INTERVIEW-New carbon targets generate more work for U.S. power companies -TVA

June 6 (Reuters) - U.S. power companies that thought they had already done enough to reduce carbon emissions to meet proposed rules for existing plants likely have more work to do, Bill Johnson, chief executive of the Tennessee Valley Authority, said on Friday.

The U.S. Environmental Protection Agency said on Monday it wants generators to reduce carbon emissions from existing power plants by 30 percent below 2005 levels by 2030.

"TVA's carbon emissions are already 32 percent below 2005 levels and we expect emissions to be 40 percent below 2005 levels by 2020," Johnson told Reuters in an interview.

But the EPA rule does not focus on absolute emissions reductions but rather seeks a reduction of carbon intensity from 2012 levels.

"We're still evaluating the EPA carbon rule and trying to determine exactly how it works. It seems the EPA wants the states to reduce emissions from a 2012 baseline to get emissions 30 percent below 2005 levels," the CEO said.

The EPA said every state except Vermont, which has almost no carbon emissions, still needs to reduce carbon intensity under the rule, including the dozen or so states whose emissions are already 30 percent or more below 2005 levels.

"I think everyone who thought they did not still have work to do to reduce carbon, still has work to do," Johnson said.

He said it was too early to say what TVA will do to comply with the carbon rule.

"There will be a lot of discussions between states and utilities over the next few months to try to figure out if we want to do this on a regional basis or go it alone," Johnson said.

TVA is a U.S. government-owned power company serving 9 million people in parts of seven southeast states.

TVA this week issued a report by Lazard, Freres & Co LLC, a financial advisor TVA hired to look into a possible government divestiture of TVA.

A year ago, the Obama Administration 2014 budget sought a review of options to address TVA's financial situation.

"Lazard concluded the best course of action is to continue on the financial and operational plan we have," Johnson said.

At the time the Administration started looking into the divestiture of TVA, Johnson said, the company was planning to build a lot of new power plants to meet fast growing demand.

But, he said demand is no longer forecast to grow as fast - less than 1 percent a year rather than 2 percent or 3 percent.

"We lost USEC our biggest customer, the economy is not growing as fast and people are becoming more efficient," he said, referring USEC Corp's decision to shut its uranium enrichment activities in Paducah, Kentucky.

He said TVA's plan now is to continue reducing debt, finish the 1,150-megawatt Watts Bar 2 nuclear reactor in Tennessee by December 2015 and finish a 1,000-MW combined cycle natural gas plant at Palisades in Kentucky by the summer of 2017.

(Reporting by Scott DiSavino; Editing by Marguerita Choy)