TVA pays record amounts to execs
Employees to receive $133 million in ‘winning performance’ pay
Nearly 10,000 TVA employees will soon have an extra reason to be thankful when the federal utility distributes $133 million in “winning performance” payments to workers just ahead of the Thanksgiving holiday in recognition of the utility’s record profits and other achievements in the past year.
For the median-income employee at TVA who was paid $134,749 in compensation in fiscal 2019, the yearly performance bonus will equal $6,840. But the amount of the special checks going to TVA workers during the week of Thanksgiving will vary widely from 5% of annual pay for a majority of TVA employees up to 150% of the annual salary for TVA CEO Jeff Lyash.
TVA met or surpassed most of its performance targets in fiscal 2019, earning a record $1.4 billion in net income, cutting TVA’s debt to the lowest level in 30 years and providing lower electric charges for many local power companies this fall for the first time in six years.
“So 2019 was a great year for TVA, and we look forward to building on those positive results in 2020 and beyond,” Lyash told investors during an earnings call on Friday.
Lyash, TVA’s new CEO, is the biggest beneficiary of the strong performance with bonus payments swelling his total compensation to a record high of more than $8.1 million, making Lyash America’s highest paid federal employee.
But nearly all of TVA’s workers will share in the winning performance payments, which are designed to encourage and reward employee activities that enhance TVA’s objectives. TVA’s winning performance payments this year will be less than a year ago, when the utility paid a total of $144.5 million, or $7,230 for the median-paid TVA employee.
Sue Collins, TVA’s senior vice president and chief human resources officer, said TVA achieved 130% of its targets in 2018 and 116% of its objectives in 2019.
“When we achieve our stretch goals in a year, those often become our basic target goals for the next year as we continue to raise the bar higher for performance,” Collins said. “In our pay-for-performance environment, we want to work each year on continuous improvement. That is working, as you can see from our results.”
TVA paid Lyash recruitment and relocation incentive of nearly $1.8 million to join the federal utility in April and awarded him other performance pay, incentives and pension benefits, provided he stays for at least the next five years, according to regulatory filings released Friday by TVA.
Lyash, a 57-year-old nuclear engineer, previously was Ontario’s highest-paid government employee as head of Ontario Power Generation and formerly worked for the U.S. federal government at the U.S. Nuclear Regulatory Commission (NRC).
Lyash was paid a base annual salary of $920,000 when he joined TVA, which is more than twice the $400,000-a-year salary of the president of the United States, and he is eligible for millions of dollars more in performance pay if TVA meets or exceeds its financial, safety, economic development and reliability targets. As a former NRC employee, the TVA board also agreed to enhance Lyash’s federal pension, which accounted for most of his total compensation package in his first year at TVA.
Lyash succeeded Bill Johnson, a 65-year-old attorney and utility executive who left TVA in April after six years to head the even bigger Pacific Gas & Electric, California’s biggest electric utility, which filed for bankruptcy last year. In fiscal 2019, when Johnson was at TVA for just over half the year, he received total compensation of more than $6.9 million from TVA. Previously in his last full year at TVA in fiscal 2018, Johnson received a compensation package valued at $8.1 million, or $48,885 less than the total compensation for Lyash during his first six months of the job at TVA.
At PG&E, Johnson is being paid a base salary of
“We compete in the market. We’re not overpaying in the market, but we need to be competitive for the talent that delivers this type of results.”
– SUE COLLINS, TVA’S SENIOR VICE PRESIDENT AND CHIEF HUMAN RESOURCES OFFICER
$2.5 million, but he could make as much as $110 million if the company’s share prices return to their 2017 peak. Johnson insists those estimates are unrealistic and that he didn’t join the company for the money.
Despite the record high pay levels at TVA for its top leaders, surveys by pay consultants indicate CEO compensation at TVA still ranks among the bottom 25% of what comparable investor-owned utilities pay their top leaders. TVA employs the consulting firm of Willis Towers Watson Energy Services to survey 37 other electric utilities for employee compensation levels.
Under its congressional authorizing legislation, the TVA board is directed to pay competitive wages and salaries to its workers and executives. TVA officials said its compensation levels help ensure the agency attracts qualified and skilled personnel to run America’s biggest government-owned utility, which serves nearly 10 million people in seven Southeastern states.
“We compete in the market,” Collins said. “We’re not overpaying in the market, but we need to be competitive for the talent that delivers this type of results.”
But U.S. Rep. Tim Burchett, a Knoxville Republican and former Knox County mayor, earlier this year called the pay given Johnson “the picture of arrogance of TVA” and urged the agency’s board to open up its committee meetings over issues of pay and TVA activities.
“The hardworking people at TVA get a slap in the face when they see that kind of thing,” he said. “That’s why they need to have those meetings open.”
Burchett and two other Tennessee members of the U.S. Congress — Reps. Steve Cohen, D-Tenn., and Scott DesJarlais, R-Tenn. — introduced legislation in January known as the Tennessee Valley Authority Transparency Act of 2019 to require TVA to open up more of its board committee meetings, but the legislation has not moved out of committee.
In its regulatory filings Friday, TVA said the CEO compensation given to Lyash and Johnson was 112 times as much as the median compensation for the typical TVA full-time employee, which TVA said equaled $134,749 in fiscal 2019.
The CEO-to-employee ratio required each year by the SEC is nearly double what it was for TVA the previous year because TVA had two CEOs in fiscal 2019 and incurred overlapping and several one-time expenses.
TVA spokesman Jim Hopson said that inflated the comparison number in fiscal 2019.
“This was a very unusual year because of these changes,” Hopson said.
Under Johnson and Lyash as leaders, TVA exceeded its goals for cutting costs, debt, power outages and worker accidents while exceeding goals for economic development in its seven-state region.
TVA reported Friday that it earned a record high $1.4 billion in net income on revenues of more than $11.3 billion in the fiscal year ended Sept. 30.
Despite a 1.2% drop in electricity sales from the previous year, TVA’s net income jumped 26.6% in fiscal 2019 compared to the previous year to a record high of more than $1.4 billion. That topped TVA’s previous yearly profit record of $1.23 billion set in 2016 and allowed TVA to cut its total debt obligations by $1.4 billion in the past year to below $22.2 billion for the first time since the 1980s.
In its annual financial report filed Friday with the U.S. Securities and Exchange Commission, TVA said its 7-state region experienced overall milder than normal weather during 2019, despite record-setting cold weather experienced during November 2018 and record-setting heat during September 2019. The overall milder weather drove lower energy sales, but revenues were still up to $84 million in the past year due primarily to TVA’s wholesale rate increase of nearly 2% implemented in October 2018.
Contact Dave Flessner at dflessner@timesfree press.com or 423-757-6340.