A milder winter cut power sales in the first three months of 2019 in the Tennessee Valley, lowering revenues and income for America's biggest government-owned utility during the quarter.
TVA said today it earned $241 million on sales of $2.7 billion in its second fiscal quarter in 2019. Sales of electricity decreased 4 percent for the three months ended March 31, 2019, as compared to the same period of the prior year due to warmer-than-normal winter temperatures following a bitterly cold winter in 2018.
But TVA is still on pace to report net income for the entire year of more than $1 billion for the the fourth time in the past five years. In the first half of its fiscal year, net income was down 11 percent from a year ago but still totaled $664 million for the six-month period despite an overall 1 percent drop in power sales in the period.
Revenue from sales of electricity increased $131 million for the six months ended March 31, 2019 due to higher rates adopted in October.
TVA said fuel costs were kept down by abundant rains, which set records both for all of calendar 2018 and for the month of February in TVA's 7-state region. Heavy winter rains swelled the level of the Tennessee River by more than 12 feet in Chattanooga in February, but TVA used its network of 49 dams to help limit flooding in the area and used its 29 power-generating dams to produce more power.
"Not only did TVA help prevent approximately $1.6 billion dollars of flood damage earlier this year, we were able to turn much of that rainfall into low-cost, carbon-free energy, providing increased value to those we serve," Jeff Lyash, TVA's new president and chief executive officer, said today in the quarterly earnings report.
Operating and maintenance expenses for TVA were up $267 million, or 21 percent higher than the six-month period ended March 31, 2018, primarily due to $135 million of additional funds for project write-offs and materials and supplies inventory reserves and write-offs related to the anticipated retirement of Bull Run and Paradise coal plans and $108 million of accelerated recovery of deferred environmental costs.
Interest expense was down 5 percent from a year earlier in the first half of the fiscal year as TVA cut its total outstanding debt as of March 31 to just over $23 billion, down $635 million since the start of the current fiscal year in October. TVA's debt is now the lowest in 25 years.
"We continue to see the benefits of debt reduction in TVA's financial results," said John Thomas, TVA's chief financial officer. "The significant decrease in interest expense in the first half of this fiscal year is a direct result of lower overall debt balances, despite the higher interest rate environment."