Tennessee Valley Authority (Form: 8-K, Received: 01/06/2009 14:22:06)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Pursuant to Section 13, 15(d), or 37 of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 30, 2008

TENNESSEE VALLEY AUTHORITY

(Exact name of registrant as specified in its charter)


A corporate agency of the United States created by an act of Congress (State or other jurisdiction of incorporation or organization)	000-52313 (Commission file number)	62-0474417 (IRS Employer Identification No.)

400 W. Summit Hill Drive Knoxville, Tennessee (Address of principal executive offices)		37902 (Zip Code)

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On December 30, 2008, Tom Kilgore, President and Chief Executive Officer of the Tennessee Valley Authority (“TVA”), approved amendments to the following TVA compensation plans (collectively, the “Plans”):

Supplemental Executive Retirement Plan (“SERP”)

Deferred Compensation Plan

Executive Annual Incentive Plan (“EAIP”)

Executive Long-Term Incentive Plan (“ELTIP”)

Long-Term Deferred Compensation Plan (“LTDCP”)

The Plans were modified to comply with the final rules of Section 409A of the Internal Revenue Code of 1986, as amended. Modifications were also made to: (1) eliminate the option for participants to elect a 15-year payout upon separation from service for deferrals in fiscal year 2009 and thereafter under the EAIP, ELTIP, and LTDCP; and (2) change the payment distribution schedule under the Deferred Compensation Plan starting in calendar year 2010 for participants who have separated from service such that they will receive all subsequent annual installments (following the initial installment upon separation) in January of each year instead of on the anniversary of their separation from service. These modifications will not result in any change to the actuarial value of benefits for participants.

Copies of the amended Plans are filed as Exhibits 10.1, 10.2, 10.3, 10.4, and 10.5, respectively.

Item 9.01 Financial Statements and Exhibits.

EXHIBIT NO.	DESCRIPTION OF EXHIBIT
10.1	Supplemental Executive Retirement Plan
10.2	Deferred Compensation Plan
10.3	Executive Annual Incentive Plan
10.4	Executive Long-Term Incentive Plan
10.5	Long-Term Deferred Compensation Plan

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Tennessee Valley Authority
	(Registrant)



Date: January 6, 2009	/s/ Kimberly S. Greene
	Kimberly S. Greene
	Chief Financial Officer and Executive Vice President, Financial Services

Exhibits 10.1, 10.2, 10.3, 10.4, and 10.5 are filed pursuant to Item 5.02 hereof.

EXHIBIT NO.	DESCRIPTION OF EXHIBIT
10.1	Supplemental Executive Retirement Plan
10.2	Deferred Compensation Plan
10.3	Executive Annual Incentive Plan
10.4	Executive Long-Term Incentive Plan
10.5	Long-Term Deferred Compensation Plan

January 2009

TENNESSEE VALLEY AUTHORITY

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

1. PURPOSE AND SCOPE

1.1

Establishment. The Tennessee Valley Authority (TVA) hereby establishes, effective October 1, 1995, an unfunded supplemental retirement plan for selected employees and their beneficiaries as described herein, which shall be known as the “Supplemental Executive Retirement Plan” (the “Plan”).

1.2

Purpose. The purpose of the Plan is to provide retirement benefits to selected employees of TVA which are comparable to those provided by competing organizations.

2. DEFINITIONS

Wherever used herein, the following terms have the meaning set forth below, unless a different meaning is clearly required by the context:

2.1

“Accrued Benefit” means an annual benefit commencing at the later of (a) the Normal Retirement Date or (b) the Participant’s age at the time of Separation from Service, and continuing during the expected lifetime of the Participant based on the applicable mortality table used by the TVA Retirement System.

2.2

“Actuarial Equivalent” means a benefit of equal value to a benefit otherwise payable in a different form or at a different time under the Plan, when computed on the basis of the mortality and interest rate that are used by the TVA Retirement System as in effect on the date distribution is made.

2.3

“Approved Termination” means termination of employment with TVA due to (a) retirement on or after the Participant’s Normal Retirement Date, (b) retirement on or after attainment of actual age 55, if such retirement has the approval of the Board or its delegatee, (c) death in service as an employee, (d) disability (as such term is defined under the Rules and Regulations of the TVA Retirement System) as determined by the Retirement Committee, or (e) any other circumstances approved by the Board or its delegatee.

2.4

“Average Compensation” means the highest average of Compensation during three consecutive Plan Years. If a Participant has been an employee of TVA for less than three Plan Years, the average shall be determined based on the period of employment.

2.5

“Beneficiary” shall mean the person or persons, designated in writing by a Participant, who are to receive a benefit under this Plan in the event of a Participant’s death. In the absence of any designated beneficiary or in the event that the designated beneficiary is deceased, then the beneficiary shall be the Participant’s estate.

2.6

“Board” means the Board of Directors of TVA.

2.7

“Compensation” means the sum of annual salary, unreduced by contributions under Internal Revenue Code sections 125, 132 and 402 (a)(8), plus annual incentive award.

2.8

“Credited Service” means actual service with TVA plus any additional service which the Board, or its delegatee, approves under this Plan.

2.9

“Date of Benefit Commencement” means the later of (a) the date benefit payments begin within four (4) months following the date the Participant turns age 55, but no later than March 15 of the year following the year in which the Participant turns age 55, or (b) the date benefit payments begin within four (4) months following the date of the Participant’s Separation from Service, but no later than March 15 of the year following the year of the Participant’s Separation from Service.

2.10

“Normal Retirement Date” shall mean the first of the month coincident with or next following the date on which the Participant has attained age 62.

2.11

“Participants” shall mean those employees participating in the Plan as provided in section 3.

2.12

“Plan Year“ is TVA’s fiscal year, October 1 to September 30.

2.13

“Prior Employer Offset” means the Actuarial Equivalent of the benefit earned under a prior employers’ qualified defined benefit pension plan or plans attributable to prior employer service, which is included in Credited Service under this Plan, assuming benefit payments are to begin at the Normal Retirement Date. A Prior Employer Offset shall only apply if all or a portion of the period of service during which such benefit was earned is included in Credited Service. The Board or its delegate may, in its sole discretion, waive all or part of the Prior Employer Offset for any Participant.

