Higher electricity prices may have squeezed recession-weary consumers in the past two years, but the higher TVA rates are helping to funnel more money into state and local government coffers.

TVA announced Thursday that it paid more than $505 million in tax-equivalent payments to state and local governments in 2009, an increase of 10.5 percent from the previous year.

For the fiscal year that began last month, TVA estimates it will pay $538 million to such governments, another 6.5 percent increase.

As a government agency, TVA doesn't pay property taxes. But the TVA Act provides that the agency make tax-equivalent payments based upon its annual sales from the previous year.

TVA makes tax-equivalent payments to the seven states where it sells power and to Illinois, where it owns coal reserves.

TVA Chief Financial Officer Kim Greene said payments are equal to 5 percent of TVA's annual revenues, payable in the next fiscal year, and are distributed based upon TVA sales in a state and its investments in the state.

Tennessee will get the biggest increase in tax-equivalent payments this year, rising from $295 million last year to $320 million this year.

"Our assets have grown a little faster in Tennessee because of investments at Watts Bar (Nuclear Plant near Spring City) and at the Kingston Fossil Plant (in Roane County)," Ms. Greene said.

Despite lower consumption of electricity in the Tennessee Valley, the 20 percent rate increase in October 2009 boosted TVA revenues overall, even with subsequent rate reductions during the past year, records show.

TVA President Tom Kilgore said the tax-equivalent payments "provide an important source of revenue for communities throughout the Tennessee Valley.

"City and county governments use the tax-equivalent payments for schools, roads and many other local programs and services," he said.