TVA adds $107M to proposed trim list

TVA adds $107M to proposed trim list

Executive's internal memo raises total savings to at least $354 million

By REBECCA FERRAR, ferrarr@knews.com
February 27, 2004

An internal TVA memo identifies more than $100 million in added cuts the agency can make to its budget, increasing the total amount of proposed savings to at least $354 million.

TVA earlier this week released plans to cut $247 million in capital projects but did not mention the additional cost savings.

The memo to employees from Ike Zeringue, TVA president and chief operating officer, referred to $107 million more in cuts that would affect operating and maintenance budgets, which includes salaries, benefits, administration, plant repairs and maintenance and similar costs.

The memo, dated Feb. 23, did not mention if any jobs would be affected.

But TVA spokesman John Moulton pointed out that the $107 million number is not a final number and will likely change, possibly rising. "That is a preliminary number," Moulton said. "It's definitely going to change."

All TVA organizations are undergoing reviews to search for cost savings in an exercise TVA's board says is necessary to prepare the agency for deregulation and to improve cash flow. Those cost savings are expected to lead to layoffs if TVA doesn't receive enough voluntary resignations or retirements.

However, one TVA critic, ~tephen Smjtb, ~;isi::cutjye director of Ailjance for ~lean Energ~. noted that Congress is not considering deregulation legislation. He blames possible layoffs on the $1.8 billion restart of Browns Ferry Nuclear Plant's Unit 1 in northern Alabama, expensive pollution control work at the agency's power plants and the cost of servicing $25 billion of debt.

On Monday, TVA told some organizations within the agency that their areas had been targeted for cost cutting. Other organizations will have to wait for the news.

"So far, projected savings identified through the program/staffing reviews for (fiscal year 2005) total about $354 million to be achieved largely through reductions in operating and maintenance costs of $107 million and $247 million in capital cost reductions," Zeringue wrote. "To obtain these additional savings, TVA organizations are completing their remaining program reviews, seeking volunteers for reductions in force and continuing to examine all operating and maintenance and capital spending."

TVA has said it expects the reviews to be completed by the end of March and layoffs to be announced on April 22.

Smith said TVA is "driving employees to the unemployment line" by insisting on the restart of Browns Ferry Unit 1.

"The TVA board blames the layoffs in part on pending deregulation, but there is, in fact, no deregulation legislation on the horizon," Smith said. "It is more accurate to state that the layoffs and rate increases are a result of the voluntary restart of Browns Ferry Unit 1. That's what's causing the cash-flow problem."

TVA Director Bill Baxter has said the utility "cannot put our heads in the sand and hope deregulation doesn't come."

TVA is the nation's largest public utility, serving 8.3 million people in Tennessee, Kentucky, Virginia, North Carolina, Georgia, Alabama and Mississippi.

Business writer Rebecca Ferrar may be reached at 865-342-6357.