2.14

“Qualified Plan” means the retirement plan under which a Participant accrues benefits for his or her TVA service and may be any of the TVA Retirement System, the Civil Service Retirement System, or the Federal Employees Retirement System.

2.15

“Qualified Plan Offset” means the Actuarial Equivalent of the Participant’s benefit under the Qualified Plan, assuming the maximum benefit with no survivor elections and benefit payments beginning at the Normal Retirement Date, with the benefit calculated as follows:

2.15.1

For a Participant in the TVA Retirement System, Civil Service Retirement System, or Federal Employees Retirement System, the product of (a) the Participant’s average compensation (as defined under the Rules and Regulations of the TVA Retirement System), times (b) Credited Service (not to exceed 24 years), times (c) 1.3 percent.

2.15.2

[reserved]

2.16

“Retirement Committee” means a group of three persons appointed by the Board or its delegatee to administer the Plan.

2.17

“Separation from Service” or “separates from service” means the same as the term “separation from service” as defined in 26 CFR §1.409A-1(h) of the Internal Revenue Code Section 409A final regulations.

2.18

“Social Security Offset” means the primary benefit amount, commencing at the Participant’s Normal Retirement Date, that would be calculated under the Social Security Act as in effect at the time of the Participant’s Separation from Service.

In the event of an Unapproved Termination, the calculation shall be made assuming that the Participant continued to earn covered compensation until the Participant’s Normal Retirement Date at a rate equal to the maximum taxable wage base. In the event of an Approved Termination, the calculation shall be made assuming no further compensation is earned. The Board or its delegatee may, in its sole discretion, waive all or part of the Social Security Offset for any Participant.

2.19

“Unapproved Termination” means a termination of employment with TVA that does not constitute an Approved Termination as such term is defined in section 2.3.

3. PARTICIPATION

The Board, or its delegatee, shall select individual employees as Participants. Each Participant so selected shall be designated as a Tier One or a Tier Two Participant.

4. BENEFIT ELIGIBILITY AND CALCULATION

4.1

Vesting. A Participant will vest in his/her Accrued Benefit (a) after five (5) years of actual TVA service, unless otherwise waived by the Board or its delegatee, (b) upon death in service as an employee, or (c) upon disability (as such term is defined under the Rules and Regulations of the TVA Retirement System) as determined by the Retirement Committee.

4.2

A Participant’s Accrued Benefit is calculated at the time of the Participant’s Separation from Service as set forth below:

4.2.1

Tier One Participants. The Accrued Benefit for Tier One Participants shall be equal to (a) the lesser of (i) 2.5 percent of Average Compensation times years of Credited Service and (ii) 60 percent of Average Compensation, minus (b) the sum of the Qualified Plan Offset, the Prior Employer Offset, and the Social Security Offset.

4.2.2

Tier Two Participants. The Accrued Benefit for Tier Two Participants shall be equal to (a) 1.3 percent, times (b) years of Credited Service, times (c) the difference of (i) Average Compensation as defined as herein minus (ii) earnable compensation as defined in the Qualified Plan.

4.3

Benefit Payable for Approved Termination. In the event of an Approved Termination, the Participant shall be eligible to receive a benefit equal to the Accrued Benefit subject to the reduction below. In the event the Participant separates from service prior to the Normal Retirement Date, the Accrued Benefit shall be reduced by 5/12 percent for each month that the Date of Benefit Commencement precedes the Normal Retirement Date; however, in no event shall the benefit be reduced by more than 35 percent.

4.4

Benefit Payable for Death Prior to Date of Benefit Commencement. In the event of a Participant’s death prior to the Date of Benefit Commencement, the Participant’s Beneficiary shall receive a lump-sum benefit that is the Actuarial Equivalent of the Accrued Benefit that would have been payable had the Participant separated from service on the date of death and elected a joint and 50 percent survivor benefit.

4.5

Benefit Payable for Unapproved Termination. In the event of an Unapproved Termination, the Participant shall receive a benefit equal to the Accrued Benefit subject to the reductions below.

4.5.1

In the event the Participant has less than ten (10) years of Credited Service at the time of Separation from Service, the Accrued Benefit shall be reduced by 10 percent for each full year of Credited Service less than ten (10) years.

4.5.2

In the event the Participant separates from service prior to the Normal Retirement Date, the Accrued Benefit, as reduced in Section 4.5.1 above, shall be further reduced by 10/12 percent for each month that the Date of Benefit Commencement precedes the Normal Retirement Date; however, in no event shall the Accrued Benefit, as reduced in Section 4.5.1 above, be reduced further by more than 70 percent.

5. PAYMENT OF BENEFITS

5.1

Terms and Conditions of Benefit Payments. The benefit calculated under Section 4 above will be paid as follows:

5.1.1

For Participants in the Plan prior to January 1, 2009, the benefit calculated under Section 4 will be paid in the Actuarial Equivalent form of five (5) annual installments, unless a Participant has validly elected pursuant to IRS transition rules prior to January 1, 2009, to receive payments in the Actuarial Equivalent form of ten (10) annual installments.

5.1.2

For Participants first in the Plan on or after January 1, 2009, the benefit calculated under Section 4 will be paid in the Actuarial Equivalent form of five (5) annual installments, unless a Participant has validly elected under IRS rules within thirty (30) days of becoming a participant in the Plan, to receive payments in the Actuarial Equivalent form of ten (10) annual installments.

5.1.3

The first annual installment pursuant to Sections 5.1.1 and 5.1.2 above will be paid on the Date of Benefit Commencement, and subsequent annual installments will be paid in January of each succeeding year.

5.2

In the event the Participant dies following the Date of Benefit Commencement but prior to the final annual installment, the remaining unpaid benefit due the Participant will be paid to the Participant’s Beneficiary following the Participant’s death in a lump sum calculated to be the Actuarial Equivalent of the remaining unpaid benefit due the Participant.

