Higher power bills boost TVA payments to local governments

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

The jump in power bills this summer may be painful for consumers but it is giving a boost to state and local government coffers.

As the nation's biggest government-owned utility, the Tennessee Valley Authority does not pay taxes. But under its charter, the federal utility does pay in-lieu-of tax payments and such payments this year are up 15.4% from the previous year due to higher consumption and rates on TVA electricity in fiscal 2022.

TVA is paying state and local governments in the eight states where it has operations or customers a total of $593 million in the fiscal year that ends Sept. 30. That's up $79 million from what TVA paid the previous year, and TVA projects such payments will grow to $609 million in fiscal 2o23.

The increases in tax-equivalent payments reflect the growth in TVA revenues, which are primarily due to higher fuel cost charges which are adjusted monthly to reflect the varying costs of coal, natural gas and other fuels. In Chattanooga, for instance, electricity prices last month were up more than 27% above what they were a year ago, although such fuel costs are dropping in September.

TVA doesn't pay property, sales or income taxes like investor-owned utilities, but it does make tax-equivalent payments to state and local governments in areas where it operates or has customers. Such tax equivalent payments are equal to 5% of TVA's revenues to local governments, so higher electric bills mean more in-lieu-of-tax payments from TVA to state, county and city governments.

TVA's tax payments dropped from the previous year in both 2020 and 2021 when the coronavirus pandemic closed many shops and businesses, and cut demand and revenues for TVA.

In addition to the seven states in TVA's service area, Illinois also receives a share of TVA's tax-equivalent payments because TVA owns coal reserves there. TVA makes tax-equivalent payments directly to 150 local governments where TVA has operations.

In TVA's service territory, Tennessee gets the biggest share of TVA tax equivalent payments with $345 million slated this year to go to state and local governments across Tennessee.

Since 1941, TVA has made more than $15.7 billion in tax-equivalent payments.

-- Compiled by Dave Flessner