Engineer may become government utility's first CEO

CHATTANOOGA, TENNESSEE - Within the next couple of months, Tom Kilgore could become the first chief executive of the Tennessee Valley Authority in its 72-year history.

Despite his potentially pioneering role at an agency formed to reshape southern Appalachia, Mr. Kilgore said he isn't looking to reshape TVA. The 57-year-old engineer, hired six months ago as TVA's chief operating officer, believes TVA "is good but not great."

"But TVA is good enough to be great, and that's what I hope I can help it become," he said.

Mr. Kilgore has come to TVA at a pivotal time. America's biggest government utility, already fraying a bit along its northern borders, is trying to revamp its contracts with the 158 municipalities and cooperatives that distribute its power.

Within the next month, TVA will implement its biggest rate increase in two decades and learn whether it could be a part of building the nation's first new nuclear power plant in more than 30 years.

To prepare TVA for further deregulation of the electricity market, Congress recently placed the agency under more oversight by the Federal Energy Regulatory Authority and authorized the president to appoint a new part-time board to govern the agency. Once in place, the new nine-member board will hire a chief executive officer to replace the full-time, three-member board that has run TVA since the agency was created in 1933 as part of President Roosevelt's New Deal.

TVA Chairman Bill Baxter said Mr. Kilgore "has exceeded our expectations" and "is perfectly capable of being CEO" for TVA during its transition.

"But that's a decision the new board, which I expect to be appointed very shortly, will have to make," Mr. Baxter said.

Mr. Baxter and TVA's other director, Skila Harris, agreed in May after Glenn McCullough completed his term on the TVA board to put all of TVA's staff under the operating authority of Mr. Kilgore.

"We are trying to prepare TVA for the board changes ahead," Mr. Baxter said.

Before joining TVA in March, Mr. Kilgore rose to the top jobs at both the Oglethorpe Power Corp., which serves most of Georgia's 42 customer-owned Electric Membership Corporations, and Progress Ventures in Raleigh, N.C., which has a diverse portfolio of energy businesses in the deregulated power market.

Mr. Kilgore said he would like to become chief executive of TVA but is content to work as the agency's president and chief operating officer. He has said he will "listen, learn and lead, in that order."

In July, Mr. Kilgore took the lead in pushing TVA's board to vote for a 7.5 percent increase in its wholesale rates to raise another $524 million next year. Rising coal and natural gas prices forced the increase, Mr. Kilgore said, and most TVA distributors said they understand.

Unlike two years ago when TVA last raised its rates, this year no TVA distributors objected to the rate increase.

"None of us likes higher rates, but we understand the need for TVA to cover its costs, and Tom Kilgore and his staff did a good job explaining that need and working with us on their budget," said Jack Simmons, president of the Tennessee Valley Public Power Association, the trade group that represents TVA distributors.

Mr. Kilgore is working with distributors to develop new longer and more flexible contracts with TVA. A consultant hired by TVPPA is reviewing some of TVA's latest proposals.

After more than a year of such talks, no agreement has been reached. But Mr. Kilgore said he is still optimistic new arrangements will be reached for distributors to buy some of their power elsewhere but commit to TVA for more than the current five- year contracts.

As CEO of Oglethorpe Power Corp. in the 1990s, Mr. Kilgore recalled, it took him 27 months to get an agreement with the 39 Electric Membership Corporations in Georgia.

"These are very complicated contracts that involve hundreds of millions of dollars," he said about the talks with TVA distributors.

Even as TVA tries to secure longer commitments from most of its customers, a half dozen of its distributors have given TVA notice of their intent to buy power elsewhere within five years. Five of those six distributors are in Kentucky, where neighboring wholesale suppliers say they can offer lower cost power than TVA.

"I'm still confident in the end that we remain the best value and we're going to keep many of those that have given us notice," Mr. Kilgore said.

Already, a cooperative in Bowling Green, Ky., this year backed off its notice to leave the TVA fold.

TVA officials contend longer-term contracts are needed with customers to back long-term power investments. TVA is among the utilities vying to participate in building the first new nuclear plant in the 21st century. The site of the unfinished Bellefonte Nuclear Plant is being offered "and technically I believe we have the best proposal," Mr. Kilgore said.

The NuStart Energy coalition of utilities and engineering firms is working on the next generation of nuclear power plans to narrow the list of potential new nuclear plant sites from six to two by the end of September.

The consortium said the earliest date any of the sites could have a workable nuclear plant is 2015.

Mr. Kilgore said TVA will have to decide within the next two years what, if any, type of new baseload power generation it will have to add to meet growing power demands by 2015. Nuclear and coal are the leading contenders for new generation, although continually changing markets could change those choices quickly, he said.

Such challenges, Mr. Kilgore said, make his job "probably the best I've ever had."

"We're one of the few industries that still make house calls and deliver a product that is essential to everybody's lifestyle," he said. "Why wouldn't you like working in that kind of industry?"