Exhibit
      10.35








**DEFERRAL
      AGREEMENT**


**John
      M. Hoskins**








The
      TVA
      Board of Directors, or their delegees, has approved your participation in TVA’s
      Long-Term Deferred Compensation Plan (Plan) under the following
      terms:





Duration
                of deferral agreement
            3
                YearsFirst
                compensation credit
            $60,000
                (10/01/2006)Second
                and third compensation credits
            $60,000
                each (10/01/07 & 10/01/08)Total
                credits over service period
            $180,000Expiration
                date
            09/30/2009





Please
      read the following provisions carefully and indicate your approval by signing
      at
      the designated place below.


___________________________________________________________________________________________


As
      a
      participant in the Plan, I hereby agree to be bound by the following terms
      and
      conditions:





Annual
      deferred compensation credits of $60,000 will be made to an account in my name
      to cover a service period of three years, beginning on October 1, 2006 and
      ending on September 30, 2009, provided that I remain employed by TVA through
      September 30, 2009.  Upon the expiration of this agreement,
      the entire amount credited to my account, including interest or return as
      provided below, will be paid to me in a lump sum unless I elect below to have
      the credits transferred to an account in TVA’s Merit Incentive Supplemental
      Retirement Income Plan (MISRIP).





I
      understand that I must be an employee of TVA at the time of the expiration
      of
      this agreement, or no payments or transfers under the Plan will be made by
      TVA,
      and any credits to my account will be extinguished.  However, in the
      event that TVA terminates my employment during the term of this agreement
      through no act or delinquency of my own, this agreement is terminated as of
      the
      date of my termination and no further credits will be made under it and any
      credits in my account from this agreement, including interest or return as
      provided below, at the time of termination will become vested.  If I
      elect below to have the balance of my account transferred to my TVA MISRIP
      account, all credits from this agreement will be paid out to me in accordance
      with my deferral election applicable to such credits or in accordance with
      otherwise applicable IRS rules.  If TVA terminates my employment for
      cause prior to the expiration of this agreement, no payments will be made and
      my
      account balance will be extinguished.**** In the event of my
      death during the term of this agreement, my account balance will be paid to
      the
      person identified on my beneficiary designation form or, in the absence of
      such
      designation, to my estate, in a manner permitted by applicable IRS
      rules.





Interest
      will be credited to the balance reflected in my deferral account on the same
      basis as interest is calculated and credited under MISRIP.  In the
      alternative, I may choose to have my balance adjusted based on the return of
      the
      funds I select under the same conditions as are contained in
      MISRIP.  I understand that I am solely responsible for the risk
      associated with any return elections that I make.





The
      Plan
      may be amended or discontinued by the Board.  If the Board elects to
      discontinue the Plan, any credits to my account as of the date of termination
      of
      the Plan will be paid to me in accordance with applicable IRS
      rules.  I elect the following option for payment upon expiration of
      this agreement:





**X**   Balance
      of account to be paid to me in a lump sum





______   Balance
      of account to be transferred to TVA MISRIP account





I
      understand that nothing contained in this agreement shall be construed as
      conferring the right to continue in the employment of TVA as an executive or
      in
      any other capacity and that the payment election I have made is final (not
      revocable).











/s/
      John M.
      Hoskins                                   10/27/06


John
      M.
      Hoskins                                              Date








/s/
      John E. Long,
      Jr.                                    10/30/06


Chief
      Officer                                                    
 Date