TVA Board Calls for Comprehensive Organizational Changes In Response to Independent Kingston Report

July 21, 2009

The TVA Board today directed TVA management to develop an extensive remediation plan in response to an independent investigation of the Kingston ash spill, various reports by the TVA Inspector General and recommendations by TVA management.

The remediation plan would eliminate deficiencies in systems, standards, controls and corporate culture that were identified by the independent investigation, which was commissioned by the Board earlier this year following the Kingston spill on Dec. 22, 2008. The Board asked for the remediation plan to be presented at its next scheduled meeting on Aug. 20.

As announced at the February Board meeting, the Board Audit Committee retained R. William Ide, former president of the American Bar Association and a national expert in independent investigations, and the firm of McKenna Long & Aldridge, LLP, to conduct an independent factual investigation of the Kingston spill and its implications relating to systems, controls and culture.

The report, which was presented to the Board today at a meeting in Knoxville, Tenn., reviewed TVA’s failure to use best practices systems, standards, controls and accountability requirements in the operations of its ash storage ponds. View report (PDF, 274 kb).

“Tough medicine is sometimes hard to take,” said TVA President & CEO Tom Kilgore. “But we take it, because we know we need to get better.” View remarks from Tom Kilgore (PDF, 45 kb).

The Board approved a resolution proposed by Director Tom Gilliland, chairman of the Audit, Ethics and Governance Committee, to address the failures identified in the McKenna report. View Board Resolution (PDF, 48 kb)

“Based on McKenna’s work to date and input from the Inspector General and TVA management, it has become clear to the Board that a real change in the current way that TVA operates is needed,” TVA Chairman Mike Duncan said. “We want to ensure that TVA has learned lessons from the Kingston spill, so that we can prevent any future events that would have negative economic, environmental, health or safety impacts on the people of the Tennessee Valley and the customers that TVA serves.

“We also believe the Kingston spill and McKenna’s investigation brought to the foreground other weaknesses in the way TVA operates, which hamper our ability to effectively serve the people of the Valley. We are committed to doing what it takes to fix those weaknesses.”

Duncan said he hopes the release of McKenna’s report to the public would help explain the “why” of the Kingston spill and demonstrate the Board’s commitment to making needed improvements.

“The actions the Board took today, which will be further refined at our August Board meeting in Knoxville, will just be one of several steps that the Board is committed to taking to earn and maintain the public trust,” Duncan said. “Unique historical realities contributed to the exact causes and the magnitude and severity of the Kingston spill, but we do not see Kingston as an aberration that can simply be dismissed as ‘one of those things.’ Instead, we recognize the Kingston spill as a wakeup call.”

Duncan also noted that when former Tennessee Senator Bill Frist introduced legislation creating the new board structure, he said, “It’s time to modernize TVA’s management structure to bring it in line with other corporations of similar size and scope.”

With respect to TVA at large, Duncan said there are “company-wide risks from a lack of comprehensive systems, standards, controls and culture of accountability.” He said that since the new Board structure was implemented in 2006, numerous managers hired by TVA from the private sector have started implementing best practices, but progress has been uneven and great challenges remain.

Kilgore said TVA would use the “tough medicine” of the report “to make improvements in our practices and procedures, and in our organization and its culture.”

TVA is the nation’s largest public power provider and is completely self-financing. TVA provides power to large industries and 158 power distributors that serve approximately 9 million consumers in seven southeastern states. TVA also manages the Tennessee River and its tributaries to provide multiple benefits, including flood damage reduction, navigation, water quality and recreation.

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TVA News Bureau, Knoxville, (865) 632-6000

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