TVA trimming 1,000 jobs and delaying some capital projects

Tennessee Valley Authority headquarters and TVA logo

With a net loss for the second quarter and a projected loss for the budget year, TVA officials said the utility's "diet and exercise plan" involves trimming about 1,000 jobs and delaying some capital projects -- including work to complete Bellefonte Nuclear Power Plant.

The 1,000 eliminated positions will include about 700 TVA workers and 300 contractors, according to an announcement made Friday to TVA employees after the utility filed its earnings statement with the Securities and Exchange Commission.

"TVA is achieving about $100 million in labor savings as we work to reduce costs to meet the challenges of the lower revenues we are currently experiencing. This will help us to maintain financial health in the near term, while improving competitiveness over the longer term," said Janet Herrin, executive vice president and chief administrative officer.

The federal utility reported a net loss for the first half of fiscal 2013 of $267 million on sales of less than $5.2 billion. In the same period a year ago, the Tennessee Valley Authority, a wholesale electricity maker, earned $205 million on sales of nearly $5.8 billion.

TVA Financial Operating Manager John Thomas blamed the weather and a sluggish economy on the downturn. But he acknowledged that challenges for coming months also include increased spending to complete the delayed Watts Bar 2 nuclear reactor and coal contract obligations that continue despite the fact that TVA has idled a number of its coal plants and has plans to slow coal generation even more.

"We've seen a $100 million increase in [coal] inventory," he said. "While we are renegotiating [some of the contracts] we do have some coal we must take.

"And while we still believe that [Watts Bar Unit 2] will be a low-cost option and help with balancing the portfolio for our fleet, the increased spending on that certainly is a hard spot," Thomas said.

TVA has ended a fiscal year with a loss 13 times in its nearly 80-year history, according to spokesman Duncan Mansfield. The last time was 2001, when TVA took a $3.4 billion write-off in nonproductive assets, mostly nuclear, he said.

Some of the positions being eliminated to "flatten the organization" already are vacant, according to Herrin's announcement to TVA staff.

"The TVA positions also include vacancies since TVA has significantly reduced its hiring as part of our diet and exercise," states her memo. "Of those full-time employees who have been affected, so far about half of them have been placed in existing positions; and we are continuing to work with others who want to stay with TVA. There have also been a number of employees interested in retiring who have chosen that path."

Tom Kilgore, President and CEO of TVA

Many of the TVA jobs eliminated were management jobs, according to Thomas and Mansfield, but TVA officials could not provide more specific contractor jobs information. Thomas said TVA has almost as many contractors as employees.

In mid-March, TVA laid off 430 of the 900 contractors working on the Bellefonte project, the utility's half-finished nuclear plant in Hollywood, Ala., about 42 miles southwest of Chattanooga.

The Watts Bar reactor already is overbudget and behind schedule, and officials say it will take three more years and up to $2 billion more than expected to finish.

TVA President and CEO Tom Kilgore has said several times in recent weeks that the Watts Bar overruns will not raise rates, and Friday he said TVA remains focused on delivering low-cost electricity.

"A balanced portfolio is really our aim," he said. "Our shift now is idling coal plants and adding gas plants. In [the] past five years, we've added five gas plants. ... And we started that long before we got to [today's] low gas prices, so that just shows you a balanced portfolio really does work."

Thomas said TVA's recent restructuring, which resulted in a number of eliminated jobs, was not undertaken to save money.

"It was really more about improving the effectiveness of the organization by reducing layers of management," he said Friday morning in a news conference about the federal utility's finances. "The lion's share" of savings will come from about a half-billion dollars in reprioritized and delayed maintenance and capital projects, he said.

Mansfield said those projects include:

• Bellefonte work for a savings of $150 million.

• Clean air and coal ash projects for a savings of $150 million.

• Capacity expansion projects for a $200 million savings.

"Nothing is canceled here, and some of it -- clean air, coal ash, especially -- will have to be done in fiscal 2013," Mansfield said. "But this will help offset this year's lower revenues. So it really is about timing."

TVA also is looking to the weather to improve sales.

Showing season forecast slides from the National Oceanic and Atmospheric Administration, Thomas said the outlook calls for a warmer-than-normal summer, which could lead to higher power sales.

"We'll see how the summer develops as we get closer," he said.

Contact staff writer Pam Sohn at psohn@timesfree press.com or 423-757-6346.