Federal Reports

We reviewed TVA's decision to construct a gas plant in northeast Tennessee to determine if TVA's analyses supporting its decision were reasonable. TVA's decision was initiated by a court-ordered accelerated schedule to install emission control equipment at John Sevier Fossil Plant, which would require TVA to shut down units at the plant for about 20 months during the construction. Although TVA evaluated various alternatives, TVA's need to preserve the reliability of the power system was the most significant factor influencing its decision.In summary, we determined TVA's analyses appeared reasonable to make the decision to construct the gas plant in northeast Tennessee. Summary Only

This review was the third in a series of reviews that will benchmark TVA's performance in key areas and answer the question, "How is TVA doing in regard to operational performance." In conducting this review we: (1) assessed key performance measures and their alignment with the key strategic objectives, (2) evaluated TVA's performance relative to key performance indicators by using target metrics and available benchmark information, and (3) identified key management challenges confronting TVA. Our report found TVA's performance is positive with respect to system reliability and safety; however, system efficiency could be improved. In summary:Reliability: One of TVA's primary responsibilities is to serve as a reliable and cost competitive source of electric power to its customers. TVA has performed exceptionally well in terms of system reliability, delivering electric service with 99.999 percent reliability. TVA also performed better than the industry at large in all its key reliability performance metrics. In addition, TVA has maintained an adequate capacity reserve margin, which has contributed to this strong reliability performance.Efficiency: System efficiency is a measure of the effectiveness of TVA's expenditures on the operations and maintenance of its generation fleet. Additional focus in this area is warranted. Specifically, higher than average forced outage rates, especially for its fossil units, have negatively impacted TVA's system efficiency performance. In addition, while TVA's delivered cost of power ranked in the second quartile of a selected peer group, its average non fuel operations and maintenance costs ranked only in the third quartile. High operations and maintenance costs coupled with low plant availability combined to depress TVA's efficiency metrics. Two things clearly impacting TVA's efficiency performance included (1) an aging fossil generation fleet and (2) reduced availability of hydroelectric power.Safety: TVA ranked in the first quartile based on the number of recordable injuries per 200,000 hours worked as based on data provided by the Occupational Safety and Health Administration and comparable data provided by the 2007 Edison Electric Institute Benchmark Data. However, the recent death of a contractor employee involved in the Kingston Fossil Plant ash spill cleanup effort emphasizes to us that safety must be the first priority in everything we do.Additionally, TVA faces many significant management challenges in attaining and maintaining operational excellence. Our report discusses the areas of (1) an aging generation fleet and transmission system, (2) an aging work force, (3) generation mix, and (4) management culture. Summary Only

We audited $25 million of costs billed to TVA by a contractor from January 1, 2006, through December 31, 2008, for the administration of TVA's dental benefit plan. Our objective was to determine if the costs billed to TVA were in compliance with the contract terms and conditions. In summary, we found TVA had been overbilled $25,591, including: (1) $17,713 for duplicate claim payments; (2) $832 for claims which exceeded plan limits; and (3) $7,046 for ineligible orthodontic payments. In addition, due to the high amount ($132,000) of additional coinsurance that was billable to members during our audit period, we determined the "Alternative Benefits" provision in the dental benefit plan might be unclear as it relates to the member's responsibility when alternative procedures are used. We recommended TVA management (1) recover $25,591 in overbilled costs from the contractor, and (2) revise the dental benefit plan to more clearly define the member's responsibility as it relates to alternative procedures The contractor and TVA management agreed TVA had been overbilled $25,591. In addition, TVA management agreed to consider revising the dental benefit plan to clearly define the member's responsibility as it relates to alternative procedures. Summary Only