A Letter from Tom Kilgore
I am proud to serve as President and Chief Executive Officer in an exciting period of challenge for TVA.
TVA has a legacy unlike that of any other organization. In its early years, it was synonymous with hope, opportunity, and progress. By bringing electricity to remote farms and towns, teaching modern farming methods, and reforesting the region, TVA enabled families to prosper, opened up the region to economic growth, and brought about a new way of life. Times change, and TVA’s role today is different, but no less critical to the people of the Tennessee Valley.
Today TVA keeps pace with a vibrant Valley economy. Companies like Nissan North America are moving their headquarters here. Firms like Denso and Verizon Wireless are expanding their businesses in the Valley. Many people are moving here in pursuit not only of jobs but also of our desirable quality of life.
Overall, our region’s demand for power is growing at about 2 percent a year. We at TVA are proud to accept the challenge to meet that ever-growing demand—a challenge that places TVA as a leader in our nation’s nuclear renaissance.
In the year that Sequoyah Unit 1 and Watts Bar Unit 1 marked their respective 25th and 10th anniversaries, the restart work at Browns Ferry Nuclear Unit 1 is on budget and on schedule for that unit to return to service in spring 2007.
Looking ahead, we are conducting a detailed scoping, estimating, and planning study for the possible completion of Watts Bar Unit 2 and exploring the option of building a new nuclear plant at our Bellefonte site in North Alabama.
As we move forward, I have asked the men and women of TVA to focus on two key priorities: improving our performance and our reputation, which means improving our numbers—starting with those on the following pages—and renewing the respect for the TVA name.
Highlights
In fiscal year 2006, the power system sold more than 176 billion kilowatt-hours of electricity to our customers, earning revenue totaling nearly $9.2 billion.
For the seventh year in a row, TVA’s transmission system delivered power to customers with 99.999 percent reliability. In July, TVA’s power system was tested by four consecutive days of peak demands above 31,000 megawatts, including an all-time TVA record demand of 32,008 megawatts on July 18.
Our power system’s performance throughout the year is a tribute to our employees’ dedication and effort in fossil, nuclear, hydro, bulk power trading, transmission, and all parts of the TVA system.
Environmental Stewardship and Economic Development
We invested $182 million as part of our ongoing $5.8 billion program to reduce emissions at our fossil plants. Weighing costs and benefits to properly address TVA’s competing responsibilities and goals, TVA’s emissions-reduction program seeks to meet and exceed all applicable legal requirements as cost-effectively as possible.
In response to requirements established by the Clean Air Act and its amendments, TVA has reduced sulfur dioxide emissions by 80 percent since 1977 and nitrogen oxide emissions during summer ozone seasons by 81 percent since 1995.
Today, our region’s air is cleaner than it has been in our lifetimes.
As steward of the Tennessee River system, TVA effectively managed the demands of power production, navigation, flood control, recreation, water quality, water supply, and land use despite a year of low rainfall.
In fiscal year 2006, TVA and our state and local partners helped attract or retain some 53,000 jobs and leveraged investments of $4.2 billion in our region.
Financial Flexibility
TVA is committed to keeping rates as low as feasible. Sharp increases in the costs of coal, natural gas, and purchased power made it necessary for us to increase rates by 7.52 percent in October 2005 and another 9.95 percent in April 2006. In July, after prices had settled, the Board approved a 4.5-percent rate reduction, effective in October 2006. It also approved a fuel-cost-adjustment mechanism that will allow TVA to adjust rates as fuel and purchased-power costs rise and fall.
We reduced our total financing obligations by $341 million. This brought our total reduction over the past decade to almost $2.5 billion—from $27.7 billion to $25.2 billion. In that time, the amount of each revenue dollar used to pay interest and other financing expenses has declined from 34 cents to 14 cents.
Strategic Plan
This year TVA made the transition to an expanded Board of Directors. With its depth and breadth of experience, the new Board is bringing new ideas and strategies to the challenges we face.
Among its top priorities, the Board requested an updated strategic plan to reflect new realities in our business marketplace, notably the need for 1) new generating plants, 2) solutions on financing those plants, and 3) viable long-term contracts with our distributor customers.
In September, William S. “Skip” Orser joined TVA as interim chief operating officer. Skip is a capable leader with three decades of industry knowledge and a proven track record of success.
In this time of positive change and ongoing improvement, I join with the men and women of TVA in accepting the challenge of improving our numbers and renewing TVA’s reputation. That means changing the way customers think of us, the way our partners do business with us, and even the way our critics and competitors view us, making TVA synonymous with efficiency, sustained value, creativity, and innovation.
I proudly accept.
Tom Kilgore
President and CEO