STATEMENT OF WILLIAM W. BAXTER, NOMINATED BY THE PRESIDENT

TO BE APPOINTED AS MEMBER OF THE BOARD OF DIRECTORS,

TENNESSEE VALLEY AUTHORITY

I’m honored to be here today as President Bush’s nominee as a Director of the Tennessee Valley Authority. And I am personally very grateful for the support and encouragement of Senator Bill Frist and Senator Fred Thompson from my home state of Tennessee. I appreciate very much the Committee expediting this hearing, and I look forward to answering any questions you might have today. If the committee and the full Senate see fit to confirm my nomination, I look forward to joining Glenn McCullough and Skila Harris on theTVA Board and joining them in the work at hand.

As a lifelong resident of Knoxville, the home of the headquarters of the Tennessee Valley Authority, my family and my business have been users of TVA power for nearly five decades, and I appreciate the critical importance of TVA to our area. For the last three years, as Commissioner of Economic Development for the State of Tennessee, I’ve come to understand even more fully the crucial role that TVA plays in the economic prosperity of the seven-state region it serves. As the nation’s largest public power producer as well as the steward of the nation’s fifth largest river system, TVA has and will continue to play a pivotal role in the future of the region.

Several challenges lay immediately in TVA’s future:

(1) First and foremost is the job of continuing to provide reliable, low cost electricity to the Tennessee Valley, a region that has been growing at a rate of 3-4% annually exceeding the national average considerably. To support this growth, a primary effort of TVA in the immediate future will be increasing base and peak generating capacity. We want to make sure that the lights don’t go out in the Tennessee Valley for lack of prudent planning or wise, forward looking investment.

(2) TVA should be a leader in addressing air pollution issues that come with fossil fuel power plants. TVA’s record investments thus far in pollution abatement measures, along with its recent announcements of significant new investments over the next few years, will continue. Today we know that the users of electricity want both reliable, affordable power and responsible environmental conduct of business. TVA, and all other power producers, must strive to achieve both. I grew up in the Smoky Mountains and I still hike there on a regular basis with my family and friends, and I am as interested as anyone in the long-term health of these mountains and the preservation of their beauty.

(3) The restructuring of the electric production and transmission industry in our country will continue with lessons learned from California and elsewhere. TVA must continue its earnest efforts to prepare for this restructuring. Significant progress has been made on the complex issues of how TVA will fit in the larger scheme of this restructured market. Excellent work has already been done by Senators Frist and Thompson from my home state, Senator Cochran of Mississippi, Congressman Ed Bryant from Tennessee, and many others. I’m happy to have developed a working relationship with many of TVA’s distributor customers during my three years in economic development in the State of Tennessee, and I believe listening to these customers is good business, especially on the issue of deregulation. Likewise, constructive dialogue with investor owned utilities can be very beneficial to understanding the proper posture of TVA after restructuring, and I look forward to productive conversations with the executives of these companies as we move forward thoughtfully into the restructured electric market place.

(4) The prudent management and stewardship of the Tennessee River system is one of the fundamental missions of TVA; in fact, it was the original mission of TVA. From my perspective, TVA has done a superlative job in this area, and improvements continue to be made every year. Successfully performing this core responsibility will continue to be a high priority at TVA, and listening to our customers, all the various users of the Tennessee River system, will the key to making those continuous improvements. I grew up on Norris Lake, the lake created by the first TVA built dam, and my family’s business has been located on the Tennessee River for four decades. I know first hand the importance of TVA’s river system stewardship.

(5) TVA is a $7 billion business, and it must be run with the best business practices. I look forward to bringing my twenty years of private sector business experience to the TVA organization and doing everything I can to ensure that best business practices are employed and the best possible financial results are produced. As you know, TVA has a very large debt, but the good news is this debt is being paid down in a steady, responsible manner. In fact, today TVA’s interest expense as a percent of revenues is at its lowest level in twenty years. Real progress is being made on this critical issue. The stimulating business challenge at TVA is to continue to reduce this debt in a disciplined fashion, while at the same time investing prudently in additional generating capacity, meeting our environmental responsibilities, promoting economic development in the valley, and managing the Tennessee River system in a professional manner, all the while maintaining rates as low and steady and predictable as possible for both home and business use. This is a business challenge of the highest order, and I look forward to being fully involved in ensuring TVA’s performance in all these areas.

Once again, I want to thank the Chairman and the members of the committee for expediting this process, as I know you and the other members of the Senate have critically important issues to deal with today. As an American citizen and as a father of four, I want to express my appreciation to each of you for all that you are doing to make our country strong and to secure our liberties for the next generation.

Thank you very much.