Detailed Information on the
Tennessee Valley Authority - NOx Emissions Reduction Assessment

Continuing installation of selective catalytic reduction (SCR) equipment at coal plants to further reduce NOx emissions.

Monitoring NOx emissions reduction programs of other energy utilities in the greater Southeast area and striving to ensure TVA emissions program remains competitive with others.

Measure: NOx Emissions Rate. Annual NOx emissions (tons) per gigawatt hours (GWh) produced by TVA's fossil units

Explanation:TVA's total annual NOx emission, in tons, as measured by TVA's EPA certified stack continuous emission monitoring systems (CEMS) divided by TVA's total annual generation, in GWh, from TVA's coal-fired plants. FY 2006 and earlier are TVA planning targets and actuals. FY 2007 and later are projected targets based upon TVA's April 2006 Power Supply Plan and Clean Air NOx Reduction Strategy.

Measure: Cost Effectiveness of NOx Removal: the total capital, fixed and variable O&M dollars spent per ton of NOx removed during each ozone season.

Explanation:This performance metric measures the cost efficiency of TVA's NOx Reduction Program by reporting the total dollars spent on NOx removal for construction and operation of its 21 SCRs divided by tons of NOX removed during each ozone season by these SCRs. It demonstrates TVA's NOx removal efficiency by measuring how TVA's actual $/ton removal costs compare to TVA's planned $/ton removal costs. The general trend of planned and actual $/ton costs will be increasing over time since typically TVA plans to install the lowest $/ton SCRs controls before it installs the more expensive $/ton SCR controls. The capital cost is levelized using a capital recovery factor of 18% corresponding to a ten year amortization and a 12% discount rate. For this analysis the fixed and variable O&M costs were assumed unchanged from the initial plan. Actual capital costs and tons of NOx removal were used in the calculation. Capital costs typically represent approximately 90% of the overall cost for SCR controls.

Measure: NOx Capital Planning Effectiveness. Ensure that SCR projects are completed within ten percent of the target cost estimate.

Explanation:This metric is designed to measure capital planning and project execution effectiveness both annually and over longer periods of time. TVA's goal is to ensure that its total capital spending for new Selective Catalytic Reduction (SCR) projects closely matches budgeted levels that are produced during the project design phase. If an SCR project is completed within 10% of the budgeted level, then TVA's capital planning is considered effective. Note: TVA somtimes completes multiple SCR projects within a single fiscal year. In such cases, the total actual project costs for all completed SCR projects within the fiscal year are compared against the total budgeted total budgeted costs for all projects.

Measure: NOx Project Completions. Number of NOx reduction projects scheduled to be completed versus actual

Explanation:The Total Number of projects scheduled to be completed versus actual completion, annually and cummulative long term.

Is the program purpose clear?

Explanation: The purpose of TVA's NOx Emissions Reduction Program is to meet all NOx-related provisions of the Clean Air Act regulations at the lowest overall cost to TVA ratepayers. TVA's Clean Air Strategy for NOx defines plant and unit specific NOx requirements to meet requirements of the Clean Air Act. TVA's coal fired power plants must be in compliance with all applicable federal, state, and local requirements of the Clean Air Act, which spells out specific requirements for nitrogen oxide (NOx) emissions.

Evidence: 1. TVA's NOx Reduction Program's mission statement. 2. TVA's NOx reduction strategy matrix 3. Semi-annual publication of TVA's Clean Air Strategy.

Does the program address a specific and existing problem, interest, or need?

Explanation: TVA's Clean Air Strategy for NOx emissions reduction addresses the specific requirements contained in federal, state, and local Clean Air Act (CAA) regulations to limit NOx emissions to specified levels during ozone season. The federal, state, and local CAA regulations require significant reductions in NOx emissions from all utility fossil fueled power plants, including TVA's coal-fired plants.