5.3

Alienation of Benefits Prohibited. No benefit payable at any time under the Plan shall be subject in any manner to alienation, anticipation, sale, transfer, assignment, pledge, attachment, or encumbrance or any kind, except as required by law. No benefit payable at any time under the Plan shall be subject in any manner to the debts or liabilities of any person entitled to such benefit, and TVA shall not be required to make any payments toward such debts or liabilities.

5.4

Incapacity. In the event that any benefit hereunder is, or becomes, payable to a minor, to a person under a legal disability, or to a person not judicially declared incompetent but who by reason of illness or mental or physical disability is, in the opinion of the Retirement Committee, incapable of personally receiving and

giving valid receipt for such payment, then, unless and until claim therefor shall have been made by a duly appointed guardian or other legal representative of such person, the Retirement Committee may provide for such payment or any part thereof to be made to any person or institution then contributing toward or providing for the care and maintenance of such person. Any such payment shall be a payment for such person and shall constitute a complete discharge of the liability of TVA therefor.

6. GENERAL PROVISIONS

6.1

Funding. The Plan is intended as an unfunded plan of supplementary retirement benefits for selected employees of TVA. TVA may establish appropriate reserves for the Plan on its books of account in accordance with generally accepted accounting principles. TVA may set up a trust or trusts to manage these reserves. Such reserves shall be, for all purposes, part of the general assets of TVA, and no Participant, Beneficiary, or other person claiming a right under the Plan shall have any interest, right, or title to such reserves except as provided by the terms of any trust established to hold such reserves. In all events, it is the intent of TVA that the Plan be treated as unfunded for tax purposes.

6.2

Right to Amend, Suspend, or Terminate. TVA reserves the right at any time and from time to time to amend or terminate the Plan by action of the Board or its delegatee without the consent of any Participant, Beneficiary or other person. However, no such amendment may decrease a Participant’s Accrued Benefit as of the time of such amendment. In the event of Plan termination, a Participant shall be entitled to receive his or her Accrued Benefit, determined as of the date of Plan termination, in the form and manner as set forth in the Plan as of the date of Plan termination. Plan amendments may be approved and implemented by the Retirement Committee except that the Board or its delegatee reserves the right to approve any Plan amendments which could change the amount of the benefits payable under the Plan.

6.3

Right to Benefit. No person shall have any right to a benefit under the Plan except as such benefit has become payable in accordance with the terms of the Plan, and such right shall be no greater than the rights of any unsecured general creditor of TVA. Notwithstanding any other provision of this Plan, if an employee shall be discharged for reasons of acts of fraud, dishonesty, larceny, misappropriation, or embezzlement committed against TVA, all of such employee’s rights to benefits under this Plan shall be forfeited.

6.4

Administration of the Plan. Except as otherwise specifically provided in the Plan, the Retirement Committee shall be the administrator of the Plan. The Retirement Committee as plan administrator shall have full authority in its discretion to determine all questions arising in connection with the Plan, including the interpretation of the Plan, and may adopt Plan amendments (subject to section 6.2) and procedural rules and may rely on such legal counsel, actuaries, accountants, and agents as it may deem advisable to assist in the administration of the Plan. The Retirement Committee may establish such rules and procedures as it deems appropriate to carry out the intent and purpose of the Plan. Decisions of the Retirement Committee as plan administrator shall be conclusive and binding on all Participants and Beneficiaries. The Retirement Committee may delegate in writing to one or more persons any of its duties as plan administrator and may revoke in writing any such designation previously made.

6.5

Titles. The titles of the articles and sections herein are included for convenience of reference only and shall not be construed as part of this Plan or have any effect upon the meaning of the provisions hereof. Unless the context requires otherwise, the singular shall include the plural and the masculine shall include the feminine; such words as “herein,” “hereafter,” “hereof,” and “hereunder” shall refer to this instrument as a whole and not merely to the subdivision in which such words appear.

6.6

Separability. If any term or provision of this Plan as presently in effect or amended from time to time, or the application thereof to any payments or circumstances, shall to any extent be invalid or unenforceable, the remainder of the Plan, and the application of such term or provision to payments or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term or provision of the Plan shall be valid and enforced to the fullest extent permitted by law.

6.7

Authorized Officers. Whenever TVA under the terms of the Plan is permitted or required to do or to perform any act or matter or thing, it shall be done and performed by a duly authorized officer of TVA.

6.8

Certain Rights and Limitations. The establishment of the Plan shall not be construed as conferring any legal rights upon any employee or other person for a continuation of employment, nor shall it interfere with the rights of TVA to discharge any employee and to treat any employee without regard to the effect that such treatment might have upon that employee as a participant in the Plan.

6.9

Compliance with Section 409A. At all times, to the extent Internal Revenue Code Section 409A and its implementing regulations (collectively, “Section 409A”) applies to amounts deferred under this Plan: (a) this Plan shall be operated in accordance with the requirements of Section 409A; (b) any action that may be taken (and, to the extent possible, any action actually taken) by the Board or its delegatee, the Retirement Committee, and the Participants or their Beneficiaries shall not be taken (or shall be void and without effect), if such action violates the requirements of Section 409A; (c) any provision in this Plan that is determined to violate the requirements of Section 409A shall be void and without effect; and (d) any provision that is required by Section 409A to appear in this Plan that is not expressly set forth shall be deemed to be set forth herein, and this Plan shall be administered in all respects as if such provision were expressly set forth herein.

TVA DEFERRED COMPENSATION PLAN

This Deferred Compensation Plan (“Plan”) constitutes an agreement between TVA and its managerial employees who are subject to it (“Participants”). The purposes of this Plan are to provide Participants (i) with deferrals of compensation in order to provide income to supplement retirement benefits, (ii) an additional means of deferring taxes on deferred compensation, and (iii) an opportunity to earn a notational investment return on deferred compensation.

Section 1 Definitions

“Account” means the account established on TVA’s books in the name of each Participant to which compensation deferred by the Participant pursuant to any of TVA’s compensation plans, or deferred compensation awarded to the Participant by TVA, as well as any notational investment earnings on such compensation, is accounted for in the form of credits.

