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Virus, weather combine to trim TVA power sales

Chattanooga Times Free Press

Aug. 4--Electricity sales by America's biggest public power utility declined by more than 8% from a year ago this spring as mild weather and the shutdowns caused by the coronavirus combined to limit power consumption in the second quarter of the year.

The Tennessee Valley Authority estimated Tuesday that the coronavirus cut its revenues by $130 million in the first part of 2020 and will likely reduce revenues by another $100 million in the balance of its fiscal year, which ends Sept. 30.

TVA said it is uncertain what the lingering effects of the virus in fiscal 2021 will mean for TVA sales, but the utility has forecast relatively flat, or possibly declining, sales over the next couple of decades as energy efficiency offsets growth in TVA's 7-state region.

Despite the drop in power sales, TVA still boosted its bottom line in the most recent fiscal quarter by more than 24% from cutting expenses and depreciation compared with a year ago.

In the three months ended June 30, TVA reported net income of $205 million on revenues of $2.25 billion. In the same period a year ago, TVA earned net income of $165 million on revenues of nearly $2.6 billion.

The improvement came even as TVA distributors suspended utility cutoffs this spring due to the coronavirus and TVA extended up to $1 billion of credit to the local power companies and other customers that buy TVA power.

"TVA remains operationally and financially healthy, which enables us to continue providing uninterrupted vital services, as well as support communities during this challenging time," Jeff Lyash, TVA's president and chief executive officer, said in TVA's quarterly earning report released Tuesday. "Our work to maintain stable, low rates is particularly impactful. In addition, our customers who have become long-term partners have received over $100 million in credits on their bills so far this fiscal year."

In the first nine months of the fiscal year, TVA reported $652 million of net income on $7.4 billion in total operating revenues. Sales of electricity were about 5% lower compared to the same period of the prior year due to overall milder weather and impacts of the COVID-19 pandemic. Total operating revenues decreased about 9% from the same period of the prior year driven primarily by lower sales volume, lower fuel cost recovery revenues, and lower effective base rates.

TVA's fuel and purchased power expense were 14% lower in the first nine months of fiscal 2020 compared with a year earlier, primarily driven by lower effective fuel rates and lower energy sales as well as the increased availability of nuclear and hydroelectric power.

Operating and maintenance expense was $275 million lower, driven primarily by less project write-offs and regulatory asset recovery for certain environmental cleanup costs that did not occur in the current year. TVA said it continues to implement various cost savings initiatives in response to the COVID-19 impacts.

Interest expense was $859 million for the first nine months of fiscal year 2020, which was a 5% decrease from the same period of the prior year, driven by lower average debt balances. TVA's debt remains at the lowest level in almost 30 years.

"While it was expected that the pandemic would have some impact on sales, TVA's proactive efforts to reduce expenses, improve the efficiency of our operations, invest in cleaner asset investments, and lower debt have all put us in a good position," said John Thomas, TVA's chief financial officer. "In fact, cash flow has been steady, and TVA reduced debt by $1 billion in the first nine months of this fiscal year after adjusting for extra cash holdings."


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