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Op-Ed | The New Republic | December 13, 2022

The Tennessee Valley Authority’s Incentive Structure Keeps Residents Hooked on Fossil Fuels

Climate and EnvironmentEthics in GovernmentExecutive Branch
The Tennessee Valley Authority’s Incentive Structure Keeps Residents Hooked on Fossil Fuels

This article originally appeared in The New Republic.

Millions of people across the Tennessee Valley region are waiting, whether they know it or not, to find out if they will spend the rest of their lives breathing toxic fumes. They could remain at the mercy of pipeline explosions and perennial energy rate hikes—or they could instead receive emission-free renewable energy to power their homes and communities. But the choice isn’t actually theirs.

Jeff Lyash, CEO of the federally owned utility corporation known as the Tennessee Valley Authority, or TVA, chose this past year to replace two aging coal plants with a new methane gas plant, instead of replacing them with clean energy infrastructure like wind or solar. Lyash justified the decision by claiming that the methane plant would be the least expensive option for the utility and its ratepayers. This is questionable.

The Environmental Protection Agency has since told the TVA it should reevaluate that decision, both “because of the urgency of the climate crisis” and because gas price volatility could easily make renewable energy a cheaper option. The TVA responded last week by still recommending gas after completing its Environmental Impact Statement. But the official decision, in the end, rests with Lyash, unless the EPA intervenes and refers the project to the White House Council on Environmental Quality. The EPA has the power to dothis; the question is whether it has the will. 

Why is Lyash fighting so aggressively to keep fossil fuels relevant? It’s easy to point to his prior work experience at fossil fuel giants like Duke Energy. But also, his bonus structure specifically incentivizes him to prioritize dirty energy.

Lyash’s total compensation including pay and benefits in 2021 was $9,882,680 (which the TVA financial reports describe as “conservative CEO compensation”). Only $1.1 million of that was from his base salary. A large proportion of Lyash’s take-home pay comes from performance-based bonuses, relying on measures like, in the words of the TVA’s annual financial reportsubmitted to the U.S. Securities and Exchange Commission, “Media Tone–[which] measures the percent of positive and balanced media coverage out of total TVA news coverage.”

Most relevantly, his bonus amount is also based on the reliability and availability of TVA’s energy. But this particular incentive exists only for the TVA’s “primary” energy sources: nuclear, coal, and gas. There is no bonus for a solar plant performing well. So if Lyash wants to maximize his bonus, it probably makes more sense to build a gas plant to replace the Cumberland and Kingston coal plants than it does to fund a wind farm.

A TVA representative who responded to a request for comment insisted this bonus structure does not incentivize Lyash to choose fossil fuels: “The number of units of any particular generation type does not impact the overall percentage,” this representative said, implying that adding a new gas plant to the total number of TVA gas plants wouldn’t automatically increase Lyash’s bonus amount. Instead, the representative said, TVA “consider[s] each particular type of generation a ‘fleet,’ and it is the total fleet capability factor that is reflected in the at-risk compensation.” However, experts including those from the nonprofit Southern Alliance for Clean Energy, or SACE, disagree. In one comment filed to the Federal Energy Regulatory Commission, or FERC, this year, experts from SACE explained that adding a new combined cycle gas plant to the fleet would affect Lyash’s bonus because a new unit is likely to have higher energy availability and better reliability than older units, increasing the overall score for gas reliability. When SACE first raised the issue of this potential conflict of interest in comments to FERC, TVA responded by saying there was no conflict of interest to be seen because it’s perfectly legal to offer any incentives a board sees fit.

The TVA has invested in recent years in a massive greenwashing campaign to cover up its deepened investments in fossil fuels. The website is plastered with shiny looking “green” programs: a “green switch” program where any lucky customer can voluntarily pay $2 plus per month to mysteriously switch a portion of their energy consumption to solar energy; a “green connect” program where TVA will help connect customers who want to install solar rooftop panels with installation companies (never mind that TVA spent the last decade slashing solar incentives, then threw up their hands in faux frustration that not enough people were signing up for these increasingly measly incentives); and a “green flex” program in which high consuming companies can purchase renewable energy certificates (read: wind energy from the Midwest) to offset their fossil fuel consumption.

It also published a document advising solar energy providers to talk up their solar installations without making misleading marketing claims (such as “This installation makes my business greener or more environmentally friendly”) that could get them into legal trouble. The document was titled “bragging.pdf.” That particular solar energy program is no longer accepting new applicants.

TVA is no stranger to bragging; its website boasts that “for more than 85 years, the Tennessee Valley has been producing clean, low-cost, renewable power,” and promises that TVA is “committed to clean air and a clean water supply for our region, as well as protecting its historical, cultural and environmental resources.” A sustainability page insists that “sustainability for TVA means commitment to meeting the needs of current generations without compromising the ability of future generations to do the same.”

But if TVA customers were to look behind the curtain, they’d see that only three percent of TVA electricity comes from renewable solar and wind energy, while 26 percent comes from methane gas and 21 percent from coal. Moreover, the TVA has a serious coal ash problem. From the TVA’s accidental ash spills, like one whose cleanup process has sickened and killed hundreds of workers, to the utility’s intentional dumping of coal ash in the majority Black south Memphis, Tennessee, as recently as this summer, the TVA has continuously chosen its dirty energy portfolio at the grave cost of the very communities it alleges to serve. This is the reality behind the green-tinted pictures of smiling children on the TVA’s website.

There are ways to change this. The nine-member TVA board is tasked with setting the pay structure for TVA leadership; these board members could alter Lyash’s bonus structure so that it no longer incentivizes new fossil fuel infrastructure development. The board also has hiring and firing power over TVA leadership, so there is a world in which board members could vote to end Lyash’s reign. A less potent but still useful option would be for the board to vote to take back some of the decision-making power that it has transferred to Lyash in recent years, including the power to choose whether the two coal plants will be replaced by gas or renewables.

All of this, however, requires a board with enough sitting members to even take votes. There are currently six nominees awaiting Senate confirmation, three of whom have been sitting in limbo for nearly 18 months. The Senate Environment and Public Works Committee has voted favorably to move all six nominees out of committee. At this point, it’s up to New York Senator Chuck Schumer to push forward and schedule a floor vote as soon as possible.

The TVA doesn’t need to be led by someone who’s rewarded for heating the planet and endangering residents. In fact, the TVA could be a leader in this country’s transition to clean, renewable energy. It’s just a matter of summoning the political will.


Climate and EnvironmentEthics in GovernmentExecutive Branch

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