Evidence: The Clean Air Act contains many Titles and Parts that specifically address NOx emission requirements. These include 40CFR Parts 51, 72, 75, 76, and 96.A brief overview of each 40CFR regulation and their interaction with TVA's NOx Reduction Program follows: Part 72 - Contains the permitting requirements and compliance options for an acid rain source (e.g. coal fired power plant). Compliance plans are included as a part of these requirements. Part 75 - Contains the continuous emissions monitoring system (CEMS) NOx monitoring, recordkeeping and reporting requirements. Part 76 - Contains the requirements of the Acid Rain (e.g. coal fired plants) NOx emission reduction program. This includes emission limits by boiler type and defines the how emissions are to be averaged across a power plant system. Part 96 - Contains the requirements of the EPA's NOx Budget Trading Program and the Clean Air Interstate Rule (CAIR). This includes NOx cap and trade program requirements for utility boilers.

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: The Clean Air Act requires all power utilities that operate fossil plants to meet specific NOx emissions standards during ozone season. Consequently, several NOx reduction programs exist that have similar and overlapping goals since there are many different utility companies involved in power production from fossil fuels. However, each utility is required to mitigate its own emissions that it creates; no single utility or government program is responsible for reducing another non-affiliated utility's emissions. Consequently, TVA's NOx emissions reduction program is the only program that exists to reduce TVA's emissions. Without the TVA NOx reduction program, TVA's NOx emissions would not be controlled, TVA would be in violation of the Clean Air Act, and environmental impacts from emissions would have a much greater negative impact on the region's air quality.

Evidence: The Clean Air Act contains many Titles and Parts that specifically address NOx emission requirements. These include 40CFR Parts 51, 72, 75, 76, and 96.A brief overview of each 40CFR regulation and their interaction with TVA's NOx Reduction Program follows: Part 72 - Contains the permitting requirements and compliance options for an acid rain source (e.g. coal fired power plant). Compliance plans are included as a part of these requirements. Part 75 - Contains the continuous emissions monitoring system (CEMS) NOx monitoring, recordkeeping and reporting requirements. Part 76 - Contains the requirements of the Acid Rain (e.g. coal fired plants) NOx emission reduction program. This includes emission limits by boiler type and defines the how emissions are to be averaged across a power plant system. Part 96 - Contains the requirements of the EPA's NOx Budget Trading Program and the Clean Air Interstate Rule (CAIR). This includes NOx cap and trade program requirements for utility boilers.

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: TVA's NOx strategy is established to meet all Clean Air Act regulations in a cost effective manner. To ensure that the program is effective and efficient, TVA continuously monitors its performance of its NOx program to ensure planned emission reductions are achieved and costs are in line with estimated NOx strategy costs. Specifically, TVA uses EPA certified Continuous Emissions Monitoring (CME) at its fossil plants to ensure the measured emissions meet Clean Air Act standards. TVA uses "pay-for-performance" contracts that create positive incentives for partners involved in the construction of emissions equipment to complete projects on schedule and within budget. During the construction phase of emissions projects, TVA monitors the progress and costs on a weekly basis and makes project management adjustments accordingly. TVA also benchmarks its NOx reduction program against other utilities that operate fossil plants. These benchmarks show that most TVA fossil plants have achieved emissions rates in the top median for performance of all utilities, and several TVA fossil plants rank in the top quartile. TVA ensures cost effectiveness for its NOx reduction program by evaluating all alternatives it can take to achieve compliance with the Clean Air Act and choosing the lowest cost options. TVA has created detailed analysis of the marginal costs associated with each NOx reduction project alternative and has chosen to implement those projects with the lowest marginal costs before implementing more expensive alternatives. Measurement of TVA's achieved NOx emissions levels and construction costs since 2000 indicate TVA has achieved its program goals to a large extent.

Evidence: 1. EPA continuous emissions monitoring results from 2000-2006. 2. Annual Reports 2001-2005 for Government Performance and Results Act 3. TVA SCR Performance Evaluation Process for G-UB-MK & NPS. 4. 2006 Ozone Season Utility Industry SCR Benchmark Assessment. 5. TVA analysis of marginal cost curves for NOx reduction project alternatives.

