REMARKS BY JOHNNY H. HAYES
DIRECTOR TENNESSEE VALLEY AUTHORITY
BEFORE THE U.S. SENATE COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
MARCH 14, 1997-- WASHINGTON, D.C.

Mr. Chairman, and members of the committee. I appreciate this opportunity to come before you today. I am grateful to President Clinton for the privilege of serving on the TVA Board for the past three-and-a-half years. and I'm honored by his confidence in nominating me for a full term.

I want to thank Senator (Bill) Frist for his introduction, and all the members of the of Tennessee Valley delegation who have supported me and my Board colleagues in our work to make TVA a more valuable asset for our nation. I also want to thank the members of this committee for your guidance and support, and with your approval I will continue working to ensure that TVA remains a productive national asset.

My experience on the Board reaffirms my belief in the value of TVA as an effective force for supporting and promoting quality economic growth. TVA continues to development and explore new approaches for producing and delivering electricity more reliably, efficiently, and with less impact on the environment. One example is the installation of a state-of-the-art electricity transmission device that maintains a constant voltage to our customers.

Today, the pending deregulation of the electric utility industry presents an opportunity to make TVA's operations even more efficient and to use our extensive experience in meeting reliability and environmental challenges that affect the utility industry. For example, we have compiled an excellent record of meeting more stringent clean air standards, while keeping our rates stable for the past 10 years. TVA intends to be successful in a deregulated utility market, and I am proud of the steps we have taken during my tenure to prepare for success in the future.

Our preparations include improving the performance of our power system and taking steps to phase out appropriated funding for the Environmental Research Center and our economic development programs. We recently created a task team to examine the operations of our other tax-supported non-power programs. The team's mission is to explore funding and operational alternatives and determine the most efficient approach for continuing these programs, whether it is under TVA or another agency. The team is scheduled to report its findings and make recommendations to the Board in September.

I have been fortunate to serve with fellow Board members who share my desire to build a forward-thinking, well-managed organization. The record is one of progress through initiatives that challenge the innovative potential of the people at TVA. As always, our most valuable resource is the dedicated force of professionals and skilled people who continue to build on TVA's legacy of service.

Their work has earned TVA national awards and recognition for quality improvements and innovative approaches to reduce costs. Since joining the Board in July 1993, one of my top priorities has been to ensure that TVA is effectively supporting economic growth by producing a competitive and reliable supply of power for the Tennessee Valley.

Briefly, here are some of the steps that we have taken:

We adopted TVA's first integrated resource plan that analyzes TVA's options for meeting the energy needs of the Tennessee Valley for the next 25 years.

We completed our nuclear construction program by bringing two units into service and making a decision to cancel completion of three other nuclear units. These actions brought to a close 28 years of nuclear construction.

We adopted an aggressive fiscal management plan that has allowed us to cap TVA's debt below the limit authorized by Congress. As a result, TVA will not increase its debt this year for the first time in 35 years. The next step is the adoption of a plan now being formulated that will enable TVA to begin reducing its debt.

We have kept power rates stable for the eighth, ninth and tenth consecutive years by maintaining a strong emphasis on controlling costs and improving efficiency. Keeping power rates steady has contributed to the growth of our region and the nation's economy.

POWER SYSTEM PERFORMANCE

Last year, TVA ranked second lowest in production costs among the 50 largest electric utilities in the nation. While keeping costs under control, our power system has continued to set new performance and efficiency records and maintain the reliability that our customers expect. In January, TVA met its highest demand ever for electricity on a single day, providing our customers with 26,670 megawatts. This past year, the TVA power system generated a record of almost 149 million megawatt-hours of electricity.

Mr. Chairman, when I and TVA Chairman Crowell were here three years ago, this committee expressed concern about the performance of our nuclear program. I want to take this opportunity to report that our nuclear program is now performing at a high level, in both safety and productivity.

Last year, TVA became the first utility to bring two nuclear units into service at same time. This included the start of commercial operation for Unit I at Watts Bar. The unit's performance ranks among the best-ever for a first-year plant. A recent assessment by the Nuclear Regulatory Commission places it in the top 25 percent of all nuclear units in the United States. Overall, in the past two years, nuclear production costs are down 40 percent and nuclear generation is up 50 percent. I also want to point out that when I joined the Board, two nuclear units were on the Nuclear Regulatory Commission's watch list for increased attention. Today, no TVA units are on the list.

The power system is able to set new performance records and hold rates steady because we have an excellent management team that emphasizes safety, quality, and efficiency. In the past three years, we also focused on keeping TVA's staffing levels competitive. In 1994 we completed a major voluntary downsizing that reduced the workforce by 2,600 positions and saved more than $100 million annually.

Despite major workforce reductions, there has been no significant change in minority representation, which remains at almost 12 percent. In 1995, we set a goal of 40 percent women and minorities among new hires, and we exceeded that goal by reaching 54 percent. Collectively, our emphasis on improving performance is keeping TVA at the forefront of efficiency in government and the utility industry.

Equally important to the success of TVA's power system are the relationships we maintain with our customers. During my first 18 months on the Board, I visited with each of the 160 local utilities served by TVA, and I have worked to address their concerns as the Board moves forward to meet the challenges of deregulation.

ENVIRONMENTAL RECORD

Mr. Chairman, earlier I said that TVA has compiled a progressive environmental record. We are conducting an aggressive Clean Water Initiative that includes work to increase the amount of dissolved oxygen in the tailwaters below our dams, and a comprehensive effort to reduce the amount of ground pollution that reaches our streams through runoff. The record includes TVA becoming the first utility to join the Department of Energy's Climate Challenge program. This is a voluntary program to reduce greenhouse gas emissions. Under TVA's commitment, we will avoid producing 22.7 million tons of greenhouse emissions, which is the largest voluntary reduction by a U.S. utility. Overall, TVA has spent more than $2 billion on air pollution controls and spends more than $350 million per year to meet clean air standards.

In the coming era of deregulation I am confident that TVA can provide leadership in meeting environmental quality and reliability commitments while keeping the price of electricity as an economic advantage for the nation. I look forward to playing a role in achieving this vital mission.

ECONOMIC DEVELOPMENT

When I joined TVA, one of the major areas that needed attention was economic development. Over the years, it had become a fragmented effort with no clear internal lines of responsibility and no clear accountability for results. Using my experience as the State Commissioner of Economic and Community Development for Tennessee, I made economic development my personal priority.

In the past three years, I am proud to report that economic development at TVA has been transformed from a collection of random grants into a system of loans focused on creating jobs and new growth. Overall, four major branches of economic development work were consolidated into one organization that works to create jobs and to earn a return-on-investment for TVA. By creating a revolving loan fund for economic development rather than issuing grants TVA is making economic-development investments that make business sense. Since 1994, the loan funds have been used to help leverage more than $1 billion in new capital investments and have directly supported the growth of 300 companies that will employ more than 12,000 people.

I would like to conclude by emphasizing that I am committed to seeing TVA operate as a business and as an effective public agency that is working to strengthen the economy of the region and the nation. I have spent my life in the Tennessee Valley, first as a private citizen who owned a successful business. and now as a public servant who believes that government can also be operated as a successful business. With your approval, I will continue working to operate TVA as a business that generates value for its customers and earns a return-on-investment for the United States of America.