ENERGY AND WATER DEVELOPMENT WEDNESDAY, FEBRUARY 29, 1984 U.S. SENATE, SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, Washington, D.C. The subcommittee met at 2:19 p.m. in room SD-192, Dirksen Senate Office Building, Hon. Mark O. Hatfield (chairman) presiding. Present: Senators Hatfield, Stennis, and Sasser. TENNESSEE VALLEY AUTHORITY STATEMENT OF CHARLES H. DEAN, JR., CHAIRMAN S. DAVID FREEMAN, DIRECTOR RICHARD M. FREEMAN, DIRECTOR WILLIAM F. WILLIS, GENERAL MANAGER Chairman HATFIELD. The hearing will please come to order. Today, we are pleased to welcome to the committee Chairman Charles H. Dean, Jr., and Directors S. David Freeman and Richard M. Freeman, who constitute the board of directors of the Tennessee Valley Authority. Chairman Dean and TVA's general manager, Mr. Willis, will outline the TVA's budget request for fiscal year 1985. TRIBUTE TO S. DAVID FREEMAN But before we proceed, I want to make note that this is the final appearance of David Freeman before the committee as a member of the TVA board of directors. His term will expire in May of this year. Some of the members may not recall that you joined the TVA in May 1977, Mr. Freeman, and in May 1978, President Carter designated Mr. Freeman as chairman of the TVA board, and he served in that capacity until June 1981. During your 7 years as a board member, the Tennessee Valley Authority has undergone major changes, and, to a great extent, you provided the leadership necessary to make those changes and to transform TVA into a more responsive organization. Throughout this period, TVA maintained its commitment to the people of the Tennessee Valley region by reducing costs and keeping power rates as stable as possible. Yet even while managing a multibillion dollar power program, you (371) never lost sight of the fact that the long-term prosperity of the valley region was directly related to the priority and attention given to the basic skills and education of its people; that increased investment in the human resource was the underpinning of the economic future of the valley. You have served this Nation well in both the legislative and executive branches of the government and also through your work at the Tennessee Valley Authority. It has been a pleasure to work with you over the years, and we wish you and your family success in your future endeavors. Senator Stennis, Senator Sasser? Senator STENNIS. Mr. Chairman, I won't take up time now except I do want to join in your sentiments here about Mr. Freeman, David Freeman, and his work. I remember so well when he came to the Authority. Time was somewhat uncertain and change was going on. He faced some difficult matters, but he made decisions and has done well. I want to thank him. Chairman HATFIELD. Thank you, Senator Stennis. Chairman HATFIELD. Senator Sasser? Senator SASSER. Mr. Chairman, I want to echo the comments that the distinguished chairman has made here today regarding David Freeman's service on the TVA board and those comments made by my able friend and colleague, Senator Stennis. David Freeman did come to the TVA at a time, I think, of great turmoil and great turbulence and at a time when, perhaps, there were corrections that needed to be made which were long overdue. David Freeman had the courage to make those corrections. I think it is well known, Mr. Chairman, that Mr. Freeman and I did not always agree on every issue, but I have a high regard for David Freeman's sincerity, his dedication, and his competence, and he has been a dedicated public servant in service to the people of the Tennessee Valley area and, indeed, the whole Nation. During his tenure on the board and as chairman and as a board member, TVA has moved into the forefront of energy conservation. I well remember when it was a source of some embarrassment and perhaps some chagrin that the Tennessee Valley Authority had gotten itself into a posture where the Environmental Protection Agency was contemplating filing suit in an effort to make TVA comply with the law of the land, and under David Freeman's leadership, the TVA has moved from that posture to now becoming one of the leaders, in fact, the leader in the electrical generating industry, in pushing for clean air and cleaning up of the pollutants that are emitted by their coal-fired plants. So the years that David Freeman has served at TVA have been significant years for that distinguished agency, and he has followed in the footsteps of his able predecessors, and I would just like to say to Mr. Freeman today, Mr. Chairman, with your permission, that we very much appreciate his years of service and appreciate the job that he has done on behalf of the Tennessee Valley Authority and on behalf of the citizens of the valley and, indeed, the citizens of this Nation. Chairman HATFIELD. Thank you, Senator Sasser. Senator SASSER. Thank you. Mr. DAVID FREEMAN. Mr. Chairman, could I respond very briefly by expressing my thanks for those comments, and also expressing a very deep feeling I have that this committee has provided such unswerving support for the Tennessee Valley Authority over a 50-year period that any success that we have achieved is directly attributable to your sup: port, Mr. Chairman, and the support of the Senators that have made up this committee. It has been a remarkable partnership for the benefit of the people that I think is benefitting the entire Nation. I would just like to add one other thought: The first thing that a TVA board member must learn is to count to two. Nothing in TVA has been done by me alone, and it has taken at least two members of the board, equal in their authority, to implement any of the actions that have been taken. Thank you, sir. Chairman HATFIELD. Thank you, Mr. Freeman. Now we will proceed to the statement of Chairman Dean. We are very happy to welcome you and Mr. Richard Freeman to our hearing today, along with Mr. Willis. You may proceed either to summarize or highlight your testimony as you may wish. We will place the entire written statement in the record. When you have finished, then, do you wish Mr. Willis then to follow with some statement, or shall we go to questions? Mr. DEAN. I have a short statement myself, Mr. Chairman, and then Mr. Willis has some amplification. Chairman HATFIELD. All right. Mr. DEAN. These are all abbreviated versions of the full statement for the record of TVA. Chairman HATFIELD. We are happy to have you here this afternoon. Please proceed. BUDGET OVERVIEW Mr. DEAN. We are pleased to be here to outline our budget request of $117.5 million. Some of the