§831n–4 Bonds for Financing Power Program

Summary

Authorizes the Corporation to sell bonds up to $30,000,000,000 outstanding at any one time to pay for its electric power program and to refund those bonds. The money from the bonds can be used to build, buy, enlarge, improve, or replace power plants and related facilities, to support leases or lease-purchase deals or contracts to buy the power from such facilities, and for other related needs. The Corporation generally must not sell power outside the area it mainly served on July 1, 1957, except for a limited growth zone (no more than five miles around that area, and the added area may not exceed 2½ percent or 2,000 square miles, whichever is less). Added area cannot be in a State not served on July 1, 1957, cannot include a city that had other electric service on or after that date, and no more than 500 square miles of added area may be in any one State already served. The law also allows certain existing service arrangements and named cities (Dyersburg and Covington, Tennessee; Paducah, Princeton, Glasgow, Fulton, Monticello, and Hickman, Kentucky; Chickamauga and Ringgold, Georgia; Oak Ridge and South Fulton, Tennessee; and supply for the Naval Auxiliary Air Station in Lauderdale and Kemper Counties, Mississippi) plus certain exchange power deals that existed on July 1, 1957. Power may be sent to the Atomic Energy Commission or the Department of Defense if the President certifies an emergency defense need. Bonds must be paid only from the Corporation’s “net power proceeds” (gross power revenues minus operating, maintenance, and administration costs and payments in lieu of taxes, before depreciation, plus net sale proceeds of power facilities, and including reserve funds). The bonds are not obligations of the United States and are not guaranteed by the U.S. They may mature no more than 50 years from issue. The Corporation sets most terms but must tell the Secretary of the Treasury at least 15 days before each sale and consult if requested; the Secretary can limit timing and maximum interest. If needed, the Corporation may issue interim obligations to the Secretary (not to exceed $150,000,000 outstanding, maturing in one year or less, with interest tied to short-term U.S. rates). If approvals stall eight months, the Corporation may sell bonds later to retire interim notes. Bonds are legal investments for federal funds and are exempt from state and local tax on principal and interest (except estate, inheritance, and gift taxes). Starting with fiscal year 1961, excess net power proceeds must be paid into the Treasury each year by September 30 as a return on prior appropriations and as repayments: at least $10,000,000 per year for five years, $15,000,000 per year for the next five, and $20,000,000 per year thereafter until $1,000,000,000 is repaid; payments may be deferred up to two years in hardship. The Corporation must set power rates to cover costs, debt service, Treasury payments, reserves, and a reasonable margin, and must use net power proceeds over each five-year period to reduce capital obligations or reinvest at least the amount of depreciation and sale proceeds. Leased or lease-purchase facilities count as power property, and the Corporation may enter covenants, create reserve funds, arrange audits, and take other actions needed to carry out these powers. The section is meant to give the Corporation funds and flexibility to support national defense and regional development.