Cheaper fuel helps cut TVA electric rates over past four years

Cheaper fuel helps cut TVA electric rates over past four years

November 23rd, 2015 by Dave Flessner in Business Around the Region

This file photo shows the Tennessee Valley Authority's Browns Ferry nuclear plant in Athens, Ala.

Photo by Associated Press /Times Free Press.

As the economy of the Tennessee Valley has gained back most of the power it lost during the Great Recession, the cost of power in the region has declined over the past four years.

TVA said Monday its average cost of delivered power has declined from 7.2 cents per kilowatthour in fiscal 2011 to 6.9 cents per kilowatthour in fiscal 2015. The rate savings, mainly due to lower operating expenses and cheaper fuel, helped make TVA more competitive with neighboring utilities in the South, although some TVA industrial rates remain above the regional average.

Bill Johnson speaks as the TVA board of directors hold a public meeting at TVA's Chattanooga Office Complex.

Bill Johnson speaks as the TVA board of...

Photo by John Rawlston /Times Free Press.

The rate cuts came despite relatively flat electricity sales coming out of the recession and growing profits for TVA.

The Tennessee Valley has added back most of of the jobs lost in the region during the 2009-2010 downturn. TVA's power demand, however, has not returned to its 2007 level, in part, due to improved energy efficiency at many homes and businesses.

Despite only sluggish growth in power sales, the federal utility has boosted net income in each of the past four years, rising to a record $1.1 billion in the fiscal year ended Sept. 30.

"The costs of generating electricity were substantially lower this year, reflected by large reductions in TVA operating costs," Johnson said Monday in a conference call about TVA's financial results for the past year. "As a result, we finished 2015 with a record high level of net income, which was invested back into the power system to keep debt mostly flat for the year."

Natural gas and coal costs have declined amid a glut of fossil fuels, while above-average rain this year helped boost production from TVA's cheapest power source — its 29 power-generating dams.

Johnson, who joined TVA three years ago as CEO after heading Progress Energy and Duke Power Co., said he initially estimated TVA could pare $542 million of annual operating and maintenance expenses at TVA.

"I'm happy to say we not only met that goal, we exceeded it with more than $600 million of savings in operating and maintenance expenses," Johnson said. "Operational savings go right to the benefit of our customers, keeping rates affordable and freeing up funds that can be invested to make our power fleet cleaner and more reliable."

Overall, TVA's operating expenses in fiscal 2015 were down 8 percent, or $760 million, from the previous year.

TVA invested a record high $3.6 billion in capital projects last year. At the same time, TVA has trimmed its full-time staff by about 2,000 positions since 2012 to end last year with 10,918 jobs.

TVA raised its base rates on Oct. 1 by an average 1.5 percent at the retail level. But most of those increases will be offset next month by another drop in TVA's monthly fuel cost adjustment.

TVA has become more competitive with its power rates than a few years ago, but major industrial customers point out their power rates are lower at some other Southern utilities, such as Duke and Georgia Power, than they are with TVA.

"TVA rates are getting better and we're pleased with the improvement, but we'd like to see them do even better," said Pete Mattheis, an attorney for Nucor Steel who serves as chairman of the Tennessee Valley Industrial Committee.

Contact Dave Flessner at dflessner@timesfreepress.com or 423-757-6340.


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