TVA boosts income even after lowering rates, boosting assistance during pandemic
- May 4, 2021 2:02 pm GMTMay 4, 2021 7:51 pm GMT
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May 4—The Tennessee Valley Authority nearly doubled its net income from a year ago this winter despite giving rebates and assistance payments to local power companies and communities to help cope with the ongoing COVID-19 pandemic.
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 both boosted net income and lowered its delivered power costs for the nearly 10 million persons it serves in the 7-state Tennessee Valley this winter.
TVA reported Tuesday that 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.
As America's biggest government-owned utility, TVA profits are used to pay down the utility's debt.
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.
TVA maintained 99.999% reliability for more than 20 years.
"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. "The dedicated effort of TVA's 10,000 employees and the diversity and resiliency of the TVA power system continued to serve the 10 million people that rely on us each and every day, just as they have for the past 88 years."
TVA's tax equivalents and interest expenses were lower in the first two quarters of fiscal year 2021 than in the same periods of the prior year, while operating and maintenance expenses increased slightly by $26 million, driven primarily by an increase in planned outage expense and labor escalation. TVA's fuel and purchased power expense was 8% lower year-over-year, primarily driven by lower fuel cost recovery resulting from volatility in the natural gas and purchased power markets, as well as lower effective fuel rates, due to lower coal prices, improved nuclear fleet performance and more hydroelectric generation.
"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," said John Thomas, TVA's chief financial officer. "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."
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.
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