Air Quality: TVA Plans to Reduce Air Emissions Further, but Could Do More to Reduce Power Demand
Published: 2002-03-08T00:00:00

Fast Facts:

Highlights:
section_title: What GAO Found
paragraphs: The Tennessee Valley Authority (TVA) relied on its 11 coal-burning plants to supply 60 percent of its electric power in fiscal year 2001. These plants account for almost all of TVA's emissions of two key air pollutants--sulfur dioxide (SO2), which has been linked to reduced visibility, and nitrogen oxides (NOx), which contribute to the formation of harmful ozone. To meet an increase in demand of 1.7 percent annually through 2010, TVA estimates that it will need to expand its current generating capacity of 30,365 megawatts by 500 megawatts annually. Building new generating capacity can produce more emissions, which raises environment concerns. To lessen the need for new capacity, TVA and other electricity suppliers promote the efficient use of electricity through "demand-side management" programs, which seek to reduce the amount of energy consumed or to change the time of day when it is consumed. Even though TVA intends to increase its capacity to generate electricity through 2005, it also expects to reduce its SO2 and NOx emissions during the same time period, primarily by burning lower-sulfur coal, installing devices to control emissions at its existing plants, and relying on fuels other than coal for new capacity. Although TVA's demand-side management programs have allowed customers to cut their electrical consumption, these programs have made only modest contributions to reducing peak-time demand. TVA has limited the scope of its key program to reduce peak-time consumption by residential customers because TVA believes the program is not cost-effective. TVA projects that its demand-side programs will produce nearly twice as much in savings between 2001 and 2005 as was achieved in the previous five years. Other large utilities have more fully implemented the types of programs that TVA now has in place and have also implemented a greater array of demand-side management tools. These programs have involved a much higher proportion of their residential customers and established different prices for electricity used during different times of the day.

section_title: Letter
paragraphs: The Tennessee Valley Authority (TVA) operates the nation’s largest public power system, supplying electricity to about 8 million customers across a 7-state region. TVA directly serves 62 large federal and industrial customers and serves other commercial, industrial, and residential customers through a network of 158 power distributors. TVA relied on its 11 coal-burning plants to supply about 60 percent of its electric power in fiscal year 2001. These plants account for almost all of TVA’s emissions of two key air pollutants—sulfur dioxide (SO2), which has been linked to reduced visibility, and nitrogen oxides (NOx), which contribute to the formation of harmful ozone.
Demand for TVA’s electricity will increase about 1.7 percent annually through 2010, according to TVA projections. To meet this demand, TVA estimates that it will need to expand its current generating capacity of 30,365 megawatts by 500 megawatts annually—nearly the equivalent of building an average-size power plant, or contracting for the power from one, every year. Building new generating capacity can result in additional emissions, which raises environmental concerns.
In part to lessen the need for new capacity, TVA and other electricity suppliers promote the efficient use of electricity through “demand-side management” programs, which are designed to reduce the amount of energy consumed or to change the time of day when it is consumed. For example, some utilities offer their customers incentives to purchase appliances and lighting that use less electricity. When current customers use less electricity, the utility has to generate less power and thus may  produce fewer emissions of air pollutants.
Concerned about TVA’s dual challenge of reducing emissions while  managing increased demand on its power system, you asked us to:  (1) determine how TVA plans to meet future demands for electricity  through 2005 while minimizing its emissions of SO2 and NOx; (2) describe  the scope and impact of TVA’s demand-side management efforts; and  (3) compare the scope and impact of TVA’s demand-side management  efforts to those of selected other utilities’ efforts.
subsections: section_title: Background
paragraphs: TVA was established in 1933 to provide flood control, navigation, and  electric power in the Tennessee Valley region. As that area has grown, in  both population and economic activity, TVA customers’ use of electricity  has grown and is expected to keep growing. TVA estimates that demand  for its electricity will increase about 1.7 percent annually through 2010.
