TVA rates fall, but bills do not
The Tennessee Valley Authority raised its base rates for the first time in four years in the fall, when it also phased out millions of dollars of the pandemic relief it had provided to local power companies in each of the previous three years.
But the price of electricity for TVA power customers this year is still lower than a year ago due to cheaper fuel costs. With natural gas prices down by more than 27% from where they were a year ago, TVA was able to deliver power to its 153 local power companies in the first three months of calendar 2024 at a price 4% below a year ago, even after TVA had raised its base rates by 4.5% in October to cover higher labor and supply costs since its previous rate hike in 2020.
TVA Chief Financial Officer John Thomas on Tuesday said he expects fuel markets to remain favorable for TVA this year compared with a year ago, although international events and weather conditions could change the current market for natural gas and coal.
“It’s always hard to predict interest rates and commodity prices in the future, but from a fundamental basis there is a lot of natural gas out there, and the run-up on prices we saw (last year) was really driven by what we saw in Europe (and the war between Russia and Ukraine),” Thomas said during an earnings call with industry analysts. “There is nothing right now that would lead us to believe that natural gas prices will be higher.”
The Henry Hub spot price of natural gas was hovering around $1.59 per million British thermal units Tuesday, down from $2.19 per
1 million Btu one year ago.
TVA generates more than 20% of its electricity from natural gas.
TVA adjusts its monthly electricity prices, in part, to reflect the changes in what its spends on coal, natural gas and purchased power. Fuel costs for TVA plunged by 15.1% in the first three months of calendar 2024, TVA reported Tuesday in its quarterly earnings report.
But even with cheaper electricity prices this winter compared with a year ago, most people in the Tennessee Valley still paid more to heat their homes this winter due to colder weather than in the previous year.
Electricity sales jumped by nearly 8% in the past three months, with the biggest increases during January when temperatures in the single digits across the Tennessee Valley pushed power demand for TVA to a weekly all-time high. TVA said Tuesday its revenues during January, February and March of 2024 totaled nearly $3.1 billion, up from $2.9 billion a year earlier even with the lower fuel cost adjustments.
TVA President Jeff Lyash said the federal utility met the record power demand in January without any major problems, unlike when Winter Storm Elliott just before Christmas 2022 caused TVA to implement rolling blackouts when power supplies lagged demand.
Lyash said TVA has invested nearly $123 million to complete more than 3,400 system enhancements to protect TVA’s power delivery system to avoid the power outages and problems that hit the utility during late December 2022.
“This year, TVA is investing even more to further enhance reliability,” Lyash said during Tuesday’s earnings call. “Operational excellence is a top priority for TVA, which has one of the most reliable systems in the nation. That matters most during times like in January, when TVA set several new power records, and in the hot summer months that are ahead of us.”
The boost in power use at TVA this winter helped the utility’s bottom line. TVA reported Tuesday net income in the first three months of calendar 2024 of $434 million, or more than three times the $149 million earned in the same period a year earlier.