“Board” means the Board of Directors of the Tennessee Valley Authority.

“Committee” means a group of three persons appointed by the Board or its delegatee to administer the Plan.

“Dependent” means the same as the term “dependent” as defined in Internal Revenue Code section 152, without regard to section 152(b)(1), (b)(2), and (d)(1)(B).

“Interest” means the notational interest on a Participant’s Account balance based on an annual interest rate set from time to time by TVA’s Chief Financial Officer or his or her designee.

“Participant” shall mean any employee of the Tennessee Valley Authority who is eligible under any of TVA’s other compensation plans (i) to defer compensation earned during a year to a later year, or (ii) to receive deferred compensation credits. Participants shall not include the members of the TVA Board of Directors.

“Return” means the notational investment return on a Participant’s Account balance based on the change in the value of the mutual funds designated by the Participant.

“Recordkeeper” means the organization selected by TVA to recordkeep the notational investment return alternatives from which the Participant may choose.

“Separation from Service” or “separates from service” means the same as the term “separation from service” as defined in 26 CFR §1.409A-1(h) of the Internal Revenue Code section 409A final regulations.

“Source” means a division within each Participant’s Account to which deferred compensation credits are assigned based on the form of payment for such deferred compensation.

“Unforeseeable Emergency” means the same as the term “unforeseeable” as defined in 26 CFR §1.409A-3(i)(3) of the Internal Revenue Code section 409A final regulations.

Section 2 Deferred Compensation Plan Credits

A.	There shall be established for each Participant an Account in the name of the Participant. Each Participant’s Account will consist of one or more Sources.

B.	A Participant’s Account shall be credited with any compensation amounts that the Participant earns during any year and properly elects to defer to a later year pursuant to any TVA compensation plan that allows deferral elections.

From time to time the Board or the Board’s delegatee , in the sole discretion of the Board or its delegatee , may award deferred compensation credits to a Participant’s Account. At the time of award, the Board or its delegatee shall designate the manner in which such deferred compensation credits shall be paid out to the Participant. In the absence of such a designation, such deferred compensation credits shall be paid out to the Participant in a lump sum upon Separation from Service in accordance with Section 3.A.1a below.

D.	The Board (or its delegatee) may consider such factors as the following in determining whether to award deferred compensation credits to a Participant and the amount of deferred compensation credits to be awarded pursuant to Section 2.C above:

meritorious performance;

providing Participants with total compensation equivalent to prevailing rates in corporate, professional, and other public organizations;

the need to use deferred compensation credits for recruitment purposes;

lost annual leave; and

such other factors as may be deemed appropriate.

Each Participant’s Account will receive Interest calculated on the ending daily balance in each Participant’s Account and credited to the Account by the Recordkeeper at the end of each month. In lieu of Interest, each Participant may elect to have all or a portion of the Participant’s Account adjusted by the Return tied to one or more mutual funds available to Participants through the Recordkeeper as selected by the Participant. TVA is not responsible for the effect on the Participant’s Account of decisions by any Participant who elects to receive the Return tied to mutual funds as provided herein. Such decisions shall be the sole responsibility of the Participant.

The total amount credited to each Participant’s Account shall be paid by TVA to the Participant upon the Participant’s Separation from Service, or the Participant’s death, in the manner set forth below. In addition, certain amounts credited to a Participant’s Account may be paid by TVA to such Participant in the event of an Unforeseeable Emergency as set forth below.

A.	Separation from Service

Upon a Participant’s Separation from Service, the balance of each Source within the Participant’s Account shall be paid to the Participant in a lump sum or in 5, 10, or 15 annual installments as properly elected by the Participant or designated by TVA (the “Lump-Sum Source,” “5-Year Source,” “10-Year Source,” and “15-Year Source,” respectively).

The balance in the Lump-Sum Source of the Participant’s Account shall be paid in a lump sum to the Participant not later than the last day of the first full calendar month following the date of the Participant’s Separation from Service.

The balances in the 5-Year, 10-Year, and 15-Year Sources shall be paid in the following manner. Not later than the last day of the first full calendar month following the date of the Participant’s Separation from Service, the Participant shall be paid a sum equal to balance in the Source divided by the number of annual installments (5, 10, or 15) tied to such Source. Subsequent annual installments shall be paid each year through 2009 on the same date as the initial installment in each year through 2009 and in January in each year beginning in 2010. The amount of each installment shall be determined by dividing the balance in the Source by the number of payments remaining to be made.

Any Participant with an Account balance not greater than the applicable dollar amount under Internal Revenue Code section 402(g)(1)(B) at the time of Separation from Service shall be paid that balance in a lump sum not later than the last day of the first full calendar month following the date of the Participant’s Separation from Service, provided that the payment results in the termination and liquidation of the entirety of the Participant’s interest under the Plan.

Death - Upon receipt of proper proof of the death of a Participant who has died in service, or a former Participant who has been receiving payments under Section 3.A.1.b. above, the balance in the Participant’s Account or the balance remaining in the Participant’s account, as appropriate, shall be paid in a lump sum to the beneficiary or beneficiaries designated by the Participant in writing prior to the Participant’s death. In the absence of any designation of beneficiary, payment shall be made in the following order of precedence:

to the widow or widower of the Participant;

if there is no widow or widower, to the child or children of the Participant and descendants of deceased children by representation;

if none of the above, to the parents of the Participant or the survivor of them;

if none of the above, to the duly appointed legal representative of the estate of the Participant; and

if none of the above, to the person or persons entitled to it under the law of the state of domicile of the Participant at the time of death.

Payment shall be made by the last day of the first full calendar month following the receipt of proper proof of the Participant’s death.

