Colder winter weather pushed up energy use this year compared with the milder 2020 winter, but the Tennessee Valley Authority delivered its cheapest electricity prices in a decade to help offset the higher power consumption.
TVA reported Tuesday that its effective power rates in the first three months of 2021 were 7% below the rates charged a year earlier due to both cheaper fuel costs and the impact of rebates TVA offered to its customers for long-term contracts and to cope with the pandemic. TVA Chief Financial Officer John Thomas said the federal utility benefited by abundant rainfall to drive up hydroelectricity generation along with improved performance from its nuclear and solar units to cut overall fuel and purchased power expenses by 8% from the same period a year earlier.
The average rate paid by the municipalities and power cooperatives that distribute TVA-generated power in the 7-state Tennessee Valley region fell from 6.8 cents per kilowatt-hour in early 2002 to 6.3 cents per kilowatt-hour in the first part of 2021.
TVA cut its rates even as the utility nearly doubled its profits and maintained its 20-year-plus record of delivering electricity to local power companies more than 99.999% of the time.
"As we continue to provide reliable power even in the most extreme conditions, the cost of TVA's electricity also remains among the lowest in the industry and the region," Thomas said. "In fact, TVA's customers are paying effective wholesale rates in 2021 that are lower than a decade ago and we project our rates will remain stable for the remainder of the decade."
The federal utility is on pace to top $1 billion in annual profits this year for the fourth consecutive year. In a quarterly earnings report released Tuesday, TVA said it earned $456 million during the first three months of 2021 on sales of more than $2.5 billion. In the same period a year ago, TVA reported net income of $256 million on sales of just under $2.5 billion.
For the first half of the current fiscal year that began last October, TVA reported net income of $640 million, up from $447 million a year earlier.
TVA said the pandemic does not appear to be hurting power sales. Electricity sales for TVA were 3% higher this winter than a year ago, primarily due to colder weather than the mild winter of 2020. The number of heating degree days was up 8% from a year ago, but the Tennessee Valley did not experience the winter storms that hit Texas and knocked more than 4 million persons out of power, at least temporarily, and led to the deaths of at least 111 persons from hypothermia and other storm-related causes.
"The industry-leading reliability of the TVA power system kept the lights and heat on in the Tennessee Valley region this winter during conditions that caused severe disruptions in other parts of the country," TVA President Jeff Lyash said in a statement Tuesday.
As part of the Strategic Financial Plan approved by the TVA Board in 2019, TVA began offering a 20-year Valley Partnership Agreement option to local power company customers. As of May 3, 2021, 142 local power companies had accepted the offer and are now TVA long-term partners. Bill credits available to long-term partners totaled over $90 million in the first two quarters of fiscal year 2021.
In 2020, the TVA also began a Pandemic Relief Credit that became effective beginning in October 2020 as a 2.5 percent monthly base rate credit, totaling approximately $200 million for 2021. As of March 31, 2021, TVA had provided approximately $104 million in Pandemic Relief Credits.
TVA is also offering the Back-to-Business credit program that provides relief to certain larger customers when returning to operations and the Community Care Fund that partners TVA and LPCs to support local initiatives that address hardships created by the COVID-19 pandemic.
Lyash said TVA also has only half of the carbon footprint of its neighboring utilities in the Southeast and its lower rates are helping to attract businesses wanting cheaper and cleaner power.
"TVA's economic development efforts, combined with our reliability and low costs, continue to attract and encourage the expansion of business and industries in the Tennessee Valley, with over $3.9 billion in investments and more than 45,200 jobs created or retained through the second quarter of 2021," he said.
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.