Lawmakers praise TVA decision

TVA's board at its Chattanooga meeting Aug. 5. TVA rates last rose 7.8 percent in 1987.

TVA Chief Financial Officer David N. Smith and TVA's Mark Medford, executive vice president for customer service and marketing, told reporters Tuesday TVA will realize $10 billion to $15 billion in added revenues by 2007.

A 10-year plan, they said, will let TVA slash debt to $13.8 billion, its lowest level since 1981. The plan projects no further rate increases before 2007 unless markets change. By then, the plan could mean lower rates, once TVA defrays interest costs. TVA now pays $2 billion a year, one-third of revenue, for interest.

Added revenues, TVA calculates, will retire half the debt, residue from an ambitious nuclear power construction program ended in 1996.

One component of the plan, Smith said, calls for laying off 1,072 TVA employees — 180 in Knoxville and 280 more in Chattanooga.

But that layoff number does not include 300 security guards, who by October will lose jobs to a private contractor.

Nor do they include a number of TVA's 2,000 "nonpower" employees, not yet included in TVA's 10-year plan.

Medford said layoffs include 348 from TVA's Career Transition Services program, 456 from corporate support services and 268 more from TVA operations. TVA says fewer than 100 fossil workers will lose jobs.

TVA already has cut its workforce by half — to 15,000 — in the 1990s. Smith said TVA will "continue to reduce labor content of production costs."

Knoxville Utilities Board President Larry Fleming said Tuesday KUB "has no alternative to passing the increase along to our customers." The increase, he said, increases KUB power costs by (maintain our) level of services and still hope to compete in a deregulated marketplace," Fleming said.

For an average household served by KUB, monthly electricity will cost $62.50 — up from $60.07.

Response to the rate hike was immediate from the Tennessee Valley Energy Reform Coalition, whose spokesmen have long predicted a TVA rate hike would hit residential and small business ratepayers hard.

Stephen Smith, TVERC executive director, said ratepayers had no way to know whether rate increases were fair, since no regulatory commission reviews TVA rates. He renewed TVERC's call for a TVA oversight panel.

"Nowhere else," Smith said, "can an electric utility board unilaterally raise rates without review and approval of an independent regulatory body."

He called the rate-setting process "undemocratic and unfair."

He called it "significant" that TVA offered industrial customers discounts for using more power but offers residential and business customers none for conserving energy. The new rate structure, he said, "frees up larger customers so they won't leave TVA" once utility deregulation makes that an option.

Smith urged residential customers to "hold onto your wallets. This is just the first of a series of TVA moves designed to pay for TVA's past mistakes on the backs of small consumers."

TVA has claimed credit for Tennessee Valley economic development by holding electric rates steady for a decade. The average $60 monthly residential electric bill remains 30 percent below the U.S. average.

Lawmakers praise TVA decision

WASHINGTON — Tennessee's members of Congress Tuesday praised TVA officials for moving to greatly reduce the agency's debt, but some questioned the amount and timing of a proposed rate increase and the proposed layoff of more than 1,000.

Rep. Van Hilleary, a Grandview Republican, said of the planned layoffs: "Before they lay off more people they need to quit trying to pay for new offices in Nashville, they need to forget about (buying/leasing) a jet, and they need to get rid of their party barge and other amenities."

Rep. John J. Duncan Jr., a Knoxville Republican, said he would urge TVA to find other jobs for the laid-off employees, and that he would help, too, with their transition.

TVA tried to improve on its communication of policy change in dealing with Congress this time, a sore point in the past, by sending its chairman, Craven Crowell, and board member Johnny Hayes to Washington.

The decision to make the lay-offs and consider raising rates, Sen. Bill Frist, R-Tenn., said, is another example of the need for the larger, better-balanced board of directors that he has proposed for TVA.

The latest proposal "is the result of a string of ill-advised strategic decisions," Frist said. "The fact that the huge debt is now being passed to consumers in the Tennessee Valley demonstrates the need for significant reform."

Sen. Fred Thompson, R-Tenn questioned the plan to raise rates now for TVA-region customers and lower them in 10 years when TVA may be able to sell power outside of its region. "In my view the residents of the Tennessee Valley should be the primary beneficiaries of any rate reduction that might occur in the future, TVA is successful in substantially reducing its debt," he said.

Duncan praised TVA officials for starting to reduce the $27 billion debt.

Rep. Bob Clement, a Nashville Democrat and former TVA board member, said he welcomed TVA attention to its debt, which he has long advocated, and praise its ability to freeze power rates for 10 years.