Leonard Muzyn's TVARS Blog

TVA paid only $282 million of its $511 million pension cost in 2015.(1)  TVA expects future customers to pay the remaining $229 million of its 2015 pension cost that it chose not to pay.  The total amount of pension cost that TVA has assigned future customers to pay is $5.4 billion.(2)  In order to defer this cost as a regulatory asset on its balance sheet, as TVA has done, accounting standards dictate that TVA must believe that it is probable that it will be recovered through higher rates charged to future customers.(3)  $5.4 billion is almost half of TVA’s total 2015 revenue.  This percentage of annual revenue is by far the highest of any of the large electric utilities surrounding TVA.(4)  Is it reasonable for TVA to believe that $5.4 billion of past pension cost will be paid by future customers?  Accounting standards indicate that such deferred costs will be subject to prudence reviews as part of the ratemaking process, and if denied, the costs will be immediately charg

A notice was sent to my TVA e-mail inbox exactly 24 hours and 1 minute before the July 30, 2015 meeting was scheduled to begin.  I was on leave and did not see this notice until after the meeting occurred.  At this meeting, the board voted 5-1 to approve the conflict of interest waiver, overturning the vote held the previous week.  Please see my previous discussion of these meetings here .  This meeting notice appears to violate the TVARS Board’s own governance policy: 3. Special Meetings: The Board is authorized to schedule additional meetings, if deemed necessary, upon the call of the Board Chair or three members of the Board, after giving appropriate notice to all Directors. The date for special meetings shall be determined by the availability of the majority of Directors.  Where circumstances permit, the Board shall try to provide at least 72 hours notice for special meetings. Please see the complete TVARS Board Governance Policy here . The meeting notice appears to just

Chris Christie, Partner, Bradley Arant Boult Cummings (“Bradley Arant”) is representing the TVARS Board in the current lawsuit over the 2009 pension benefit reductions (“pension lawsuit”).  TVA is another party to the pension lawsuit.  Kevin Newsom, another Partner with Bradley Arant, has been asked by TVA to provide legal services to TVA on a matter unrelated to TVARS.   Chris Christie asked the TVARS Board for a conflicts waiver as required by applicable legal ethics rules. The conflict of interest arises from Bradley Arant being paid by TVA for services while some of TVA’s interests are counter to TVARS’ interests in the pension lawsuit.  Given the vast resources at TVA’s disposal, which could be used to influence those wishing to begin or expand their business relationships with TVA, I do not believe the TVARS Board should grant the conflicts waiver.  I am concerned with the possibility of such influence that a conflicts waiver would allow.  That the other matter is not related t

On September 15, 2015, the retirees and employees of TVA appealed the August 19, 2015 final judgment to the Sixth Circuit Court of Appeals. The Sixth Circuit encompasses the states of Michigan, Ohio, Kentucky and Tennessee. Please see the Notice of Appeal here .

The conclusion I reach from reading the court order is that TVA and TVARS can do whatever they want concerning our retirement benefits, and we cannot seek relief through the courts.  It appears that TVARS and TVA could agree to stop paying pension benefits, and TVA retirees could not sue in court to have them restored.  This goes against common sense, and the judge even stated that this is inconsistent with other retirement programs.  This is one reason I believe that the likelihood of an appeal succeeding in this case is greater than usual.  I understand that the plaintiffs have 60 days from the issuance of this court order to appeal.  I would be very surprised if the plaintiffs do not appeal. I understand that if the plaintiffs do appeal, it would be to the U.S. Court of Appeals for the Sixth Circuit , and that a 3-judge panel would be formed to look at the record and decide the case anew.  I understand that the panel would not rely on interpretations or conclusions reached in t

Click here to see the court order and here to see the complete accompanying memorandum. The court order: UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION JERRY DUNCAN, ET AL,  Plaintiffs TENNESSEE VALLEY AUTHORITY  RETIREMENT SYSTEM and  TENNESSEE VALLEY AUTHORITY,  Defendants No. 3:10-cv-217 Judge Trauger Magistrate Judge Brown ORDER For the reasons set forth in the accompanying Memorandum, defendant Tennessee Valley  Authority’s Motion for Summary Judgment (Docket No. 121) is hereby GRANTED and  plaintiffs’ claims against both defendants are DISMISSED WITH PREJUDICE. The  plaintiffs’ Partial Motion for Summary Judgment (Docket No. 211) is denied as moot. Entry of this Order shall constitute judgment in the case. It is so ORDERED. Enter this 19th day of August 2015. ____________________________________ ___________________________________ ALETA A. TRAUGER United States District Judge From the memorandum:

Thank you very much for the confidence you have shown in me by letting me run unopposed for another term as an elected TVARS board member!  The TVA Retirement System (TVARS) recently accepted nominations for a three-year term as an elected member of the TVARS board of directors. At the close of the nomination period deadline, the only nomination petition received was for Leonard J. Muzyn, who currently serves as an elected director on the board. The TVARS rules and regulations state in the event only one person is nominated for the director position to be filled, the board may declare such nominee elected without the necessity of formal balloting by the membership. Therefore, in a special called meeting on July 24, 2015, the board approved a resolution declaring Mr. Muzyn re-elected as a director of the TVARS board for the three-year term beginning November 1, 2015, through October 31, 2018. Mr. Muzyn’s candidate information form is available for review on the TVARS website . A

The term of Allen Stokes, a TVA retiree and the current 7th Board member, ends October 31, 2015.  The 7th member is appointed by the other six per the retirement system rules.  Allen has served as 7th member for four years.  Allen has submitted his name for consideration for another term.  Last I heard, his is the only name that has been submitted.  If any other names are submitted, I will keep an open mind and be happy to participate with the other five board members when we conduct the interview process. At this time though, in response to many of your questions, I want to let you know that I have been impressed with Allen’s performance and leadership as 7th member and Chairman of the TVARS Board.  Allen’s positions are always well thought out.  He takes his responsibility to TVA retirees and employees very seriously.  If Allen is reappointed as the 7th Board member, I believe the TVARS Board would be in a very good position to follow through on some matters of great importance

The TVARS board filed documents with the court yesterday requesting that the Court grant Plaintiffs' Motion as to the vesting of COLAs.  The TVARS Board stated in the filing that the 2009 Amendments to the TVARS Rules reduced vested COLA benefits .  The TVARS Board stated that the Rules are ambiguous, but that the Rules' language and extrinsic evidence both show that all COLAs were and are vested benefits .  The TVARS Board also requested that the Court schedule a Conference to determine remedies if the Court grants Plaintiffs' Motion as to the vesting of COLAs. See TVARS' Response to the two Motions for Summary Judgment filed by the Plaintiffs and TVA  here .  See TVARS' Statement of Additional Relevant Facts here . See the Declaration of Patrick D. Brackett here .  See TVARS' Response to TVA's Statement of Undisputed Material Facts here .  See TVARS' Response to Plaintiffs' Statement of Undisputed Material Facts here . If the Court agrees that

It's all about the lack of contributions from TVA. The investment performance has been above average over most time frames we measured. Unfortunately, the chart probably makes TVA look better than it really was compared to the others in 2014 because it is on a fiscal year.  Interest rates were significantly higher at the end of fiscal year 2014 than they were at the end of calendar year 2014.