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Preparing TVA for Deregulation

By Craven Crowell

October 1998
The Tennessee Magazine (the official publication of the Tennessee Electric Cooperative Association)

How do our actions today shape the world of tomorrow? That question is at the forefront of our thinking at TVA as we prepare for the new millennium and for the restructuring of the electric-utility industry.

Now and in the future, public power companies like TVA and the members of TECA serve the interests of the people. In the deregulated marketplace—more than ever—public power companies must play a key role by serving as a benchmark by which the performance and environmental responsibility of all power companies can be measured. TVA will fulfill this role by continuing to meet the needs of our customers for reliable, competitively priced electricity and by setting the standard for service to the public.

Looking back in the past five years, it’s easy to see how far TVA has come in its preparations for a restructured utility industry. In 1993, when Director Johnny Hayes and I joined Bill Kennoy to form the new TVA Board, TVA was attempting to build four nuclear units. Its debt was increasing by about $2 billion a year, and there was no strategic plan for the future. At that time, the Board embarked on a deliberate, step-by-step plan to put TVA on track for the coming era of competition.

The first step was the Board’s decision to complete one nuclear unit at Watts Bar and stop construction work on the others. This permitted us to focus our attention on operational excellence. Thanks to an ongoing program of modernization and upgrading, TVA’s fossil and hydro plants have increased productivity by some 20 percent system-wide. Our nuclear plants are now performing at record levels, well above the national average. Last year our transmission system set a record for reliability, and overall our power system is operating better today than at any time in our history.

The next step was to address the debt. Because of the steps we had taken, it was possible to develop and implement the 10-Year Business Plan to ensure that TVA remains competitive in a restructured marketplace. Under the plan, we will cut the debt in half by the Year 2007, thereby reducing our costs for the long-term. We have already cut the debt by a total of $1 billion, and we recently announced that there will be no increase in the price of TVA electricity in the coming year.

From this sound operational and financial base, the Board has also articulated a strategic vision for TVA in 21st Century. In January, looking ahead to the era of restructuring, the Board outlined the key points that define that vision. Those points include the following:

First, we’re committed to seeing TVA remain a public enterprise with the flexibility and initiative of a private corporation.

Second, we want TVA to continue functioning as an integrated whole, with the river and the power systems working together to optimize benefits.

Third, we intend to go on operating the TVA power system in the most efficient manner possible, while remaining true to our commitments to conservation and the public interest.

Fourth, TVA should continue managing the Tennessee River to prevent floods and support commercial activity.

Fifth, we want to work with customers, like those represented by TECA, to give you the flexibility you need to succeed in the competitive era. It was in that spirit of cooperation that we reached an agreement last spring with the Tennessee Valley Public Power Association on the direction industry restructuring should take for the future.

As the nation’s largest public wholesaler of electric power, TVA has an important role to play in the restructured landscape of the 21st century. We are continuing to hone our operations to be the power producer of choice in terms of availability, reliability, service and cost, and we are remaining true to TVA’s special role as a public power company dedicated to serving the Tennessee Valley region.

Craven Crowell is Chairman of the Tennessee Valley Authority

 

 

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