TVA saw record hydro output in past fiscal year

The Tennessee Valley Authority (TVA) reported Nov. 18 that the public-owned utility ended FY 2013 with net income of $271m on $11bn in operating revenues despite a decline in sales, while record levels of low-cost hydroelectric generation helped offset higher fuel costs.

During a typical year, the hydro dams generate 8% to 10% of TVA’s total output, said TVA President and CEO Bill Johnson during a financial conference call.

During FY 2013, however, they accounted for 12% of the generation mix, Johnson said. The hydro dams benefitted from heavy rainfall in the region.

All four units at Raccoon Mountain Pumped-Storage Plant were still temporarily out of service Sept. 30 of this year. All units are expected to return to service in 2014. The units, with a total net summer capability of 1,616 MW, are utilized to balance the transmission system as well as generate power.

TVA uses a federal fiscal year that runs from October through September.

Nuclear accounted for 36% of TVA’s power mix for 2013. Nuclear generation was down 6% in 2013 versus 2012 due to four nuclear refueling outages and a steam generator replacement project, compared with two nuclear refueling outages the previous year. As a result, fuel expense increased $140m in FY 2013 compared with FY 2012.

Coal accounted for 43% of the TVA power output for FY 2013; compared to 41% in FY12 and 52% in FY11. Gas or oil generation accounted for 9% in FY13 compared to 12% in FY12 and 5% in FY11.

 TVA is also working to resolve some Nuclear Regulatory Commission (NRC) oversight issues, Johnson said.

TVA replaced four steam generators at Sequoyah 2 during FY 2013, Johnson said. TVA still hopes to complete Watts Bar 2 by the end of 2015. TVA has largely placed development of the Bellefonte nuclear site on the backburner, given that there is currently no market demand for the project, Johnson said.

TVA has yet to select either the technology or the capacity size of a new natural gas generating unit at the Paradise power station in Kentucky, officials said.

Paducah idling, soft economy hurt TVA

“We experienced lower demand for power during the year due to the shutdown of a major customer facility, a slow-growing economy and adoption of energy conservation by customers,” Johnson said. “We expect to see low growth in power demand into the next decade, and we are committed to living within our means to keep rates low for our customers and the people of the Tennessee Valley.”

Sales to local power companies were up slightly in 2013 as compared with 2012, as more normal weather patterns returned in 2013, favorably impacting demand. Sales to industrial customers directly served by TVA were off 15% from the prior year, primarily due to the USEC (NYSE:USU) closure of its uranium enrichment facility near Paducah, Ky.

On May 24, 2013, USEC announced the cessation of enrichment activities at its Paducah site. TVA and USEC have subsequently completed agreements to extend power sales to facilitate the cessation of enrichment activities and to support non-enrichment activities at the site at a greatly reduced level.

These sales arrangements may continue to be extended. Power sales to USEC represented 3% and 5% of TVA’s total operating revenues for the years ended Sept. 30, 2013, and 2012, respectively.

Lower sales to directly served industrial customers were offset by higher off-system sales resulting from excess generation, TVA said Monday in its 2013 annual financial report to the U.S. Securities and Exchange Commission (SEC).

Total revenues declined 2% in 2013 compared with the prior year. The decrease was driven by a decline in base revenue as local power companies implemented new TVA wholesale rate structures, and lower fuel cost recovery revenues as a result of lower electricity sales.

Operating and maintenance expenses were reduced by $82m in 2013 compared with 2012. The decrease was driven by fewer outage costs and lower scheduled maintenance for coal-fired units due to retirement or idling of less efficient coal units, and decreased costs related to post-employment benefits. Offsetting the decreases were expenses related to the four nuclear outages and other projects in 2013.

TVA reported net income of $271m on $11bn in operating revenues for FY 2013, compared with net income of $60m on $11.2bn in revenues last year.

On other items, TVA reported:                                

** TVA’s three wind turbines (2 MW nameplate capacity) at its Buffalo Mountain Site in Tennessee were not operational as of Sept. 30, 2013, and do not appear to be economical for returning to operation.

As of September 30, 2010, TVA had 14,573 MW (Summer Net Capability) of coal-fired generation. After the utility’s planned actions TVA will have 9,098 MW (Summer Net Capability) of coal-fired generation.

TVA submitted the license renewal applications for both Sequoyah nuclear units to the NRC on January 7, 2013. If ultimately approved by NRC, Sequoyah 1 and 2 will be licensed until 2040 and 2041 respectively.

Transmission upgrades may be required to maintain reliability when some coal units become inactive.

TVA invested $130m in such upgrades between 2011 and 2013, and estimates future expenditures for transmission upgrades to accommodate inactive coal units to be about $350m for 2014 to 2020.

Upgrades may include enhancements to existing lines and substations or new installations as necessary to provide adequate power transmission capacity, maintain voltage support, and ensure generating plant and transmission system stability.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.