To meet its customers’ demand for electricity, TVA generates electricity  not only at its 11 coal-fired plants (consisting of 59 generating units), but  also three nuclear power plants (five units), 29 hydroelectric dams  (109 units), one pumped storage site (four units), and five sites with  combustion turbines (64 units). (See fig. 1.) It also generates power from  landfill gas, solar, and wind projects, and it purchases power from others.
From the 30,365 megawatts of generating capacity available from these  sources, TVA generated about 156 billion kilowatt-hours of power in fiscal  year 2001. It also purchased roughly 9.9 billion kilowatt-hours of power.  Of its power supply, 60 percent came from coal, 27 percent from nuclear,  6 percent each from hydropower and power purchases, and 1 percent  from combustion turbines. (See fig. 2.)
The share of electricity generated by burning fossil fuels has implications  for the environment. Burning fossil fuels produces SO2 and NOx gases,  and the Environmental Protection Agency estimates that fossil fuel  burning from utilities accounted for 67 percent of the nation’s SO2  emissions and 27 percent of its NOx emissions in 1999. Both gases can be  transported over long distances following the patterns of air movements.  SO2 emissions contribute to the production of airborne sulfate particles  that contribute to acid rain, which can harm waters, forests, and materials.  In addition, these particles can block the transmission of light, resulting in  haze in urban areas and the degradation of scenic vistas in many national  parks. NOx is also a source of acid rain and, through chemical reactions in  the atmosphere with other pollutants, leads to the formation of ground- level ozone, the principal component of smog. Smog can cause chronic  human health effects, particularly respiratory problems, as well as  harming plants.
TVA’s choices in generating power are constrained by laws, regulations,  and internal policies. For example, the Clean Air Act, as amended, limits  emissions of SO2 and NOx from coal-fired power plants. Moreover, the  Tennessee Valley Authority Act, which established TVA, provides that the  generation of power from hydroelectric units is a lower priority than  navigation and flood control. Finally, an internal TVA policy limits the time  period when TVA can draw down the lakes (reservoirs) that it manages for  flood control and in the process generate hydropower.
To meet its customers’ increasing demand for electricity, TVA can upgrade  its existing plants, construct new plants, purchase power from others, or—  as an alternative to finding additional supply sources—provide incentives  to its customers—called “demand-side management”—to reduce or shift  their demand for electricity.
The Department of Energy defines demand-side management as actions  taken on the customer’s side of the meter to change the amount or timing  of energy consumption and identifies several types of programs.
Energy efficiency programs involve the use of technologies that reduce  total energy use, during both peak and off-peak periods, such as energy- efficient lighting, appliances, and building equipment.
Peak load reduction programs focus on reducing load during periods of  peak power consumption on a utility’s system. These programs can  involve the use of technologies that smooth out the peaks (called “peak  shaving”) in energy demand. Such technologies include control systems,  such as switches attached to heating, cooling, and ventilation systems that  allow the systems to be turned off during peak load times. They can also  include rate-schedule programs where utilities structure their rates to  encourage customers to modify their pattern of energy use.
According to the Department, utility funding for demand-side management  programs in the United States declined nationally between 1994 and 1998,  due in large part to increased competition and uncertainties regarding  electricity deregulation. Funding for these programs leveled out in 1999  and slightly increased in 2000 as concerns over electric supply shortages in  California led many utilities and state regulatory agencies to increase their  emphasis on demand-side management.
TVA can benefit from demand-side management, especially reducing peak  loads, because electricity use varies substantially within a 24-hour period.  For example, on August 17, 2000, an unusually hot day, TVA customers  used about 67 percent more electricity during the hour of highest  consumption (4 p.m.) than the hour of lowest consumption (5 a.m.). TVA  used its various energy sources in a sequenced manner to supply this  electricity. (See fig. 3.) Nuclear facilities provided power steadily  throughout the day, while coal facilities provided power fairly  consistently—somewhat lower at night and higher during the day. As  demand increased during the afternoon, TVA increased the use of  hydroelectric power and it purchased power from other utilities. Finally,  during the hottest, mid-day hours, TVA used its combustion turbines. Even  though TVA’s customers used more electricity on that day than on any  other in its history, TVA officials told us that the sequencing of power  sources was standard practice.
