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B-114850 1 (1974-11-04)

handle is hein.gao/gaobaaejj0001 and id is 1 raw text is: COMPTROLLER GENERAL OF THE UNITED STATES WASHINGTON, D.C. Z0348 - B-114850 NOV4- 1974 oq2o-2 The Honorable Bill Brock United States Senate Dear Senator Brock: Ih accordance with your request of August 27, 1974, we reviewed the situation surrounding the announcement by the Tennessee Valley Authority (TVA) that it may be forced to curtail electric power serv- ice to its customers this winter because of a coal shortage. We inquired into the reasons for the potential coal shortage', the plans made and actions taken by TVA, the possible effects, and additional steps which may be taken to avoid cutbacks in electric service. Although coal production was up about 7 percent in the first half of 1974 compared with a similar period of the previous year, some of the increased production appears to be available at prices and with other contract terms which TVA generally has been unwilling to accept. In addition, a shortage of railroad hopper cars and barges and production difficulties have contributed to delinquent coal deliveries to TVA under existing contracts. Also, coal which should have been shipped to TVA under existing contracts has been diverted to others but the full extent of this diversion was diffi- Cult to determine. TVA told us, however, that there was no evidence that this diversion involves a significant amount of coal. As a result of these situations, TVA coal stockpiles declined from a 100-day supply at the start of fiscal year 1974 to a 69-day supply at the end of the fiscal year. At September 30, 1974, the stockpile had further declined to a 45-day supply. TVA considers an emergency to exist when the coal stockpile at any one steamplant is insufficient for 60 days of continuous operation. TVA was faced with the choice of paying coal prices (up to about $50 a ton) and agreeing to contract terms (such as no quality guarantee and no TVA land reclamation requirements) which it consid- ered unreasonable, or of allowing its coal stockpiles to reach unac- ceptably low levels with the resulting possibility of cutbacks in power this winter. In this situation, TVA adopted an approach of paying some of the higher prices--but not the highest prices--being requested for coal, refusing to change its coal quality guarantee and mining reclamation requirements, and taking alternative actions designed to reduce its coal consumption,

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