Unforeseeable Emergency - In the event of an Unforeseeable Emergency, a Participant may apply to the Committee for a distribution of all or part of the total amount credited to the Participant’s Account. The distribution may be granted in the Committee’s sole discretion upon a determination by the Committee that the amount distributed is reasonably necessary to satisfy the emergency need based on the relevant facts and circumstances of the case. Under Internal Revenue Code section 409A and its implementing regulations (collectively, “Section 409A”), an Unforeseeable Emergency means a severe financial hardship to the Participant resulting from any of the following:

illness or accident of the Participant, the Participant’s spouse, the Participant’s beneficiary, or the Participant’s Dependent;

loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance); or

other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

Section 409A states that the purchase of a home and the payment of college tuition are not unforeseeable emergencies. Under Section 409A, a distribution on account of an Unforeseeable Emergency may not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of deferrals under the Plan. In other words, Participants will not be eligible for consideration of distributions from the Plan for an Unforeseeable Emergency under this Section 3.C if the Participant has, or through his or her own ability has access to, any funds to help take care of the financial issues related to the Participant’s Unforeseeable Emergency.

Unforeseeable Emergency distributions will be deducted from the Sources within the Participant’s Account until exhausted in the following order of precedence: Lump-Sum Source, 5-Year Source, 10-Year Source, and 15-Year Source.

Section 4 Assignments Prohibited

No transfer, assignment, pledge, seizure, or other voluntary or involuntary alienation or encumbrance of any benefit provided under the Plan will be permitted or recognized other than as specifically provided in this Plan; provided, however, that TVA may offset amounts owed to it by a Participant against amounts payable to a Participant under this Plan.

Section 5 No Trust is Created

No trust in favor of any Participant is created by this Plan, and in the absence of any attempted assignment prohibited under Section 5, Participants shall have the rights of general unsecured creditors of TVA with respect to amounts credited their Accounts established by this Plan.

Section 6 Amendments to Plan

This Plan may be amended or terminated as authorized by the Board, or its delegatee, at any time as it deems appropriate without the consent of any Participant, beneficiary, or other person.

Section 7 Compliance with Section 409A

At all times, to the extent Internal Revenue Code section 409A and its implementing regulations (collectively, “Section 409A”) applies to amounts deferred under this Plan: (a) this Plan shall be operated in accordance with the requirements of Section 409A; (b) any action that may be taken (and, to the extent possible, any action actually taken) by the Board or its delegatee, the Committee, and the Participants or their Beneficiaries shall not be taken (or shall be void and without effect), if such action violates the requirements of Section 409A; (c) any provision in this Plan that is determined to violate the requirements of Section 409A shall be void and without effect; and (d) any provision that is required by Section 409A to appear in this Plan that is not expressly set forth shall be deemed to be set forth herein, and this Plan shall be administered in all respects as if such provision were expressly set forth herein.

TENNESSEE VALLEY AUTHORITY

EXECUTIVE ANNUAL INCENTIVE PLAN

The Executive Annual Incentive Plan (“EAIP” or “Plan”) is designed to encourage and reward TVA officers and other participants for their performance and contribution to the successful achievement of financial, operational, and individual goals.

This is accomplished by linking a significant element of variable annual compensation to the accomplishment of selected short-term financial, operational, and individual performance standards. The Plan, in conjunction with salary, provides total annual compensation opportunities similar to those found at competing companies, thus assisting TVA in retaining and recruiting executive talent critical to TVA’s success.

The Board of Directors, the Chief Executive Officer (“CEO”), or their delegatees, approve the Participants in the Plan in accordance with then existing delegations of authority.

Each performance period follows TVA’s fiscal year (October 1 through September 30).

ANNUAL INCENTIVE OPPORTUNITY

Annual Incentive Opportunities for each Participant are established based on market data, level of responsibility, and relationship with other TVA positions in order to ensure a consistent approach among TVA organizations. Annual Incentive Opportunities under the Plan are designed to align each Participant’s Total Annual Compensation with relevant labor market practices.

The basis of a target award opportunity is a percentage of the Participant’s salary, which is established based on the Participant’s position within TVA.

PERFORMANCE MEASURES AND GOALS

The Plan incorporates the use of Performance Measures which focus on key areas essential for the achievement of TVA’s strategic objectives. These measurement areas typically include:

Assets/Operations

Individual Performance

The selection of Performance Measures is specific to each Participant’s position. Weighting of the measures, when appropriate, will be based on the relevance of the measure to the organization, the position purpose, accountabilities, scope and impact applicable to the Participant.

Performance Measures, Performance Measure weighting, and the identification of Performance Goals for each Performance Measure, will be established for each performance period in accordance with reservations and delegations of authority under the TVA Compensation Plan and communicated in administration of the Plan by the Vice President, Human Resources.

Annual Incentive Awards are based on performance against the predefined Performance Measures and Goals and the Annual Incentive Opportunity for each Participant calculated as follows:

Annual Incentive	=	Salary	x	Annual Incentive	x	Percent of Opportunity
Award				Opportunity		Achieved

Final Annual Incentive Awards for each Participant may be adjusted by the Board of Directors, the CEO, or other appropriate delegated officer based on the evaluation of the Participant’s individual achievements and performance results over the fiscal year. The maximum Annual Incentive Award allowed under this Plan is 125 percent of the Annual Incentive Opportunity for each Participant, unless a different maximum is approved by the Board of Directors or its delegatee.

A Participant must be a full-time employee at the end of the Plan year in order to be eligible to receive an award.

Participants who have been employed for the entire Plan year are eligible to receive a full award.

Except as set forth above, Participants who become participants in the Plan at a time other than the beginning of the Plan year, and who are employed at the end of the Plan year, will be eligible to receive a Prorated Award based on the number of full months he/she has been a Participant in the Plan year.

Notwithstanding the above, if a Participant’s employment is terminated due to death or Disability during the Plan year, then the Participant will receive a Prorated Award.

Annual Incentive Awards are paid in a lump sum during the first quarter of the next fiscal year but no later than March 15 th of the next calendar year following the year in which the Awards are earned. All Annual Incentive Awards will be approved by the Board of Directors, the CEO, or other delegated officer prior to payment.

In the event a Participant’s employment is terminated due to death or Disability, the Prorated Award will be calculated assuming target achievement and paid either (i) by the last day of the first full calendar month following the receipt of proper proof of the Participant’s death, or (ii) within 90 days of termination of employment due to Disability.

