Mild weather in the first half of 2017 and increased energy efficiency efforts have reduced the Tennessee Valley Authority's year-over-year sales of electricity and its fiscal third-quarter 2017 net income, officials said Aug. 1.
Speaking on the federal government-owned utility's third-quarter 2017 earnings conference call, TVA President and CEO Bill Johnson said the company "continues to see very strong financial performance," with higher revenues for the first nine months of fiscal year 2017. "We achieved this despite slightly lower power sales, with higher revenues primarily driven by higher fuel costs recovery revenues," he said.
Total electricity sales were down year over year because of lower sales to local power companies, driven by milder weather in the first half of the year and increased energy efficiency, Johnson said. "Our year-to-date financials continue to reflect the warm, dry conditions and lower hydroelectric output in the first half of the fiscal year along with higher average natural gas prices," he said.
TVA on Aug. 1 reported 2017 fiscal third-quarter net income of $233 million, down from net income of $291 million in the prior-year period. The company's operating revenues rose year over year to $2.57 billion from $2.48 billion, primarily driven by higher fuel cost recovery revenues. Meanwhile, operating income fell to $561 million in the fiscal third quarter of 2017, from $566 million a year ago.
Johnson also pointed to TVA's diverse generation portfolio and its sustained operational efficiency efforts, which he said have been "instrumental in keeping rates lower for our customers despite challenging operating conditions this year."
"I'm optimistic we will end the fiscal year in good shape," Johnson said, adding that an updated 2018 business plan that will outline the utility's continued efforts to maintain low-cost and reliable power and improve its operational efficiency will be presented to the TVA Board of Directors at its August meeting.
TVA recently celebrated the completion of its Paradise CC plant in Muhlenberg County, Ky., Johnson said. The 1,000 MW of additional power provided by the plant has played a key role in providing low-cost, reliable power for Kentucky and the rest of TVA's service area over summer, he said.
The utility is also making progress moving from wet to dry coal ash storage, according to Johnson. The company has already committed $1.2 billion to the effort and is expected to spend another $1.1 billion through 2022.
Work on the Thomas H Allen CC plant is more than 75% finished and is on schedule to begin operating next year, Johnson said. The installation of clean air equipment at its Gallatin fossil plant is expected to be completed on time and within budget. Together, the two projects total more than $1 billion, according to Johnson.
Additionally, Johnson maintained that TVA is making more investments in its transmission system, noting the $300 million strategic fiber initiative the board signed off on in May.
Meanwhile, The U.S. Nuclear Regulatory Commission issued TVA a confirmatory order at the end of July related to work environment safety issues at its Watts Bar Nuclear plant. TVA agreed to an "an extensive list of corrective actions," including independent audits and assessments as part of the order, the agency said.
After initiating an investigation into the plant's work environment in late 2015, the NRC found that some operations employees did not feel free to call attention to safety concerns. Additionally, the NRC said it saw indications that licensed operators at the plant could have come under "undue influence and direction" from staff at TVA outside of the control room. TVA told the NRC at a meeting in May 2016 that it overhauled management practices at the plant and has held meetings with operations staff to address the issues.