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Why You Shouldn’t Care that TVA CEO Bill Johnson Makes $5.9 Million4 min read

TVA Nuclear Power

The Chattanooga Times Free Press reported that new CEO Bill Johnson made $5.9 million in the 2013 fiscal year, nearly 50% more than his predecessor. The report implies, as did other local media outlets, that the public should be outraged at the large compensation package.

I disagree, and there are several reason why $5.9 million is a fair amount. In fact, he might be under paid.


The Tennessee Valley Authority is a federally owned corporation and the largest power provider in the United States. According to their own website, TVA was established by Congress in 1933 to address a wide range of environmental, economic, and technological issues, including the delivery of low-cost electricity and management of natural resources. TVA services most of Tennessee and parts of Alabama, Georgia, Kentucky, Mississippi, North Carolina and Virginia. That swatch of land covers 80,000 square miles and serves more than 9 million people.

Another key fact is that initially, TVA was funded by federal appropriations (Congress via the Taxpayers). That is no longer the case. TVA is now fully self-financed, funding operations primarily through power sales and power system financings.


A look at the most recent annual report, released on September 30, 2013 shows TVA generated $271 Million of net income from $10.956 Billion in revenue. That net income represents a 352% increase over the 2012 fiscal year net income. It is important to note that 2012 revenue was actually higher, at $11.220 Billion.

Total operating expenses also decreased by $417 Million, a 4.2% drop.

By definition, a CEO’s responsibility is to maximize shareholder value. We can’t give all the credit to Mr. Johnson for a good financial report since he’s only been CEO since January, but we certainly can highlight a positive financial picture for the “public” utility from 2012 to 2013. In any industry, such an increase in net income given a decrease in revenues would be worthy of at least a pat on the back.

Industry Competitors

Many people don’t give this argument much credit, but it is absolutely imperitve that TVA pay its employees competitively compared to other companies in it’s industry. Check out the graphic below that shows five of the top utility companies in the nation based on total revenues.

Top Utilities CEO Pay in U.S.

Keep in mind there are a few differences here in how each of these companies are structured. The other four listed companies are publicly traded whereas TVA is a government owned entity. It doesn’t take a rocket scientist to realize that if TVA does not pay their executives and employees a comparable salary to what these other companies would offer, they wouldn’t be able to attract that same top quality talent.

Also, I should note that some of the compensation for the other executives takes into account stocks, options, etc. TVA does not have the ability to offer that, so that’s another reason to offer more incentives and higher salary.


The next argument is going to be tax breaks and incentives. It is true that TVA is not subject to federal income tax, however keep this in mind:

TVA paid out $548 Million in tax and tax equivalents to local and state governments last year.

TVA’s latest annual report describes their taxation and tax equivalent situation:

“TVA is not subject to federal income taxation. In addition, neither TVA nor its property, franchises, or income is subject to taxation by states or their subdivisions. Section 13 of the TVA Act does, however, require TVA to make tax equivalent payments to states and counties in which TVA conducts power operations or in which TVA has acquired power-producing properties previously subject to state and local taxation. The total amount of these payments is five percent of gross revenues from the sale of power during the preceding year excluding sales or deliveries to other federal agencies and off-system sales with other utilities, with a provision for minimum payments under certain circumstances. Except for certain direct payments TVA is required to make to counties, distribution of tax equivalent payments within a state is determined by individual state legislation.”

Bottom Line

Here’s the deal. $5.9 Million is a TON of money. But relative to the company that Bill Johnson runs, I’d say his compensation package is just about where it needs to be. It’s important to the long term stability of the organization that the leadership is also stable. If TVA paid much less, it could be viewed as a “stepping stone” and “proving ground” for upcoming utility executives who would jump ship at the next best offer.

I would love to hear your thoughts in the comment section below!

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