Colder weather boosts TVA sales, income

Utility starts fiscal year with $102 million in net income

The Tennessee Valley Authority building in downtown Chattanooga is shown in 2016. / Staff file photo
The Tennessee Valley Authority building in downtown Chattanooga is shown in 2016. / Staff file photo

A colder fall generated more cold cash for America's biggest government utility, boosting power sales by a strong 7 percent in the final three months of 2016 compared with the milder fall a year-ago period.

The Tennessee Valley Authority said today it earned $102 million for the three months ended December 31, 2016, compared with a net loss of $37 million in the same period a year earlier. The income and sales gains in TVA's first fiscal quarter positioned TVA for an even better fiscal year than the record high net income reached in fiscal 2016, although milder temperatures this month could offset some of the comparative advantage over last year in the winter period.

The number of heating degree days - a key measure for how weather affects electricity usage - was 29 percent higher last fall than the previous year due to more normal weather across TVA's 7-state region. Combined with higher fuel cost adjustments and a 2 percent base rate increase last October, overall operating revenues for TVA grew by 12 percent, or $266 million, over the previous year to more than $2.5 billion.

Last year, the Valley experienced some of the mildest temperatures in a half century during October, November and December.

Total operating expenses for TVA were up by $65 million, or about 3 percent, from the same period in 2016. The higher operating expenses were mainly driven by fuel costs that were about $88 million higher.

"Unlike last year, when we had an abundance of rainfall, the extended drought conditions that carried over from summer limited power production from TVA's dams," TVA President Bill Johnson said in today's earnings report. "This resulted in increased use of higher cost generation sources and higher fuel prices. So, while the energy costs of producing electricity were not as favorable, the higher revenues, along with the efficiencies we've been able to build into the business, helped us improve the bottom line."

Non-fuel operating and maintenance costs were relatively flat to that of the same period in the prior year.

"TVA is off-setting inflation and other cost pressures with efficiencies, and maintaining our cost-savings momentum," TVA Chief Financial Officer John Thomas said in a statement today. "Even with the increased power demand, TVA's non-fuel operating costs were lower, helping us keep power rates low."

TVA has reduced operations and maintenance expense by a sustainable $800 million over the past four years, which has helped the bottom line and also resulted in lower power rates, Johnson said.

TVA completed construction of its long-delayed unit 2 reactor at its Watts Bar Nuclear Power Plant near Spring City last September. But the federal utility still plans to spend nearly $3 billion this year in capital improvements and new gas-fired generation, including the Paradise combined-cycle natural gas facility in Kentucky, and the Allen gas plant in Memphis.

In addition, emission controls at Gallatin Fossil Plant near Nashville and the Shawnee Fossil Plant in Kentucky are scheduled to be completed this fall.

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