Pension pain: TVA retirement plan $4.8 billion underfunded
A week ahead of the Thanksgiving holiday, TVA employees are getting an extra reason to be thankful as they receive an average of nearly $11,400 each in year-end bonuses for helping the federal utility surpass all of its major goals in the past year.
The Tennessee Valley Authority is distributing $131 million in "winning performance" payments to its 11,500 employees this week. The bonuses for the average TVA employee, equal to what the typical Tennessee worker takes more than three months to earn, come just six weeks after TVA boosted average wage rates for its white-collar employees by more than the wage gains given to most U.S. workers in the past year.
TVA CEO Bill Johnson said the performance incentives reward "the extraordinary efforts of our employees" in improving plant performance and reliability while cutting operating costs and accident rates.
"We had a strong financial year in 2014 highlighted by further improvements in TVA's operating and maintenance costs -- an area we have been acutely focused on over the last two years," Johnson said.
In leading TVA, Johnson himself was paid a compensation package worth $4.6 million in fiscal 2014, or more than 11 times the $400,000 salary paid to President Obama.
Johnson, a 60-year-old attorney, will be eligible to earn nearly $1 million more than this year's compensation in 2015. But because of a one-time pension payment made to help lure him to TVA nearly two years ago, Johnson took home 26 percent less in 2014 than the $6.2 million compensation package he received in his first year at TVA.
Johnson is a former CEO at Progress Energy who was paid a $44 million severance package when Progress merged with Duke Energy and the board of the combined company decided to hire a different CEO.
While Johnson made less at TVA in 2014, other executives at TVA were paid more. In a regulatory filing Monday, TVA disclosed it has paid more than $2 million in compensation to three other executives and hired a new chief nuclear officer with a compensation package worth nearly $1.6 million.
The pay levels for TVA executives are among the highest of any federal employees in the country. But Kathy Black, TVA's senior vice president for human resources and communications, said TVA executive pay is below the industry average for investor-owned electric utilities.
According to surveys by Towers Watson, Johnson's compensation is still in the bottom 25 percent of all electric utilities. TVA tries to stay near the median of utility pay levels nationwide for its rank-and-file employees, Black said.
TVA's multimillion-dollar compensation packages have been repeatedly denounced by U.S. Rep. John Duncan, R-Knoxville, the dean of Tennessee's congressional delegation who represents TVA's Knoxville headquarters where most of the executives are based.
"You don't have to pay these kinds of ridiculous salaries," said Patrick Newton, a spokesman for Duncan, who has opposed any federal employee making more than the president.
But TVA Chairman Joe Ritch said Johnson and other executives are underpaid for what they have done to help turn the agency around.
"I make no apologies for what we pay," Ritch said. "We could get someone for less, but in the end that would not be as beneficial for the ratepayers or the [Tennessee] Valley."
TVA said Monday it earned $469 million on $11.1 billion in revenues in 2014 -- the best results in four years. TVA paid down its debt by $1.2 billion while investing a record $2.8 billion in capital improvements. TVA worked to lure a record $8.5 billion of new investment in the Tennessee Valley, projected to add 60,300 new jobs.
TVA Chief Financial Officer John Thomas said employees helped the utility meet 122 percent of its targeted goals for safety, reliability and performance in 2014.
Last year, TVA also exceeded its performance goals and paid its 12,612 employees a total of $127 million in its "winning performance" payments, or just over $10,000 for each worker.
TVA cut nearly 2,000 positions in the past year to help it meet its target of trimming annual operating costs by $500 million.
In addition to the year-end bonuses, TVA granted wage increases to most white-collar workers in October and is expected to do the same for blue-collar workers in January.
Compensation consultants hired by TVA showed the average utility worker received a 3 percent wage increase in the past year. The performance-based raises granted on Oct. 1 for TVA managers, engineers and other white-collar workers averaged 2.9 percent in October, Black said.
"We try to be competitive and our raises, on average, were slightly below the 3 percent average [for the entire utility industry]," Black said.
But TVA wage increases were greater than what most workers received in the past year, according to the U.S. Bureau of Labor Statistics. The BLS said wages and salaries for all civilian workers increased an average 2.1 percent in the 12 months ended in September.
Contact Dave Flessner at email@example.com.
Recent news report: