TVA Officers Achieve All 2004 Performance Targets, Earn Incentive Pay

December 29, 2004

TVA’s top 51 officers met or exceeded all of their 2004 performance targets, which are linked to the organization’s financial and operational performance goals, and earned incentive pay in excess of $25,000, according to a report submitted to the U.S. Office of Management and Budget today.

The officers are responsible for the operation of nuclear, fossil and hydro power plants and the management and operation of a 17,000-mile transmission system and a corporation with $7.5 billion in revenues. Even with changes to make compensation more competitive, TVA still is not able to offer its top executives stock options or certain other forms of compensation available to executives at shareholder-owned utilities.

“In the 2004 fiscal year, the people of TVA achieved measurable successes in three major areas – energy, the environment and economic development,” said TVA Chairman Glenn McCullough Jr. “We strive to offer compensation that will attract and retain executives whose work helps TVA deliver value to 8.5 million people across the Tennessee Valley through affordable, reliable energy, cleaner air and water and a growing economy that provides jobs and career opportunities in the communities we serve.”

Because of TVA’s successful business operations, TVA is constantly under pressure from competing companies seeking to hire talented managers and executives. “All TVA employees qualified for performance incentives this year, and a total of $45 million was awarded to employees based on the performance of TVA, their business unit and their strategic units,” said TVA Director Skila Harris. “Executives who achieved their performance target also were awarded incentive pay. This year, incentive pay was higher for some officers because all targets were reached, and operationally we had an excellent year.”

TVA’s compensation plans seek to balance TVA’s role as a federal corporation with the skills and experience needed to manage the nation’s fifth largest river system, and to meet the electric power needs of 8.5 million residents in the Tennessee Valley.

“TVA’s compensation is based on market surveys of utilities similar in size, and going forward, we will continue to offer a competitive compensation package to top-quality leaders within market ranges and with incentives based on performance,” said TVA Director Bill Baxter. “Like any good business, TVA puts annual incentive pay for its top officers at risk, and we keep raising the bar on performance targets in an effort to improve TVA’s performance each year.”

TVA Board members’ salaries are set by Congress, and Board members do not receive bonuses or other supplemental pay. The chairman’s salary is $145,600, and directors’ salaries are $136,900. TVA is self-financed and receives no tax dollars.

TVA is the nation’s largest public power provider and is completely self-financed. TVA provides power to large industries and 158 power distributors that serve approximately 8.5 million consumers in seven southeastern states.

Media Contact:

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

TVA Newsroom

Highlights of TVA’s 2004 performance

Sold more electricity than ever before—almost 166 billion kilowatt-hours—and met an all-time summer peak of 29,878 megawatts.
Earned revenue of $7.5 billion and net income of $386 million.
Reduced total financing obligations by $278 million—$53 million more than targeted. TVA has reduced interest expense as a percentage of revenue from 34 cents of every revenue dollar in 1997 to 17 cents in 2004.
Reduced capital expenditures by $142 million from the previous year and saved $60 million in labor costs.
Contributed almost $2.4 billion to regional economy through purchases from Tennessee Valley suppliers.
Provided almost $338 million in tax-equivalent payments to Valley communities for support of local education and other vital needs.
Continued the recovery of Browns Ferry Unit 1, now 50 percent complete, to provide 1,280 megawatts of clean, reliable and affordable power to TVA customers in 2007.

Also during 2004, the TVA Board approved

The Strategic Plan to preserve TVA’s core mission and ensure its financial viability in a more competitive marketplace.
A new operating policy for the reservoir system to increase recreational opportunities and improve navigation while maintaining effective flood control.
The first rate adjustment in six years, providing TVA with about $365 million in additional annual revenue to fund clean-air improvements.
A $1.5 billion prepayment from Memphis Light, Gas & Water Division—TVA’s largest customer—for a significant portion of MLGW’s electricity needs through 2018.

Energy Highlights

Set an all-time fossil system record for reliability from May through September.
Set continuous run records at a dozen TVA fossil units, including Widows Creek Unit 3, which set a new TVA fossil-system record of 616 days.
Achieved the second-highest ever nuclear power generation.
Maintained 99.999 percent transmission reliability for the fifth year in a row.
Earned recognition from Nucleonics Week magazine for all three TVA nuclear plans being among the nation’s 12 most-efficient generators.
Earned an excellent rating for Browns Ferry Nuclear Plant for 2004 from the Institute of Nuclear Power Operations.
Earned recognition from Electric Power & Light magazine for TVA’s Bull Run Fossil Plant being the most energy-efficient coal-fired plant in the nation in 2002
Completed modernizations of TVA hydropower facilities that added 18 megawatts of generating capacity.

Environment Highlights

Invested $365 million in clean-air equipment during the year, including 10 more selective catalytic reduction systems to reduce emissions of nitrogen oxides and a scrubber at Paradise Fossil Plant that will reduce emissions of sulfur dioxide.
Managed the Tennessee River system effectively under extreme conditions, including the wettest September in 130 years of record-keeping and averted about $10 million in potential flood damages from Hurricane Ivan.
Certified the 39th “Clean Marina” in the Tennessee Valley.
Began installation in Memphis of TVA’s 16th Green Power Switch® solar facility.
Agreed to purchase power from the largest wind-turbine project in the Southeast, now being built at TVA’s existing wind farm in East Tennessee.

Economic Development Highlights

Helped attract or retain more than 50,000 jobs in the seven-state TVA region and leveraged investments of $2.1 billion.
Deployed an economic development Web site that provides comprehensive information for businesses and industries wishing to locate or expand in the Tennessee Valley.
Promoted use of the Synchronist Business Information System TVA to community and economic development leaders in the Valley, giving them a tool for capturing and analyzing data useful to local industry.
Assisted Hopkinsville, Ky., and Columbus, Miss., with marketing two industrial “megasites” certified by McCallum Sweeney Consulting as suitable for major automobile manufacturing or assembly plants.