Warmer spring temperatures in the Tennessee Valley heated up power sales while cheaper fuel cut operating costs in TVA's most recent fiscal quarter.
As a result, TVA's net income in the three months ended June 30 totaled $291 million, nine times as much as the $32 million in net income earned in the same period in 2015.
In its quarterly earnings report released this morning, TVA said operating expenses plunged 15 percent due to cheaper natural gas, coal and purchased power expenses and a better generation mix from TVA's fleet of power plants.
"TVA has positioned its generation fleet to benefit from lower fuel prices," TVA Chief Financial Officer John Thomas said in TVA's quarterly earnings report. "In addition, TVA's efforts to reduce operating and maintenance costs in recent years are helping us provide the Tennessee Valley with power rates among the lowest in the nation."
Despite the improvement in the spring quarter, TVA's net income for the first three quarters of the current fiscal year were still below last year's results. For the first nine months of its fiscal year, TVA power sales were down 5 percent from a year ago due to the milder winter this year compared with the record-setting cold temperatures in 2015. As a result, net income so far this year for TVA totaled $572 million, down $37 million from the same period a year ago.
"Even though the Tennessee Valley experienced a warm spring, it was not enough to offset a very mild winter in terms of revenue," TVA President and CEO Bill Johnson said in a statement today. "As we noted at the end of the second quarter, despite the challenges we are maintaining a healthy financial picture and we continued to improve in the third quarter."
Compared to the same period last year, total operating expenses for TVA decreased over $400 million, or approximately 7 percent, in the first nine months of the fiscal year due to savings from lower fuel and purchased power costs.
TVA's quarterly financial report also highlighted TVA's major construction projects. Construction of the Watts Bar Unit 2 reactor near Spring City, Tenn., which will be the first new U.S. nuclear power facility of the 21st century.is undergoing final ascension testing in preparation for commercial operation expected later this summer. The unit achieved initial criticality and began initial power generation in May.
The new Watts Bar reactor is projected to cost $4.7 billion for the final completion phase of the facility, which TVA first began building in 1973. That is about $200 million more than what TVA projected five years ago but still less than half the cost of other new nuclear reactors being built in Georgia and South Carolina.
TVA' also is building new natural gas-fired facilities at the Paradise site in Kentucky and the Allen site in Tennessee, and clean air equipment at TVA's Gallatin, Tenn., fossil plant.
The Paradise project is approximately 75 percent complete and is expected to be online in the spring of 2017.
With dry scrubber construction complete at Gallatin Fossil Plant, TVA said is it turning its focus now o the selective catalytic reduction ("SCR") additions. The first two SCRs at Gallatin are scheduled to become operational in the spring of 2017, and the final two SCRs are scheduled for completion in the fall of 2017.
"As we strive to operate more efficiently today, we are also investing for greater effectiveness tomorrow," Johnson said. "TVA's major investments will help make the TVA power system even cleaner and more diversified for the future.