Sales growth, diverse resources help give TVA best financial health 'in decades'

The Tennessee Valley Authority's power sales increased by 4% for the fiscal year ended Sept. 30 and 2.1% for the fiscal year's fourth quarter, with most of it produced with zero emissions, according to data released during the public power agency's annual earnings call.

In a year that featured surging natural gas prices, TVA's heavy reliance on renewables with near-zero marginal costs and nuclear power with very low and declining fuel costs helped the public power provider to achieve what President and CEO Jeff Lyash called "the best financial health we've had in decades."

"After the COVID-19 impacts seen the previous year, 2021 was a strong year for TVA and the 10 million people TVA serves," Lyash said. "TVA's low-cost, reliable power and strong economic development efforts have continued to play a key role in helping our region recover from the pandemic while our strong financial results help keep power rates low as we invest in the sustainability and resiliency of our power system."

The Into TVA monthly average day-ahead on-peak bilateral index jumped by more than 52% to $36.55/MWh in the 12 months ending Sept. 30, compared with the same period of 2019-2020, according to S&P Global Platts price database.

TVA power sales totaled 157.4 TWh in the most recent fiscal year, compared with less than 151.3 TWh for the previous fiscal year. As a federal agency, TVA operates on fiscal year that begins Oct. 1. For the most recent quarter, TVA sold 43.7 TWh, up 2.1% from 42.9 TWh in the comparable period of 2020.

'The value of diversity'

"Meeting such high demand and reliability [challenges] highlights the strength of our diverse generation mix," Lyash said. "The value of diversity shines during periods of rising industry prices."

Non-emitting resources provided the bulk of TVA's power in the most recent fiscal year, led by the following:

• Nuclear: 41%
• Hydroelectric: 10%
• Purchased renewable: 5%

Nuclear fuel's average cost per MWh fell by 5.2% to about $5.50 in the most recent fiscal year, compared with 2019-2020. The average annual cost of coal-fired generation fell 8.6% to $24.60/MWh, but a 28.6% increase in the average annual cost of gas-fired electricity to $25.20/MWh caused TVA's weighted average fuel cost to increase by 8.3% to $14.40/MWh.

Gas plants provided 21% of TVA's power in the most recent fiscal year, while coal plants provided 15%, and purchased non-renewable power provided 8%. TVA did not provide comparable data for 2020.

TVA reported net income of $1.5 billion on operating revenues of $10.5 billion in the fiscal year ending Sept. 30, compared with less than $1.4 billion in net income on $10.2 billion for the previous fiscal year.

For the most recent quarter, TVA's Securities and Exchange Commission filings show the federal provider had net income of $603 million on operation revenues of $3.2 billion, compared with net income of $700 million on operating revenues of $3 billion in the same period of 2020.

Industrial, utility demand

Industries directly served by TVA gave the strongest impetus to the federal power provider's sales, up 11.1% to 18.8 TWh for the 12 months ended Sept. 20 and up 17.6% to 4.9 TWh in the most recent quarter.

Local power companies, to which TVA sold 86.7% of its electricity in the most recent fiscal year, had solid fiscal-year annual growth of 3.2%, but the year-on-year quarterly growth was a more modest 2.1%.

The normal energy demand growth that might occur because of the economy or population changes has often been offset by energy efficiency gains, Lyash said, but extraordinary trends have provided some impetus for net increases in power demand.

"We're seeing now demand from data centers and manufacturing moving into the TVA area, and we're beginning to see a trend in positive load growth," Lyash said during the earnings conference call. Lyash cautioned, however, that "we'll need to see a couple more data points" of annual growth before TVA would need to consider revising its generation capacity plans.

In a year with extreme conditions – record-setting heat waves, wildfires, brutal cold hurricanes – that resulted in power outages in other regions, Lyash celebrated TVA's 99.999% reliability.

"The TVA power system remained stable through extreme cold weather which negatively impacted much of the country last winter, and as heat waves this summer caused some of the highest power demand in a decade for our service area, with multiple peakloads over 30,000 MW," Lyash said.