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: TVA's NOx reduction strategy is designed to benefit the stakeholders of the Tennessee Valley by improving the overall air quality of the region. The strategy has a specific funding plan for NOx reduction at all 59 of TVA's coal-fired units that include: 1. The specific scope of work to reduce NOx emissions (e.g. capital projects such as low NOx Burners, Selective Catalytic Reduction or operational changes to the unit such as boiler optimization) 2. The cost to achieve these reductions based upon this scope of work (includes both cash flow and total cost) 3. The specific NOx emission target for this NOx reduction project and 4. Project completion and operational date for the NOx reduction project in order to meet this target

Evidence: 1. TVA's NOx reduction strategy matrix

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: TVA's NOx Strategy has specific performance measures that are focused on the long-term outcome of TVA's NOx Reduction Strategy. These outcomes include measures and goals related to the program's NOx emissions rate, project completion schedule, and capital planning effectiveness. Specifically TVA's long term goals are: 1. Tons of NOx removed per Gigawatt produced from TVA's fossil units. This goal measures how much NOx TVA is able to remove vs. how much power it produces from NOx emitting fuel sources. A downward trend indicates the program is becoming more effective. 2. Number of annual NOx emissions projects completed versus number of projects planned for completion. This goal measures TVA's ability to complete NOx emission reduction projects on schedule. NOx emissions projects are very capital intensive and often require several years to construct. TVA's ability to complete projects on schedule has a large impact on its ability to comply with Clean Air Act requirements. 3. Cost Variance for emissions projects. This goal measures TVA's ability to complete emissions projects within budget. TVA strives to complete emissions projects within 10 percent of budgeted costs. TVA's ability to meet this goal ensures that it provides Clean Air Act compliance without having to raise customer utility rates unexpectedly. 4. Dollar cost per ton of NOx removed. This goal measures the total capital and O&M costs that TVA spends to remove each ton of NOx during ozone season. This performance measure allows TVA to track the cost effectiveness and efficiency of its NOx removal program over time.

Evidence: 1. TVA's NOx Reduction Strategy has a target NOx emission level for each of the next 20 years which is based upon projected generation levels (Megga Watt Hours - MWHs) for all 59 units and unit specific NOx emission rates (lb/mmBtu). 2. TVA project schedule analysis. 3. TVA project cost variance analysis. 4. TVA's preformance metric for dollar cost per ton of NOx removed

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: TVA's NOx Strategy establishes ambitious long-term goals over its 20 year planning horizon, by calling for annual reductions in the NOx emission rate (tons NOx/gwh). These rates must be aggressive in order to meet the emission requirements of the various Clean Air Act regulations while minimizing costs and without constraining the expected and needed generation from TVA's fossil system. TVA has reduced its NOx emissions rate by over 40% since 1999 and calls for further reductions going forward into the future. TVA plans to construct up to 18 new NOx emissions projects by the year 2018, implement a low-sulfur fuel switch on 8 fossil plants by 2016, and place up to four fossil units in an extended outage state. These plans are intended to achieve a further 43 percent reduction in total NOx emissions. This will be achieved at the same time energy demand grows in the Tennessee Valley region by 2 percent a year.

Evidence: 1. TVA long term goal - Tons NOx Removed / Gigawatt Hours produced from fossil fuels. 2. TVA long term goal - Number of annual NOx emission projects completed vs. number of planned project completions. 3. TVA long term goal - Cost variance of TVA emissions projects ( goal is to remain within 10 percent of budget)

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: TVA's NOx Reduction Program has annual goals which track performance of TVA's overall long term outcome goals. Specifically TVA tracks annual performance in the following areas: 1. TVA's NOx emission rate. 2. The completion of scheduled NOx projects 3. The program's capital planning effectiveness. 4. Total dollars spent per ton of NOx removed.

Evidence: 1. TVA long term goal - Tons NOx Removed / Gigawatt Hours produced from fossil fuels. 2. TVA long term goal - Number of annual NOx emission projects completed vs. number of planned project completions. 3. TVA long term goal - Cost variance of TVA emissions projects ( goal is to remain within 10 percent of budget) 4. TVA long term goal - Total Cost per ton of NOx removed.

Does the program have baselines and ambitious targets for its annual measures?

