TVC Tennessee Valley Authority

---

---

---

---

---

•	New or changed laws, regulations, and administrative orders, including those related to environmental matters, and the costs of complying with these new or changed laws, regulations, and administrative orders, as well as complying with existing laws, regulations, and administrative orders;

•	The requirement or decision to make additional contributions to TVA's pension or other post-retirement benefit plans or to TVA's Nuclear Decommissioning Trust ("NDT") ;

•	Events at a TVA nuclear facility, which, among other things, could result in loss of life, damage to the environment, damage to or loss of the facility, and damage to the property of others;

•

Events at a nuclear facility, whether or not operated by or licensed to TVA, which, among other things, could lead to increased regulation or restriction on the construction, operation, and decommissioning of nuclear facilities or on the storage of spent fuel, obligate TVA to pay retrospective insurance premiums, reduce the availability and affordability of insurance, increase the costs of operating TVA's existing nuclear units, negatively affect the cost and schedule for completing Watts Bar Nuclear Plant ("Watts Bar") Unit 2 and Bellefonte Nuclear Plant ("Bellefonte") Unit 1, or cause TVA to forego future construction at these or other facilities;

•	Significant delays, cost increases, or cost overruns associated with the construction of generation or transmission assets;

•	Settlements, natural resource damages, fines and penalties associated with the Kingston Fossil Plant ("Kingston") ash spill;

•	Inability to eliminate identified deficiencies in TVA's systems, standards, controls, and corporate culture;

•	The outcome of legal and administrative proceedings;

•	Significant changes in demand for electricity;

•	Addition or loss of customers;

•	The continued operation, performance, or failure of TVA's generation, transmission, flood control, and related assets, including coal combustion residual ("CCR") facilities;

•	Modernizing aging coal-fired generating units and installing emission control equipment to meet existing and anticipated emissions reduction requirements, which could render continued operation of many of these units not cost-effective and result in their removal from service, perhaps permanently;

•	Disruption of fuel supplies, which may result from, among other things, weather conditions, production or transportation difficulties, labor challenges, or environmental laws or regulations affecting TVA's fuel suppliers or transporters;

•	Purchased power price volatility and disruption of purchased power supplies;

•	Events involving transmission lines, dams, and other facilities not operated by TVA, including those that affect the reliability of the interstate transmission grid of which TVA's transmission system is a part, as well as inadequacies in the supply of water to TVA's generation facilities;

•	Inability to obtain regulatory approval for the construction or operation of assets;

•	Weather conditions;

•	Catastrophic events such as fires, earthquakes, solar events, floods, hurricanes, tornadoes, pandemics, wars, national emergencies, terrorist activities, and other similar events, especially if these events occur in or near TVA's service area;

•	Restrictions on TVA's ability to use or manage real property currently under its control;

•	Reliability and creditworthiness of counterparties;

•	Changes in the market price of commodities such as coal, uranium, natural gas, fuel oil, crude oil, construction materials, reagents, electricity, and emission allowances;

•	Changes in the market price of equity securities, debt securities, and other investments;

•	Changes in interest rates, currency exchange rates, and inflation rates;

•	Rising pension and health care costs;

•	Increases in TVA's financial liability for decommissioning its nuclear facilities and retiring other assets;

•	Limitations on TVA's ability to borrow money which may result from, among other things, TVA's approaching or substantially reaching the limit on bonds, notes and other evidences of indebtedness specified in the TVA Act of 1933;

•	An increase in TVA's cost of capital which may result from, among other things, changes in the market for TVA's debt securities, changes in the credit rating of TVA or the U.S. government, and an increased reliance by TVA on alternative financing arrangements as TVA approaches its debt ceiling;

•	Changes in the economy and volatility in financial markets;

•	Loss of quorum of the TVA Board of Directors;

•	Ineffectiveness of TVA's disclosure controls and procedures and its internal control over financial reporting;

•	Problems attracting and retaining a qualified workforce;

---

•	Changes in technology;

•	Failure of TVA's assets to operate as planned and the failure of TVA's cyber security program to protect TVA's assets from cyber attacks;

•	Differences between estimates of revenues and expenses and actual revenues earned and expenses incurred; and

•	Unforeseeable events.

---

---

---

•	Contracts that require five years’ notice to terminate;

•	Contracts that require 10 years’ notice to terminate; and

•	Contracts that require 15 years’ notice to terminate.