section_title: TVA Plans to Reduce SO2 and NOx Emissions but Increase Generating Capacity
paragraphs: TVA projects that its SO2 and NOx emissions in 2005 will fall 28 percent  and 25 percent, respectively, below its 2000 levels, despite a planned  addition of 3,086 megawatts of generating capacity. TVA projects that its  SO2 emissions will decline as it increasingly uses coal with a lower sulfur  content at some of its coal-burning power plants. TVA projects that its  NOx emissions will decline as it installs more control devices at its coal- burning plants. Moreover, TVA plans to increase its generating capacity  largely from sources—other than coal-burning plants—that generally emit  less of these pollutants. Aside from constructing new generating capacity,  TVA also plans to continue purchasing peak power in a range between  1,500 and 3,000 megawatts annually during the 2001 to 2005 period. (The  emissions associated with purchased power—equivalent to 6 percent of  TVA’s power supply—are not included in TVA’s emissions data.) Finally,  TVA estimates that its demand-side management programs will offset new  peak demand by 396 megawatts between fiscal year 2001 and 2005.
subsections: section_title: TVA Plans to Continue Reducing SO2 and NOx Emissions
paragraphs: TVA projects that the SO2 emissions from its coal-burning plants will  decline from 727,000 tons in 2000 to 498,000 tons in 2003, before rising to  525,000 tons in 2005. (See fig. 4.) According to a TVA official, the expected  increase after 2003 is directly related to planned increases in generating  capacity at its coal plants. TVA attributes overall projected declines in SO2  emissions to the continued switching to coal with lower sulfur content at  three plants. Specifically, the lower sulfur coal is 0.5 to 0.6 percent sulfur,  about half the sulfur content of the coal that is currently burned at these  units. Moreover, according to the same official, even though SO2  emissions will increase slightly from 2003 to 2005, the average emissions  rate will remain unchanged during this period.
Beyond 2005, TVA has committed to further reduce SO2 emissions. In  October 2001, TVA announced that it would install five additional  scrubbers to limit SO2 emissions at its coal-burning plants between 2006  and 2010. According to a senior TVA official, annual SO2 emissions from  TVA coal-burning plants are likely to fall to around 400,000 tons by 2010.
TVA’s projections show a steady decline in its NOx emissions, from  287,000 tons in 2000 to 216,000 tons in 2005. TVA attributes this projected  decline to the planned installation of “selective catalytic reduction”  systems—which remove nitrogen oxides from the exhaust gases—at some  of its generating units at its coal-burning plants. TVA’s first such system  began operating in 2000. According to TVA, by spring 2005 it will have  installed 18 of these systems, or similar such systems, which will control  NOx emissions on 25 of its 59 generating units.
Moreover, TVA expects to make even sharper cuts in its NOx emissions  during the summer “ozone season” that extends from May through  October. Ozone levels are higher during these months because emissions  levels of NOx and natural hydrocarbons are higher, and there is more  sunlight, all of which are needed for the formation of ozone, as well as  higher temperatures, which speed up the chemical reactions. TVA expects  its ozone-season NOx emissions to fall from 118,000 tons in 2000 to  43,000 tons in 2005.  (Additional information on TVA’s SO2 and NOx emissions from 1974  through 2010 is included in apps. I and II of this report, respectively.)
section_title: Capacity Increases to Come Mainly from Energy Sources Other Than Coal
paragraphs: Of the 3,086 megawatts of additional capacity that TVA plans to add  between 2001 and 2005, more than half (1,658 megawatts) will come from  “peaking” units, which are used only during the parts of the day when  demand spikes. The rest of the new capacity (1,428 megawatts) will be  base load units, which are used throughout the day. Most of this increased  capacity will be generated through hydropower, natural gas, nuclear  power, and other noncoal sources. (See fig. 5.)
