System Planning - PSP Process Redesign

1. System Planning - PSP Process Redesign • Key Customers • COO / CFO / Board • Major Asset Groups • Fleet Strategy • Revenue Forecasting • Controller / Budgets • Highlights • Distinct plans • Establishment of a Planning Council • Focus on the right level of detail for each type of Plan • Collaboration between COO & FS • Hardspots • Separation into distinct plans has proven difficult due to emergent issues • delaying/changing plans • Specific role of Planning Council has not been clearly delineated • Key Initiatives • Improve cycle time • Communicate changes • Establish Metrics/ Indicators for each type of plan • Key Work Products • 4 Original plans; 1) 20 yr Capacity Plan & LT Fin plan, 2) 5 yr Bud Plan, 3) Mid term/FCA plan, 4) 35 day Near term plan • Process, Schedule, Accountabilities –Framework and definitions TVA Confidential and Privileged - Pre-decisional Deliberative Document

2. System Planning - Transmission Planning 60,000 MW Plan Resource Integrated (500 – kV Only) - 60,000 MW Plan Resource Integrated (500 – kV Only) - WV IL KY Paradise Shawnee VA MO Marshall nd nd Add 2 Add 2 Bank Bank 640 MW 640 MW Increase Capacity Increase Capacity Montgomery Sullivan Gleason Phipps Bend nd nd Cumberland Add 2 Add 2 Bank Bank 2500 MW 2500 MW Weakley 2500 MW 2500 MW W. Nashville W. Nashville 500 MW 500 MW Hartsville Hartsville Hartsville 400 MW 400 MW Wilson Bull Smith Smith Smith Smith Smith Smith Run Davidson TN Roane Volunteer Jackson Putnam Putnam Johnsonville Pinhook Lagoon AR Sw Sta Watts Creek Rutherford nd nd NC Add 2 Add 2 Bank Bank Maury Bar Alcoa Alcoa 900 MW 900 MW E. Jackson E. Jackson nd nd Add 2 Add 2 Bank Bank Upgrade to 3000a Upgrade to 3000a 1200 MW 1200 MW 570 MW 570 MW Shelby Brownsville Brownsville Franklin, TN 2500 MW 2500 MW Yard Upgrades Yard Upgrades Savannah Savannah 2500 MW 2500 MW Cordova Sequoyah 800 MW 800 MW Widows Bradley Bradley Freeport Creek Benton, MS Sw Sta Raccoon Browns Browns Mtn Pumped 700 MW 700 MW Ferry Ferry Storage 870 MW 870 MW Madison Pleasant Bellefonte nd nd Add 2 Add 2 Bank Bank Limestone SC Looper Looper ’ ’ s s Farm Farm 300 MW 300 MW 300 MW 300 MW Hill SW Sta 2400 MW 2400 MW Trinity 720 MW 720 MW Goose Pond Goose Pond 720 MW 720 MW Add Bank Add Bank 650 MW 650 MW Union E Point nd nd Add 2 Add 2 Bank Bank nd nd Add 2 Add 2 Bank Bank 500 MW 500 MW Valley West MS GA View Point nd nd Add 2 Add 2 Bank Bank 2500 MW 2500 MW Sw Sta nd nd Add 2 Add 2 Bank Bank Lowndes Pinson (GPC) 800 MW 800 MW Choctaw Sw Sta 800 MW 800 MW nd nd Add 2 Add 2 Bank Bank French New 500 - 161 - kV Bank New 500 New 500 - - 161 161 - - kV Bank kV Bank AL Camp Sw Sta New 500 New 500 New 500 New 500 New 500 New 500 - - - - - - kV Line kV Line kV Line kV Line kV Line kV Line New Line Existing 500 Existing 500 Existing 500 Existing 500 - - - - kV Line kV Line kV Line kV Line Existing 500 Existing 500 - - kV Line kV Line 500 kV Substation New 500 New 500 New 500 New 500 New 500 New 500 - - - - - - kV Substation kV Substation kV Substation kV Substation kV Substation kV Substation Philadelphia Area Philadelphia Area Philadelphia Area 500 kV Lines 500 500 500 500 500 500 - - - - - - kV Substation kV Substation kV Substation kV Substation kV Substation kV Substation SENSITIVE INFORMATION DELIBERATIVE AND PREDECISIONAL PRIVILEGED - • Highlights • Technical ability • Relationships with Distributors • FAWG Db/Program • Hardspots • Retention/Recruiting • Automation/Processes • Culture / Strategy • Metrics / Indicators • Key Initiatives • Unified Long Range Transmission Plan • Best Start/Head Start Plan • Optimum New Gen Sites • Key Customers • 159 PDs, 65 DSs, & 9 GOs, • FERC, NERC, & SERC • PSO, CR, PS&F, & NPG • IPP/Market Stakeholders • Key Work Products • Transmission Assessment/Expansion Plan Short Term Power System Ratings • Nuclear Offsite Power Studies, Customer Power Supply Plans 3 yr Capital Budget Plan • Optimum Reactive Studies Regional Stakeholder Studies Stability Studies TVA Confidential and Privileged - Pre-decisional Deliberative Document

