KNOXVILLE, Tenn. – Despite a challenging year, the Tennessee Valley Authority board of directors on Thursday passed a TVA budget for fiscal year 2013 that includes no increase in wholesale electric rates.
“This demonstrates TVA’s commitment to delivering reliable, low-cost and cleaner energy to consumers and businesses in the Valley,” said TVA President and CEO Tom Kilgore. “Supplying reliable, competitively priced electricity is the single most important thing TVA can do for the economic health of the region.
“The budget recommendation approved by the board contains no rate increase for FY2013 and lays the foundation for a consistent rate strategy in the years ahead,” he added.
Kilgore noted that even as TVA works to improve its power rates, it also must invest in the power system to address necessary maintenance and operational needs, including environmental projects. The approved 2013 budget, which is based on projected revenues of $11.2 billion, includes $2.7 billion for capital investments, in addition to $9.5 billion for operating expenses.
Kilgore noted that TVA’s internal program to reduce costs and improve productivity produced significant results this year and should continue to produce savings into the future, thanks to employee efforts. Examples include using fewer contractors, filling fewer positions and getting more for the money in equipment purchases and services.
Lower costs for the fuel used to generate electricity also are helping to lower costs for TVA, its customers and consumers, Kilgore said. Power costs are 4 percent lower this year than last year, and TVA is on track to have some of the nation’s lowest electric rates before 2020.
Long term, having a balanced portfolio of several generating sources – instead of relying heavily on any one source – will help TVA lower power costs and ensure reliability, Kilgore said. TVA also plans to avoid spikes in power prices in the future by considering smaller rate increases more frequently.
“This rate strategy would serve our customers and TVA better by making our rates less volatile and easier to predict,” he said. If TVA had used that approach in past years, TVA rates would be no higher than they are now but TVA would have better cash flow for maintaining and upgrading the power system.
Highlights of TVA’s 2012 performance include meeting record power demands during four consecutive days of temperatures in triple digits. TVA met a record load swing from just over 15,000 megawatts to more than 30,000 megawatts between 3 a.m. and 5 p.m. on June 28, when temperatures rose from 68 degrees to 101 across the Tennessee Valley. The next day TVA met a peak record for June (31,097 megawatts), and then a weekend peak record (30,771 megawatts) on June 30-July 1.
“This safe and reliable performance is a credit to the diversity and flexibility of our power system and to the partnership we have with our customers to help us meet high demands more economically,” Kilgore said.
Other performance highlights include:
- Transmission system reliability that is on track to achieve its 13th year of 99.999 percent performance.
- Economic development partnerships that have helped create or retain about 43,000 jobs and a capital investment of $5.3 billion in the region so far this fiscal year.
- More reliable generation and fewer forced outages at TVA fossil and nuclear plants.
- Continuous operation of three nuclear units – Browns Ferry 2, Sequoyah 2 and Watts Bar 1 – for more than 300 days at the same time, for the first time since 2002.
- Current construction and project progress at Watts Bar Nuclear Plant Unit 2 that supports the updated schedule and cost estimate to complete the unit by December 2015.
Upcoming investments to sustain the reliable generation and delivery of energy include restoring or replacing major equipment at Sequoyah Nuclear Plant and Raccoon Mountain Pumped Storage Plant, investing in reliability upgrades and safety modifications at TVA nuclear plants, and continuing installation of clean-air equipment.
TVA Chief Financial Officer John Thomas said management actions to reduce costs in FY 2012 after the mildest winter in 60 years and a sluggish economy impacted sales revenue “will allow us to enter FY 2013 without a rate increase.”
In other actions, the board:
- Approved the issuance of up to $5 billion in long-term bonds, if needed, during FY 2013.
- Approved an update to the unique transmission service arrangement TVA has with Memphis, Light, Gas and Water to support changing utility and business obligations for high voltage transmission.
- Heard an update on TVA’s environmental policy that noted progress in air quality, climate change mitigation, water resources, waste management and natural resource management.
- Selected Ernst and Young as TVA’s independent external financial auditor for FY 2013.