The Tennessee Valley Authority is once again starting its fiscal year in the red, but utility officials said Tuesday they aren't going to put TVA on the same "diet and exercise" program they did last year to cut staff and spending - at least yet.
"We're looking at this very closely," TVA CEO Bill Johnson said Tuesday after TVA reported a $245 million net loss in the last three months of calendar 2012. "If we have to adjust, we certainly will to make these numbers add up at the end of the year. I believe the cost management and cost control is something we need to be doing all the time to achieve financial excellence."
TVA typically loses money during its first fiscal quarter from October through December when milder temperatures and holiday vacations cut power sales. But TVA's losses in the past quarter were up nearly 42 percent from the $173 million loss TVA incurred in the same period a year ago. A mild winter and cutbacks by TVA's biggest industrial customer this year could continue to restrain TVA sales.
In response to net losses early in fiscal 2012, TVA adopted a freeze on hiring and many capital spending programs and trimmed about 1,000 employee and contractor jobs during fiscal 2012.
TVA industrial power sales to major industries served directly by TVA fell by 12.3 percent in the final three months of calendar 2012 compared with a year ago. The U.S. Enrichment Corp., (USEC) TVA's biggest industrial customer, has cut back its operations in Paducah, Ky., and "was the primary driver" for the drop in industrial sales, TVA Chief Financial Officer John Thomas said.
Although USEC agreed to a one-year contract extension with TVA last year, the amount of electricity bought by USEC is down significantly this year.
Nonetheless, Johnson said overall operating revenues "remain on plan" and Thomas said the cost-saving moves adopted last year "have positioned TVA to remain financially healthy through the year.
"We are seeing reduced base rates during transition months and winter months, and expect to see higher revenues during the summer months," Thomas said.
The increase in operating and maintenance expenses for TVA last fall was due, in large part, to three refueling outages at TVA nuclear units in the period. Earlier this month, TVA completed a $376 steam generator replacement program at the Sequoyah Nuclear Plant near Soddy-Daisy on time and under budget. But that project and other routine maintenance cycles pushed nuclear power generation down 28 percent in the quarter.
In its quarterly filing with the U.S. Securities and Exchange Commission, TVA also revealed that the utility continues to suffer from rotor problems at its Raccoon Mountain Pumped Storage Facility, just west of Chattanooga.
TVA rebuilt and restarted one of its four units at Raccoon Mountain in October with a partially restacked rotor after inspections previously found cracks and defaults in the equipment of all four units. But the restarted unit 2 was forced to again be taken out of service last month due to a failed rotor pole clamp.
Johnson said he hopes to soon restart the unit 3 at the pumped storage facility, but it could be another year or more before all four units resume operations.
TVA's biggest construction project -- the $4.5 billion completion of the Unit 2 reactor at Watts Bar Nuclear Plant near Spring City -- is proceeding on schedule and within budget again after cost overruns last year forced TVA to delay the startup of the unit by up to two years and added nearly $2 billion to its completion cost, Johnson said.
If Watts Bar proceeds on plan, Johnson said TVA will begin studying by the end of 2013 the possibility of finishing units at its incomplete Bellefonte Nuclear Plant in Hollywood, Ala.