To increase its base load capacity, in December 2001 TVA began  purchasing power from a new 440-megawatt coal-burning lignite power  plant in Mississippi. Although TVA does not own the plant, it purchases all  of the facility’s output. To further increase its base load capacity, TVA  plans both to upgrade existing units and to build new capacity: constructing a 500-megawatt, natural gas-fired, combined cycle plant in  Tennessee, to begin operating in 2003;  increasing the base load generating output at the Browns Ferry, Alabama,  and Sequoyah, Tennessee, nuclear plants, between 2003 and 2005, by  290 megawatts.  increasing turbine efficiency at three of its coal-burning plants between  2001 and 2005, adding 153 megawatts of capacity; and  increasing its acquisition of “green power” (from landfill gas, solar, and  wind sources) to 45 megawatts in 2005.
To increase its own peak load capacity, TVA plans to add
1,336 megawatts of additional combustion turbine capacity, primarily in  2001 and 2002, at facilities in Mississippi and Tennessee;
310 megawatts of capacity between 2001 and 2005 by continuing to  modernize its hydropower and pumped storage facilities; and
12 megawatts of peak capacity by constructing a battery storage plant in  Columbus, Mississippi.
Finally, TVA plans to meet future needs by continuing to purchase power  to meet peak-time demand. These purchases are expected to remain in the  range between 1,500 and 3,000 megawatts through 2005.
section_title: TVA’s Demand-Side Management Programs Have Realized Few Savings to Date, but TVA Projects Bigger Savings in the Future
paragraphs: Between fiscal years 1996 and 2000, demand-side management programs  reduced TVA’s peak load by 204 megawatts (about 41 megawatts a year, or  roughly equivalent to 1/10th of 1 percent of its overall capacity). Two  programs accounted for these savings: the Energy Right Program, which  promotes the installation of energy-efficient heat pumps and other electric  appliances; and the Cycle and Save Program, which gives residential  customers a bill credit for allowing TVA to switch off their water heaters  and air conditioners during peak demand periods. TVA reported no  savings from its rate-schedule program for commercial and industrial  customers. Due in large part to a new program introduced in mid-2001,  TVA plans to achieve a cumulative peak load reduction of 396 megawatts  for the fiscal year 2001 through 2005 period (about 80 megawatts a year).  Finally, TVA is studying ways to expand its demand-side management  programs and increase their impact.
subsections: section_title: TVA’s Demand-Side Management Programs Achieved Limited Energy Savings
paragraphs: Each year tens of thousands of customers participate in TVA’s  demand-side management programs. Such programs involve all major  types of customers—commercial, industrial, and residential. Moreover,  they are aimed at reducing electricity use both year-round and during peak  demand periods.
According to TVA, energy-efficiency and load-reduction programs saved  97 megawatts in fiscal year 2000, and a cumulative total of 204 megawatts  from fiscal years 1996 through 2000. Furthermore, TVA expects these  programs to result in an additional 120 megawatts of savings in fiscal  year 2005 and a cumulative total of 396 megawatts from fiscal year 2001  through 2005.  According to TVA, its peak load reduction impacts are to  increase from 0.7 percent of peak load in fiscal year 2000 to 2 percent of  peak load in fiscal year 2005.
subsections: section_title: The Energy Right Program Actually Increased Consumption
paragraphs: TVA attributes 74 percent of the energy savings for the fiscal year period  1996-2000 to its Energy Right Program. This program offers incentives to  encourage contractors, developers, and homeowners to install  energy-efficient electric appliances, such as heat pumps and water heaters.  (TVA attributes the remaining 26 percent to a direct load control program,  discussed below.) The Energy Right Program includes components for  new homes, manufactured homes, heat pumps in existing homes, and  self-audits by residential customers. (See fig. 6.)
The Energy Right Program, which has the greatest number of participants  among TVA’s demand-side management programs, is designed to reduce  residential customers’ consumption both year-round and during peak- demand times through increases in energy efficiency. In fiscal year 2000,  37,182 residential customers became participants in the program, a  substantial increase from the 15,481 residential customers who became  participants in fiscal year 1996. TVA anticipates that an additional 58,900  new participants will join the program in fiscal year 2005.
