Despite a $545 million drop in power sales due to the coronavirus pandemic this year, the Tennessee Valley Authority said Friday it managed to reduce its rates, pay down its debt, and earn nearly $1.3 billion of net income during fiscal 2020.
TVA said power sales fell along with the economic downturn and milder weather this year, but TVA offset the drop in revenues by improving the performance of its plants and cutting its fuel and interest expenses by taking advantage of abundant rainfall, cheaper gas and lower borrowing costs.
"Overall, it was an incredibly strong financial year," TVA Chief Financial Officer John Thomas told the TVA board during its quarterly meeting. "It really takes the alignment, commitment and creativity of 10,000 people going in the same direction to be able to create these kinds of results in these very challenging conditions."
TVA used its savings last year to help lower wholesale rates last year by 3.1% for local power companies like EPB that signed long-term purchase agreement with TVA and provided another 2.5% credit on wholesale power bills in the current fiscal year that began Oct. 1 . TVA provided the latest savings to local power companies through a $200 million Pandemic Relief Credit, which came in addition to the creation of a Community Care Fund to help local nonprofits and the extension of a pandemic credit relief program for financially distressed companies through next June.
"Public power means putting people over profits," TVA President Jeff Lyash said. "We have begun redefining public power for the future."
Among its utility peers across the country, Lyash said only two other utilities have kept rates stable in the past couple of years "and there is no other utility I am aware of anywhere" that has reduced wholesale rates as much as what TVA has done over the past 15 months. In the latest power price comparisons among the nation's 100 largest utilities in June, TVA residential rates were in the lowest 25% of all utilities and its industrial rates were in the lowest 10%.
With cheaper fuel passed along to customers in the monthly fuel cost adjustment, TVA's delivered cost of wholesale power is now cheaper than it was a decade ago. In the past year, electricity utilities nationwide, on average, have raised power rates 1.7% while TVA has reduced its power bills.
After decades of raising rates, TVA has kept its electricity prices relatively stable — and with fuel cost adjustments has cut some rates — over the past decade. TVA projects that its power sales in the current year will drop below $10 billion due to cheaper rates and stagnant sales amid the ongoing pandemic.
With its pandemic relief payments, TVA projects its average wholesale price of electricity in fiscal 2021 will be 6.54 cents per kilowatt hour, or nearly 5% less than in fiscal 2013.
TVA has pledged to keep its power rates constant for the next decade. Lyash said the utility has done so while shifting away from coal-fired power generation to more nuclear power, hydro, solar and low-emission natural gas generation. That has cut TVA's carbon emissions by 60% since 2005 and the utility expects to have cut those carbon emissions below 2005 levels by 70% by 2030, Lyash said.
"We're the greenest utility in the Southeast," Lyash boasted.
Most of TVA's carbon-free generation has come from nuclear power, which supplies over 40% of TVA's electricity, and hydropower generated by the 29 power-producing dams that TVA built along the Tennessee River and its tributaries. TVA also has shifted more to low-emission natural gas and installed scrubbers and other pollution controls on its remaining coal-fired plants.
TVA has made such changes while reducing its long-term debt by more than $6 billion over the past decade and a half and achieved its fiscal target set by the Government Accounting Office three years ahead of schedule, Thomas said. TVA's debt fell to just over $21 billion in fiscal 2020.
TVA's performance won the praise Friday of outgoing U.S. Sen. Lamar Alexander, who has worked with TVA for more than three decades as Tennessee's governor, as a U.S. senator, as a University of Tennessee president and as a former Secretary of Education. Alexander said when he was first elected to Congress in 2002, TVA's debt was approaching its $30 billion debt ceiling and rates and pollution were still rising. But that has since been reversed, he said.
Alexander said low-cost power was key to his work as governor in recruiting Nissan to build the first automobile assembly plant in Tennessee, which was later followed by similar plants from General Motors and Volkswagen.
"I'm very proud of the direction that TVA is going," Alexander told the TVA board Friday. "You've kept the rates low, the air clean and the power on."
Contact Dave Flessner at email@example.com or 423-757-6340.