DEFERRAL ELECTION OPTION

Performance-Based Compensation

Participants may be eligible to elect to defer all or a portion of any eligible Annual Incentive Award for a performance period to the TVA Deferred Compensation Plan under the following conditions:

Deferral election must be made on or before the date that is six (6) months before the end of the performance period;

The deferral must be made in 25% increments of the actual Annual Incentive Award and is irrevocable as of the date set forth above;

Deferred amounts will be paid out upon the Participant’s Separation from Service in either a lump sum or in 5 or 10 annual installments, as elected by the Participant; and

The Participant performs services at TVA continuously from the date the Participant’s performance criteria are established through the date a deferral election is made.

Annual Incentive Awards are eligible for deferral to the extent (i) they constitute “performance-based compensation,” as that term is defined in 26 CFR §1.409A-1(e) of the Internal Revenue Code section 409A final regulations, and (ii) the amount of the awards has not become readily ascertainable at the time of the deferral election.

First Year of Eligibility

Participants who become participants in the Plan at a time other than the beginning of the Plan year may be eligible to elect to defer a portion of any eligible Annual Incentive Award for the performance period to the TVA Deferred Compensation Plan under the following conditions:

Deferral election must be made within thirty (30) days after the date the Participant becomes eligible to participate in the Plan;

The deferral election choices are 25%, 50% or 75% of the actual Annual Incentive Award, to the extent such choices are available to the Participant;

The deferral is irrevocable as of the date set forth above; and

Deferred amounts will be paid out upon the Participant’s Separation from Service in either a lump sum or in 5 or 10 annual installments, as elected by the Participant.

The amount of Annual Incentive Award eligible for deferral depends on the number of days remaining in the performance period after the date of the Participant’s election over the total number of days in the performance period as set forth in 26 CFR §1.409A-2(a)(7) of the Internal Revenue Code section 409A final regulations

Annual Incentive Opportunities, Performance Measures and Goals, and the results of the Performance Measures and Goals for each Participant are approved on an annual basis in accordance with the TVA Compensation Plan and the delegations thereunder.

The Plan will be administered by the Vice President, Human Resources. Corporate Human Resources will develop and interpret all rules for the administration of the Plan.

TERMINATION OR AMENDMENT OF THE PLAN

The Board of Directors, or its delegatee, may at any time modify, suspend, terminate, or amend the Plan in whole or in part.

COMPLIANCE WITH SECTION 409A

At all times, to the extent Internal Revenue Code section 409A and its implementing regulations (collectively, “Section 409A”) applies to amounts deferred under this Plan: (a) this Plan shall be operated in accordance with the requirements of Section 409A; (b) any action that may be taken (and, to the extent possible, any action actually taken) by the Board, or its delegatee, and the Participants shall not be taken (or shall be void and without effect), if such action violates the requirements of Section 409A; (c) any provision in this Plan that is determined to violate the requirements of Section 409A shall be void and without effect; and (d) any provision that is required by Section 409A to appear in this Plan that is not expressly set forth shall be deemed to be set forth herein, and this Plan shall be administered in all respects as if such provision were expressly set forth herein.

Annual Incentive Award	Actual dollar amount awarded to a Participant under the EAIP.

Annual Incentive Opportunity	Award opportunity expressed as a percent of the Participant’s salary.

Disability	Term “disability” as defined in 26 CFR §1.409A-3(j)(4)(xii) of the Internal Revenue Code section 409A final regulations.

Participant	An officer or other Manager/Specialist employee approved to be eligible to receive an award under the EAIP.

Performance Goals	The goals established for each Performance Measure used to determine the Annual Incentive Award.

Performance Measures	The specific metrics used to measure performance.

Prorated Award	Method used to determine the Annual Incentive Award amount for an employee not eligible to receive a full award. Pro-ration is based on the number of full months employed.

Separation from Service	Term “separation from service” as defined in 26 CFR §1.409A-1(h) of the Internal Revenue Code section 409A final regulations.

Total Annual Compensation	Term used by TVA that includes salary plus Annual Incentive Award.

TENNESSEE VALLEY AUTHORITY

EXECUTIVE LONG-TERM INCENTIVE PLAN

The Executive Long-Term Incentive Plan (“ELTIP” or “Plan”) is designed to provide Manager/Specialist employees in “especially critical” positions with incentive opportunities based on successful achievement of established financial and/or operational goals measured over a multi-year period. The Plan, in conjunction with salary, annual incentive compensation, and long-term deferred compensation, provides total direct compensation opportunities similar to those found at competing companies.

Participation is limited to “especially critical” positions that have the ability to directly impact TVA’s long-term strategic objectives. The Board of Directors, the Chief Executive Officer (“CEO”), or their delegatees, approve the Participants in the Plan in accordance with then existing delegations of authority.

Each performance cycle extends for a period of three consecutive fiscal years.

A new performance cycle begins at the start of each TVA fiscal year (October 1).

An example of the three-year performance cycle with overlapping cycles is illustrated below:


Performance Cycle	FY 2008	FY 2009	FY 2010	FY 2011	FY 2012

1 - FY08
2 - FY09
3 - FY10

PERFORMANCE MEASURES AND GOALS

The Plan incorporates the use of Performance Measures that focus primarily on the achievement of TVA’s long-term financial and/or operational goals. Performance Measures and Goals are measured over the three-year period of the performance cycle.

Performance Measures, Performance Measure weighting, and the identification of Performance Goals for each Performance Measure, will be established for each performance cycle in accordance with reservations and delegations of authority under the TVA Compensation Plan and communicated in administration of the Plan by the Vice President, Human Resources.

ELTIP INCENTIVE OPPORTUNITY

ELTIP Incentive Opportunities for each Participant are established based on market data, level of responsibility, and relationship with other TVA positions in order to ensure a consistent approach among TVA organizations. ELTIP Incentive Opportunities under the Plan are designed to align each Participant’s Total Direct Compensation with relevant labor market practices.

The basis of a target award opportunity is a percentage of the Participant’s salary, which is established based on the Participant’s position within TVA.