Explanation: TVA has actual NOx emissions data for all 59 of its fossil units dating back to 1974. As such, TVA has a baseline for measuring its planned and actual NOx reductions. TVA also has data on the completion schedule achieved and cost variance for NOx emission reduction projects dating back to 2001 when the program was established. TVA uses this historical data as a baseline to set ambitious targets for meeting future annual performance goals. As stated earlier, TVA plans to implement ambitious targets to construct up to 18 new NOx emissions projects, switch to low sulfur fuel at 8 fossil units, and place up to 4 units in an extended outage state to achieve an additional NOx reduction target of 43 percent over the next 15 years. TVA also has collected baseline data since 2004 on the total dollars spent per ton of NOx removed.

Evidence: 1. See TVA's EPA certified CME NOx reduction results 2. See schedule of TVA completed NOx emission reduction projects 3. See historic cost variance of completed TVA NOx emission reduction projects 4. See TVA's total dollars spent per ton of NOx removed 5. See TVA NOx Reduction Strategy Matrix

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: The long term and annual goals of TVA's NOx emissions reduction program is to meet Clean Air Act requirements at the lowest possible costs for TVA ratepayers. TVA uses partners mostly to execute the construction goals of its NOx reduction program. These partners include TVA's SCR Construction partner (Alstom) and TVA's Construction Modifications partners (GUBMK and NPS). The compensation for these partners is tied to the achievement of TVA's NOx reduction strategy and is specifically linked to completing projects on schedule, within budget, and the NOx removal efficiency of the completed emission controls.

Evidence: 1. TVA SCR Performance Evaluation Process for G-UB-Mk &NPS 2. TVA Project Justification Process 3. G-UB-MK Executive Management Summary 4. Project Closure Report for KIF-U1-U4 Selective Catalytic Reduction Addition

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: Independent evaluations of TVA's NOx reduction effectiveness are performed by the Environmental Protection Agency on a regular basis to ensure compliance with the Clean Air Act. TVA must report its emissions performance to the EPA which is responsible for certifying the results. EPA does not measure the cost effectiveness of TVA's NOx program; it only measures the effectiveness of emissions reductions. Other evaluations of TVA's program are largely performed by TVA itself. TVA measures both emissions performance and its cost effectives by conducting competitor assessments and benchmarking itself against other utilities on a regular basis. For example, in 2003 TVA performed an SCR cost comparison for the utility industry. In 2003-2006 TVA conducted annual benchmarking evaluations for SCR emissions through the utility industry. In 2006 TVA performed an internal cross function and inter-organizational assessment of TVA's Clean Air Program.

Evidence: 1. EPA's 2000 - 2007 emissions reports. 2. TVA's 2003 SCR cost comparison for the utility industry 3. TVA's 2003 - 2006 annual benchmarking evaluation of SCR emissions 4. TVA's 2006 assessment of Clean Air Program though a competitor analysis. 5. TVA's 2006 internal Clean Air Strategy assessment using a Kepnor-Tregoe analysis approach

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: TVA maintains a long-term NOx reduction strategy that calls for specific NOx emissions targets to be met by specific dates. These NOx emissions targets are achieved by TVA constructing emissions reduction equipment at TVA fossil plants based on a schedule of when emission targets must be achieved. TVA has created a long-term budget to provide adequate capital planning and funding to ensure completion of its NOx reduction projects in accordance with its long term plan. TVA also completes capital justification forms that provide more detailed capital cost estimates on a project specific basis. When projects enter the construction phase, TVA continuously monitors progress through weekly evaluations using a process called "SCR Performance Evaluation Process." Finally, TVA ties the performance of its existing SCR projects to TVA's overall strategic goals by including "environmental performance" as a line item in TVA's balanced scorecard.

Evidence: 1. TVA's NOx Reduction Strategy matrix 2. TVA's Fossil Group Long-Term Forecast 3. Capital Project Justification Forms 4. G-UB-MK Executive Management Summary 5. Balanced Scorecard Winning Performance Summary

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: TVA regularly reviews and updates its NOx Reduction Strategy using actual emission, schedule, and cost performance data versus the current NOx plan. On a semi-annual basis TVA updates its NOx Strategy based upon latest planning information which includes: 1. Expected coal plant generation levels 2. Coal, emission allowance, and electricity prices 3. Capital and operating costs of NOx emission control equipment 4. Actual NOx reduction performance of control equipment 5. TVA's Regulatory Outlook Document for future regulatory changes 6. Evaluation of new and emerging NOx reduction technologies. A recent example of TVA taking a step to correct a strategic planning deficiency is its decision to accelerate the schedule for emission controls to be built at its John Sevier plant in order to reduce emissions near Smokey Mountain National Park.

