published Wednesday, February 5th, 2014

TVA sticks with stable power outlook despite record January power use

TVA headquarters in downtown Chattanooga.
TVA headquarters in downtown Chattanooga.
Photo by Staff File Photo /Chattanooga Times Free Press.

TOP 5 ENERGY DAYS

Last month included three of the TVA's all-time top days for electricity use

• 1. Jan. 7, 2014, 703 gigawatthours

  1. Jan. 8, 2010, 701 gigawatthours

• 3. Jan. 16, 2009, 688 gigawatthours

• 4. Jan. 6, 2014, 678 gigwatthours

• 5. Jan. 28, 2014, 677 gigawatthours

TVA BY THE NUMBERS

In the first quarter of fiscal 2014 (ended Dec. 31):

• Net loss of $67 million was down from loss of $245 million a year ago

• Revenues totaled $2.38 billion, down $245 million from a year ago

• Average electricity rates were 6.2 cents per kilowatthour, down 5 percent from a year ago

• TVA debt totaled $26.1 billion, down $271 million from a year ago

Source: Tennessee Valley Authority

The Arctic polar vortex that put the chill in the Tennessee Valley last month pushed daily power demand to an all-time high for the Tennessee Valley Authority, requiring the federal utility to temporarily limit power to customers with interruptible contracts for the first time in years.

While temperatures plunged into single digits on Jan. 7, nearly 40 percent of the buildings in Murray State University in Kentucky lost power under its contract with TVA and suffered damages from frozen pipes.

The college saves $1.3 million a year by being among more than 1,200 customers with interruptible TVA contracts. But Murray State suffered unexpected problems that cost the college even more when a backup generator failed to work during the cold weather.

TVA President Bill Johnson said Tuesday the utility met all of its contractual obligations to the 9 million people it serves during the coldest January in nearly three decades. In a conference call with industry analysts, Johnson said the high power demand spurred by the unusually cold weather last month -- and the weather-induced rise in natural gas prices -- was not enough to change TVA's future plans.

"When you have a once in a 30-year event, which is what this was, I don't think you need to get too excited about the future," Johnson said. "I think the forecast will largely remain the same."

TVA is projecting that fiscal 2014 will be the fourth year of declining electricity sales since the Great Recession and, adjusted for weather, TVA doesn't expect to get back to its 2007 power demand levels for another decade.

TVA reported Tuesday that electricity sales in the final three months of 2013 were down by $245 million from a year ago, reflecting both cheaper fuel-adjusted rates and the loss of its biggest customer -- U.S. Enrichment Corp. in Paducah, Ky.

But TVA did surpass the projected peaks expected for this year during three different cold waves in January, raising doubts by some about whether projections of slow power growth will be adequate.

"The bitter cold that swept into the area on Jan. 6 and Jan. 7 not only froze pipes and exposed gaps in the weatherization of buildings, it also revealed serious concerns about the long-term planning strategy for our power grid," said Roger Babb, a former TVA power planner and CEO of Operation Simulations Associates Inc.

Babb has started a group to analyze TVA's future power needs, known as "OurTVA."

"The struggle to meet the peak load raises the immediate question of whether TVA will have adequate capacity to meet future peaks," he said.

To comply with stricter environmental rules, TVA is shutting down at least 18 of its 59 coal-fired units and replacing that generation with nuclear and natural gas plants. TVA's power plan is forecast on a much slower growth in power consumption in the Valley than TVA previously experienced through most of TVA's 81-year history.

Natural gas prices, which fell two years ago to only one third of their peak levels reached five years ago, have nearly doubled from their low points and rose in January as cold temperatures pushed up demand. But Johnson said he still expects natural gas to remain cheaper than upgrading TVA's aging coal fleet to comply with new clean air standards.

"We have confidence in pretty good stability longer term for gas and I think the equation still moves you to new gas generation rather than retrofits (of older coal plant)," Johnson said.

While residential power use will creep up, industrial use has been declining for the past four years, Johnson said.

With relatively stagnant sales growth in electricity and plans to shutter more coal units, TVA is also preparing to trim its 12,000-employee staff this year. But Johnson said he wants to see how many employees volunteer to retire or resign this month before announcing any specific staffing cuts.

Johnson said he is focused on cutting $500 million in operating and maintenance expenses by 2015 to keep TVA competitive and responsive to the changing power market..

Contact Dave Flessner at dflessner@timesfreepress.com or at 7857-6340.

about Dave Flessner...

Dave Flessner is the business editor for the Times Free Press. A journalist for 35 years, Dave has been business editor and projects editor for the Chattanooga Times Free Press, city editor for The Chattanooga Times, business and county reporter for the Chattanooga Times, correspondent for the Lansing State Journal and Ingham County News in Michigan, staff writer for the Hastings Daily Tribune in Nebraska, and news director for WCBN-FM in Michigan. Dave, a native ...

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