Mitigation of Original Equipment Manufacturer Reliance Risk

The Tennessee Valley Authority’s (TVA) Enterprise Risk Management (ERM) business unit (BU) focuses on identifying and prioritizing enterprise risks.  Annually, ERM leads the preparation of an enterprise risk portfolio, which includes risks across TVA, to aid leadership in strategic and business planning processes.  Each BU includes their specific risks in the portfolio and documents the probability of occurrence, financial impact, and actions to manage the risk.  TVA Generation included Original Equipment Manufacturer (OEM) reliance risk in its fiscal year (FY) 2026 ERM risk portfolio.  The risk description stated that Generation is heavily dependent on OEM support for both new construction and the existing fleet.  Due to the reliance on OEMs, we performed an evaluation of the risk mitigation actions.  We determined that TVA is taking actions to mitigate OEM reliance risk and considers the impact of ongoing actions, however the risk probability and impact have significantly increased since 2023 and TVA has not added any new actions to address this increase.  According to ERM and Generation personnel, they meet annually to conduct risk portfolio workshops and discuss current and potential risks.  During these workshops, they discuss changes to risks to determine if the probability of occurrence, financial impact, or action plans should be adjusted.  Since FY 2023, the OEM reliance risk probability of occurrence increased from 30 percent to 55 percent while the financial impact rose from $100 million to $300 million.  Generation personnel indicated that this increase is driven by greater use of the same OEM as the gas fleet expands.  TVA’s FY 2026 risk portfolio had eight action plans associated with the OEM reliance risk and all were ongoing, however these actions do not address the cause of the increase in the probability of occurrence and financial impact, identified by management.