“This is the most exciting time to be in this business in my career.”
New technologies and distributed energy generation are threatening to upend the way homes and businesses get and use electricity in the future as America's biggest government-owned utility prepares to enter its second century.
But the new head of Tennessee Valley Authority says he doesn't feel threatened by such changes, even if they may mean scaling back the growth of TVA's historically ambitious centralized power network.
"This is the most exciting time to be in this business in my career," said Jeff Lyash, a 37-year utility executive who took over as TVA's chief executive this month. "Is there uncertainty? Yes. Is there risk? Absolutely. Is there going to be change? Clearly, there will be."
But Lyash, a former CEO of one of Canada's biggest public utilities, thinks TVA is uniquely positioned for the challenges ahead. In partnership with the 154 municipalities and power coops that distribute the power TVA generates, Lyash said the federal utility can take a longer-term approach to the environmental and economic changes ahead without some of the shareholder pressures of investor-owned utilities.
"We can focus on what is needed in the long run that might be more difficult for companies that have to focus on quarterly earnings and, by necessity, have to think shorter term," Lyash said in an interview with the Times Free Press last week. "The public power model in the valley will allow us to think about what is best over time for all of our customers."
While TVA doesn't have shareholders wanting a return on their investment, TVA did end fiscal 2018 with $24.3 billion in debt. That's the lowest in 25 years, however, and TVA is on pace this year to earn more than $1 billion in net income for the fourth time in the past five years.
But for the first time in its 86-year history, TVA is projecting that electricity demand for the next decade or two will remain stagnant or could even decline. TVA's largest customer, Memphis Light Gas & Water, is studying whether it should give TVA a 5-year notice and look for a power source elsewhere or generate its own power. That could cost TVA nearly 10 percent of its load should MLGW decide to split with TVA.
Lyash, who met with Memphis officials during his first week on the job, urged the Memphis utility to consider all of its options "but we obviously want them to stay with TVA.
"I think this model is a strategic advantage and I think they will be glad if they stay with TVA," he said.
Cost cutting continues
While TVA has paid down its debt and cut annual operating expenses by more than $800 million by cutting more than 3,000 jobs over the past six years, Lyash said more needs to be done.
TVA has "a tremendous workforce — stronger than I expected," Lyash said of the roughly 10,000 employees at TVA. Nonetheless, the new TVA CEO said cost cutting efforts must continue.
"We have got to maintain the focus on financial strength so that the company can do what it needs to do," he said. "I think TVA has done a very good job of leaning out the organization and improving the quality of its operations, but there is more to be done. I think we can optimize these assets and get more out of them. We also can apply technology and continue to lean out our cost structure."
Power rates should be stable
Lyash said he expects electric rates to remain "relatively stable" in the future, although he said it is still too soon for him to project what rate increase, if any, he may request of the board in August when it adopts the fiscal 2020 spending plan for the utility.
TVA also is developing a new long-range power plan for the next 20 years which the TVA board will consider in August. Most of the scenarios envisioned in the new integrated resource plan foresee a need for more carbon-free generation in response to climate change worries and other environmental challenges.
Lyash believes electricity will be a growing fuel source in a shrinking market as more cars, industrial processes and space heating switch from burning gas or coal to electric power. But new and smarter meters and more efficient furnaces, machines and appliances will likely curb power demand. Self-generated power from solar panels and windmills are likely to further limit demand for TVA power.
Moving away from carbon
Lyash was formerly head of Ontario Power Generation (OPG), a government-owned electric utility about half the size of TVA in Ontario Canada. OPG has one of the lowest carbon footprints of any utility in the world with 60 percent of its power from nuclear, 28 percent from hydro and 12 percent was everything else, including solar, wind, gas.
Last year for the first time in a half century, TVA derived more than half of its power from non-carbon sources, including about 40 percent from nuclear plants, 10 percent from hydroelectric dams and more than 3 percent from solar, wind and energy efficiency measures.
TVA has shut down more than half of the 59 coal-fired plants it once operated. But the utility is still having to deal with the legacy of the coal ash left behind by its fossil plants.
Coal ash cleanup controversy
TVA's Kingston Fossil Plant suffered the worst coal ash spill in history in 2008 when an ash dike ruptured and spilled 1.1 billion gasllon of coal fly ash surry into the Emory River. TVA has spent more than $2 billion cleaning up the Kingston spill and converting wet coal ash ponds at other coal plants to dry ash storage.
"You would have liked for the spill at Kingston never to have happened and that TVA would have taken steps in advance so that that did not happen," Lyash said. "I think TVA did a good job of owning that event and doing what was necessary to restore that local environment to a condition that is as good or better than before that ash pond disaster. TVA took responsibility for that and took the right set of actions."
Like his predecessor, Bill Johnson, Lyash defended TVA's use of Jacobs Engineering as a contractor hired to clean up the Kingston ash spill even though TVA may be required to indemnify Jacobs for some of any damages awarded to former Jacobs workers who claim they were injured or even died from their exposure to coal ash during the Kingston cleanup.
"Jacobs is a strong company that has done complicated projects like this across the country so TVA's selection of Jacobs was a well-founded selection at the time," he said. "At Kingston, we've got to keep working to make sure we understand that the issue is completely resolved and, if it is not, we need to take whatever additional steps are necessary."
Lyash, who worked with Johnson at Progress Energy in the 1990s, praised his predecessor at TVA.
"I think Bill Johnson did a great job repairing the foundation here and I just hope I can build off that momentum and carry this into the next decade," Lyash said.
Contact Dave Flessner at email@example.com or at 757-6340.