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What TVA Learned From Tom Sawyer

"After playing hooky from school on Friday and dirtying his clothes in a fight, Tom is made to whitewash the fence as punishment on Saturday. At first, Tom is disappointed by having to forfeit his day off. However, he soon cleverly persuades his friends to trade him small treasures for the privilege of doing his work. He trades these treasures for tickets given out in Sunday school for memorizing Bible verses and uses the tickets to claim a Bible as a prize..." -- From Wikipedia article on "Tom Sawyer."

Tom Sawyer didn't like having to whitewash Aunt Polly's fence on Saturday. So he talked his friends into doing the job for him. And the friends gave Tom various treasurers for the privilege of doing the work! (Note the apple Tom's eating in the 1890 drawing above.)

TVA didn't like having to answer critics for dirtying the air, for causing global warming, and for failing to invest in "green power." So TVA persuaded a few of its customers to pay for some small "green power" projects. The projects were too small to clean any air. But they were enough to give TVA a way to answer its critics, and they backed off. A pretty good deal for TVA -- get somebody else to pay you to solve your PR problem!

Here's how TVA pulled it off:

  • Think of TVA as a Fortune 500 corporation with $9.2 billion in annual revenue and $329 million in net income.1

  • The press and some of the corporation's 8.7 million residential customers2 criticize the corporation because its only product is environmentally dirty.3

  • The company admits that its product is environmentally dirty but claims that a clean alternative would cost 42% more.4

  • The company persuades one in 400 of its residential customers5 to voluntarily pay a 42% surcharge for some of the clean alternative, while continuing to meet 99.9% of its total demand with the same old dirty product.6
  • So what's wrong with this story?

  • A small number of ordinary consumers voluntarily pays $95,000 per month (or about $1.1 million a year) to the rich corporation.
  • The corporation spends none of its own money but uses the consumers' voluntary payments to produce a limited amount of the clean product alternative.7

  • Press and public criticism cease because the corporation now claims that it has responded to criticism and is indeed making an environmentally clean product (albeit in token amounts) .

  • The corporation claims that it's fully meeting consumer demand for the clean product and refuses to invest in more clean product production capacity so long as consumer demand (i.e. the voluntary payments) exceeds supply.8 In other words, the public is not just being misled, it's also being misread.

  • The corporation publishes only the most general information about the sources of its clean product9 -- makes no effort whatsoever to account for the voluntary payments received from the public10 -- and never explains how they might trigger investment in more clean product production capacity.

  • The corporation advertises the clean product widely, receives the accolades of environmentalists, and deflects public attention away from other environmental issues, e.g. acid rain, mountaintop removal, and cushy land deals.

  • Meanwhile, 99.9% of the product sold by the giant corporation remains as dirty as ever, the corporation's total sales increase about three percent each year,11 and the environment suffers more than ever.

  • And there is little or no prospect that the corporation will ever produce more than an insignificant amount of the clean product.

  • "...[Tom Sawyer] loses much of his glory, however, when, in response to a question to show off his knowledge, he incorrectly answers that the first two disciples were David and Goliath." -- From Wikipedia article on "Tom Sawyer."


    1 Data from TVA annual report for FY 2006. TVA does not qualify for the Fortune 500 list because it is not publicly traded, but -- if it were on the list -- it would rank #273. Duke Energy -- to which TVA is often compared -- has annual revenues of $16 billion and is ranked #193 on theFortune 500 list. Click here for a list of the largest US power companies. return

    2 TVA is the monopoly supplier of electricity in Tennessee and adjacent portions of six other states. According to "About TVA" on the TVA website, the approximate population of the TVA service area is 8.7 million. return

    3 TVA's only significant product is electricity. According to the TVA Annual Report for FY 2006, TVA generates 64.1% of its electricity by burning fossil fuels, 29.1% from nuclear reactors, and 6.4% from hydroelectric dams too old to qualify as "green." return

    4 According to "Frequently Asked Questions About TVA" on the TVA website, the average base rate for residences in the TVA area is $0.064/kWh. A "block" of "green" electricity (Green Power Switch) is 150 kwh and costs $4.00 ($.0267/kwh) over and above the base rate charged all consumers for standard (or "brown") electricity. NB: TVA reports the "average residential power rate" for 12 months ending Dec. 31, 2006, is $0.0780 /kWh. Data from here. According to "Residential Electricity Prices: A Consumer's Guide," by DOE/EIA, the price...... return

    5 Two TVA executives said Sept. 19, 2007, that TVA serves approximately 5 million residences, of which about 12,500 (0.25%) voluntarily pay for (i.e. "subscribe to") an average of about two blocks of GPS per month. return

    6 A typical residence in the TVA area consumes 1,250 kwh per month. Click here to see the GPS product label for 2000. So a typical GPS subscriber consumes about 300 kWh of "green" electricity and 950 kWh of "brown" electricity per month. The total amount of "green" electricity consumed by all residences in the TVA area is 0.06% green and 99.94% brown. And the total cost of all electricity consumed by residences in the TVA area is about $400 million/month, of which $1 million (0.25%) is paid by GPS subscribers. But GPS residential subscribers voluntarily pay an extra $100 thousand/month (i.e. a premium or surcharge) for green electricity. return

    7 TVA hasn't invested a dime in green power. The GPS program is entirely financed by voluntary contributions from the public (residential and business consumers) -- called a "premium" by TVA -- and by long-term power purchasing agreements (PPA's) with electricity providers, e.g. Invenergy. return

    8 According to the Knoxville Utilities Board (KUB), "TVA has indicated it would not make a decision on adding additional resources until existing Green Power generation is approaching full utilization (source)." The public seems to understand and accept this policy. For example, a Maryvlle College student wrote in November 2007, "[TVA's] progress [sic] shows they are willing to make a shift in production, but it requires a shift in consumer consciousness. When we create the demand, they will generate more electricity from green sources." return

    9 GPS newsletters published quarterly data in 2001-2003 and 2005. But data gaps appeared in 2004 and 2006-2007. Only one GPS newsletter was published in the first nine months of 2007. The TVA website now appears to be reporting oversll numbers for GPS production during the previous three months under "generation update," but historic numbers are erased each month. return

    10 TVA has never published any dollar amounts for GPS income and expense, even though this is money voluntarily paid by the public in expectation of certain benefits, e.g. investment in additional green power production capacity. return

    11 Total sales of electricity by TVA in 2006 as compared to those in 2005. Data from TVA Annual Report for FY 2006. return

    This page was last updated on Dec. 21, 2007.

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