President Donald Trump made news recently when he said that the Tennessee Valley Authority chief executive’s salary — $920,000 this year — is too high. Add in future pension benefits and it could be $8.16 million.
So why shouldn’t Congress pass a law saying that the salary has to be, say, in the bottom fourth of big utility CEO salaries?
Because such a law wouldn’t change a thing. TVA already pays its CEO, currently Jeffrey Lyash, a salary that is in the bottom fourth of big utility CEO salaries, according to an executive compensation survey and confirmed by independent auditors.
The Tennessee Valley Authority plays in the big leagues. It is our country’s largest public utility, a $10 billion company serving 10 million residents in seven states. Big utilities pay big salaries to attract the best executives.
How would fans like it if the state legislature said that the University of Tennessee’s football and basketball coach had to be paid in the bottom fourth of coaches’ salaries in the Southeastern Conference? That wouldn’t go over so well. UT fans want to play and win in the big leagues — and winning usually means paying a high salary to attract coaches who can beat Georgia, Florida and Kentucky.
So is TVA winning?
Federal law says that TVA’s scoreboard should be based mostly upon how well the utility is producing large amounts of low-cost, reliable electricity. TVA’s residential rates — the monthly electric bills you and I pay — are among the cheapest 25% in the country, according to TVA. TVA’s industrial rates — for the big companies that provide good jobs — are among the cheapest 10% in the country. TVA’s reliability is 99.9%. And it has announced its intention not to raise rates for the next decade.
Most of TVA’s other statistics look pretty good, too. Its debt is the lowest in 30 years. Its pension fund is stronger. In the first three months of this year, TVA helped avoid floods by managing the largest amount of rainfall we’ve had in 130 years. And the air we breathe is healthier because TVA is producing more clean energy. During this economic slowdown, when power demand is low, up to 85% of TVA power is being produced by emission-free nuclear and hydropower. Over the last five years, TVA’s industrial recruiters have helped attract 350,000 jobs to the Tennessee Valley. On the negative side, it has been embarrassed by a coal ash spill in Roane County.
The president said that TVA’s leader is the highest-paid federal employee. Technically, that’s true. TVA is a federal corporation. The president appoints, and the U.S. Senate confirms, its board of directors. But it receives no federal taxpayer dollars. TVA salaries are paid by ratepayers, just like every other utility.
Federal law requires TVA’s board to “pay competitive compensation” to all its employees. To determine the CEO’s salary, the board relies on an independent survey of 28 investor-owned utilities with revenues of $3 billion or more plus five major government entities.
When UT loses too many games, the solution is not to cut the coach’s salary. UT fires the coach and usually raises the salary to attract a better coach.
If electric bills and debt go up and the rivers flood and the air turns dirty, the solution should be to fire the TVA CEO, not cut his salary. And when board members then go looking for a better leader, they’re going to have to be very persuasive recruiters because the salary they’ll be offering, at least today, is in the bottom fourth of what the CEOs of other big utilities earn.
Lamar Alexander represents Tennessee in the U.S. Senate.