
The effective date of this Act, referred to in subsec. (a), and
``the effective date of this section'', referred to in subsec. (f),
probably means the effective date of Pub. L. 86-137, which was approved
Aug. 6, 1959.
Title II of the Government Corporations Appropriation Act, 1948,
referred to in subsec. (e), means title II of act July 30, 1947, ch.
358, 61 Stat. 576, which was not classified to the Code.
Codification
In subsecs. (b) and (c), ``subchapter II of chapter 15 of title
31'', ``chapter 31 of title 31'', and ``sections 9105 and 9106 of title
31'' substituted for ``Revised Statutes 3679, as amended (31 U.S.C.
665)'', ``the Second Liberty Bond Act, as amended'', and ``sections 105
and 106 of the Act of December 6, 1945 (59 Stat. 599; 31 U.S.C. 850-
851)'', respectively, on authority of Pub. L. 97-258, Sec. 4(b), Sept.
13, 1982, 96 Stat. 1067, the first section of which enacted Title 31,
Money and Finance.
Amendments
1979--Subsec. (a). Pub. L. 96-97 substituted ``$30,000,000,000'' for
``$15,000,000,000''.
1976--Subsec. (e). Pub. L. 94-273, Sec. 2(30), substituted
``September'' for ``June''.
Subsec. (f). Pub. L. 94-273, Sec. 35(a), inserted provision relating
to computation of five-year periods as of Oct. 1, 1975.
1975--Subsec. (a). Pub. L. 94-139, Sec. 1(a), substituted
``$15,000,000,000'' for ``$5,000,000,000''.
Subsec. (e). Pub. L. 94-139, Sec. 1(b), struck out ``December 31
and'' before ``June 30''.
1970--Subsec. (a). Pub. L. 91-446 substituted ``$5,000,000,000'' for
``$1,750,000,000''.
1966--Subsec. (a). Pub. L. 89-537 increased the limitation on the
amount of revenue bonds the TVA may issue and sell from $750,000,000 to
$1,750,000,000.
1959--Subsec. (a). Pub. L. 86-157 struck out proviso relating to the
transmission of the power construction program to the Congress by the
President with the budget estimates, and the provision for withholding
initiation of construction of new power producing projects until the
construction program of the Corporation has been before Congress in
session for ninety calendar days.
Transfer of Functions
Atomic Energy Commission abolished and functions transferred by
sections 5814 and 5841 of Title 42, The Public Health and Welfare. See
also Transfer of Functions notes set out under those sections.
Section Referred to in Other Sections
This section is referred to in section 824k of this title.
