Despite lower net power sales from extreme weather, reduced operating costs helped the Tennessee Valley Authority achieve its highest ever net income of $1.2 billion for fiscal year ended Sept. 30, 2016, up $122 million from 2015.
“It is TVA‘s mission of service that motivated us to improve our financial and operating performance as we focus on providing low cost, clean and reliable energy, environmental stewardship and economic development,” said TVA president and CEO Bill Johnson. “Through the dedication and strong performance of TVA’s employees, we were able to deliver on our mission of serving the people of the Tennessee Valley.”
In TVA’s Annual Report on Form 10-K filed with the Securities and Exchange Commission today, TVA reported that sales of electricity decreased by 1.5 percent for the fiscal year, as compared to the prior year. The Tennessee Valley region experienced the second mildest winter of the last 55 years, only partially offset by the warmest summer of that same period.
Revenues from the sale of electricity decreased by $386 million in fiscal year 2016, as compared to the prior year, primarily due to lower fuel cost recovery revenues, as well as lower sales volume driven by weather.
“It was a strong year for TVA employees – they met goals and objectives and delivered results for the Tennessee Valley financially, operationally and in our relationships with customers and other stakeholders,” Johnson said. TVA’s strategic imperatives include maintaining low power rates, living within its means financially, meeting the reliability expectations of customers and being responsible stewards.
“In 2016, our fuel and purchased power costs were nearly a billion dollars less than in 2012,” Johnson said. “This was due primarily to the flexibility of our more diverse generating portfolio, lower gas prices and improved operating performance,” he said. “With the reduction of almost $800 million in O&M costs, TVA employees have reduced annual expenses by almost $1.8 billion dollars in the past three years.”
Total operating expenses declined in 2016 by $498 million, or 5.7 percent, versus 2015. Fuel and purchased power expense was $304 million below 2015 levels, down nearly 10 (9.8 percent) percent. Operating and maintenance costs were essentially flat in 2016, as TVA was able to offset inflation and other cost pressures through greater efficiencies.
“TVA’s power rates have become more competitive year over year – for several years in a row – even as we have made necessary investments in the power system,” said TVA CFO John Thomas. “Our total effective rate is lower today than it was five years ago, and we expect our rates to continue to be more competitive.”
As a wholly-owned government corporation, income from TVA’s operating activities is invested back into its power system. TVA invested almost $3 billion in the power system during 2016 while only raising debt by less than $100 million. These investments included clean air equipment at Gallatin (Tenn.) and Shawnee (Ky.) fossil plants; new natural gas plants at Paradise (Ky.) and Allen (Memphis); Watts Bar Unit 2 construction; Browns Ferry Nuclear Plant up-rates; and, investments in the transmission system.
TVA’s annual report also highlights the recent achievements of the completion of Watts Bar Unit 2 as the nation’s first new nuclear generation of the 21st century. The unit entered commercial operation in October.