TVA on pace for record earnings in 2018

With a little bit of help from Mother Nature and cheaper natural gas, the Tennessee Valley Authority more than doubled its net income this spring and is on pace for its most profitable year in the utility’s 85-year history.

TVA said Friday it achieved improved financial performance while cutting the average rate charged for its electricity by about 1 percent compared with a year ago. Cheaper fuel costs more than offset TVA’s base rate increase implemented last fall.

TVA said Friday it earned $470 million in the second quarter of 2018, more than double the $213 million of net income the utility earned in the same period a year ago. Despite dip in industrial power sales, colder weather in the winter and hotter temperatures in the spring and summer months this year boosted overall power sales up 6 percent to nearly $2.7 billion in the second quarter.

For the first nine months of the fiscal year, TVA has earned $1.2 billion on sales of more than $7.9 billion. In the same period a year earlier, TVA had net income of $546 million on revenues of $7.5 billion.

TVA benefited by more abundant rain, which boosted hydroelectric generation from TVA’s 30 powergenerating dams, and cheaper natural gas and its own cost-cutting programs. Overall fuel and operating expenses declined by 4 percent despite the higher power sales.

TVA’s seventh-state service territory experienced overall warmer-than-normal weather in the spring quarter as cooling degree days measured 36 percent above normal during the period.

“The strong performance of TVA’s nuclear and hydroelectric assets is playing a significant role in keeping power rates low for customers in 2018,” TVA President Bill Johnson said. “TVA has one of the cleanest, most diverse and most reliable power fleets in the entire nation — and we are seeing the benefits of that on the bottom line, with significantly lower operating expenses.”

Operating and maintenance expense for the first nine months of the fiscal year was down $85 million from a year ago, mostly driven by a decrease in planned outage days and the size of TVA’s overall workforce, which has declined to about 10,000 workers from its peak of more than 50,000 in the early 1980s.

Fuel expense was down $68 million due to more hydro generation and cheaper natural gas prices.

“The major changes in TVA’s operations and power system we’ve implemented as part of our long-range financial plan are showing the positive results we expected in 2018,” said John Thomas, TVA chief financial officer. “We have significantly improved performance, reduced costs, and made progress in reducing debt. These benefits will only accelerate as we continue to follow our plan.”

Over the past five years, Thomas said TVA has invested $11.6 billion in capital improvements to its power plants and transmission network while reducing its total debt obligations by $1.9 billion and keeping rates essentially flat.

In its first nine months of fiscal 2018, TVA has already earned as much as it did in its most profitable year in 2016 when the utility reported record net income of $1.2 billion. With the final and typically biggest sales period yet to be reported, TVA is expected to achieve its highest net income this year since the federal utility was created in 1933.

In its quarterly report, TVA noted that the Allen Combined Cycle Plant in Memphis, which TVA said is among the most efficient gas generating plants in the United States, officially entered commercial operation on April 30 and should help TVA further take advantage of cheaper natural gas prices during the hot summer months.

The first of three extended power uprates at the Browns Ferry Nuclear Plant also was completed in April and achieved its full enhanced power output in July, giving TVA 155 megawatts of additional base load generation this summer.

TVA’s seven nuclear reactors, 30 hydroelectric dams and other purchased wind and solar generation helped TVA get more than half of its total power output this spring from carbon-free generation. A generation ago, TVA got most of its power from its fleet of coal-fired power plants.

Johnson said TVA has cut its carbon dioxide emissions in half since 2005 and expects to release 60 percent fewer C02 emissions by 2020 as it did in 2005.

Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.