TVA - EPA talks break down; TVA files court petition

EPA and TVA have been negotiating for some time over possible settlements in
enforcement actions filed by EPA over modifications made to TVA power plants
in violation of New Source Review (NSR) rules. Those negotiations to reach
an out-of-court solution have officially broken down, with TVA filing a
petition in federal court late yesterday opposing EPA's NSR enforcement
allegations.

While many felt TVA might settle with EPA (since it was government
negotiating with government), TVA has taken a very strong stance, indicating
that they made some offers to EPA but that EPA's unreasonable stance would
cause severe harm to grid reliability, the financial viability of TVA and
pocketbooks of the ratepayers. Southern Company and Duke Energy filed
petitions supporting TVA.

EPA is insisting that these court filings will in no way stop the Agency from
pursuing NSR enforcement measures.

I will keep you posted as to any developments in negotiations or court
actions in this area.

Jeff Keeler
Director, Environmental Strategies
(202) 466-9157