Evidence: 1. TVA NOx Reduction Strategy Matrix - 2006-2007 2. Updated Colbert and John Sevier Environmental Controls Swap Analysis

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: TVA's NOx Reduction Program collects information on the following items associated with its NOx reduction program: 1. Total NOx emissions and emissions rate 2. The completion of scheduled NOx projects 3. Capital planning effectiveness Monthly emissions data is provided by TVA's certified CEMS equipment in accordance with Clean Air Act regulations. TVA's Projects organization, which is responsible for construction of emissions projects, collects project cost information on a weekly, monthly, and quarterly basis and uses the information to forecast each project's cost and schedule. Actual data is used to provide feedback into base assumptions regarding, cost, emission performance, etc. for each semi-annual update to TVA's NOx Reduction Strategy. Corrective action is taken if actual NOx emissions, NOx reduction equipment costs, or project schedule deviate from plan. Corrective action happens in real time once a deviation occurs.

Evidence: 1. TVA's NOx Reduction Strategy matrix 2. 2006 EPA CEMS emissions data 3. TVA's Fossil Group Long-Term Forecast 4. Capital Project Justification Forms 5. G-UB-MK Executive Management Summary 6. Balanced Scorecard Winning Performance Summary

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: TVA managers, staff, and partners (GUBMK and NPS, Alstom) are held accountable for key performance measures such as meeting project cost requirements, schedule compliance, and NOx emission performance targets. Each TVA fossil plant has specific NOx emission goals that are expected to be met. Partners are held accountable through pay-for-performance contracts as outlined in the "TVA SCR Performance Evaluation Process". TVA staff and managers are held accountable through the Winning Performance & Balanced Scorecard program initiatives, which include performance incentives for superior environmental management (which includes NOx reduction in addition to other environmental goals). Winning Performance compensation for all TVA fossil plant employees is tied to achieving or exceeding TVA's NOx goals.

Evidence: 1. TVA SCR Performance Evaluation Process for G-UB-MK&NPS 2. G-UB-MK Executive Management Summary 3. Balanced Scorecard Winning Performance Summary

Are funds (Federal and partners') obligated in a timely manner, spent for the intended purpose and accurately reported?

Explanation: Before construction of a NOx emissions project begins, TVA completes a detailed capital project justification analysis along with planning and engineering plans that incorporate project costs. Pay for performance contracts are signed with construction partners to ensure funds are spent on approved purposes in a timely manner, according to the agreed upon engineering design. TVA monitors project progress and the associated costs on a weekly basis during the construction phase according to the "TVA SCR Performance Evaluation Process," and reports this information to project managers and TVA executives. Capital funds for TVA's NOx Reduction construction projects are authorized on an annual basis as part of TVA's agency-wide fiscal year budgeting process. TVA's long-term NOx reduction strategy is updated semi-annually, and can result in budget changes if warranted.

Evidence: 1. TVA's NOx Reduction Strategy matrix 2. TVA's Fossil Group Long-Term Forecast 3. Capital Project Justification Forms 4. Project Closure Reports 5. G-UB-MK Executive Management Summary 6. TVA SCR Performance Evaluation Process

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: TVA has contract frameworks in place to create pay-for-performance agreements with its construction partners that ensure cost effectiveness and superior performance for the NOx emissions reduction program. TVA's has entered into contracts with its major modification partners (GUBMK and NPS) as well as NOx process equipment supplier (Alstom), and its NOx catalyst partner (Cormetech) that include either incentives for completing work below the approved project control estimate or for improving process system performance (e.g. NOx removal guarantees) or on catalyst performance and longevity. TVA's pay-for-performance contract framework is highlighted in its "TVA SCR Performance Evaluation Process."

