Electricity sales by one of America's biggest public power utilities declined by more than 8% from a year ago this spring as mild weather and the shutdowns caused by the coronavirus combined to limit power consumption in the second quarter of the year.
The Tennessee Valley Authority estimated Tuesday that the coronavirus cut its revenues by $130 million in the first part of 2020 and will likely reduce revenues by another $100 million in the balance of its fiscal year, which ends Sept. 30.
TVA said it is uncertain what the lingering effects of the virus in fiscal 2021 will mean for TVA sales, but the utility has forecast relatively flat, or possibly declining, sales over the next couple of decades as energy efficiency offsets growth in TVA's seven-state region.
Despite the drop in power sales, TVA still boosted its bottom line in the most recent fiscal quarter by more than 24% from a year ago by cutting expenses and depreciation compared with the second quarter of 2019.
In the three months ended June 30, TVA reported net income of $205 million on revenues of $2.25 billion. In the same period a year ago, TVA earned net income of $165 million on revenues of nearly $2.6 billion.
The improvement came even as TVA distributors suspended utility cutoffs this spring due to the coronavirus and TVA extended up to $1 billion of credit to the local power companies and other customers that buy TVA power.
"TVA remains operationally and financially healthy, which enables us to continue providing uninterrupted vital services, as well as support communities during this challenging time," Jeff Lyash, TVA's president and chief executive officer, said in TVA's quarterly earning report released Tuesday. "Our work to maintain stable, low rates is particularly impactful. In addition, our customers who have become long-term partners have received over $100 million in credits on their bills so far this fiscal year."
TVA Chief Financial Officer John Thomas said the average customers' cost of power was down from a year ago due to stable base rates by TVA and declining fuel costs due to the cheaper natural gas and coal and more abundant hydroelectric and nuclear generation, which uses the lowest price "fuel" from rainwater and uranium.
In the first nine months of the fiscal year, TVA reported $652 million of net income on $7.4 billion in total operating revenues. Sales of electricity were about 5% lower compared to the same period of the prior year due to overall milder weather and impacts of the COVID-19 pandemic.
But TVA's operating revenues decreased about 9% from the same period of the prior year driven primarily by lower sales volume, lower fuel cost recovery revenues, and lower effective base rates. TVA also cut its borrowings, reduced its interest expenses and added to its cash reserves, Thomas said. TVA's debt remains at the lowest level in almost 30 years.
Operating and maintenance expense was $275 million lower, driven primarily by fewer project write-offs and regulatory asset recovery for certain environmental cleanup costs that did not occur in the current year. TVA said it continues to implement various cost savings initiatives in response to the COVID-19 impacts.
"While it was expected that the pandemic would have some impact on sales, TVA's proactive efforts to reduce expenses, improve the efficiency of our operations, invest in cleaner asset investments, and lower debt have all put us in a good position," Thomas said.
Contact Dave Flessner at dflessner@timesfreepress.com or 423-757-6340.