Similarly, TVA expects the program’s impacts to increase by fiscal  year 2005. The reduction in year-round consumption, which stood at  23,565 megawatt-hours in fiscal year 1996 and 54,129 megawatt-hours in  fiscal year 2000, is expected to reach 83,726 megawatt-hours in fiscal year  2005. Also, the reduction in peak load demand, which was 19 megawatts in  fiscal year 1996 and 43 megawatts in fiscal year 2000, is expected to reach  62 megawatts in fiscal year 2005.
According to TVA’s most recent estimate, the program’s overall effect on  peak demand varied by season. For example, in 1996, the program resulted  in an annual decrease of 19.4 megawatts in peak summer demand and an  annual increase of 31.3 megawatts in winter demand, by providing  incentives to developers and others to install appliances powered by  electricity rather than natural gas or another energy source. According to  TVA, such programs help improve the overall efficiency of its system and  ultimately result in lower costs to consumers.
section_title: TVA Limited the Scope of Its Load-Control Program
paragraphs: TVA’s Cycle and Save program allows TVA to turn off certain appliances in  participating households for short periods when demand is high. TVA  estimates that its Cycle and Save Program for residential customers  accounted for about 26 percent of the savings realized from fiscal year  1996 through 2000. On an annual basis, the program’s savings outpaced  those attributed to the Energy Right Program. However, because the Cycle  and Save Program’s benefits are not cumulative, the Energy Right Program  accounted for 74 percent of the cumulative savings.
TVA reduced the incentives it offered distributors to participate in the  Cycle and Save Program and later restricted the number of distributors  that may participate in the program. According to the program manager,  TVA determined that the Cycle and Save Program was not cost-effective  and allowed it to decline over time. As a result, peak-time consumption  was presumably higher than it would have been if TVA had not taken these  actions. For example,
TVA shifted to the distributors the cost of purchasing, installing, and  maintaining the switches that allow certain appliances to be cycled-off.  While TVA initially paid for all switches installed on appliances, including  air conditioners, standard water heaters, and storage water heaters, it  currently pays for the switches only on storage water heaters. TVA pays  only for these switches because storage water heaters are cycled-off for a  longer period of time than air conditioners and standard water heaters,  thereby providing enough peak load savings to justify their costs.
Between 1992 and 1998, TVA reduced the amount of the monthly credit  provided to participating distributors. It reduced the credit for storage  water heaters from $5.70 to $5.50; for standard water heaters from $5.25 to  $4.75; and for air conditioners and heat pumps from $1.40 to $1.15 (dollar  figures not adjusted for inflation).
TVA estimates that 30 percent of the radio-controlled switches that allow  the water heaters or air conditioners to be cycled off are inoperable. TVA  currently allows only 14 of its 158 distributors to participate in the  program. According to the TVA program manager, as many as 30  distributors participated in the mid-1980s, but this number declined  significantly after TVA eliminated incentives for distributors to participate  in the program. The manager further noted that despite TVA’s changes in  the program, several non-participating TVA distributors continue to  express interest in participating in the program.
section_title: TVA Reports No Energy Savings for Its Rate-Schedule Program
paragraphs: TVA offers rate discounts to its commercial and industrial customers who  give TVA permission to interrupt their power during periods of peak  demand (called “interruptible power contracts”). According to TVA, 51 of  the 62 large federal and industrial customers it serves directly have such  contracts, as do 345 of its distributor-served commercial and industrial  customers. TVA estimates that these contracts give it the ability to curtail  up to 1,800 megawatts of power at times of peak demand. However, TVA  seldom uses this tool. Between 1996 and 2000 TVA curtailed power under  these contracts on only three occasions, and did not measure the savings it  accrued. Moreover, according to TVA, the customers enrolled in these  programs may reduce their consumption by 300 or more megawatts in  response to price increases.
section_title: TVA Projects Bigger Demand-Side Management Savings in the Future
paragraphs: TVA projects that its demand-side management programs will save nearly  twice as much in the fiscal year 2001 through 2005 period as they did in the  previous 5-fiscal year period. Specifically, it projects cumulative savings of  396 megawatts through fiscal year 2005, in contrast to the 204 megawatts  saved through fiscal year 2000. The higher level of savings stems from  several factors: increased participation in its long-standing programs, and  the introduction of a new “buyback” program for large commercial and  industrial customers in June 2001. Specifically, this program allows TVA to  buy power back from its large commercial and industrial customers  whenever it is economical for these customers to curtail their power usage  or when they can generate power from on-site sources. TVA expects that  the program will reduce peak demand by an average of about 27  megawatts annually between fiscal years 2001 and 2005, or 133 megawatts  overall for the fiscal year 2001 through 2005 period.
