With major changes expected in the electric power sector, and on energy and environment regulations under the Trump administration, how is the nation's largest publicly owned utility adjusting its outlook and operations for the dramatic changes that could be ahead? During today's OnPoint, William Johnson, president and CEO of the Tennessee Valley Authority, explains how coal could play a larger role in TVA's future generation mix. He also talks about the three open positions on TVA's board that are set to be filled by Trump nominees.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is Bill Johnson, president and CEO of the Tennessee Valley Authority. Bill, thank you for joining me.
William Johnson: As a frequent watcher of your show, it's a delight to be here. Thank you for having me.
Monica Trauzzi: Oh, thank you. Thank you for coming on. With the Trump administration now in office, there are major changes expected in the electric power sector and also in terms of energy and environment policy and regulations. What do you believe the biggest changes will be at TVA based on how this administration is expected to operate?
William Johnson: Well, obviously the two big changes for us, first before we get to the regulation, our board is appointed by the president and then nominated — confirmed by the Senate, and we have three openings. So the first thing I would expect is he will have an impact on our board, and in fact, he could replace a majority of the board this year.
On the policy front, you know, as a government agency, really a corporation owned by the government, we tend to follow policy but not make policy, right, and I think the environmental policy is going to be important to watch. Where's the Clean Power Plan going, what's going to happen with coal, all these things. So we're sort of watching to see what the tea leaves tell us.
Monica Trauzzi: So let's talk about the three openings that you have on the board. They could very well go to folks who are fans of coal, and then what does that mean for TVA?
William Johnson: Well, TVA is a funny kind of animal. We actually are the creation of a federal statute, and that statute is very clear about what we're supposed to do, how we're supposed to do it and what decisional criteria we should use. So I think the overriding factor for whoever gets on the board is going to be what's the statute say. And what the statute says basically is our job is to make electricity at the lowest feasible rate, and everything we do has to be focused on least cost. So if coal becomes the least cost option, that's where we'll be heading.
Monica Trauzzi: And do you believe that coal could become the least cost option under the Trump administration?
William Johnson: It's possible but, you know, the main market dynamic there over the last five to 10 years has been the price of natural gas. And really a lot of the coal implications in this country have been market-driven, fuel-price-driven, also environmentally driven. I think it will be hard for coal to catch up with where natural gas is, but 10 years ago, none of us thought we'd be talking about natural gas as we are today.
Monica Trauzzi: And certainly President Trump has already signaled that he'd like to see a revitalization of sorts in the coal industry if further incentives were pushed in that direction.
William Johnson: And coal is going to be important to us at TVA for a long time. We have closed a number of coal plants, all based on economics, but today, 25 percent of our energy still comes out of coal. I would expect that to continue for the next several decades. So coal price, coal incentives will be important to us.
Monica Trauzzi: We're expecting the Trump administration will roll back the Clean Power Plan. How does that impact your outlook and operations?
William Johnson: I don't think it will affect us at all. Over the last four or five years, we've made a number of asset decisions based on the age of the asset, material condition, fuel price. During that process, we transferred a lot of gas into the place of old coal. So if the Clean Power Plan was to come into fruition, we would meet it today. But we didn't get there by planning on the Clean Power Plan. We got there by doing customer map, what's the cheapest way to make electricity for our customers.
Monica Trauzzi: Would you be in favor of a shift away from cleaner forms of power generation if that's what this administration was looking to do and the new board was looking to do?
William Johnson: So my main focus in life is what's best for customers. So I'm in favor of low-cost, reliable, but I'm also in favor of cleaner over dirtier. I do think we all live on this planet, we have an obligation to have the least impact we have, so I do think cleaner is important, but I also think the way we're doing coal these days is a lot cleaner than it used to be.
Monica Trauzzi: I'm curious on the heels of the firing of acting Attorney General Yates, you're at all concerned about speaking negatively about the new administration or having disagreements on policy.
William Johnson: I am not concerned because we are federal government employees. I never said anything negative or positive about the past administration and wouldn't do so now. We have disagreements from time to time with the administration, the parts that we deal with. I think that's part of government, and so I'm not too concerned about this.
Monica Trauzzi: Talk about the workforce situation currently at TVA and how you're impacted by President Trump's hiring freeze for federal agencies.
William Johnson: So over the last four or five years, we have reduced headcount by 2,500 positions. We have the lowest headcount at TVA today since 1934. So we're already on the track of right-sizing, downsizing, get our costs in control. The presidential memorandum basically says you can't hire any new people unless you have certain exceptions like public safety, national security. Well, we have both of those obligations so we will find a way to comply with the memorandum. It won't have a big impact on us, but we will make sure that the things we do that are inherently dangerous or related to security, we'll make sure those are done right.
Monica Trauzzi: You've made strides on nuclear. What's next on nuclear? Well, tell us a bit about where you've been and what you've done, what's next, and how do you think this administration will look at nuclear and handle it?
William Johnson: Well, TVA has recently completed the first new nuclear plant of the century at Watts Bar 2, and we of course completed the last one of the last century, Watts Bar 1, so we've had the last two in this country. We also plan to do some upgrades to some of our plants, so in 10 years, about 45 percent of our energy's going to come out of nuclear. We think it's a great source for electricity. We're very pro-nuclear, and we're looking at SMRs. We can talk about that if you want. I think this administration's going to be very pro-nuclear. It's infrastructure, it's jobs, it's clean, it's domestic, so I'm hoping and expecting that they'll be big supporters of nuclear.
Monica Trauzzi: And do you anticipate that they will put the appropriate amount of research dollars towards advanced nuclear?
William Johnson: I think that's an open question, so what I've been reading is a focus on the DOE budget, focus on R&D projects. I do hope we continue with R&D on things like clean coal, small modulars, advanced nuclear. I do think the government has a big role to play in developing those technologies.
Monica Trauzzi: All right, we'll end it there. Very interesting. Thank you for coming on the show. I appreciate it.
William Johnson: Thank you.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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