All Reports

We conducted a review to assess the TVA role as rate regulator over municipal utilities and cooperatives (collectively "distributors") which purchase TVA power. The TVA Act imposes only one regulatory requirement, prohibiting discrimination between consumers of the same class. The TVA Act, however, also gives the Board authority to include terms and conditions in power contracts as needed to carry out the purposes of the Act, which include keeping rates as low as feasible.

We performed a limited scope review to determine if claims are being adjudicated in accordance with the provisions of the TVA Dental Benefit Plan. While the majority of claims reviewed were adjudicated properly, we did identify an adjudication error associated with charges for preventive services. TVA Employee Benefits had also discovered the error and subsequently addressed the issue. The dental claim administrator had reimbursed TVA in the amount of $5,353.22 and reimbursement for 16 additional charges identified by our review was pending. Summary Only

We audited the employee recognition costs billed to TVA by a contractor under two contracts for engineering services provided in support of BFN Unit 1. In summary, we found the contractor had (1) not refunded TVA for $71,406 of unspent funds under one contract and (2) billed TVA $49,093 for employee recognition costs under the second contract. Although the second contract did not provide for TVA to receive a refund, the amounts paid by TVA had been agreed to based on the contractor's representations that it would be incurring employee recognition costs.

We audited $12.4 million of costs billed to TVA by a contractor for performing welding services for fossil and hydro projects. In summary, we found TVA had been overbilled $539,194 for (1) labor costs due to unsupported records and the contractor's use of incorrect labor rates; (2) mobilization, travel, and per diem costs that were ineligible or billed at incorrect rates; (3) duplicate costs and invoice calculation errors; (4) equipment costs due to the contractor's use of incorrect billing rates; and (5) unsupported costs.

We reviewed $59.2 million of costs paid by TVA to a contractor for providing managed security services for TVA Nuclear and security support for other TVA organizations.

We reviewed $5.7 million of payments TVA made to a contractor for providing analysis and licensing support for tritium production at Sequoyah Nuclear Plant and determined the contractor had overbilled TVA $78,653. The overbilling included (1) an estimated $76,075 in unsupported labor costs and (2) $2,578 for travel and material costs that were either unsupported or ineligible. TVA management is planning to recover the overbilled costs. Summary Only

We assessed TVA's compliance with applicable policies, procedures, and laws/regulations when conducting land disposal transactions. TVA's land disposal actions include easements, sales, abandonments, deed modifications, transfers, and leases. The TVA Act grants TVA authority to transfer land to government agencies, corporations, partnerships, or individuals. TVA's overall policy on the use, acquisition, and disposal of land is contained in TVA Code V, which was last updated in 1982. With regard to reservoir property:TVA maintains 293,000 acres of reservoir property.

We reviewed TVA's contracts with a contractor that provided boiler pressure parts and burner parts and determined the contracts' compensation clauses were not adequate for determining and evaluating prices to be billed for the parts. We recommended TVA management (1) incorporate specific pricing criteria in the contracts for use in determining and evaluating prices and (2) revise/supplement the cost reimbursable payment terms under one of the contracts to specifically address costs/rates to be paid by TVA.

We assessed the adequacy of controls applicable to the accounting for costs associated with non-nuclear insurable losses. TVA has negotiated and obtained insurance to cover two areas of non-nuclear operations: (1) non-nuclear property and (2) unplanned outages. The unplanned outage insurance covers Fossil's nine baseload units. In summary, we found that the Corporate Insurance Risk & Analysis Group (CIR&A) is in the process of developing policies and procedures to ensure identification of non-nuclear insurable losses and the accounting for associated costs.

This is my first report to TVA’s newly constituted Board since the new Board members were sworn in on March 31, 2006. Legislation signed by President Bush in 2004 expanded the Board from three full-time members to nine part-time members, with a full-time chief executive officer to run TVA on a day-to-day basis. As has been noted by many, this is a historic change to the governance structure of TVA.The impetus for this change was a growing sentiment over the years that TVA’s governance structure had become anachronistic. For 73 years, TVA was managed by three full-time board members.