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U.S. Code as of:
01/19/04
Section 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.
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