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Value in assuring
that our customers can continue to enjoy the benefits of TVA service
in a restructured electric power marketplace
The desired outcome of electric power industry restructuring and deregulation
is to provide incentives for utilities to deliver reliable power at
the lowest possible price. However, recent experiences in California
and other states show that this outcome is not guaranteed and suggest
the wisdom of a more measured approach to restructuring in the Tennessee
Valley.
Investor-owned
utilities are already consolidating to reduce costs and improve efficiencies
through economies of scale. TVA is focusing on economies of value by
taking bold steps to further drive down costs and boost productivity
and reliability so as to offer the best value in price and service to
its customers. And we are doing this while maintaining our commitments
to reliability, safety and long-range planning.
TVA is keeping
its delivered cost of power stable while the market cost has increased
dramatically during the past three years. TVA’s production costs
continue to be among the lowest in the nation, and employee productivity
has risen 164 percent in the past decade.
TVA continues to
maintain competitive prices and expand its financial flexibility through
innovative financial management. After capping its debt four years ago,
TVA has successfully reduced the debt by a total of $1.7 billion, including
a $391 million reduction in fiscal year 2000. In recent years TVA has
refinanced some $13 billion of debt on U.S. and global bond markets,
lowering its average interest expense as a percentage of total debt
from 7.6 to 6.8 percent. Thanks to these measures and the support of
more than 370,000 investors worldwide, TVA’s interest expense as
a percentage of revenues is lower than at any time in the past 20 years.
Beyond the bottom
line
Lower costs and higher productivity are essential, given the nature
of energy growth in the United States. Energy demand continues to increase
nationwide, but even more so in the Tennessee Valley region, where economic
growth of 4 percent annually means more people are working and producing.
Strong economic growth drives strong energy demand growth of 3 percent
a year—nearly 1.5 times the national average. If present trends
continue, the southeastern United States could need as much as 80,000
mega-watts of additional generating capacity within 12 years.
Possible capacity
shortages and inadequate transmission nationwide highlight the need
for more investment in infrastructure and new technology.
Conclusion
TVA is striving to be the best by delivering value to the people we
serve. As our nation’s economy grows and our reliance on electronic
technology increases, so will the need for the superior value that only
electricity can provide. TVA’s plan for meeting this demand focuses
on five strategic objectives:
—Reduce
the delivered cost of power.
—Retain customers and grow stakeholder support.
—Optimize use of assets and ensure reliability.
—Retain the benefits to the region of TVA’s integrated operations.
—Create and expand opportunities for targeted business and industrial
growth.
By achieving these
objectives, TVA will meet customer and other stakeholder needs as efficiently
and effectively as possible and continue to be the energy supplier of
choice in the Tennessee Valley. TVA has the people, the vision and an
effective, integrated strategy to meet these objectives. In the future,
as in the past, TVA will apply all its resources to the continuing challenges
of quality, reliability and, above all, value.
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