---

•	Operation, maintenance, and administration of its power system;

•	Payments to states and counties in lieu of taxes ("tax equivalents") ;

•	Debt service on outstanding indebtedness;

•	Payments to the U.S. Treasury in repayment of and as a return on the government's appropriation investment in TVA's power facilities (the "Power Program Appropriation Investment") ; and

•	Such additional margin as the TVA Board may consider desirable for investment in power system assets, retirement of outstanding bonds, notes, or other evidences of indebtedness ("Bonds") in advance of maturity, additional reduction of the Power Program Appropriation Investment, and other purposes connected with TVA’s power business.

•	Operating and maintenance costs;

•	Tax equivalents (other than the amount attributable to fuel cost-related revenues);

•	Other costs in accordance with the TVA Act; and

•	Debt service coverage.

---

---

---

---

---

---

---

---

---

---

---

---

•	43 percent from the Illinois Basin;

•	37 percent from the Powder River Basin in Wyoming;

•	19 percent from the Uinta Basin of Utah and Colorado; and

•	1 percent from the Appalachian Basin of Kentucky, Pennsylvania, Tennessee, Virginia, and West Virginia.

---

---

---

---

---

---

---

---

---

---

---

---

---

•	Additional capital expenditures to address future clean air, water quality, and waste management requirements,

•	Adding more renewable, gas, or nuclear generation,

•	Conversion of existing coal-fired units to natural gas,

•	Idling or retiring more coal-fired units, and

•	Transmission upgrades in part to help address plant/unit retirements.

---

---

---

•	Provisions of the pension plans;

•	Changing employee demographics;

•	Rates of increase in compensation levels;

•	Rates of return on plan assets;

•	Discount rates used in determining future benefit obligations and required funding levels;

•	Future government regulation; and

•	Levels of contributions made to the plans.

---

---

---

•	The value of the investments in the trust declines significantly, as it did during the 2008-2009 recession, or the investments fail to achieve the assumed real rate of return;

•	The assumed real rate of return on plan assets, which is currently five percent, is lowered by the TVA Board or is overly optimistic;

•	Changes in technology and experience related to decommissioning cause decommissioning cost estimates to increase significantly;

•	The NRC guidelines for calculating the minimum amount of funds necessary for decommissioning activities are significantly changed.

•	May have to invest a significant amount of resources to repair or replace the assets or the supporting infrastructure;

•	May be unable to operate the assets for a significant period of time;

•	May have to operate less economical sources of power;

---

•	May have to purchase replacement power on the open market at prices greater than TVA's generation costs;

•	May not be able to meet its contractual obligations to deliver power;

•	May not be able to maintain the integrity or reliability of the transmission system at normal levels;

•	May have to remediate collateral damage caused by a failure of the assets or the supporting infrastructure;

•	May have to increase its efforts to reduce encroachments by vegetation onto transmission lines to comply with applicable regulations;

•	May be required to invest substantially to meet more stringent reliability standards; and

•	May be unable to maintain insurance on affected facilities, or be required to pay higher premiums for coverage, unless necessary repairs or upgrades are made.

---

---

---

•	TVA's access to funds held in United States Treasury accounts could be limited or denied.

•	TVA's own credit ratings could be downgraded as a result of a downgrade of the United States's credit ratings.

•	The economy could be negatively impacted, resulting in reduced demand for electricity, increased expenses for borrowings, and increased cost of fuels, supplies, and other material required for TVA's operations.

•	A downgrade could increase TVA's interest expense by increasing the interest rates that TVA pays on new Bonds that it issues.  An increase in TVA's interest expense may reduce the amount of cash available for other purposes, which may result in the need to increase borrowings, to reduce other expenses or capital investments, or to increase power rates.

•	A downgrade may result in TVA ' s having to post collateral under certain physical and financial contracts that contain rating triggers.

•	A downgrade below a contractual threshold may prevent TVA from borrowing under three credit facilities totaling $2.5 billion .

•	A downgrade may lower the price of TVA ' s securities in the secondary market, thereby hurting investors who sell TVA securities after the downgrade and diminishing the attractiveness and marketability of TVA Bonds.

---

•	Approximately 16,000 circuit miles of transmission lines (primarily 500 kilovolt and 161 kilovolt lines);

•	508 transmission substations, power switchyards, and switching stations; and

•	1,240 customer connection points (customer, generation, and interconnection).

---

•	Approximately 11,000 miles of reservoir shoreline;

•	Approximately 293,000 acres of reservoir land;

•	Approximately 650,000 surface acres of reservoir water; and

•	Over 80 public recreation areas throughout the Tennessee Valley, including campgrounds, day-use areas, and boat launching ramps.

