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H.R. 3406, The Electric Supply and Transmission Act of 2001
Subcommittee on Energy and Air Quality
The Honorable Glenn McCullough Jr.
Good
afternoon, Mr. Chairman and distinguished members of the Subcommittee.
I would like to thank you, Chairman Barton, as well as Ranking Member
Boucher, for your interest and leadership on issues relating to the continuous
supply of reliable and affordable electricity throughout the Nation.
I assure you that it is an issue we take very seriously at the Tennessee
Valley Authority. I
am pleased to be here today to discuss with the subcommittee how H.R. 3406, the Electric
Supply and Transmission Act, addresses the way in which TVA might
look in the more competitive and restructured electricity marketplace of the
future. Together with the Tennessee
Valley Public Power Association (TVPPA), the trade association representing the
distributors of TVA power, and the Tennessee Valley Industrial Committee (TVIC),
which represents TVA's large industrial customers, I am very pleased that the
Valley's consensus language was accepted as the TVA title in H.R. 3406.
Additionally, this language is generally acceptable to the
administration. The regional
consensus approach, included in this title, reflects a great deal of hard work
and compromise from stakeholders throughout the Valley, and represents a
common-sense approach to addressing, in a comprehensive manner, the unique
setting of TVA in the electricity marketplace.
It is for this reason that I would like to express a great deal of
gratitude and appreciation to Congressman Ed Bryant, Congressman Chip Pickering,
Congressman Bart Gordon, Congressman Rick Boucher, and Congressman Ed Whitfield,
all of whom sit on this subcommittee, as they have all been among the strongest
advocates for TVA, TVPPA, TVIC, and most importantly the Valley's ratepayers,
throughout this process. A
New Day at TVA It
has been more than two years since a representative from TVA last appeared
before this subcommittee. In that
time, there have been many changes, and it is a new day at TVA.
We have a completely new Board. Director
Skila Harris and I began serving the Valley in November of 1999 and Director
Bill Baxter was sworn in less than two weeks ago.
We are committed to making TVA a more responsible and business-like
agency as we work to deliver affordable, reliable power, a cleaner environment
and a vibrant economy for the good of the people. I
would like to report to the subcommittee that TVA is stronger operationally and
fiscally as the entire organization prepares for the future of competition.
While there is still much work to be done, I am confident that a very
bright future lies ahead for the people we are charged to serve.
As a result of our hard work, I am certain that we will succeed in the
competitive marketplace as people continue to recognize the value TVA delivers
through excellent business performance. TVA
Background TVA,
which is the Nation's largest provider of public power, was created by
Congress in 1933 to provide for flood control, navigation, and the generation of
electric power in the seven-state region of the Tennessee Valley, which includes
Alabama, Georgia, Kentucky, Mississippi, North Carolina, Tennessee, and
Virginia. This mission is the
cornerstone of our service across the Valley today. Together with 158
municipally and cooperatively owned distributor customers, TVA provides
electricity ultimately to 8.3 million residential consumers throughout the
Tennessee Valley, while managing and developing the Tennessee River watershed
and providing leadership for sustainable economic development for the people we
serve.
The Tennessee River system is the fifth-largest river basin in the United
States. It stretches 652 miles from Knoxville, Tennessee, to Paducah, Kentucky,
where it flows into the Ohio River and ultimately the Mississippi.
It encompasses over 11,000 miles of shoreline, 54 dams and 14 locks.
About 34,000 loaded barges travel the Tennessee River each year - the
equivalent of two million trucks traveling the roads.
TVA, incidentally, no longer receives any federally appropriated funds
for the management and stewardship of the Tennessee River.
TVA has used power revenues for these functions since October 1999. TVA's
power system has a generating capacity of 30,365 MW.
TVA operates 59 coal fired units at 11 plants, five nuclear reactors at
three plant sites, 29 hydro-power plants, and five combustion turbine plants.
The Bush Administration's National Energy Policy released earlier this
year recognizes the importance of diversity in energy supply - including new
attention to promoting nuclear energy, clean coal technologies, and renewable
energy sources. TVA's mix of
coal, nuclear, hydroelectric, and natural gas-fired generation resources
illustrates the value and benefits of such diversity.
In FY2001 TVA's generation sources were approximately 65 percent fossil
and combustion turbine, 29 percent nuclear, and 6 percent hydropower.
