The Tennessee Valley Authority is raising the pay of its chief executive, who is already the highest paid federal employee in America.
TVA directors voted Thursday to boost the $995,000 base salary of TVA President Bill Johnson by 5.5 percent and add up to $100,000 more to his performance pay after the federal utility achieved nearly all of its corporate goals in the past year and cut its carbon emissions, injury rate and employee count to record lows.
"We think Bill Johnson is one of the best executives in the utility industry and we feel very fortunate that we have him," TVA Chairman Richard Howorth said after the board voted unanimously to boost Johnson's pay package. "He could make more somewhere else."
Howorth said the salary and bonus increases for Johnson reflect his "outstanding performance" and the TVA act requirement to pay employees of TVA competitive wages.
› Rates: Electricity prices, including fuel cost adjustments are expected to be 2 percent lower than five years ago.
› Cost cutting: TVA has cut annual operating costs by $800 million, in part, by phasing out more than 2,000 jobs and shutting down aging coal plants.
› Power upgrades: Started Watts Bar Unit 2 in Spring City, Tenn., as the first new American reactor added to the grid in over two decades; finished Paradise combined cycle gas plant in Kentucky; regulatory approval for 14 percent powe upgrade at the Browns Ferry nuclear power plant, and installed 1 megawatt solar farm and started pre-operational testing at the Allen combined cycle gas plant in Memphis.
› Environment: Cut carbon emissions by 40 percent since 2005 and is on pace for a 60 percent reduction by 2020
› Financing: Paid down debt by nearly $200 million and pumped another $800 million into underfunded employee pension fund
› Safety: Achieved the lowest injury rate since keeping such figures in 1995
› Reliability: Delivered electricity 99.999 percent of the time for the 18th consecutive year
Source: Tennessee Valley Authority
Johnson was paid a total of $4.9 million in fiscal 2016 and received total compensation with retirement, longevity and other benefits of more than $6 million. TVA will disclose Johnson's compensation for fiscal 2017 next week when the agency releases its year-end financial report.
Johnson's salary and performance bonus is more than 10 times the $400,000-a-year annual salary of the president of the United States. But the TVA president is still paid less than half the median pay for comparable utility CEOs in the private sector, according to TVA's compensation consultants, Frederic W. Cook & Co.
About 70 percent of Johnson's total compensation package is based upon his performance and the overall results for TVA.
In the final TVA meeting for outgoing directors Marilyn Brown and Lynn Evans, the board voted Thursday to grant Johnson and other TVA employees a full 103 percent of the target for the annual winning performance bonuses based upon the achievements of TVA in the fiscal year ended Sept. 30.
TVA has had higher winning performance payouts in previous years, sometimes with lesser results, Johnson said.
"We have had one of the best performance years since I've been here, and this is not the highest payout," Johnson said. "My personal philosophy is that sometimes I'm pleased, but I'm never satisfied."
TVA earned $685 million on revenues of $10.7 billion in fiscal 2017. Although net income was down from the record high $1.2 billion earned in fiscal 2016, the decline was due almost entirely to a one-time infusion of $500 million TVA made this summer into its underfunded employee pension fund, boosting TVA's total payments to the retirement fund in the past year to $800 million.
TVA cut its debt and financing obligations by nearly $200 million in the past year even while making more than $2 billion of capital improvements.
Johnson called the fiscal 2017 performance of TVA "outstanding" with lower average electric rates than what TVA charged four years ago and more cost reductions than what the agency had budgeted.
TVA maintained its 99.999 percent reliability of power delivery for the 18th year and brought both a new nuclear reactor and another combined cycle gas plant on line during fiscal 2017 to help cut TVA's carbon emissions by 40 percent from the 2005 levels. By replacing nearly half of its coal-fired generation — and installing pollution controls on its remaining fossil plants — TVA expects to cut carbon emissions by 60 percent by 2020.
"Air quality in the Tennessee Valley is as good as it has been for anyone here in their lifetime," Johnson told TVA directors during a board meeting in Counce, Tenn.
TVA also achieved its best employee safety record since such incidents have been monitored.
"TVA employees performed very well in 2017 and I think their accomplishments should earn them some respect," Johnson said. "I would put the work of TVA employees in this area up against anyone, anywhere and anytime."
With energy demand stagnant or declining for the first time in TVA's 84-year history, Johnson said the current energy market "is as challenging as any in my 40 years in the business" and he said the pace of change is accelerating.
To cope with a growing demand from some customers for renewable energy, Johnson said TVA is preparing proposals for a couple of business prospects who want to buy only electricity generated from renewable sources such as solar, wind or hydro. TVA structured similar deals two years ago to convince Google to locate data centers in both Alabama and Tennessee, which will be supplied entirely from renewable energy sources.
"Our work in renewables continues," TVA Director Eric Satz said, noting that TVA is planning to add at least 200 more megawatts of new renewable energy by 2020. "We understand the growing demand for renewable energy and we are working on meeting those needs."
But TVA also is preparing a pricing change next year that could raise the fixed portion of the average electricity bill and could thereby limit some of the advantages of wind and solar generation. TVA is reducing its premium payments for solar and wind power added to the TVA grid to better reflect the actual costs of such power, Johnson said.
Solar power advocates claim such a change for those who self-generate power with their own solar panels, combined with TVA reductions in payments for solar generation for those who sell power back on the grid, could weaken the development of solar power.
"Tennessee is falling behind its neighbors," said Stephen Smith, executive director for the Southern Alliance for Clean Energy.
Contact Dave Flessner at email@example.com or at 423-757-6340.
This story was updated Nov. 9 at 11 p.m. with more information.