With help from Mother Nature and cheaper fuel, the Tennessee Valley Authority boosted its income in fiscal 2018 while still reducing the average cost of delivered power to the nearly 10 million customers served by the federal utility.
TVA said today it earned more than $1.1 billion in net income in the fiscal year ended Sept. 30, up by more than 63 percent from the previous year, even after TVA took extra income to pay off the remaining debt on the last of TVA's investments in nuclear plants that were never finished.
TVA sold more than $11 billion in electricity across its 7-state region in fiscal 2018, primarily due to colder winter weather in January which led to TVA setting an all-time record for energy demand in a 24-hour period. Also in January 2018, TVA set three of its top-12 winter peak demand records during the coldest days of the year.
Cheaper natural gas and more abundant rain for TVA's hydroelectric units, combined with more nuclear power generation, helped to reduce TVA's fuel costs from 1.7 cents per kilowatthour to 1.62 cents per kilowatthour. That offset a 1.5 percent base rate increase during the year to keep the delivered cost of power slightly below the average for the previous year.
"We've kept rates flat or even slightly down over the past five or six years while reducing our debt to the lowest level in 25 years and improving our reliability to our best ever," TVA President Bill Johnson said. "It was a remarkable year and our employees did an excellent job this year."
Net income was the second highest ever for TVA in its 85-year history during 2018, behind only the record high of $1.2 billion earned in 2016. TVA would have had a record year for profits in the past year, but it took advantage of its higher operating income in fiscal 2018 to accelerate the pay off of the remaining $764 million in debt associated with its canceled Bellefonte Nuclear Power Plant in Alabama to fully amortize the unfinished plant.
That cut net income, but also helped reduce TVA's debt level to the lowest level since the early 1990s, TVA Chief Financial Officer John Thomas said.
"With the improved results, it seemed appropriate to extinguish some of these obligations," Thomas told the TVA board Wednesday. "With our strong results, we ended up with lower debt levels so we had lower interest expenses (in fiscal 2018)."
TVA invested more than $4 billion in building Bellefonte, plus billions more in interest expense, before it suspended work in 1988 and ultimately decided to scrap the facility due to shrinking growth in power demand and rising costs to complete the plant. TVA has given developer Franklin Haney until the end of the month to complete a $111 million purchase of the Bellefonte assets.
Paying off the Bellefonte debt helped TVA to pare its debt and long-term obligations down to $24.3 billion — $5.7 billion below its statutory limit and the lowest debt level for TVA in 25 years,
Even with more power sales, in 2018 TVA cut its operating and maintenance expense by $508 million for the year primarily driven by a one-time discretionary pension contribution in 2017, and a decrease in nuclear planned outage days. Over the past five years, TVA has cut its annual operating expenses by more than $800 million, primarily by cutting 3,000 TVA jobs and thousands of other contract positions after TVA shut down some of its coal plants and reduced its building staff.
TVA reported today that as of Sept. 30, it had 10,023 employees. Most of those workers will be receiving winning performance bonuses for the favorable 2018 results later this month, TVA Human Resources Vice President Sue Collins said.
The TVA board approved the bonus payments for the employees' annual at-risk pay during Wednesday's meeting in Tupelo, Mississippi. The annual payments are expected to be paid around Thanksgiving.