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New Strategic Plan Sets Future Direction for TVA

TVA has developed a new strategic plan to guide decision-making as it prepares for a more competitive market and customer choice. The new framework is based on the most thorough analysis of future market conditions that TVA has ever done.

“We are living in a world of change, and our Strategic Plan identifies steps TVA needs to take so we can be successful in a more competitive market,” said TVA Chairman Glenn McCullough Jr. “The changes that we make in the future will strengthen TVA’s ability to fulfill our fundamental mission of providing affordable, reliable power, being good stewards of the environment, and helping attract and retain jobs.”

The draft plan is being made available to members of Congress and the Administration, distributors of TVA power, employees and other stakeholders. A final plan will be completed by the end of the year.

“During fiscal year 2004, we will do detailed operational planning to identify the actions necessary to accomplish the steps spelled out in the strategic plan,” said TVA Director Skila Harris. “TVA’s success is built on a record of employee accomplishments, and this strategic plan gives employees today an opportunity to define TVA’s future, rather than seeing that future defined for us.”

The plan envisions four fundamental changes to TVA’s business environment:

• An evolving wholesale electricity market
• The option for distributors of TVA power to buy power from competing suppliers
• Exposure to market fluctuations and the uncertainty in revenues resulting from open market competition for TVA customers
• The need for increased financial flexibility, to be achieved in part by further reductions in TVA’s debt.

“The Strategic Plan provides a framework that we will use to set annual budgets and develop annual performance plans, allowing us to make the business decisions today that will help us be successful in the future,” said TVA Director Bill Baxter. “In a competitive environment, our success comes down to our performance.”

According to the plan, preparing for a more competitive market requires TVA to begin working with distributors to develop new, more highly differentiated prices for power, unbundled services and new contract terms. TVA will also assess the way it provides and prices transmission service to its customers and decide whether to integrate its transmission system into a larger regional market.

The plan recommends a debt-reduction target of $3 billion to $5 billion over the next 10 to 12 years but says debt-reduction targets will be updated annually depending on TVA priorities and changing market conditions. Accelerated debt reduction can be achieved through continued emphasis on cost reduction, increased productivity, asset improvements to increase performance, further limiting capital projects where appropriate, and rate adjustments and rate changes consistent with market and power supply conditions. Read details of the plan.

TVA is the nation’s largest public power producer and is completely self-financed. TVA provides power to large industries and 158 power distributors that serve 8.3 million consumers in seven southeastern states.

Media Contact:

John Moulton, Knoxville (865-632-8048) or TVA News Bureau, Knoxville (865-632-6000)