All Reports

We are pleased to present our report for the period March 31, 2012, through October 1, 2012. Once again our theme focuses on navigating risks faced by the Tennessee Valley Authority (TVA)-specifically, cyber security risk. Business leaders and government officials alike recognize the significant risk posed from cyber security threats that are constantly changing.

TVA's Board of Directors approved a Financial Trading Pilot Program in September 2003 to hedge or otherwise limit the economic risks associated with the price of commodities covered by TVA's Fuel Cost Adjustment (FCA). At that time, the maximum Value at Risk (VaR) was not to exceed $5 million on an annual basis without the approval of the TVA Board. In May 2005 the TVA Board approved the request to expand and fully implement the Financial Trading Program (FTP).

Because of the importance of successful capital project management, and in light of recent capital project cost overruns and schedule delays, we initiated a review of Tennessee Valley Authority's (TVA's) capital project management. The objective of our work was to determine whether the Project/Portfolio Management (PPM) function of PowerPlant meets the needs of the strategic business units (SBU).PowerPlant replaced TVA's Project Justification System on March 7, 2011, at a cost of about $7 million.

TVA established the Direct Load Control (DLC) program in the 1970s as a means to shift load from on-peak/high-priced periods to off-peak/low-priced periods. At the time of our audit, there were 12 distributors participating in the DLC program. Credits provided to these distributors during 2011 ranged from $5,909 to more than $1 million for a total cost to TVA of $2,365,819. The OIG audited TVA's DLC program to address concerns received regarding the benefits of the program.

We audited $10.4 million in costs billed to the Tennessee Valley Authority (TVA) by Hartford Steam Boiler Inspection and Insurance Company of Connecticut for nuclear Authorized Inspection Agency service under several contracts. The $10.4 million billed included (1) $4.8 million billed between October 1, 2001 and December 31, 2008 under one contract; (2) $4.1 million billed between December 1, 2007 and August 19, 2011, under second contract; and (3) $1.5 million billed between January 1, 2009, and July 22, 2011, under a third contract.

With the age of TVA generating assets, the need to understand the condition of these assets and use this information to effectively plan is critical. As a result, the OIG initiated a review to determine how TVA assesses the condition of electric assets and uses this information in planning. This review did not include assessing the condition of TVA assets.

The OIG audited Tennessee Valley Authority's (TVA) craft labor staffing, which was identified by TVA as one of its top five risks in two risk categories, talent management and capacity expansion and construction. Our objectives were to assess TVA's mitigation of craft labor risks associated with competition from other companies and a shrinking labor pool and its process for identifying craft labor risks. We focused on TVA's plans with regard to contractor craft workforce.

The OIG performed an interim audit of costs billed to the Tennessee Valley Authority (TVA) by Bechtel Power Corporation for providing engineering, procurement, and construction services in support of the completion of TVA's Watts Bar Nuclear Plant Unit 2. Our audit included about $397 million in costs billed to TVA from October 1, 2007 to December 31, 2009. Our objective was to determine if Bechtel billed TVA in accordance with the contract terms and conditions.

The OIG completed agreed-upon procedures to assist the Center for Resource Solutions (CRS) in determining TVA's compliance with annual reporting requirements of the CRS Green Pricing Accreditation Program for the year ended December 31, 2011. The results of procedures applied to TVA's renewable energy initiative, "Green Power Switch," were provided to the Center for Resource Solutions. Summary Only

The OIG audited $35.7 million in costs billed to the Tennessee Valley Authority (TVA) by Trans-Ash, Inc. The contracts provided for Trans-Ash to perform(a) assistance in the off-site fly ash utilization project at Johnsonville Fossil Plant,(b) ash pond management services at Johnsonville Fossil Plant, and (c) additional work described in separate Task Agreements (TAO) executed by TVA and Trans-Ash. In summary, we determined Trans-Ash billed TVA (1) $1,479,630 for work that was not authorized under the contracts, and (2) $186,955 in excessive and unsupported costs.