The coronavirus may be curtailed in the next year, but the Tennessee Valley Authority is still extending its pandemic relief programs into 2023 after the federal utility reported record profits in the past year during the ongoing outbreak.
TVA boosted net income in fiscal 2021 to a record-high $1.5 billion, allowing the authority to approve a plan to offer another 1.5% credit on the base electric rates it charges to 153 municipalities and power cooperatives that distribute TVA-generated electricity across the Tennessee Valley through fiscal 2023.
TVA directors this week approved the extended credits for another year, although the price breaks in 2023 will be less than the 2.5% reduction granted to TVA distributors in the current fiscal year under the pandemic relief program.
TVA expects the credits will collectively save municipalities and co-ops in its seven-state region about $220 million this year and $133 million next year.
"We've improved productivity and efficiency, and we are passing along the savings to customers," TVA President Jeff Lyash said. "TVA's robust, diverse generation portfolio helps keep power costs low and reliability high."
But some distributors want TVA to use more of its record income to make further reductions in its prices.
Rody Blevins, president of Volunteer Energy Corp., which supplies power to 122,000 customers in East Tennessee, said TVA should have passed along at least another $600 million in savings to its distributors to help lower local power bills 6% or more.
"We think a net income of $1.5 billion for a federally owned nonprofit agency is way too high, and we think they ought to return more of that money to the ratepayers in the valley," Blevins said Thursday. "We appreciate the pandemic relief program, but we definitely think TVA could do more."
Volunteer Energy was among three local power companies that unsuccessfully appealed to the Federal Energy Regulatory Commission this year to try to force TVA to open access to its transmission lines for the local power companies to buy and get electricity from what they claim would be cheaper power producers than TVA from outside of the Tennessee Valley.
Although most utilities in America are able to buy wholesale power on the grid and use other utilities' transmission lines at regulated rates, TVA controls both generation and transmission of power in its seven-state region under the so-called "fence" erected around the Tennessee Valley by Congress in 1959.
Despite objections by Volunteer Energy, other TVA distributors welcomed TVA's credits, which helped to avoid local rate hikes in the past year for Chattanooga's EPB and a majority of other local power companies in the TVA service territory.
"In this economically distressed area that we serve up here on the Cumberland Plateau, we were concerned about how we were going to get through this, so when TVA implemented the pandemic relief credit it helped us tremendously," said Dave Cross, general manager of the Plateau Electric Cooperative.
Rising fuel costs
The pandemic relief credits, combined with TVA's ongoing pledge to keep its base rates flat through at least 2030, helped lower the price of electricity in fiscal 2021 below a year ago by about 1.5%, even as fuel costs have jumped during the year.
TVA's average delivered cost of power to its distributors in fiscal 2021 was 6.6 cents per kilowatt-hour, which was nearly 4.4% below what TVA charged distributors for its electricity eight years earlier in fiscal 2013 when TVA began a cost-cutting initiative that pared about $800 million a year from the utility's operating costs.
But TVA's delivered price of power is expected to rise from 5% to 10% this winter compared with a year ago due to higher fuel costs pushed up by the resurgence in demand coming out of the pandemic and supply chain bottlenecks, according to Brian Child, vice president of enterprise planning at TVA.
Child told TVA directors Wednesday that he expects natural gas price hikes to be short term and fuel prices are likely to come down again next spring after the winter increases.
TVA benefited in the past year from higher power sales, extra rain to "fuel" hydroelectric dams and lower interest rates, including a recent sale of TVA bonds at the lowest rate ever.
Although TVA is investing more money to upgrade its transmission and control center and to build new natural gas power plants, TVA is no longer borrowing money to build major new baseload power generation from nuclear power or new coal-fired power plants. As a result, TVA paid down its long-term financial obligations by another $900 million in the past year and its current debt level is the lowest level in 30 years.
In the fiscal year that ended Sept. 30, TVA reported receiving $10.5 billion in revenue, $1.5 billion of which was net income - an 11.8% increase.
Despite lower rates, TVA sales grew by 2.5% in fiscal 2021 over the previous year as electricity sales in the Tennessee Valley rose to the highest level since 2008.
Child said TVA added more than 70,000 residential customers from June 2020 to May 2021 as many people relocated to Tennessee and other TVA states during the pandemic.
"The strong economic recovery also is driving higher commercial and industrial loads," Childs said.
Demand growing
After more than a decade of relatively stable power demands in the TVA region, the utility is projecting growing demand for power in the future, in part due to the rising use of electric vehicles.
TVA said its residential rates rank as the 21st lowest among the 100 biggest U.S. electric utilities and its industrial rates rank No. 5 among the top 100 utilities.
"TVA's consistent strengthening of its operational and financial performance over the last several years has left us in the best financial health we've had in decades," TVA Chief Financial Officer John Thomas said. "In addition to lowering wholesale rates today, we are well-positioned to maintain stable rates and advance public power priorities in the future."
The combination of the pandemic relief credits this year and another 3.1% credit granted to the 145 local power companies that have signed long-term power purchase agreements with TVA have provided $410 million in rate relief over the past year. TVA and local power companies partnered for an additional $8.3 million in assistance through the Community Care Fund, which has been extended through fiscal 2022 with an additional $5 million in matching funds from TVA.
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.