•	Under section 31 of the TVA Act, TVA has authority to dispose of surplus real property at a public auction.

•	Under section 4(k) of the TVA Act, TVA can dispose of real property for certain specified purposes, including providing replacement lands for certain entities whose lands were flooded or destroyed by dam or reservoir construction and to grant easements and rights-of-way upon which are located transmission or distribution lines.

•	Under section 15d(g) of the TVA Act, TVA can dispose of real property in connection with the construction of generating plants or other facilities under certain circumstances.

•	Under 40 U.S.C. § 1314, TVA has authority to grant easements for rights-of-way and other purposes.

---

---

---

•	TVA's Business and Vision - a general description of its business, its objective, its strategic priorities, and its core capabilities;

•	Executive Overview - a general overview of activities and effects on operations for 2012;

•	Results of Operations - an analysis of TVA's consolidated results of operations for the three years presented in its consolidated financial statements;

•	Liquidity and Capital Resources - an analysis of cash flows; off-balance sheet arrangements and aggregate contractual obligations; and overview of financial position;

•	Key Initiatives and Challenges - a discussion of current and future challenges facing TVA;

•	Critical Accounting Policies and Estimates - a discussion of accounting policies that require critical judgments and estimates; and

•	Other Matters - a discussion of governance and certain risks facing TVA.

1.	TVA is a government corporation.

2.

The area in which TVA sells power is limited by the Tennessee Valley Authority Act of 1933, as amended, 16 U.S.C. §§ 831-831ee (as amended, the “TVA Act”) under a provision known as the “fence”; however, another provision of federal law known as the “anti-cherrypicking” provision generally protects TVA from being forced to provide access to its transmission lines to others for the purpose of delivering power to customers within substantially all of TVA's defined service area.

3.	The rates TVA charges for power are set solely by the TVA Board of Directors (the "TVA Board") and are not set or reviewed by another entity, such as a public utility commission.  In setting rates, however, the TVA Board is charged by the TVA Act to have due regard for the primary objectives of the TVA Act, including the objective that power be sold at rates as low as feasible.

4.

TVA is not authorized to raise capital by issuing equity securities.  TVA relies primarily on cash from operations and proceeds from power program borrowings to fund its operations and is authorized by the TVA Act to issue bonds, notes, or other evidences of indebtedness ("Bonds") in an amount not to exceed $30.0 billion outstanding at any given time.  Although TVA's operations were originally funded primarily with appropriations from Congress, TVA has not received any appropriations from Congress for any activities since 1999 and, as directed by Congress, has funded essential stewardship activities primarily with power revenues.

---

•	Low rates

•	High reliability

•	Responsibility

•	Cleaner air

•	Greater energy efficiency

•	More nuclear generation

---

---

---

---

---

---

---

•	Operation, maintenance, and administration of its power system;

•	Payments to states and counties in lieu of taxes;

•	Debt service on outstanding Bonds;

•	Payments to the U.S. Treasury in repayment of and as a return on the government's appropriation investment in TVA's power facilities (the "Power Program Appropriation Investment") ; and

•

Such additional margin as the TVA Board may consider desirable for investment in power system assets, retirement of outstanding Bonds in advance of maturity, additional reduction of the Power Program Appropriation Investment, and other purposes connected with TVA’s power business, having due regard for the primary objectives of the TVA Act, including the objective that power shall be sold at rates as low as are feasible.  See Note 16 — Appropriation Investment .

•	The depreciation accruals and other charges representing the amortization of capital expenditures, and

•	The net proceeds from any disposition of power facilities,

•	The reduction of its capital obligations (including Bonds and the Power Program Appropriation Investment), or

---

•	Investment in power assets.

---

---

---

---

---

---

---

---

---

---

---

•	Regulatory Accounting

•	Environmental Cleanup Costs — Kingston Ash Spill

•	Asset Retirement Obligations

•	Pension and Other Post-Retirement Benefits

---

---

---

---

---

---

---

---

---

---

---

---

---

•	A downgrade could increase TVA’s interest expense by increasing the interest rates that TVA pays on new Bonds that it issues.  An increase in TVA’s interest expense may reduce the amount of cash available for other purposes, which may result in the need to increase borrowings, to reduce other expenses or capital investments, or to increase power rates.

•	A downgrade could result in TVA's having to post additional collateral under certain physical and financial contracts that contain rating triggers.