Evidence: 1. TVA SCR Performance Evaluation Process. 2. G-UB-MK Executive Management Summary

Does the program collaborate and coordinate effectively with related programs?

Explanation: TVA's NOx Reduction Program is integrated into TVA's overall Clean Air Strategy that also addresses emissions associated with Sulfur Dioxides (SOx) and mercury. TVA has developed a holistic Clean Air plan that addresses budgeting, emissions targets, implementation dates for construction projects, etc. for all three pollutants (NOx, SOx, and mercury) as part of a unified clean air strategy. A few examples of the integration of TVA's overall Clean Air Strategy with the NOx Reduction Program are: 1. The SCR at Colbert Unit 5 was integrated into the Sulfur Oxide (SOx) reduction strategy that called for switching to low sulfur western coal. The ammonia tanks and injection system for the SCR were designed to supply ammonia for flue gas conditioning which is required to burn the low sulfur western coal. 2. The SCRs at Kingston were designed so that the catalyst material would produce the proper amounts of SO3 to condition the flue gas. Flue gas conditioning was necessary to meet the SO2 reduction strategy goals which required a fuel switch to lower sulfur coal. 3. The SCRs in TVA's NOx reduction strategy are integrated along with the planned scrubbers for SO2 reduction to jointly reduce mercury emissions. The SCR catalyst oxidizes the elemental mercury in the flue gas stream into oxidized mercury which is a form of mercury that can be readily removed by scrubbers.

Evidence: 1. TVA's Clean Air Strategy matrix 2. Integration of SCR project designs with S0x strategy plans at Colbert and Kingston fossil plants.

Does the program use strong financial management practices?

Explanation: TVA utilizes a rigorous financial and project management system that monitors progress, tracks costs, and ensures that billings and payments are aligned with the progress and costs of NOx emissions reduction projects. This process is documented in the TVA SCR Performance Evaluation Process and has been demonstrated in management reports submitted by G-UB-MK, TVA's partner in NOx emissions reduction construction projects. TVA's financial controls and reports are certified by TVA's independent auditor, Price WaterHouse Cooper (PwC). TVA's financial management systems and processes voluntarily comply with the Sarbanes-Oxley Act. TVA also submits financial report to the Securities and Exchange Commission on a quarterly and annual basis

Evidence: 1. Price Waterhouse Cooper audit reports 2. TVA monthly financial reporting 3. TVA monthly emissions and generation reporting 4. TVA's 10-K and 10-Q reports submitted to the SEC.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: TVA has an ongoing plan to improve the operation and performance of its NOx emissions reduction program. As part of the semi-annual update to the NOx Reduction Strategy, any deviations on project costs, cash flows, NOx reductions, or fossil generation levels are assessed and corrective action is then incorporated as appropriate into the overall program. One example of TVA taking steps to address management or planning deficiencies is its decision to swap completion of environmental controls projects at John Sevier and Colbert fossil plants. The decision to swap these projects is predicted to save considerable amounts of financial resources for TVA.

Evidence: 1. TVA NOx Reduction Strategy matrix 2. Updated Colbert and John Sevier Environmental Controls Swap Analysis

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: Since 1995, TVA's ozone season NOx emissions have been reduced by 81% versus a planned ozone season reduction of 75%. TVA's overall annual NOx emissions have been reduced by 64% versus a planned overall annual NOx reduction of 60%. Since 2001, TVA has met all planned NOx reduction goals, except for 2003, on a Tons/GWh basis as measured by both TVA's total generation and fossil generation output Since 2001, TVA has met its schedule goals for NOx emissions reduction project completions, except in 2003 when completion of one project was delayed until 2004. TVA has kept capital spending for NOx reduction projects, for all years since 2001, within 10 percent of budget except in 2002, when project costs exceeded budget estimates by 17.9%. TVA completed NOx emissions projects at greater than 10% under budget in 2005 and 2006. While completing projects under budget is preferable to exceeding budgeted estimates, TVA nevertheless, discourages overestimating project costs in order to prevent forgone financial benefits (such as interest) associated with uncommitted project capital. Since 2004, TVA has achieved its goal each year for dollars spent per tons of NOx removed. This is indicative that TVA has been able to maintain adequate cost controls and efficiencies in implementing its NOx removal program.

