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"Powering the Future: A TVA Update"

Remarks By Craven Crowell, Chairman
Tennessee Valley Authority
To The TVPPA Annual Meeting Annual Conference
May 20, 1998 -- Nashville, Tennessee

 

Thank you, Ron [Hutchins, TVPPA President and GM of North Georgia Electric Membership Corp.], for that kind introduction, and good morning, everyone. Ron, I'd like to thank you for your support of TVA, and I look forward to working with you over the next year. On behalf of Johnny, Bill and myself, I'd like to say that one of this Board's goals for the past year has been to strengthen and enhance the relationship between TVA and TVPPA.

An essential element in any relationship is communication. Sometimes we hear what we want to hear or what we expect to hear. In the past year, we've tried to be better communicators.

I believe we've made some progress, and in the past year TVA and TVPPA have worked together well. We worked together on the DOE's regional consensus process with Betsy Moler. We reached an historic agreement on our priorities for a restructured industry.

We certainly appreciate your support for the efforts of the Deregulation Task Force and for our 10-Year Business Plan, and we are working together on our appropriations effort, which I'll come back to in a moment.

I'm very pleased to be here this morning. Today I'd like to cover three main areas. First, I'd like to review our operations and achievements of the past year. Second, I'd like to give an update on several current issues, and third, I'd like to reiterate the Board's vision for TVA in the 21
st Century.

So let me begin with the past year. At the top of my list, as you noticed, is our operations. TVA's Power System is operating better than any time in its history, and that's due in no small part to the efforts and improvements TVA and TVPPA have made together.

During the past 10 years, we've improved the capacity factor of the fossil system by more than 20 percent. Three of our fossil plants--Bull Run, Gallatin and John Sevier -- are ranked among the top 20 steam plants in the country. We are continuing the long-term modernization and upgrading of all our hydro units, which have resulted in increased productivity and fewer unplanned outages.

Last year our nuclear generation was up 19 percent, production cost down 4 percent and capital spending down 51 percent. In the area of reliability, our transmission system achieved its fewest interruptions ever, with a 26 percent improvement in "load not served" for the year. All of us know the importance of reliability, and we know reliability will continue to grow in importance as we approach a restructured marketplace.

We all know the standards of reliability consumers expect. To give an illustration, many of us think of 99 percent reliability as a good mark. But, let me share some thought on what it means bring right 99 of the time.

Being right 99 percent of the time means --

  • 20,000 lost articles of mail per hour,
  • unsafe drinking water for 15 minutes each day,
  • 5,000 incorrect surgical operations per week,
  • two short or long landings at most major airports each day,
  • 200,000 incorrect prescriptions each year,
  • and no electricity for almost seven hours each month.

In our business, we obviously can't control the weather. But we are pursuing our goal to be the most reliable system in the country. TVA is one of the few utilities that has brought new generation facilities on line in the past three years, and we're the only ones to have added nuclear generation in the past five years.

With Browns Ferry 3, in fall of 1995, and Watts Bar, in spring 1996, we added 2,200 megawatts of capacity. In contrast, elsewhere in the Eastern U.S., some 16,000 megawatts of capacity have been shut down, and that's not including the 4,300 megawatts in Ontario that are not available this summer. This summer, there are predictions that parts of the country will experience interruptions.

But we're doing everything we can to make sure we can meet the demand this summer and every summer. I'd also take this opportunity to renew our pledge to stand ready to assist whenever inclement weather does hit our region. Several times during the storms of this winter, we were pleased to be called on to help in recovery efforts.

To sum up the first part of my remarks, TVA ranks as the second-lowest-cost power producer among the nation's 50 largest utilities, and we are taking the steps needed to keep our competitive edge.

One of the key steps was our 10-Year Business Plan. I'm pleased to report that our performance is permitting us to be ahead of our Plan. We're on track to pay down the debt by a total of $1 billion by the end of this year.

That brings me to the second part of my remarks. Let me start with appropriations. I know you're interested in learning what's going on with TVA's appropriated dollars.

I, too, am interested in learning what's going on with our appropriated dollars. I have often said that the challenge of being Chairman of TVA is to lead a very large business in a political environment, and I can attest to the fact that there's plenty of politics in obtaining money from Washington. The President's Budget Proposal, released earlier this year, recommended appropriations of $76.8 million for TVA.

That's basically the same as we're receiving this year, with the addition of $6.8 million to begin replacement work on Chickamauga Lock. We're doing everything we can to support the President's proposal, because TVA gives the public a great value for its dollars. , and because the people of the Valley and our elected officials have insisted that we continue to carry out our stewardship duties.