TVA
provides wholesale power to 158 local power distributors and 62 directly served
customers through a network of 17,000 miles of transmission lines in the seven
state region. The TVA Act directs the three members of the Board of Directors,
all of whom are appointed by the President and confirmed in the Senate, to set
TVA's electric rates as low as feasible, while recovering the full costs of
providing electricity for the Valley. TVA's
Business Performance I
am very proud of the way employees from throughout TVA have responded to the
call of service in the public interest throughout the Tennessee Valley. Here are just a few examples of our most recent
accomplishments:
POWER SYSTEM
FINANCIAL
ENVIRONMENTAL STEWARDSHIP
TVA's
power system is setting production records, operating more efficiently and more
cost-effectively than at any time in the past three decades, and TVA has had
only one rate increase in 14 years. Affordable,
reliable electric power is the fuel of our region's economy, and TVA is
performing as a business as it delivers power production, economic growth and
environmental stewardship for the region. The
TVA Title Once
again, I would like to express my appreciation for the subcommittee's
leadership on electricity issues and to you specifically, Chairman Barton, for
working closely with members from the Tennessee Valley delegation on issues
relating to TVA. As a Federal
corporation, TVA plays a unique role in meeting the power supply needs of the
seven-state Tennessee Valley region, and there are statutory and regulatory
issues that affect our region that are not experienced by investor-owned
utilities. As a result, TVA has
been involved in extensive discussions with distributors of TVA power and
industries directly served by TVA in an effort to reach consensus on the
appropriate role for TVA to play in a future restructured competitive
environment. The TVA provisions
that are part of H.R. 3406 reflect that consensus, although they are still under
review within the Administration. Some
of the key provisions within the TVA title in H.R. 3406 include:
Equitable Competition
TVA Power Sales
Regulation of TVA Transmission System
It
would come as no surprise to any of you that TVA is a large and complex
organization and quite different from any other utility in the Nation. The area in which TVA can serve electricity is limited by
law. The boundary that was
established by the 1959 amendments to the TVA Act is known as the "fence."
While TVA is limited outside the fence, other utilities are
limited in their ability to serve loads within the fence.
Many of these unique and complex issues may require Congressional action. TVA's mission, as codified by the TVA Act, is to serve the people of the Valley. There is a key theme throughout the TVA title contained in H.R. 3406 that I would like to emphasize - the title continually reaffirms TVA's role as a steward within the Valley region. The original mission is left unchanged by the title I have come here to discuss today. In
the effort to maintain the integrity of our original mission, TVA has agreed to
several restrictions that I am certain no other utility in the country would be
willing to subject themselves to. The
TVA Title in H.R. 3406, creates a model where TVA would be required to
renegotiate its current contracts with all of its customers inside the Valley in
order to bring about wholesale competition.
Furthermore, with respect to sales outside the Valley, this title
prohibits TVA from selling to any retail customers outside the Valley, and
allows only the sale of excess power to wholesale customers outside the Valley. TVA
has been in the process of preparing for competition for several years.
As I mentioned earlier, we have reduced debt by $2.4 billion over the
past four years, while reducing the interest burden of our debt from a high of
34 percent of our costs in 1997 to the current rate of 23 percent.
Additionally, we have been paying debt down while making significant
upgrades to our transmission system to ensure reliability, adding peaking
generation to our system, and installing significant emissions control equipment
at our fossil plants across the Valley. All
of these things add up to better service to our customers.
We continue to believe that when competition arrives in the Valley, we
will be the low-cost choice for our customers.
Customer
service has been a core component of the process of developing the consensus
title. To this end, in addition to
internal preparation for competition, we are also in the midst of discussions
with our customers about the future. We
have offered distributors of TVA power a 10-percent partial-requirements
contract and a shorter-term contract. In
doing so, we hope to promote a new relationship with our customers through
innovation and flexibility. Moreover,
while some distributors are seeking shorter-term contracts, others would like
long-term contracts with more price stability and rate security.
The needs of our customers are diverse.
By working closely with distributors and knowing what each distributor
plans for its future, TVA can best serve the Valley in the competitive future. I
would like to share several basic principles that we believe are necessary, with
respect to the TVA Title, as this subcommittee moves forward:
(1) that TVA legislation affirms TVA's responsibility for the
integrated resource management of the Tennessee River and economic development;
(2) ensures the availability of affordable electricity for rural and
fixed-income consumers in the Tennessee Valley; and (3) ensures the continued
reliability of the power supply and the transmission system. Conclusion TVA
is working hard to prepare for competition by reducing our debt, keeping our
electric rates low, and efficiently managing the Tennessee Valley's integrated
resource system. I want to assure
all of you that TVA will continue to work cooperatively with Congress and the
people of the Valley to ensure that restructuring is done in a way that's fair
to TVA, to the ratepayers, to our distributors, to taxpayers, and that it
enables us to set the standard for public power in the future. We
have worked with many stakeholders, especially TVPPA and TVIC, to develop a
regional, common sense approach to restructuring.
I am very proud of the progress we have made at TVA, and I have never
been more confident that the Valley's future is bright.
I hope to continue working very closely with this Subcommittee, and I
applaud you all for your insight and leadership. Furthermore, TVA and the Administration look forward to
working with Congress on the legislative provisions in Title V dealing with TVA.
Thank you again for the opportunity to appear here today, and I look
forward to answering your questions.
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