ELTIP Awards are based on achieved level of performance compared to the established Performance Measures and Goals over the Performance Cycle and the ELTIP Incentive Opportunity for each Participant calculated as follows:

ELTIP Award	=	Salary	x	ELTIP Incentive	x	Percent of Opportunity
				Opportunity		Achieved

ELTIP Awards are calculated based on Participants’ salaries at the end of the performance cycle. Final ELTIP Awards for each Participant may be adjusted by the Board of Directors, the CEO, or other appropriate delegated officer based on the evaluation of the Participant’s individual achievements, peer group comparisons, and performance results over the Performance Cycle. The maximum ELTIP Award allowed under this Plan is 150 percent of the ELTIP Incentive Opportunity for each Participant, unless a different maximum is approved by the Board of Directors or its delegatee.

A Participant must be a full-time employee at the end of the Performance Cycle in order to be eligible to receive an award.

Participants who have participated in the Plan for the entire Performance Cycle, or Participants who are not new TVA employees at the time they become participants in the Plan, will be eligible to receive a full award.

Except as set forth above, Participants who become participants in the Plan at a time other than the beginning of a Performance Cycle, and who are employed at the end of the Performance Cycle, will be eligible to receive a Prorated Award based on the number of full months he/she has been a Participant in the Performance Cycle.

Notwithstanding the above, if a Participant’s employment is terminated due to death or Disability, then the Participant will receive a Prorated Award for the Performance Cycle ending on September 30 th following the date of termination of employment, but no other Performance Cycles.

ELTIP Awards are paid in a lump sum during the first quarter of the next fiscal year following each performance cycle but no later than March 15 th of the next calendar year following the year in which the Awards are earned. All ELTIP Awards will be approved by the Board of Directors, the CEO, or other delegated officer prior to payment.

DEFERRAL ELECTION OPTION

Performance-Based Compensation

Participants may be eligible to elect to defer all or a portion of any eligible ELTIP Award for a Performance Cycle to the TVA Deferred Compensation Plan under the following conditions:

Deferral election must be made on or before the date that is six (6) months before the end of the Performance Cycle;

The deferral must be made in 25% increments of the actual ELTIP Award and is irrevocable as of the date set forth above;

Deferred amounts will be paid out upon the Participant’s Separation from Service in either a lump sum or in 5 or 10 annual installments, as elected by the Participant; and

The Participant performs services at TVA continuously from the date the Participant’s performance criteria are established through the date a deferral election is made.

ELTIP Awards are eligible for deferral to the extent (i) they constitute “performance-based compensation,” as that term is defined in 26 CFR §1.409A-1(e) of the Internal Revenue Code section 409A final regulations, and (ii) the amount of the awards has not become readily ascertainable at the time of the deferral election.

First Year of Eligibility

Participants who become participants in the Plan at a time other than the beginning of the Performance Cycle may be eligible to elect to defer a portion of any eligible ELTIP Award for the Performance Cycle to the TVA Deferred Compensation Plan under the following conditions:

Deferral election must be made within thirty (30) days after the date the Participant becomes eligible to participate in the Plan;

The deferral election choices are 25%, 50% or 75% of the actual ELTIP Award, to the extent such choices are available to the Participant;

The deferral is irrevocable as of the date set forth above; and

Deferred amounts will be paid out upon the Participant’s Separation from Service in either a lump sum or in 5 or 10 annual installments, as elected by the Participant.

The amount of ELTIP Award eligible for deferral depends on the number of days remaining in the Performance Cycle after the date of the Participant’s election over the total number of days in the Performance Cycle as set forth in 26 CFR §1.409A-2(a)(7) of the Internal Revenue Code section 409A final regulations

ELTIP Incentive Opportunities, Performance Measures and Goals, and the results of the Performance Measures and Goals for each Participant are approved for each Performance Cycle in accordance with the TVA Compensation Plan and the delegations thereunder.

The Plan will be administered by the Vice President, Human Resources. Corporate Human Resources will develop and interpret all rules for the administration of the Plan.

TERMINATION OR AMENDMENT OF THE PLAN

The Board of Directors, or its delegatee, may at any time modify, suspend, terminate, or amend the Plan in whole or in part.

COMPLIANCE WITH SECTION 409A

At all times, to the extent Internal Revenue Code section 409A and its implementing regulations (collectively, “Section 409A”) applies to amounts deferred under this Plan: (a) this Plan shall be operated in accordance with the requirements of Section 409A; (b) any action that may be taken (and, to the extent possible, any action actually taken) by the Board, or its delegatee, and the Participants shall not be taken (or shall be void and without effect), if such action violates the requirements of Section 409A; (c) any provision in this Plan that is determined to violate the requirements of Section 409A shall be void and without effect; and (d) any provision that is required by Section 409A to appear in this Plan that is not expressly set forth shall be deemed to be set forth herein, and this Plan shall be administered in all respects as if such provision were expressly set forth herein.

Disability	Term “disability” as defined in 26 CFR §1.409A-3(j)(4)(xii) of the Internal Revenue Code section 409A final regulations.

ELTIP Award	Actual dollar amount awarded to a Participant under the ELTIP.

ELTIP Incentive Opportunity	Award opportunity expressed as a percent of the Participant’s salary.

Especially Critical	A position that has the ability to significantly impact the long-term financial, and/or operational objectives critical to TVA’s overall success.

Participant	An officer or other Manager/Specialist employee in an Especially Critical position approved to be eligible to receive an award under the ELTIP.

Performance Cycle	The three-year period of time over which performance is measured for the purpose of awarding incentives.

Performance Goals	The long-term strategic goals established for each Performance Measure used to determine the ELTIP Award.

Performance Measures	The specific metrics used to measure performance.

Prorated Award	Method used to determine the ELTIP Award amount for an employee not eligible to receive a full award. Pro-ration is based on the number of full months of participation in a given Performance Cycle.

Separation from Service	Term “separation from service” as defined in 26 CFR §1.409A-1(h) of the Internal Revenue Code section 409A final regulations.

Total Direct Compensation	Term used by TVA that includes salary plus Annual Incentive Award plus ELTIP Award plus LTDCP annual credits.

