KNOXVILLE - America's biggest public power utility will extend for another year the price breaks it has provided during the pandemic for the local power companies that provide electricity to more than 10 million people under a budget plan adopted Wednesday.
The Tennessee Valley Authority, which has cut both its operating costs and debt expenses for nearly a decade, will extend its 2.5% pandemic relief rebate provided this year as a "pandemic recovery" credit and pledged to soon develop a plan to extend the credit into 2023. TVA President Jeff Lyash said the utility has paid down its debt by nearly $8 billion and cut its annual operating expenses by more than $800 million over the past decade to allow for the reduction in the price of electricity.
The pandemic recovery credit being provided to all TVA customers is in addition to the 3.1% credit TVA has provided to the 144 local power companies in the Tennessee Valley that have signed 20-year power purchase contracts with TVA.
"This credit is putting real dollars back into Valley communities to meet local needs," Lyash said. "Because of TVA's strong operational and financial performance, we have an opportunity and responsibility to use these resources to provide continued support for customers, businesses and communities."
Local power companies like Chattanooga's EPB ultimately set retail electricity prices, and Lyash said more than half of the 153 distributors of TVA power didn't raise their rates this year, in part due to the pandemic credit.
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Although the pandemic initially cut power sales last year, electricity use has rebounded in 2021, and TVA expects to earn more than $1 billion in net income this year for the fourth consecutive year. TVA's wholesale rates remain higher than some of its neighbors in the South, but TVA residential rates are below about 70% of those charged by other utilities nationwide, and its industrial rates are among the lowest 20% of all utilities, according to Energy Information Administration data.
TVA has pledged to keep its base rates constant for the next decade, and the rebates are helping TVA improve its competitive position in the cost of its power.
Despite recent increases this summer in its monthly fuel cost adjustments, TVA Chief Financial Officer John Thomas said retail power rates in the Tennessee Valley are still down about 4% since 2019 and are below what they were a decade ago.
"TVA's effective rates have been going down while our peers' have been going up," Thomas told the board. "Combined with a debt level that is the lowest in more than 30 years, our strong financial position gives us confidence in maintaining stable rates through at least 2030 while preserving our ability to invest in our existing facilities and future capabilities, and continuing to support the people in communities in our region."
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The TVA board created the pandemic relief credit last year to provide a monthly 2.5% wholesale power cost credit to each of the 153 local power companies TVA serves, as well as customers served by TVA directly and large customers served by local power companies. For fiscal 2021, the credit will be about $200 million, and extending the program through fiscal 2022 is expected to provide an additional $220 million.
TVA distributors who were faced with a series of wholesale price increases a decade ago to help pay down TVA's debt and the cost of many of its canceled nuclear power plants are welcoming the rebates, especially during the pandemic when some local power companies suffered lost power sales or had to write off more unpaid accounts during the economic downturn.
"TVA has been able to bring down its debt in a way that many didn't think they could, and we're pleased to see these moves to hold down rates," said Doug Peters, president of the Tennessee Valley Public Power Association, the Chattanooga-based trade group that represents the 153 local power companies that distribute TVA power across its seven-state region.
During Wednesday's TVA board meeting, directors also approved the continuation of the Community Care Fund into the new fiscal year, providing up to $5 million in additional TVA funds. This brings the total TVA contribution to $9 million to support groups that continue to help those most in need in local communities.
The extended rebates and credits are part of a $10.5 billion spending plan the TVA board approved for the fiscal year that begins Oct. 1. Thomas said TVA is forecasting flat revenues in the next year compared with the current fiscal year. Electricity sales have rebounded this year from the pandemic, and TVA expects its flat rates and continued energy efficiency measures by its customers will largely offset power growth from the expanding economy.
In the past month, TVA has had four days of hot weather that boosted its power demand to more than 30,000 megawatts. That's the first time TVA has had such peak power demand in the summer since 2010, according to TVA Chief Operating Officer Don Moul.
Contact Dave Flessner at dflessner@timesfreepress.com or 423-757-6340.