3. System Planning – Capacity Expansion PlanNew Generation & Portfolio Optimization • Highlights • Staff: Sr Mgr + 3 employees • Utilizes industry standard capacity expansion model • Summarizes and communicates key assumption and portfolio results & analyses to multiple orgs and executives • Emphasis on accuracy • Key Customers • Executives, Board Committees • FS • Asset Owners • PS&F • CR / EE&DR • Hardspots • Speed • Lack of resources to test and implement new expansion optimization model upgrades • Lack of consistent, uniform reports • Stabilizing 5 year plan • Key Initiatives • Speed and response time for evaluation • One annual robust base long term plan vs. 12 plans • Uniform reports • Indicators: 12 month resource adequacy; summer capacity deficit • Key Work Products • 20 year robust capacity expansion and resource plan for TVA • Updated short term capacity and capital budget plans • One-off sensitivity evaluations and engineering analyses for project evaluations, PPA decisions, upgrades, special studies, etc. TVA Confidential and Privileged - Pre-decisional Deliberative Document

4. System Planning – Load Forecasting • Key Customers • Financial Services • PS&F • TRO • Customer Resources • Hardspots • Upcoming attrition • Small staff • Delivery point forecast system currently on main-frame computer. • On/off peak energy split • Key Initiatives • Improve forecast of on/off peak (5x16) energy. • Move delivery point forecast from main-frame to server. • Add impacts of dryness to weather normalization process. • Highlights • Experienced and knowledgeable staff. • Key resource to TVA. Significant number of data requests from across TVA organizations. • Forecast accuracy within industry measures. • Key Products • Near-term, monthly peak and energy forecast. Delivery Point seasonal peak forecast. • Long-term, annual peak and energy forecast. Peak and energy weather impact analysis. • Hourly load forecast. Short-term hourly load forecast. • Other: monthly reports, single distributor forecasts, and interruptible load forecasts. TVA Confidential and Privileged - Pre-decisional Deliberative Document

5. System Planning - Long Term Resource Planning Key Customers Board/CEO PS&F/Fuels CFO/Financial Services PSO/TRO FPG RO/River Scheduling • Hardspots • Small staff • Changes to inputs & assumptions often requires rework and turnaround that does not allow ample time for complete review of results • Lack of consistent, uniform reports • Transition to monthly FCA • Key Initiatives • Implement stochastics as part of generation planning • Standardize reports and messaging of analysis results • Highlights • Experienced, knowledgeable staff with a wide background of technical and analytical experience (1 Sr. Mgr + 4 staff) • Able to respond quickly and accurately to the many varied scenario analyses that are requested by our customers • Excellent working relationships with organizations across TVA • Key Products • Generation and Production Costing Plans - (Year 1 – Year 20) to support Long Range Financial Plan, FCA, and Annual Business Plans • Scenario Analysis to support Financial Services, asset organizations, and energy trading and origination organization TVA Confidential and Privileged - Pre-decisional Deliberative Document

6. System Planning - Short-term Resource Planning Fall 2008 MW Out Of Service • Key Customers • CEO • PSO/TRO • FPG • RO/River Scheduling • FS/Operations Business Services • PS&F • Key Initiatives • Metrics / Indicators • Processes/Procedures • 1-5 Day Ahead Info • Tool Enhancement • Outage Planning • Hardspots • Small Staff • Metrics/Indicators • Processes/Procedures • Technical Support • Tools / Speed • Highlights • Strong Core Team • Excellent Customer Relationships • Key Work Products • Current Season MW Out Of Service graph Next 6 Outage Seasons MW Out Of Service graphs • GenMan output database Power Supply Update Days 3-10 • Block Cost data for River Scheduling TVA Confidential and Privileged - Pre-decisional Deliberative Document

7. System Planning - Planning Coordinator • Key Customers • FERC/NERC/SERC • TVA TP and RP • CPPP Stakeholders • E.ON & SPP (under contract per FERC order) • Hardspots • Evolving compliance requirements from FERC NERC / SERC • Determination of Capacity in complex environment • Key Initiatives • Reliability Assessment Process Enhancement • CPPP Stakeholder process implementation/refinement • CIPC Support • Highlights • No direct staff – leveraging resources from multiple transmission and resouce planning groups • Transparent planning processes established with stakeholders • First economic studies issued • eer relationships established • Key Products • TVA PC Resource & Transmission Adequacy Assessment • E.ON Transmission Assessment/Expansion Plan evaluation submitted annually to SPP • Near and Long-Term Reliability Assessments • NERC Reliability Standard compliance including SOL/IROL, etc. TVA Confidential and Privileged - Pre-decisional Deliberative Document