New management structure coming to TVA

Posted on Sun, Dec. 05, 2004

New management structure
coming to TVA

DUNCAN MANSFIELD
Associated Press

KNOXVILLE, Tenn. - A new management structure is coming to the Tennessee Valley Authority, intended to make the nation's largest public utility look more like a publicly traded company.

Added to a massive spending bill awaiting a quick House vote and President Bush's signature, the changes raise as many questions as answers about how the 71-year-old TVA will operate in the future.

Some 8.5 million people in Tennessee and parts of Alabama, Mississippi, Kentucky, Georgia, North Carolina and Virginia will be affected - not just in their electric bills, but in job opportunities, air quality, flood control and enjoyment of the Tennessee River watershed.

The New Deal agency created by President Roosevelt in 1933 to lift these Southern states out of poverty still casts a broad shadow over the region, even as competition, clean air regulations and a nagging $25 billion debt threaten its survival.

"The question of whether TVA's challenges and problems are structural or not is very debatable," said University of Tennessee historian Bruce Wheeler, who has studied the agency. "The philosophy and the whole mission of TVA is something that may have to get rethought."

U.S. Senate Majority Leader Bill Frist's TVA reform plan, which he has pushed since TVA's first electric rate hike in a decade in 1997, doesn't go that far.

But the Tennessee Republican's plan does redraw TVA's management scheme "to bring it in line with other corporations of similar size and scope ... to increase accountability and oversight."

TVA's full-time, three-member board that oversees daily operations will be replaced with a part-time, nine-member board that will hire a chief executive officer to manage the 12,000-employee agency.

Board terms will be shortened from nine years to five. Pay will be cut from $145,600 for chairman and $136,900 for other members to $50,000 and $45,000, respectively, plus business travel and lodging allowances.

At least two members can come from outside the TVA region, although that has happened before at TVA. None, however, has ever come from Alabama, which is TVA's second-largest customer base.

Board members still will be presidentially nominated and confirmed by the Senate. But under the new structure, the board will select its own chairman, not the president - whose choice was typically partisan.

"You are never going to take all the politics out of a presidential appointment and Senate confirmation," said TVA Director Bill Baxter, the newest member of the TVA board, appointed by Bush in 2002, and likely TVA's next chairman.

"However, going to part-time makes it possible for people who are making a living full-time doing something else to serve. I think that is a positive thing and will help take some of the politics out," said Baxter, who plans to resume running his family's gas company in Knoxville.

TVA's boards have had 26 men and one woman. They included defeated congressmen, bureaucrats, college presidents, lawyers, engineers, a railroad executive, a former journalist, an auto executive and two former TVA general managers - which today might be called CEOs.

Frist's restructuring stipulates for the first time that a TVA board member "shall have management expertise relative to a large for-profit or nonprofit corporate, government or academic structure."

However, board candidates also for the first time can have investments in other energy companies - a potential conflict of interest - and they can't be a TVA employee.

Steve Smith, director of the Southern Alliance for Clean Energy, hopes to see some environmentalists on the new board, but worries it could follow the old path of "political hacks and friends of politicians."

"How they populate this board for the first time will set a very important precedent because this is a new way of doing it," he said.

Changes could come after May 18, 2005, when TVA Chairman Glenn McCullough's nine-year term ends. The third member of the current board, Skila Harris, would become a part-time member like Baxter. Her term ends in 2008.

The new board's first order of business will be finding a CEO, which will mean a national search. The CEO's pay package will likely dwarf the $1.4 million earned in 2003 by TVA's highest paid executive, President and Chief Operating Officer Ike Zeringue, who is looking to retire. The top executive at comparable investor-owned utilities received $4.9 million in 2003, according to TVA consultants.

U.S. Rep. John J. "Jimmy" Duncan Jr., a Knoxville Republican and chairman of the House subcommittee that oversees TVA, said three Tennessee Valley congressmen urged him to oppose the restructuring plan even though TVA's 158 power distributors support it.

Duncan declined, despite his own doubts that it alone can bring the "fiscally conservative business" attitude to TVA he believes is needed.

"I don't think it is the magic bullet that some people thought. Enron proved you can still have scandals with part-time boards," he said.

"But I knew when Bill (Frist) started talking about it it was going to be done, and I hope it works. I hope TVA becomes better, and maybe it will," Duncan said.