Tennessee Valley Authority
Strategic Plan: A Framework for the Future
January 14, 2004
Read the complete text of the final TVA Strategic Plan (PDF, 394 kb).
Fast Facts About the Strategic Plan
Background
• TVA is preparing for fundamental changes that we believe increased competition will bring to the entire electric utility industry and to TVA’s business environment.
• In the past decade, as the electric-utility industry has moved toward open-market competition, many TVA distributor customers have told us that they want the option of buying from other sources.
• We have agreed with TVA distributors on legislative language, called the TVA Title, that would open the Tennessee Valley to competition.
• While we don’t know when legislation might be enacted, the draft Strategic Plan simulates the competitive world created by the TVA Title, and it gives us tools to analyze TVA’s operational and financial options in that environment.
• The planning process considers how the new market may function, what competitive pressures TVA will face, and how TVA must prepare now for success in the future.
Plan Development
• The strategic plan establishes an analytical framework within which TVA can set annual budgets, develop annual performance plans, and make projections about the region’s power needs.
• The analysis that supports this plan is the most detailed and rigorous competitive-risk analysis in TVA’s history.
• The analysis focused on assessing how competitive markets are likely to work and how TVA could be impacted.
• TVA staff and industry experts examined TVA’s total operations and developed and analyzed scenarios to examine such issues as how competitive TVA could be in a changing market, how many customers might switch to other power suppliers if prices changed, and how TVA can gain the financial flexibility needed for survival in a more volatile market.
Plan Content
• While most of the data from the analysis is competitive information that must be kept confidential, the analysis is the quantitative foundation for the draft Strategic Plan.
• Based on the analysis, the plan concludes that TVA needs to concentrate on four specific areas:
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Developing new, more highly differentiated pricing structures, services, and contract terms that more closely tie the cost and the risk of the product to its terms and pricing.
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Addressing issues that affect TVA’s transmission business, including how TVA will interface with surrounding markets to ensure reliability and how TVA will charge for transmission services inside the Valley when distributors can choose other suppliers.
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Accelerating debt reduction so that TVA has the financial flexibility to thrive in a more dynamic, competitive market. The plan recommends a target reduction of $3 billion to $5 billion over the next 10 to 12 years.
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Maintaining and operating the TVA power system so that customers can count on a safe and reliable power supply.
• At all times, TVA remains committed to its fundamental mission of supplying affordable and reliable electric power, providing environmental stewardship, and leading sustainable economic development in the Tennessee Valley.
Next Steps
• The final Strategic Plan is being made public on January 14, 2004. We shared the draft plan with stakeholders and solicited their comments, and we have taken that input into consideration in finalizing the plan.
• The Strategic Plan establishes a framework within which TVA will set annual budgets and develop annual performance plans.
• To meet budget challenges in fiscal year 2004, which began October 1, 2003, TVA is reviewing staffing levels and programs in all areas, and some staffing reductions will be necessary in FY04. We will communicate with TVA employees about changes as quickly and fully as possible.
• Beginning with fiscal year 2005 and over the long-term, the Strategic Plan will be used to set the parameters for annual performance planning. It will be revised and updated as market conditions change.
News Release on the Final Strategic Plan