•	A downgrade below a contractual threshold could prevent TVA from borrowing under three credit facilities totaling $2.5 billion.

•	A downgrade could lower the price of TVA securities in the secondary market, thereby hurting investors who sell TVA securities after the downgrade and diminishing the attractiveness and marketability of TVA Bonds.

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

•	If TVA remains a majority-owned U.S. government entity but Standard & Poor's ("S&P") or Moody's Investors Service ("Moody's") downgrades TVA's credit rating to AA or Aa2, respectively, TVA's collateral obligations would likely increase by $ 45 million ; and

•	If TVA ceases to be majority-owned by the U.S. government, TVA's credit rating would likely be downgraded and TVA would be required to post additional collateral.

---

---

---

---

---

---

---

---

---

•	Original Benefit Structure.   The pension benefit for a member participating in the Original Benefit Structure is based on the member’s creditable service, the member’s average monthly salary for the highest three consecutive years of base pay, and a pension factor based on the member’s age and years of service, less a Social Security offset.

•

Cash Balance Benefit Structure.   The pension benefit for a member participating in the Cash Balance Benefit Structure is based on credits accumulated in the member’s account and the member’s age.  A member’s account receives pay credits equal to six percent of his or her straight-time earnings.  The account also receives interest credits at a rate set at the beginning of each calendar year equal to the change in the Consumer Price Index ("CPI") plus three percent , with the provision that the rate may not be less than six percent or more than ten percent .  The rates of the credits were six percent for calendar years 2012 and 2011 .

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

•	Petition to Immediately Suspend the Operating Licenses of GE BWR Mark I Units Pending the Full NRC Review With Independent Expert and Public Participation From Affected Emergency Planning Zone Communities

---

•	Twelve separate petitions on various issues

•	Petition Pursuant to 10 CFR 2.206 - Demand For Information Regarding Compliance with 10 CFR 50, Appendix A, General Design Criterion 44, Cooling Water, and 10 CFR 50.49, Environmental Qualification of Electric Equipment Important to Safety for Nuclear Power Plants

---

---

---

---

---

---

---

---

---

---

•

Provide a competitive level of compensation that enables TVA to attract, retain, and motivate highly competent employees. Total target compensation for each position in TVA is determined by market pricing based on a level needed to attract, retain, and motivate employees critical to TVA's success in achieving its mission and vision. Accordingly, total direct compensation levels typically are targeted at the median (50 th percentile) of the relevant labor market for most positions. However, total direct compensation levels for positions subject to market scarcity, recruitment and retention issues, and other business reasons, are targeted at a higher level (typically between the 50 th and 75 th percentiles). Similarly, total direct compensation levels for positions that are not subject to competitive pressures are targeted at a lower level (typically between the 25 th and 50 th percentiles).

•

Encourage and reward executives for their performance and contributions to the successful achievement of financial and operational goals. A key tenet of the Compensation Plan is to pay for performance by rewarding all employees for improvement in TVA's overall performance, as well as that of individual business units. The TVA Board believes that the portion of total direct compensation delivered through structured incentive compensation should increase as an employee's position and level of responsibility within TVA increases. Accordingly, executives have the highest percentage of their compensation tied to TVA and business unit performance. For the Named Executive Officers, 56 percent to 68 percent of their total target direct compensation opportunity is performance-based incentive compensation.

•

Provide executives with the focus to achieve short-term and long-term business goals that are important to TVA, TVA's customers, and the other people TVA serves. TVA seeks to hire and retain executives who are focused on both TVA's short-term and long-term success. The Compensation Plan is designed to achieve this goal by providing a mix of salary and performance-based annual and long-term incentive compensation.

•

Improve overall company performance through productivity enhancement. An executive cannot help meet TVA's goals and improve performance without the work of others. For this reason, the performance goals set at the corporate level are the same for both executives and all non-executive employees. This generally translates into all TVA employees receiving compensation in a manner that aligns their work with the same goals and encourages and rewards them for the successful achievement of TVA's goals.

---

---

•	Specifies all compensation (such as salary or any other pay, benefits, incentives, and any other form of remuneration) for the CEO and TVA employees;

•	Is based on an annual survey of the prevailing compensation for similar positions in private industry, including engineering and electric utility companies, publicly owned electric utilities, and federal, state, and local governments; and

•	Provides that education, experience, level of responsibility, geographic differences, and retention and recruitment needs will be taken into account in determining compensation of employees.