figures are over there on the chart. As TVA is beginning its second half century, we reaffirm to this subcommittee TVA's commitment to effectively serve the Tennessee Valley region and the Nation through new technologies and new approaches for achieving integrated resource development and economic growth. The technical assistance which comprises a significant portion of this budget program for 1985 can be characterized as TVA helping put the valley's resources, farms, and people back to work. Our activities do not duplicate services offered in the private sector or those provided by other agencies. We play a complementary role to ensure that the most significant gaps are filled. Indeed, our efforts normally involve a cooperative arrangement with other entities. TVA continues to improve its internal management and planning to ensure maximum return on the Federal dollars invested. Linking business management practices to the Federal budget process is not always easy, but the efficiency which can be achieved is worth the effort. TVA's budget request of $117.5 million for 1985 compares to an appropriation of $125.5 million for 1984. The 1985 request is slightly lower than last year, but it is basically a continuation of the 1984 level for the operational components of TVA's programs as contrasted with the capital part. TVA's general manager, Mr. Willis on my right, will present details of the budget request. Before that, there are several specific areas we would like to mention. OCOEE DAM No. 2 RECREATIONAL WATER RELEASES Mr. Chairman, a recent TVA and State of Tennessee agreement provides for recreational releases of water from Ocoee No. 2 for the next 35 years. The first release is scheduled for March 24. Congress has appropriated funds which, combined with consideration provided by the State of Tennessee, will compensate the TVA power system for the increased costs of recreational releases on 116 days per year during times of heaviest use. Consistent with the direction of Congress, we will also have arrangements in place by March 24 for collecting fees from commercial outfitters to reimburse the Treasury for these appropriations. UNOBLIGATED CARRYOVER BALANCES We would like now to briefly discuss TVA's unobligated balance which existed at the end of 1983. The Congress has consistently appropriated TVA funds on a no-year basis. This recognizes the problems inherent in estimating expenditures for construction of large capital projects. It also eliminates the motivation for unwise yearend spending. Last year we reported to this subcommittee that we expected our carry-forward into 1984 to be as much as $100 million. It was actually $113.5 million. If we exclude the $47 million which the administration deferred to partially fund our 1984 program, TVA's unobligated balance was approximately $66 million, $60 million of which was derived from specific capital projects, particularly our coal gasification project in north Alabama, Columbia Dam, and Pickwick lock. We believe this level of unobligated balance, given the special circumstances surrounding most of it, is a reasonable amount. The new lock at Pickwick Landing Dam experienced a significant underrun in 1983. Due to increased productivity by the construction forces and the reduction of our contingency funds, the project will be completed some $20 million under its last reported cost estimate and on schedule. TVA has recommended deferring $2.2 million of these savings into 1985 to finance other planned activities and reduce TVA's 1985 new appropriations request to $115.3 million. We have deferred an additional $7 million from 1984 to 1985 to complete the Pickwick project without additional appropriated money. This is an accomplishment of which TVA is quite proud. ELECTRIC POWER RATES TVA's customers still enjoy the electric power rate stability that we talked about last year. Actual bills to customers on the TVA system in 1984 are at about the same level as they were in October 1982. In today's power market, with its demand and regulatory uncertainties, flexibility is essential. Flexibility is not possible without a vigorous research and development program, and TVA has one. ATMOSPHERIC FLUIDIZED-BED COMBUSTION PLANT We are particularly excited, all of us, about the atmospheric fluidized-bed combustion demonstration plant that will be constructed at our Shawnee steam plant in Paducah, Ky. Our partners will be the Electric Power Research Institute, the State of Kentucky, and Duke Power Co., and substantial funds have been committed by the Congress-$30 million-and private sources. We will show that this technology will allow the generation of electricity at competitive costs and in compliance with tough atmospheric emissions standards. An additional benefit is that it allows the use of high-sulfur coal without expensive flue gas scrubbers. I might say that the funds needed to build this project have been essentially secured, so the project is ongoing. Mr. Chairman, Dave Freeman would like to make a few comments before Mr. Willis outlines the details of our budget request. STATEMENT OF S. DAVID FREEMAN Mr. DAVID FREEMAN. Mr. Chairman, since this is my last appearance, I would like your indulgence for just a very few moments to make some remarks that I would like to address to the committee. I believe that there are three initiatives which TVA has underway that hold the greatest promise for the future. We are all enthusiastic about TVA's initiatives in training and education. We are already demonstrating that investments in human beings who want to work but don't have the needed skills can pay dividends for the Nation as great as 10 to 1. There is no better investment for the Federal Government, in my opinion, than to take people off the welfare rolls and put them on the payrolls. SOIL CONSERVATION EFFORTS A second item is soil conservation. It is part of the heart and soul of TVA, and nothing is more vital to the welfare of this Nation. Each generation, apparently, must learn the lesson that if we abuse the soil, we lose it. We have initiated programs in no-till farming and other such demonstrations to save our soil. These programs merit your support and they will require a stronger effort in the years ahead. It is a sad fact, Mr. Chairman, that this Nation has pledged to use military force to protect the oil supplies of the Middle East. Indeed, lives have already been lost in an involvement in Lebanon that cannot be disassociated from our oil dependency. Yet the urgency for achieving energy self-sufficiency is sadly lacking. |