We know this is an important issue for all of us. As of now, we don't know whether Congress will appropriate funds for TVA. What I can tell you, is that this Board is committed to TVA's role as steward of the Tennessee River.

We are working with members of Congress and to find a solution to the appropriations issue, and we will do our best to make sure it's one that works for you, and for your customers. We were pleased that reports from both O-M-B and G-A-O concluded that the public services TVA provides, are appropriately funded through federal dollars. The crucial piece for TVA, is that we continue to operate as an integrated whole, and it's our view that keeping the river and power system working together is in the best interests of you as well as everyone in the Valley.

We know there are varying viewpoints on this issue. But we are working to find the best solution we can. We appreciate the help we've received from TVPPA members in obtaining appropriations, and we'll do our best to communicate with you so that hopefully our messages won't need decoding.

UPDATE ON RESTRUCTURING

Moving to another current topic, naturally we're all interested in the progress of energy-industry restructuring. As you know, the process in Washington has been moving more slowly than was first anticipated. This is for a variety of reasons, including the fact that this is an election year.

It is apparent that restructuring of our industry has proved more complex than it was for either the airline or telecommunications industries. The Clinton Administration recently sent its restructuring plan to Congress. That plan would bring about full consumer choice starting in the Year 2003.

We appreciate all the effort that many of you have put forth, and I believe we all recognize how important it is that we work together as partners. We're especially pleased that we were united in our recommendations to the committee, including --

  • that once deregulation takes place the fence should come down,
  • that TVA should continue to exist as both a power producer and steward of the river system,
  • and that TVA and the Distributors should recover their Stranded Costs.

As the restructuring process continues, all of us need to continue to work closely with Congress and the Administration to ensure that any restructuring legislation is fair to TVA and fair to the Valley. This Board is especially committed to ensuring that residential and rural consumers are treated fairly in a restructured marketplace. As you know, 30 percent of American consumers are served by public power, and of course we are concerned that the savings expected in deregulation will be achieved at the expense of rural and residential customers, who are the backbone of the Tennessee Valley.

Together, we can help ensure that the interests of these customers are protected and that they're treated fairly.

TRITIUM AT BELLEFONTE

Let me also give you an update on our involvement and interest in tritium production. Our proposal to D-O-E for Bellefonte has been extended to July 1. Another proposal for using Watts Bar has expired.

We believe that any TVA involvement in tritium production is consistent with our tradition of supporting the national defense , and we welcome the opportunity to provide an important service to the nation. We believe it would be an effective use of Bellefonte to help us recover our investment, and it would be a welcome source of revenue. Of course, we recognize that there are budget challenges for D-O-E associated with such a proposal, and I know there's competition from the accelerator facility in South Carolina, and I look forward to working with Betsy Moler and others in the administration as this issue develops in the future, and I want to assure everyone that we're open to suggestions and discussion on how we can be helpful in producing tritium.

That brings me to the final part of my remarks, on the Board's vision for TVA in the future. In my speech to employees in January, I outlined the 10 key elements that Johnny, Bill and I want for TVA in the 21
st Century. These points are the blueprint for TVA future, and these are the points that we're communicating to Congress, to the administration, and to our customers and employees.

Our first key element for TVA in the 21
st Century, is that we remain a public enterprise, owned by the government and possessing the flexibility and initiative of a private corporation. Second, that TVA continue to operate as an integrated whole, with the River and the power system working together to optimize benefits. Third, that we continue to operate our power system as efficiently as possible, while remaining true to our commitments to conservation and the public interest.

Fourth, we continue to maintain and operate the Tennessee River to prevent floods and support commercial activity. Fifth, that we work with you, our customers, to give you the flexibility you need in your contracts. Sixth, that we promote consumer choice in a way that benefits all customers.

Seventh, that we are permitted to recover stranded costs where appropriate. Eighth, that we are eventually permitted to sell power outside the traditional fence, so that we can maintain our flexibility to all of you. Ninth, we operate under tax policies that give full and fair consideration to TVA's non-profit status and existing tax-equivalent payments.

Finally, I stated the Board's goal of empowering TVA employees to give them the tools they need to continue to improve.

In conclusion, I'd like to sum up by saying that I see a very bright future for TVA and TVPPA. We've become an organization that can change and adapt, while honoring our responsibilities to the Tennessee Valley. We are committed to a strong and viable nuclear program.

We are committed to continuous improvement, and to success in a restructured marketplace. We are committed to you, our customers. We're committed to --

  • giving you the flexibility you need in your contracts,
  • to doing what is necessary to be the power producer of choice now and in the future,
  • and to working in partnership with you to serve the region.

It's been a pleasure talking with you this morning, and I'll be happy to take your questions. .

Craven Crowell is Chairman of the Tennessee Valley Authority

 

 

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