•	The TVA Board will annually approve all compensation (such as salary or any other pay, benefits, incentives, and other form of remuneration) of all managers and technical personnel who report directly to the CEO (including any adjustment to compensation);

•	On the recommendation of the CEO, the TVA Board will approve the salaries of employees whose salaries would be in excess of Level IV of the Executive Schedule ($155,500 in 2012); and

•	The CEO will determine the salary and benefits of employees whose annual salary is not greater than Level IV of the Executive Schedule ($155,500 in 2012).

•

The TVA Board has approved compensation ranges for the direct reports to the CEO of 80 percent to 110 percent of the median total direct compensation for comparable positions, as established by benchmarking sources outside of TVA, and authorized the CEO to set or adjust compensation for the CEO's present or future direct reports within such compensation ranges, as well as to approve the parameters under which such executives may participate in certain supplemental benefit plans such as TVA's Supplemental Executive Retirement Plan ("SERP") , provided that the CEO may not finally set or adjust such compensation until the Committee, or the full TVA Board, has had the opportunity to review the proposed compensation.

•

The TVA Board has delegated to the Chairman of the TVA Board, in consultation with the Committee and with input from individual members of the TVA Board, the authority to evaluate and rate the performance of the CEO during the year, and the authority to approve any payout to the CEO under the Executive Annual Incentive Plan ("EAIP") based on, among other things, the CEO's evaluated performance during the year.

•	The TVA Board has delegated to the CEO, in consultation with the Committee and with input from individual members of the TVA Board, the authority to approve the individual performance goals for the CEO's direct reports and the authority to evaluate and rate the performance of the CEO's direct reports during the year.

---

•	Published and customized compensation surveys reflecting the relevant labor markets identified for designated positions; and

•	Publicly disclosed information from the proxy statements and annual reports on Form 10-K of energy services companies with revenues ranging from one-half to two times TVA's revenue.

•	Test target compensation level and incentive opportunity competitiveness; and

•	Determine appropriate target compensation levels and incentive opportunities to maintain the desired degree of market competitiveness.

---

---

•	Net Cash Flow,

•	Nuclear Equivalent Availability Factor, and

•	Critical Fossil Seasonal Equivalent Forced Outage Rate.

---

---

---

•	Using corporate-level performance criteria that are directly aligned with TVA's mission;

•	Using a “cumulative” performance approach to measure performance achieved over a three-year period with a new three-year performance cycle beginning each year;

•

Targeting award opportunities for each performance cycle at levels that approximate median levels of competitiveness with TVA's peer group and incorporating the Committee's policy of targeting that (i) approximately 80 percent of each executive's total long-term incentive opportunity be performance-based (under the ELTIP) and (ii) approximately 20 percent of each executive's total long-term incentive opportunity be retention and security-oriented (under the Long-Term Deferred Compensation Plan ("LTDCP") as described below under the heading “Long-Term Deferred Compensation”); and

•	Utilizing an award opportunity range of 50 percent to 150 percent of salary to enable payment of awards that are commensurate with performance achievements.

---

•	retail rates (distributor-reported retail power revenue plus directly-served power revenue divided by distributor-reported retail sales plus directly-served power sales);

•	load not served (the product of the percentage of total load not served times the number of minutes in the period);

•	organizational health index (measures and tracks the organizational elements that drive TVA's performance culture); and

•	stakeholder survey (measures the external reputation and perception of TVA in how it responds to its strategic objectives).

•	The threshold goal was TVA's performance ranking in the 12th position (50th percentile) of a comparison group of regional utilities composed of 23 utilities, which are subsidiaries of 15 holding companies with annual revenues greater than $3.0 billion, in the regional proximity of the TVA service territory (the “ELTIP Retail Rates Comparison Group”);

•	The target goal was TVA's performance ranking in the 8th position (2nd quartile) of the ELTIP Retail Rates Comparison Group's performance; and

•	The maximum goal was TVA's performance ranking in the 6th position (75th percentile) of the ELTIP Retail Rates Comparison Group's performance.

---

---

---

---

-	Original Benefit Structure ("OBS") for employees covered under the plan prior to January 1, 1996, with a pension based on a final average pay formula.

-	Cash Balance Benefit Structure ("CBBS") for employees first hired on or after January 1, 1996, with a pension based on an account that receives pay credits equal to six percent of compensation plus interest.

-	For OBS members, TVA provides matching contributions of 25 cents on every dollar up to 1.5 percent of annual salary.

-	For CBBS members, TVA provides matching contributions of 75 cents on every dollar up to 4.5 percent of annual salary.

