TVA says net income in fiscal 2016 rose nearly 11 percent
The Tennessee Valley Authority has managed to cut more than $800 million of annual operating costs over the past four years, helping the federal utility to achieve record earnings while reducing the average cost of its power.
TVA said Thursday it boosted its net income in the fiscal year ended Sept. 30 to more than $1.2 billion, topping the record earnings of the prior year by nearly 11 percent in spite of a 3.4 percent drop in electricity sales. TVA Chief Financial Officer John Thomas said the utility has pared the average delivered cost of its power from 6.9 cents per kilowatt-hour last year to 6.7 cents per kilowatt-hour this year. TVA expects to cut its power cost down to 6.6 cents per kilowatt-hour this year, capitalizing on the cheapest fuel of any major U.S. utility because of its above-average supply of hydroelectric generation from its 29 power-generating dams and its seven operating nuclear reactors.
“Lower rates for our customers were driven by lower expenses, lower debt and higher net income,” TVA Chief Financial Officer
John Thomas told the TVA board today during a quarterly meeting today in Blairsville, Ga. “Virtually all of our financial metrics are headed in the right direction.”
TVA Director Peter Mahurin, the chairman of Hilliard Lyons Financial Services and chair of the board’s finance committee, praised TVA’s management for improving the utility’s financial status over the past three years by lowering its debt even while investing billions in new generation.
“If this were a publicly traded company I would rush out and buy some of your stock,” Mahurin quipped.
TVA, of course, is not an investor-owned utility but is owned by the federal government as an independent government corporation serving parts of seven Southeastern states. But TVA Chairman Joe Ritch said to be effective TVA must compete with its rates and its employee pay with other investor owned utilities to maintain attractive power rates.
As a result, TVA rewards its 10,000 employees when the utility achieves its performance targets. Based upon TVA beating its budget targets and meeting other performance metrics, TVA directors Thursday agreed to pay the full amount of winning performance bonuses to its rank and file workers this fall.
Last November, TVA paid 95 percent of the potential bonuses under TVA’s “winning performance” pay plan due to some safety problems, handing out a total of $113 million to about 10,900 employees based upon its fiscal 2015 results.
“I have to say that 2016 was a really good year by the employees of TVA,” TVA CEO Bill Johnson. “They met goals and objectives and delivered results for the Tennessee Valley financially, operationally and in our relationships with customers and other stakeholders.”
Johnson and other top TVA managers will fare even better because of the improved performance for America’s biggest public power utility.
The TVA board agreed to pay out 110 percent of the performance rewards for fiscal 2016 under the executive bonus plan and to raise the performance bonus that Johnson is eligible to earn next year, likely boosting his pay next year well above the $6.4 million compensation package he got last year. Johnson is already the highest paid federal employee in America, but compensation consultants for TVA estimate Johnson’s pay package is still in the bottom 25 percent of comparable utility CEOs in the the private sector.
“We’ve seen enormous progress and we recognize that when you have a highly talented person or group of persons in management like we have at TVA we need to be somewhat competitive in our compensation,” TVA Chairman Joe Ritch said. “We are still below the average pay for many of these positions, but we still want our leadership to know that we are supporting them. While compensation is not the only thing you get by working at TVA, it is a very important reflection of our belief that they should be here and stay here at least for a reasonable period of time.”
TVA officials said the past year wasn’t without its challenges. The region experienced the wettest December on record, and the hottest and driest summer since 2010 — with dry conditions continuing. During October, run-off across the Tennessee River watershed was less than one-tenth of an inch, the lowest in 142 years of record keeping.
That has limited generation from TVA’s 29 powergenerating dams, the cheapest source of TVA’s power.
Johnson said power demand continues to be flat. TVA is currently projecting load growth of threetenths of 1 percent over the long term “and it could go even lower.”
“Reduced load means less revenue, a challenge for any business,” Johnson said. “New technologies, new generating resources and new consumer preferences are also impacting our business and TVA is working with its customers to stay ahead of these changes.”