Staff graphic by Matt McClane / Increases in performance pay and pensions for TVA's top officers boosted the total compensation for most of the utility's top executives in fiscal 2015.TVA accomplishments in 2015
* Generated record net income of $1.1 billion on $11 billion in sales* Trimmed record $600 million of annual operating expenses over the past three years through staff and program cuts* Recruited record high 76,200 new jobs from $7.8 billion in new business investment to the Tennessee Valley* Maintained power reliability of 99.999 percent for the 16th consecutive year during a winter with the biggest power swing ever for TVA.* Obtained an operating license for Watts Bar Unit 2 and extended the operating license for the Sequoyah nuclear plant.* Kept TVA debt $1.2 billion below budget even with a record $3.6 billion of capital spending.Source: Tennessee Valley Authority
Tennessee Valley Authority employees who helped boost the utility's income last year above $1 billion for the first time will share in some of the fruits of those record earnings next week.
TVA directors Friday voted to give the agency's 10,900 employees an extra reason to celebrate Thanksgiving next week by approving Winning Performance payments of $113 million, or an average year-end bonus of $10,367 per employee.
The board was even more generous to its top five executives, who TVA disclosed Friday were paid anywhere from five to 16 times more than what President Barack Obama is paid during fiscal 2015.
TVA CEO Bill Johnson was paid a compensation package in fiscal 2015 worth more than $6.4 million, making him again the highest paid federal government employee in America. Four other top TVA executives were each paid more than $2 million in the fiscal year ended Sept. 30.
TVA Chairman Joe Ritch acknowledged that TVA's executive staff is well paid by government standards. But he insisted that TVA is not a typical government agency and the federally owned utility must compete with higher-paying, investor-owned utilities to keep and retain top talent.
"We have a team here at TVA that is as good as any in the industry, but we don't pay them that level because of the service side of TVA and the fact that we are a government organization," Ritch said. "We are dealing with the fact that because of the high performance we are getting, many other utilities would like to hire our people away. We still pay below industry levels."
Ritch and other TVA directors praised Johnson and other top executives for helping to turn around TVA's financial standing, raising the utility's net income in each of the past four years from $60 million in fiscal 2012 to a record high $1.1 billion in fiscal 2015.
"A few years ago, everyone was talking about how TVA was going to have to raise its $30 billion debt ceiling, but we don't hear that talk anymore," said Peter Mahurin, a TVA director who is chairman of the board's rates and finance committee. "We've improved our finances and we're paying down our debt, and I hope we don't hear anymore talk about raising our debt ceiling for many more years."
Under Johnson, TVA cuts its annual operating expenses by $600 million and kept power rate increases below the rate of inflation while preparing the utility for new clean air standards by finishing a nuclear plant, cleaning up its coal plants and building more renewables and natural gas plants. Despite a record $3.6 billion in capital spending last year, TVA managed to keep its debt $1.2 billion below what it had budgeted for the year.
"Our rates are very competitive and getting more competitive," Johnson told the TVA board during its meeting in Bowling Green, Ky., on Friday.
Those rates and TVA's 16 years of 99.999 percent reliability for power delivery helped recruit a record number of new jobs into the Tennessee Valley last year, Johnson said.
During the past year, TVA invested more than $3 billion in the power system and environmental improvements, including clean air equipment at the Gallatin Fossil Plant, natural gas plants at Allen in Memphis and Paradise in Kentucky, completing construction at Watts Bar Nuclear Plant Unit 2, and acquiring the Ackerman Gas Plant. About $340 million was invested in the transmission system.
"By controlling costs, TVA was able to better its cash flow allowing us to fund some of these investments with cash rather than debt," TVA CFO John Thomas said.
Johnson was quick to credit TVA employees for the agency improvements.
"The performance of TVA employees in 2015 was outstanding, and I am not someone who uses that word lightly," he said.
The total amount of Winning Performance payments to employees was down by 14 percent from a year ago, but most of that reflected a drop in TVA employment. TVA has offered early retirements and not filled vacant positions to cut most of the more than 2,000 jobs eliminated over the past couple of years.
Johnson said he is pleased with the cost reductions that have been achieved but not satisfied.
"I don't look for stability," he said. "I look for better results."
Despite the improved financial performance, some have questioned the multi-milllion-dollar salaries and benefits for TVA's top executives. Through most of its history, and until a generation ago when TVA revamped its pay system, the federal utility couldn't pay more than what a member of Congress is paid, now $174,000 a year.
U.S. Rep. John Duncan, R-Knoxville, said he doesn't believe anyone at TVA should be paid more than the $400,000 salary given the president of the United States.
"You don't have to pay these kinds of ridiculous salaries to get good people to live and work in East Tennessee," Duncan said last year and reiterated Friday about TVA's executive pay.
But Johnson's approach - and his top pay - won the support of many of TVA's distributors.
"We're fortunate to have someone of Bill's caliber," said Mark Iverson, general manager of Bowling Green Municipal Utilities, which hosted TVA's board Friday.
EPB President Harold DePriest, a former chairman of the Chattanooga-based Tennessee Valley Public Power Association, said Johnson has brought better discipline and strategy to the nation's biggest government utility.
"I think Bill Johnson has been making decisions that are worthy of his pay, and compared to what he was making in the private sector he's not being paid that much at all," DePriest said.
TVA recruited Johnson three years ago after he left Duke Energy as CEO and was paid $44 million in severance payments.
Contact staff writer Dave Flessner at dflessner@timesfreepress.com or 423-757-6340.