In October 2001, TVA began a study of its demand-side programs, which it  expects to complete in early 2002. According to the TVA project manager,  the study’s goal is to identify ways to increase cumulative savings to  500 megawatts by the end of fiscal year 2003—75 more megawatts than the  current estimate of 425 megawatts for fiscal year 2003. The study will  consider a range of options, including real-time pricing, rebates to  consumers who purchase energy-efficient appliances (such as air  conditioners and refrigerators), and incentives for industrial and  commercial customers to install high-efficiency lighting.
section_title: Other Utilities More Aggressively Pursue Demand-Side Management Programs
paragraphs: Some comparable utilities have gone further than TVA in implementing  demand-side management programs that are similar to TVA’s programs  and in operating other programs. In an effort to determine how other  utilities are approaching demand-side management, we contacted four  utilities with such programs:  The Bonneville Power Administration, which sells wholesale electricity,  primarily generated by hydropower, in Idaho, Oregon, Washington, and a  portion of Montana;
Florida Power and Light, a utility serving a large residential population in
Georgia Power, which serves retail customers in Georgia; and
Puget Sound Energy, which sells electricity to retail consumers in  Washington state.
The utilities we selected serve different sections of the country and face  differing regulatory environments. For example, Florida Power operates in  a regulated environment and recovers expenses from an energy  conservation cost recovery plan run by the Florida Public Service  Commission. As compensation for demand-side management  expenditures, Florida Power and Light requested reimbursement of more  than $158 million from the Commission in 2000.
subsections: section_title: Energy Efficiency Programs
paragraphs: Unlike TVA, the Bonneville Power Administration—an agency of the U.S.  Department of Energy—offers a credit program to wholesale power  customers who take action to further conservation and renewable  resource development in the region. Bonneville offers utilities and directly  served customers a rate reduction of one-twentieth of a cent per kilowatt- hour to develop their own conservation and renewables programs.
section_title: Peak Load Reduction Programs
paragraphs: Like TVA, both Florida Power and Light and Georgia Power have load  management programs for residential customers. Florida Power  residential customers receive a bill credit if they allow the utility to switch  off their air conditioners, hot water heaters, and pool pumps at peak  times. The utility estimates that about 657,000 (about 19 percent) of its  residential customers participate in its load control program, as contrasted  with about 2 percent of TVA’s residential customers. In addition, Florida  Power has 14,285 businesses enrolled in a similar program for air  conditioners. Florida Power and Light estimated that peak load savings  from its program amounted to 941 megawatts in 2000. Similarly, Georgia  Power operates a program that cycles off power to residential air  conditioners. The program, begun in 1997, is projected to reduce peak  demand by 44 megawatts in 2004.
Also, like TVA, Georgia Power has 500 megawatts of interruptible power  available. Though interruptions are rare, Georgia Power uses an average of  350 megawatts when necessary. In the summer of 2000, it interrupted  power for a total of 12 hours over 3 days.
section_title: Rate-Schedule Programs
paragraphs: Georgia Power and Puget Sound Energy have experience with time-of-use  pricing programs—Georgia Power involves commercial and industrial  customers, while Puget Sound Energy involves residential customers.  Georgia Power started a real-time pricing program in 1992, and it has  become the largest such program in the country, according to the Electric  Power Research Institute. About 1,600 large commercial and industrial  customers, or about 25 percent of such customers, participate in the  program. In response to peak demands for power, Georgia Power can  initiate a pricing “event.” The company uses e-mail to notify participating  customers, a day or an hour ahead of time, that their prices during the  event will be based on the marginal cost of producing power.