---

(1)

Represents $350,000 awarded under the EAIP, $1,081,455 awarded under the ELTIP, and a deferred compensation credit of $ 275,000 provided under an incentive-based long-term deferred compensation arrangement. See information regarding the details of the arrangement under Compensation Discussion and Analysis — Executive Compensation Program Components — Other Agreements . An additional $350,000 may be paid under the EAIP at the time Watts Bar Unit 2 begins commercial operation, but only if the total cost of the project is $4.4 billion or less and commercial operation is achieved on or before December 31, 2015. See Compensation Discussion and Analysis — Executive Compensation Program Components — Annual Incentive Compensation.

---

---

---

---

---

---

(1)	Includes vested and unvested earnings. Because none of the amounts is above market earnings under SEC rules, none of these amounts is included in the Summary Compensation Table.

(2)	Includes vested and unvested contributions and earnings.

(3)

Represents an unvested annual credit in the amount of $300,000 provided under a LTDCP agreement with Mr. Kilgore (reported in the “All Other Compensation” column in the Summary Compensation Table) and a credit of $275,000 to be awarded under an additional incentive based long-term deferred compensation arrangement (reported in the "Non-Equity Incentive Plan Compensation" column in the Summary Compensation Table).

(4)	The $275,000 amount reported in "Registrant Contributions in Last FY" column will be credited to his account in the first quarter of 2013 and is not included in the balance. A total of $2,008,662 was reported as compensation to Mr. Kilgore in the Summary Compensation Tables in previous years.

(5)	Represents credits totaling $150,000, $50,000 of which vests on December 31, 2012, and $100,000 of which vests on September 30, 2013, provided under two separate LTDCP agreements with Mr. Thomas (reported in the “All Other Compensation” column in the Summary Compensation Table).

(6)	Includes a total of $205,464 of contributions and earnings that were not vested as of September 30, 2012. A total of $50,000 was reported as compensation to Mr. Thomas in the Summary Compensation Tables in previous years.

(7)	Represents credits totaling $250,000, $150,000 of which vested on September 30, 2012, and $100,000 of which vests on December 31, 2012, provided under two separate LTDCP agreements with Ms. Greene (reported in the “All Other Compensation” column in the Summary Compensation Table).

(8)	Includes a total of $101,641 of contributions and earnings that were not vested as of September 30, 2012. A total of $830,000 was reported as compensation to Ms. Greene in the Summary Compensation Tables in previous years.

(9)	Represents credits totaling $225,000, $125,000 of which vests on December 31, 2012, and $100,000 of which vests on September 30, 2013, provided under two separate LTDCP agreements with Mr. Swafford (reported in the “All Other Compensation” column in the Summary Compensation Table).

(11)	Represents credits totaling $130,000, $60,000 of which vests on December 31, 2012, and $70,000 of which vests on September 30, 2013, provided under two separate LTDCP agreements with Mr. Rodgers (reported in the “All Other Compensation” column in the Summary Compensation Table).

---

---

---

---

---

---

•	comprised solely of a right to payment of retirement benefits resulting from former employment or fiduciary relationship;

•	arising solely by virtue of cooperative membership or similar interest as a consumer in a distributor of TVA power; or

•	arising by virtue of ownership of publicly traded securities in any single entity with a value of $25,000 or less, or within a diversified mutual fund investment in any amount.

---

•	The aggregate amount of all such non-audit services provided to TVA does not exceed five percent of the total amount TVA pays the external auditor during the fiscal year in which the non-audit services are provided;

•	Such services were not recognized by TVA at the time of the engagement to be non-audit services or non-audit related services; and

•	Such services are promptly brought to the attention of the Audit, Risk, and Regulation Committee and approved at the next scheduled Audit, Risk, and Regulation Committee meeting or by one or more members of the Audit, Risk, and Regulation Committee to whom the authority to grant such approvals has been delegated.

•	Bookkeeping or other services related to the accounting records or financial statements of TVA;

•	Financial information system design and implementation;

•	Appraisal or valuation services, fairness opinions, and contribution-in-kind reports;

•	Actuarial services;

•	Internal audit outsourcing services;

•	Management functions or human resources;

•	Broker or dealer, investment adviser, or investment banking services;

•	Legal services and expert services unrelated to the audit; and

•	Any other services that the Public Company Accounting Oversight Board determines, by regulation, is impermissible.

---

(1)	Consolidated Financial Statements.  The following documents are provided in Item 8, Financial Statements and

---

---

---

---

---

---

---

---

---

---