TVA boosts income, but cost-cutting measures, staff cuts still coming

TVA boosts income, but cost-cutting measures, staff cuts still coming

May 7th, 2014 by Dave Flessner in Business Around the Region

Employees work in the Paducah Gaseous Diffusion Plant in Paducah, Ky. The plant, which was TVA's largest customer, shut down last year.

Employees work in the Paducah Gaseous Diffusion Plant...

Photo by Associated Press /Times Free Press.


• $500 million -- TVA target for reduced annual operating and maintenance spending by 2015

• 1,260 -- Current number of TVA employees

• 1,000 -- Number of job vacancies TVA plans not to fill this year

• 750 -- Number of resignations and retirements through voluntary reduction-in -force program

• 390 -- Number of Babcock and Wilcox contractors being laid off by August at Watts Bar Nuclear Plant


• $295 million -- Net income in TVA's most recent quarter, up from $54 million last year

• $2.9 billion -- TVA sales in the most recent quarter, up from $2.7 billion a year ago

• 6.6 cents -- Average wholesale price of TVA electricity, up 2 percent from a year ago

• 8 percent -- Drop in power sales from the loss of U.S. Enrichment Corp. plant in Paducah, Ky., offset by higher residential sales

Source: Tennessee Valley Authority

Mother Nature gave the Tennessee Valley Authority a winter reprieve from the shutdown of TVA's biggest industrial customer, but the head of the federal utility says more still needs to be done to cut TVA costs in response to lagging power sales.

TVA said Tuesday that colder-than-normal weather in the first three months of the year boosted residential electricity sales enough to offset the 8 percent drop in TVA revenues from last year's closing of the U.S. Enrichment Corp. uranium processing plant in Paducah, Ky.

After raising rates 2 percent and cutting fuel and operating expenses, TVA managed to boost its quarterly earnings this winter to more than four times what it earned in the same period a year ago.

In an earning report issued Tuesday, TVA said it earned $295 million on revenues of $2.9 billion in the first three months of 2014. A year ago, TVA earned $54 million on sales of $2.7 billion in the same period.

TVA Chief Financial Officer John Thomas said TVA cut its $26 billion debt by $1.2 billion in the past year while still investing $1.4 billion to continue work toward finishing a second reactor at the Watts Bar Nuclear Plant and beginning work on $1 billion of pollution controls at the Gallatin Fossil plant.

"We're making good progress on improving our financial health," Thomas said during a conference call with industry analysts Tuesday.

TVA operating expenses in the first half of its fiscal year were down 8 percent from last year, driven by 18 percent lower fuel expenses due to increased nuclear power generation from fewer refueling outages.

But TVA is still only about three quarters of the way toward cutting expenses enough to meet its 2015 target of reducing $500 million of annual operating and maintenance costs.

TVA President Bill Johnson said additional staff cuts will be needed to meet the cost-reduction targets since 80 percent of TVA's operating and maintenance costs are in labor expenses. TVA offered a voluntary incentive of a week's pay for each year of employment up to a 30-week maximum for employees who volunteered to resign or retire this year. Johnson said 750 such employee departures were accepted and TVA is not filling another 1,000 vacant jobs.

In addition to those 1,750 job cuts, TVA also expects some layoffs and firings this year and expects to trim many of the more than 10,000 contract workers at TVA facilities.

TVA has already paid $3 million in severance payments and has budgeted another $25 million for additional severance pay in the current fiscal year, which ends Sept. 30.

Because of ongoing construction work at the Watts Bar Nuclear Plant and TVA efforts to address regulatory problems at its Browns Ferry Nuclear Plant, TVA has delayed its cost-cutting efforts at most of its nuclear plants. But by the end of the calendar year, Johnson said he expects TVA's 4,000-employee nuclear power program will have a reorganization in place to also reduce its operating costs.

"This is a hard thing to do," Johnson said Tuesday. "We're doing this because we've had a significant reduction in revenue and we can only spend the amount of revenue that we have."

TVA is one of the largest employers in the Chattanooga region with more than 4,000 workers at the utility's power headquarters and at nearby Sequoyah, Watts Bar and Widows Creek power plants. Because of the technical and engineering skills of most TVA workers, the average TVA employee is paid more than $70,000 a year, or about twice the average for the typical Chattanooga worker.

The TVA staff cuts, the biggest in more than two decades for the federal utility, will cut TVA's payroll in the Chattanooga area by tens of millions of dollars a year.

Johnson said the reorganization "has put the right structure in place," but he said TVA is still reshuffling some staff as workers retire or quit this year "to make sure we get the right people in the right jobs."

"I think you will see a lot of roles expanded," Johnson said, "and we hope we can streamline our processes to be more efficient in the way we do our jobs."

Contact Dave Flessner at or at 757-6340.