Mild weather, economy help cut TVA rates, sales

Tennessee Valley Authority headquarters and TVA logo

With the summer heat on across the Tennessee Valley, electricity users are getting some relief with TVA wholesale rates 4 percent below those of a year ago.

Lower fuel and purchased power costs from cheaper gas and coal prices helped TVA cut its own power rates even as higher temperatures boosted power usage this spring by nearly 5 percent.

"As we move into the hot summer months, that is certainly good for our customers because their summer bills will not be as high as what they otherwise would have been," TVA Chief Financial officer John Thomas said Friday.

But the favorable trend in rates was offset by lower sales and bigger losses for TVA, which also cut its staff by 488 jobs since May to limit its losses.

Thomas said he expects TVA will operate in the red for all of 2012 - the first such yearly loss for the federal utility since 2001.

To pare its budget in response to lower sales last winter, TVA spokesman Duncan Mansfield said TVA has cut 488 jobs and didn't fill 182 vacancies in the past four months. Those moves helped save $66 million, and Thomas said other productivity and cost-cutting measures as part of TVA's "diet and exercise" program should save about $200 million in all.

In a regulatory filing with the U.S. Securities and Exchange Commission Friday, TVA said it lost $23 million on sales of more than $2.7 billion in the spring quarter. The losses were less than 10 percent as much as a year ago, however, when TVA lost $230 million on sales of about $2.6 billion.

In June of this year, TVA had four straight days of temperature above 100 degrees, which helped boost electricity sales but also increased TVA's operating expenses, Thomas said.

"The hot weather we had in June wasn't enough to make up for the warmest winter in 60 years," Thomas said. "I would predict that TVA will end up with a net loss for all of fiscal 2012."

For the first nine months of the current fiscal year, lower sales overall contributed to a net loss of $290 million on TVA sales of nearly $7.9 billion. In the same period a year earlier, TVA lost only $35 million on sales of $8.4 billion.

TVA directors will meet Aug. 16 to consider a budget plan for fiscal 2013. TVA President Tom Kilgore said he remains committed to restoring TVA as a top quartile utility in the South for low-cost electricity rates. TVA industrial rates are now only about average among utilities in the region.

"While rates may be down for some customers from a year ago, TVA is still lagging behind other utilities in the region in its industrial rates," said John Van Mol, executive director for the Tennessee Valley Industrial Committee, which represents TVA's biggest industrial power users.

In Chattanooga, electric rates this month are about flat with a year ago because TVA's cheaper wholesale rates have been offset, in part, by higher EPB rates.