TVA’s new CFO knows layoffs, cost cutting
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“It teaches you a lot. It teaches you about efficiency. It teaches you about how to do your business differently when costs really matter,” Michael Rescoe said in a recent interview with The Associated Press.
Rescoe, 51, arrived at the nation’s largest public utility in July from 3Com Corp., a global leader in computer networking before the telecom bubble burst and two-thirds of its 15,000 employees were let go.
Before that, Rescoe was CFO at Pacific Gas and Electric Corp., the nation’s largest utility that sank into bankruptcy after selling its power plants as a result of California’s fiasco with deregulation.
With this background, Rescoe comes to TVA, a government-owned utility facing its own demons — huge debt, rising costs of pollution and growing fears it will lose its 70-year monopoly over the 80,000-square-mile Tennessee Valley.
An internal review could reveal as early as Monday what programs will stay and which will go, leading to job cuts for TVA’s 13,245-employee work force by June.
“It is potentially less employees. But I can’t say (how many) because I don’t have the data yet,” Rescoe said.
Although TVA has been analyzing scores of scenarios for what the future might hold, options for reducing costs are limited.
“Our costs are machines, fuel and people. So we have to look at machines, fuel and people. And how we deploy them,” Rescoe said.
Rescoe, a New Jersey native and University of Texas MBA grad, was an investment banker before joining one of his clients — Dallas-based Enserch Corp. He said his experience handling corporate crises is important in helping TVA through its struggles.
“The career experience is about companies who perceive that they are in a change process, and the CFO is in a key role … to either help the change or frustrate the change,” he said.
“I embrace the future because I think it is exciting. And I think I can help,” said Rescoe, who succeeded the retired David Smith.
TVA Director Bill Baxter said Rescoe’s management expertise with the private sector, utilities and investments “is very attractive” for TVA, a self-supporting agency with some $7 billion in annual revenues from power sales to about 8.3 million consumers in Tennessee and parts of Kentucky, North Carolina, Virginia, Georgia, Alabama and Mississippi.
“TVA has some very difficult financial decisions to make … and I am glad we’ve got somebody like Mike Rescoe to help us figure that out,” Baxter said.
TVA operates three nuclear plants, 11 coal-fired stations, 29 hydroelectric dams and a 17,000-mile transmission grid. What is their future?
“Anytime you give up assets, you give up scale. You give up flexibility. So I am not a fan of giving up assets,” Rescoe said. “Having said that, I am a fan of making your assets more efficient and changing them through time.”
Many of TVA’s fossil plants were built in the 1940s and 1950s, and TVA estimates it may cost up to $3 billion for pollution controls to meet air standards.
“The major ‘what if’ question about our (fossil) facilities is: Are they the right assets for tomorrow? They have been just fabulous, and they are fabulous today. But there is a trend: Nobody is ever going to want less clean air,” Rescoe said.
Meanwhile, Rescoe said there is no movement to save money by eliminating non-power programs that are part of TVA’s heritage, such as managing the 652-mile Tennessee River watershed for recreation, navigation and wildlife or TVA’s economic development programs.
Rescoe said it is “pretty clear that our (current) business model, carrying $25 billion worth of debt, is not a good thing. So if you are an enterprise like ourselves, what do you do to reduce debt?”
An investor-owned utility might seek a rate increase, but TVA thinks “the right thing to do is to turn inward and look at ourselves,” Rescoe said. “To see if there is a way that we can do business better, faster, cheaper.”
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On the Net:
TVA, http://www.tva.gov/
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