DEFERRED COMPENSATION PLAN

The TVA Long Term Deferred Compensation Plan (“Plan”) is designed to provide long-term incentives to executives to encourage them to stay with TVA and to provide competitive levels of total compensation to such executives. This Plan will also assist in the recruitment of top executive talent for TVA by providing an opportunity for significant additional tax deferred compensation. As in other corporations, deferred compensation can be an integral part of a total compensation package.

The Board of Directors, the Chief Executive Officer (“CEO”), or their delegatees, approve the participants in the Plan in accordance with then existing delegations of authority (“Participants”).

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TVA enters into a deferral agreement with each Participant (a “Deferral Agreement”) under which deferred compensation credits (“Credits”) are made to an account in the Participant’s name (each, an “Account”). Credits are made on an annual or other periodic basis for an established period of time, as specified in the Deferral Agreement, after which the Participant vests in the full amount in the Participant’s Account, including interest or return as provided below.

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The Participant must be employed with TVA at the time of the expiration of the Deferral Agreement, or no payment under this Plan will be made by TVA to the Participant pursuant to the Deferral Agreement, and all Credits, and any interest or return on such Credits, in the Participant’s Account will be forfeited. This will not apply in the event TVA terminates the Participant’s employment without cause through no act or delinquency of the Participant or in the event of the Participant’s death in service, in which cases the Participant will become vested in the Account balance at the time of termination or death. In the event of death in service, the Participant’s Account balance shall be paid in a lump sum to the Participant’s designated beneficiary, or in the absence of any such designation, to the Participant’s estate, by the last day of the first full calendar month following the receipt of proper proof of the Participant’s death.

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Each Participant’s Account will receive interest on the same basis as interest is calculated under the TVA Deferred Compensation Plan. In lieu of interest, each Participant may elect to have all or a portion of the Participant’s Account adjusted by the return tied to one or more mutual funds selected by the Participant under the same conditions as are contained in the TVA Deferred Compensation Plan.

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The entire vested amount in the Participant’s Account will be paid to the Participant in a lump sum within sixty (60) days following the expiration of the Deferral Agreement, unless the Participant elects, within thirty (30) days following the date the Deferral Agreement is entered into, to further defer receipt of vested amounts by having the vested Account balance upon expiration of the Deferral Agreement credited to an account in the Participant’s name in the TVA Deferred Compensation Plan. Deferred amounts will be paid out upon the Participant’s Separation from Service in either a lump sum or in 5 or 10 annual installments, as chosen by the Participant at the time of election.

For purposes of the above paragraph, Separation from Service means the term “separation from service” as defined in 26 CFR §1.409A-1(h) of the Internal Revenue Code section 409A final regulations.

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Under certain Deferral Agreements with Participants in key positions within TVA, TVA will vest the Participant in certain Credits at the time the Credit is made to the Participant’s Account. In the event a Credit vests upfront on the effective date of the Deferral Agreement or within twelve (12) months following the effective date of the Deferral Agreement, TVA will specify within the terms of the Deferral Agreement how the Credit(s) will be paid to the Participant (lump sum within sixty (60) days following the expiration of the Deferral Agreement or upon Separation from Service in either a lump sum or in 5 or 10 annual installments), and the Participant shall not have a deferral election with respect to such Credits.

•	Approvals regarding the terms of Deferral Agreements under the Plan for each Participant, such as the duration of the Deferral Agreements and the amount and number of Credits, will be made in accordance with the TVA Compensation Plan and the delegations thereunder.

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The Vice President, Human Resources, shall have sole and exclusive responsibility for resolving any dispute regarding this Plan or a Deferral Agreement. The decisions of the Vice President, Human Resources, in all matters pertaining to the Plan’s operation shall be final and conclusive as to all parties.

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TVA shall maintain each Participant’s Account and credit to each Account the Credits, interest, return, and other such amounts as may be approved or elected pursuant to this Plan. TVA shall make payments to Participants (and their beneficiaries, as applicable) pursuant to this Plan, applicable Deferral Agreements, and the TVA Deferred Compensation Plan.

•	Nothing contained in this Plan or any Deferral Agreement shall be construed as conferring upon any Participant the right to continue in the employment of TVA as an executive or employee or in any other capacity.

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Nothing contained in this Plan or any Deferral Agreement and no action taken pursuant to the provisions of this Plan or any Deferral Agreement shall create or be construed to create a trust of any kind, or a fiduciary relationship between TVA and any Participant, designated beneficiary or any other person.

•	No transfer, assignment, pledge, seizure, or other voluntary or involuntary alienation or encumbrance of any benefit provided under this Plan or any Deferral Agreement will be permitted or recognized other than as specifically provided in this Plan.

•	The above paragraph notwithstanding, TVA may offset amounts owed to it by a Participant against any amounts payable to a Participant under this Plan or any Deferral Agreement.

This Plan may be amended or terminated by the Board, or its delegatee, at any time as it deems appropriate without the consent of any Participant, beneficiary, or other person; provided, however, that if the Board, or its delegatee, elects to terminate the Plan, any Credits already made under then current Deferral Agreements to Participants’ Accounts as of the date of termination, including any interest and/or return as calculated pursuant to this Plan, will vest and be paid to the Participants either (i) in a lump sum within sixty (60) of the termination of the Plan or (ii) pursuant to the Participant’s valid deferral election, as appropriate.

Compliance with Section 409A:

At all times, to the extent Internal Revenue Code Section 409A and its implementing regulations (collectively, “Section 409A”) applies to amounts deferred under this Plan: (a) this Plan and all Deferral Agreements shall be operated in accordance with the requirements of Section 409A; (b) any action that may be taken (and, to the extent possible, any action actually taken) by the Board, or its delegatee, and the Participants, shall not be taken (or shall be void and without effect), if such action violates the requirements of Section 409A; (c) any provision in this Plan or a Deferral Agreement that is determined to violate the requirements of Section 409A shall be void and without effect; and (d) any provision that is required by Section 409A to appear in this Plan or any Deferral Agreement that is not expressly set forth shall be deemed to be set forth herein, and this Plan and such Deferral Agreement shall be administered in all respects as if such provision were expressly set forth herein.