During such an event, prices have two components: (1) a baseline charge  and (2) either a marginal charge or credit, depending on how the  customer’s energy use varies from its historic energy use. In August 1999,  when prices spiked to more than $1 per kilowatt-hour (15 times the  average price), customers reduced their demand by 800 megawatts.  During typical peak events, customers reduce demand by an average of  300 megawatts.
During 2001, Puget Sound Energy piloted a time-of-use program for about  300,000 of its 1.4 million residential customers in order to get them to use  less electricity at peak demand times. It established different rates for  4 time periods during the day—from a low of 6.5 cents per kilowatt-hour at  night to 9 cents during the mid-morning and evening hours. Moreover,  Puget Sound Energy’s state-of-the-art automated meter reading system  allowed its customers to log on to its website and track their energy  consumption throughout the day. The utility found that the customers  involved in the “informational pilot program” (billed on the standard rate  but provided with consumption information via the internet), on average,  shifted about 5 percent of their consumption from peak to off-peak hours.  Preliminary results indicate that those actually being billed on the time-of- use rate reduced their overall consumption by 6 percent. Subject to state  regulatory approval, Puget Sound Energy said it plans to introduce the  program to all of its residential customers in 2002.
Bonneville Power has a demand exchange program for large industrial and  commercial customers who are willing to curtail their consumption  depending on electricity prices. Program participants are notified via the  internet of hourly, 1-day-ahead, and 2-day-ahead prices that are associated  with peak load events. Customers may respond, via computer, noting their  willingness to curtail their use of power at the posted prices.
section_title: Conclusions
paragraphs: While TVA plans to substantially reduce its SO2 and NOx emissions by  three means—installing control devices, using lower-sulfur coal, and  relying largely on noncoal sources for additional capacity—it could reduce  emissions even more by more aggressively pursuing an existing fourth  option—demand-side management. However, TVA’s demand-side  management programs are generally limited in scope, and they contribute  little to moderating future demand. As a result, to meet its customers’  growing demand for power, TVA will need to generate more power itself,  or purchase more power from others, which will likely produce more air  emissions. In contrast, certain other utilities have realized greater savings  from their demand-side management programs. TVA’s recently  commissioned study of opportunities to increase the short-term impact of  its demand-side management programs may serve as a useful first step.  However, TVA still needs to assess the potential contributions of demand- side management over a longer time horizon.
section_title: Recommendations for Executive Action
paragraphs: TVA should reevaluate the design of its current programs and evaluate  opportunities for adopting proven ideas from other utilities. Accordingly,  we are recommending that the TVA Chairman (1) evaluate the structure  and effectiveness of its current programs; (2) review the longer-term  potential applicability of other programs to its power system; and (3), as  appropriate, implement demand-side management practices.
section_title: Agency Comments
paragraphs: We provided a draft of this report to TVA for review and comment, and  received a letter from the Interim Vice President for Governmental  Relations (see app. III). He said that TVA was evaluating its own demand- side management programs, including identifying potential opportunities,  researching programs offered by other utilities, and analyzing the cost  effectiveness of potential programs, all of which are consistent with our  recommendations. In addition, he provided technical comments, which we  have incorporated in the report as appropriate.
section_title: Scope and Methodology
paragraphs: To determine TVA’s plans for meeting future power demands for  electricity while minimizing emissions of SO2 and NOx and to describe the  scope and impact of TVA’s demand-side management efforts, we  interviewed officials from TVA and reviewed studies and other documents  prepared by the Department of Energy’s Energy Information  Administration and TVA. In addition, we interviewed three TVA  distributors that participate in TVA’s demand-side management programs  in order to hear their opinions on the programs’ strengths and weaknesses.  In addition, we contacted experts at five non-governmental  organizations—the American Council for an Energy Efficient Economy,  Edison Electric Institute, Electric Power Research Institute, Regulatory  Assistance Project, and Southern Alliance for Clean Energy.