Evidence: 1. Refer to TVA's CEMS reports, and NOx emissions graphs. 2. Refer to TVA's project completion schedule 3. Refer to TVA's project completion costs and variance from budget estimates 4. Refer to TVA's total dollars spent per ton of NOx removed.

Does the program (including program partners) achieve its annual performance goals?

Explanation: TVA has met or exceeded all annual NOx Reduction Strategy goals since 2001 with the exception of 2003 when the planned emissions goal was slightly exceeded (2.55 tons/gwh target versus 2.60 tons/gwh actual for fossil generation only). This was due to a power supply decision by TVA not to operate some SCRs during the summer ozone months because of threats to power generation during the summer peak power demand season, which caused NOx ozone levels to exceed TVA targets. Since 2001, TVA completed all annual SCR projects on schedule except for 2003 when one project completion was delayed until 2004. TVA has completed all annual SCR projects within 10% of the project budgets, except in 2002 when actual costs exceeded budgeted costs by 17.9%. Since 2004, TVA has achieved its goal each year for total dollars spent per ton of NOx removed.

Evidence: 1. Refer to TVA's annual GPRA reports 2. Refer to TVA's monthly CEMS emission reporting 3. Refer to TVA's historic SCR project performance analysis. 4. Refer to TVA's total dollars spent per ton of NOx removed.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: Since 2004, TVA has achieved its goal each year for meeting the dollar cost per ton of NOx removed. TVA measures its NOx reduction program efficiency by tracking the marginal cost of reducing NOx emissions per ton of NOx reduced or removed. The marginal cost to remove NOx includes both the annual amortized capital cost plus operating costs. A lower dollar cost per ton of NOx removed would be indicative of improving program efficiency. However, TVA has indicated that the marginal costs of implementing NOx emissions controls at various fossil plants will differ depending on the age and condition of the plant, as well as the boiler technology that is used. At the same time, TVA is required to meet clean air act standards, which typically become more stringent as time goes by. To meet increasing Clean Air standards in the future, TVA may have to implement NOx projects that have a greater marginal cost than existing projects. This scenario could cause the dollars spent per ton of NOx removed to increase.

Evidence: 1. TVA's preformance metric for dollar cost per ton of NOx removed 2. TVA's marginal cost curve analysis of completed and planned SCR projects.

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: TVA routinely benchmarks itself against other utilities that operate fossil plants to compare NOx emission performance. For the 2006 ozone season, TVA continued to lower it NOx emissions relative to surrounding utilities. On a NOx emission rate basis (NOx lb/mmBtu) TVA's overall NOx emission rate, which includes both SCR and non SCR units, was highly competitive with its surrounding utilities. According to the Utility Industry Benchmark Assessment dated Feb 7-8, 2007, 3 of TVA's 21 SCR's performed in the top decile, 10 of 21 performed in the top quartile, 18 of 21 performed in the top third, all 21 performed above the median during the 2006 Ozone Season. Eighteen of 21 TVA facilities ranked in the top 50% for 2006 Average NOx rate; 8 ranked in the top 25%; while 1 ranked in the top decile. TVA compares favorably when compared with these benchmarks.

Evidence: Refer to TVA's 2006 Ozone Season Utility Industry SCR Benchmark Assessment prepared by TVA's R.E. Collins dated February 7-8, 2007 and presented at the Reinhold Environmental Ltd. NOx Pollution Users' Group Meeting.

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: TVA's planned NOx reductions have been achieved. TVA is in compliance with all CAA regulations and bettered its 2006 NOx target by 11% (1.92 tons/gwh actual versus 2.16 tons/gwh target). These emissions are verified by the EPA independent of TVA through its continuous emissions monitoring (CEMS) program. Independent evaluations on the cost effectiveness of TVA's NOx reduction program are largely unavailable. Most utilities keep information about their cost structures private for competitive reasons, including information on environmental compliance. TVA, therefore, is not able to easily able to evaluate the cost effectiveness of its NOx reduction program through independent evaluations.

Evidence: 1. Refer to TVA's EPA CEMS emissions reports.