TVA CEO gets $2 million pay boost as agency achieves record profits while cutting rates, debt

America's highest-paid federal employee got a 35% raise in pay during the past year, boosting his total compensation to a record high of nearly $9.9 million even though former President Donald Trump previously denounced such pay for a government employee as "ridiculous" and urged that it be cut "by a lot."

The Tennessee Valley Authority disclosed Monday it boosted the compensation for its CEO, Jeff Lyash, by nearly $2.6 million in the fiscal year ended Sept. 30 after Lyash helped the federal utility meet or exceed all its major corporate goals over the past year.

Lyash, the 60-year-old former Ontario Power Generation Inc. CEO who joined TVA in 2019, is the highest-paid federal employee in the United States, with direct compensation last year nearly 20 times as great as the salary paid to the president of the United States.

But compared with CEOs of comparably sized electric utilities, Lyash continues to be paid below industry averages. A compensation study of 42 other U.S. utilities by the consulting firm hired by TVA to assess the market - Frederic W. Cook & Co. Inc. - estimates Lyash's pay is about 28% below the industry average.

Even with his pay boost last year, Lyash continued to make significantly less than the CEOs of other major Southern electric utilities, including Southern Co., Duke Energy Corp., NextEra Energy Inc. and American Electric Power Co. Inc.

(READ MORE: TVA pays out record-high performance payments)

"We look at this issue very closely as a board, and Jeff is still paid below his peers in the industry," TVA Chairman Bill Kilbride said after last week's TVA board meeting. "I think we have the right guy who understands the public mission of TVA, and we recognize the need to pay competitive salaries to keep the best talent."

But environmental groups on Monday objected to raising Lyash's pay when the utility has cut some of the energy efficiency programs it operated in the past.

"The raise for TVA's CEO is a slap in the face for customers that continue to struggle to pay high electricity bills across the TVA territory," Maggie Shober, director of utility reform at the Southern Alliance for Clean Energy, said in an email statement Monday. "Based on public records, with this raise TVA will be spending nearly three times as much each year on its CEO's salary compared to contributions made for low-income energy efficiency programs that would lower energy bills and put more savings in the pockets of customers in TVA's seven-state service territory."

Herman Morris Jr., an attorney and consultant to Friends of the Earth who was formerly president of TVA's biggest customer - Memphis Light, Gas and Water - said Monday in a phone interview he is "amazed and shocked" the TVA board would grant such a big pay raise to a public sector employee at an agency created to help lift an impoverished region up during the Great Depression in the 1930s.

"I think this level of compensation is outrageous and excessive," said Herman, who is urging the Memphis utility to split with TVA and try to buy cheaper wholesale power from other utilities. "TVA was created to serve the public and, unlike these other investor-owned utilities, it doesn't have to pay dividends or answer to public service commissions or be subject to competition from neighboring utilities."

Herman said with a $1.5 billion net income last year, TVA should have done more to lower consumer rates rather than raise executive pay. Morris said Memphis could save up to $1 million a day by buying wholesale power outside of TVA, although TVA is blocking some of that advantage by restricting access to TVA transmission lines to bring outside power into the Tennessee Valley.

Lyash insists that when all of the economic development and long-term power advantages of TVA are considered, Memphis Light, Gas and Water should stay in the TVA fold.

Under Lyash, TVA has pledged to maintain stable base electricity rates for at least the next decade and continue to reduce its carbon footprint.

In recognition of Lyash's performance, the board granted the TVA CEO a $1.1 million base salary, a $2.9 million annual performance award, nearly $2.7 million in a long-term performance award and $754,300 in a long-term retention award, in addition to pension and relocation benefits, during fiscal 2021.

All six of the top TVA officers are being paid multimillion-dollar compensation packages, according to TVA's executive compensation filings Monday with the Securities and Exchange Commission.

In its annual financial report, TVA said "the complexity, scale and scope of its utility operations rival those of the largest U.S. utility companies."

"Attraction and retention of talent is paramount to TVA given its complex operations and high-performance expectations," TVA said in its SEC filing. "In order to fulfill its public power mission in the most effective way possible, TVA must provide market-based, competitive compensation levels to deliver superior performance and execute ambitious multi-year objectives aligned with TVA's public power mission."

Former President Donald Trump urged the TVA board two years ago to cut Lyash's salary, which he said is out of line for a federal employee. Trump even dismissed two former chairs of the TVA board, in part, for their support of the multimillion-dollar pay packages for TVA's CEO.

"I don't know the gentleman, but he's got a heck of a job," Trump said about Lyash when asked in 2020 about proposals to require TVA to cut executive pay. "He gets paid a lot of money, which is an amazing thing."

Trump could not control TVA salaries, however, which are set by the board that is appointed by the president and confirmed by the U.S. Senate.

TVA employees do not receive taxpayer-funded salaries, and TVA customers generate all the utility's operating revenues used to pay its employees. Dr. Anthony Fauci, who earned $434,300 last year, is the most highly compensated federal employee paid by taxpayer dollars.

TVA is a federally owned utility and enjoys a competitive advantage over investor-owned utilities that have to pay state, local or federal taxes along with taxable dividends to its shareholders. TVA makes in-lieu-of-tax payments in the seven states where it operates, but TVA does not pay any corporate income taxes or local property taxes.

In response to Trump's concerns voiced more than two years ago, the TVA board conducted another study of executive pay and reaffirmed its decision on Lyash's pay last year, and the board has since boosted his salary and incentive pay opportunities. Most of Lyash's compensation is paid only if TVA meets or exceeds the goals set by the TVA board each year.

Although TVA is government-owned, the more corporate-like board structure adopted for TVA by Congress in 2005 requires the federal utility to set its pay based on prevailing compensation for similar positions in investor-owned companies as well as governmental entities.

The reforms pushed by former U.S. Senate Majority Leader Bill Frist, R-Tennessee, replaced the former three-member, full-time board structure that governed TVA for its first 72 years with a nine-member, part-time board, which hires a full-time CEO to run the agency. The 2005 reforms require TVA to follow SEC reporting requirements similar to investor-owned companies.

Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.