To describe the demand-side activities of other utilities, we contacted  officials from, and reviewed studies and other documents prepared by, the  Edison Electric Institute, the Electric Power Research Institute, and four  utilities: the Bonneville Power Administration, Florida Power and Light,  Georgia Power, and Puget Sound Energy. We selected these utilities for  their geographic dispersion, diverse customers bases, and reputation for  undertaking noteworthy demand-side management efforts. These utilities  are not necessarily representative of other utilities in this country.
We conducted our review between July 2001 and February 2002 in  accordance with generally accepted government auditing standards.
As arranged with your office, unless you publicly announce its contents  earlier, we plan no further distribution of this report for 14 days after the  date of this letter. At that time, we will send copies of this report to the  Ranking Minority Member, Subcommittee on Legislative, House of  Representatives Committee on Appropriations; Senator Fred Thompson;  Representative Zach Wamp; the TVA Chairman; the EPA Administrator;  and other interested parties. We will make copies available to others upon  request.
Questions about this report should be directed to me or David Marwick at  (202) 512-3841. Key contributors to this report were Richard A. Frankel,  Timothy Minelli, and Richard Slade.
section_title: Appendix I: TVA’s SO2 Emissions, 1974-2010
paragraphs: The planned reduction in TVA’s SO2 emissions from 2001 to 2010  continues the trend over the previous quarter-century, as shown in  figure 7. TVA’s emissions dropped from 2,212,000 tons in 1974 to 727,000  tons in 2000, and are expected to drop to 406,000 tons in 2010. This  represents an 82-percent decrease over the entire period.
TVA’s two primary means for reducing SO2 emissions from its coal- burning plants are (1) installing scrubbers that remove sulfur from  smokestack gases and (2) decreasing the sulfur content of the coal it burns  to generate electricity.
Between 1974 and 1995, when TVA reduced its annual emissions from  2,212,000 tons to 876,000 tons, there were notable decreases in 1978, 1982,  1984, and 1995. These decreases reflect the installation of scrubbers at  TVA’s two largest plants (Cumberland in Tennessee and Paradise in  Kentucky), as well as at Widow’s Creek in Alabama, in those years.  Between 1995 and 2000, TVA further reduced its annual emissions to  727,000 tons, without adding any more scrubbers, by switching to lower- sulfur coal. Over those 5 years, TVA lowered the average sulfur content of  its coal purchases from 2.26 percent to 1.88 percent. This decrease of  about 17 percent is roughly equal to the proportional decline of SO2  emissions during that period.
Between 2000 and 2010, TVA plans to use both strategies to further reduce  its SO2 emissions. Through 2005, TVA plans to reduce its annual emissions  to 525,000 tons, by continuing to switch to lower-sulfur coal. Beyond 2005,  TVA plans to further reduce its emissions, by installing five scrubbers on  12 units at four coal-fired plants. This will increase to 60 percent the share  of TVA’s coal-fired capacity operating with scrubbers.
According to TVA, in 2001, TVA emitted SO2 at a rate of 1.18 pounds per  million British thermal units of fuel energy. TVA expects the rate will  decline to below 0.8 pounds per million units in 2010. This remains above  the rate that plants considered new sources are required to meet, which is  about 0.3 pounds per million British thermal units.
section_title: Appendix II: TVA’s NOx Emissions, 1974-2010
paragraphs: TVA’s planned reduction in NOx emissions at its coal plants from 2001 to 2010  continues the trend that began after 1995, when emissions reached 530,000 tons. (See  fig. 8.) In that year, phase one of the Acid Rain Program (authorized by title IV of the  Clean Air Act Amendments of 1990) started and TVA began modifying its coal plants  to reduce their NOx emissions.
By 2000, when the program’s second phase began, TVA’s annual NOx emissions had  fallen to 285,000 tons. In that year, TVA’s first selective catalytic reduction system  went into operation at its Paradise, Kentucky, coal plant. According to TVA, by spring  2005, it will have installed 18 selective catalytic reduction systems, or similar systems,  on 25 generating units at 7 of its coal plants. TVA projects that, once these systems  are installed, the NOx emissions from its coal plants will fall to 215,000 tons in 2005.  NOx emissions shown in figure 8 reflect no additional controls beyond the 18  systems.