The Tennessee Valley Authority (TVA) reported US$10.2 billion in total operating revenue on more than 151 billion kilowatt-hours of electricity sales for the fiscal year 2020. Sales of electricity were about 5% lower compared to the prior year because of overall milder weather and impacts of the COVID-19 pandemic.
Total operating revenues decreased about 9% from the prior year, driven primarily by lower sales volume, lower effective base rates, and lower fuel cost recovery revenues. The TVA estimates base revenues were approximately US$185 million lower because of the impacts of the COVID-19 pandemic.
The TVA's fuel, purchased power, operating and maintenance, tax equivalents, and interest expense were all lower in 2020 than in 2019. Its fuel and purchased power expense was 15% lower year-over-year, primarily driven by lower effective fuel rates and lower energy sales because of impacts of milder weather and COVID-19, as well as the increased generation of nuclear power.
"The TVA's strong financial position helped us absorb the impacts of the pandemic in 2020 and still provide extra support for our customers," said Jeff Lyash, TVA president and chief executive officer. "And the TVA was in a position to reduce effective power rates for customers for 2021, when our communities need relief the most. This would not have been possible without the ongoing financial discipline of our employees."
Operating and maintenance expense was US$370 million lower, driven primarily by less project write-offs and regulatory asset recovery for certain environmental cleanup costs that did not occur in the current year. The TVA continues to implement various cost savings initiatives in response to the COVID-19 impacts.
Interest expense was US$1142 million in 2020, which was a 5% decrease from 2019, driven by lower average debt balances. The TVA's debt has decreased to the lowest level in over 30 years.
"The TVA is one of the most competitive utilities in the nation, as our results through 2020 demonstrate," said John Thomas, the TVA's chief financial officer. "The effective rate our customers pay is among the lowest in the country, and has been stable for the past seven years even while we have reduced debt by US$6 billion and invested over US$15 billion in the power system — and we remain on target to keep rates stable for this decade."
Additional highlights from the TVA's fiscal year 2020 include:
- As part of the Strategic Financial Plan approved by the TVA Board in 2019, the TVA began offering a 20-year Valley Partnership Agreement option to local power company customers. As of Nov. 16, 2020, 142 local power companies had accepted the offer and are now TVA long-term partners. Bill credits available to long-term partners totaled over US$163 million in 2020.
- Because of higher volatility in the financial markets from COVID-19, the TVA increased its target balance of cash and cash equivalents in March 2020 as a precautionary measure. The TVA continued to hold higher target cash balances as of Sept. 30, 2020. The TVA has maintained continued debt market access since the outbreak of the pandemic. In May, the TVA issued US$1 billion of power bonds to take advantage of the historically low interest rate environment and to meet its ongoing funding needs.
- In response to the pandemic, the TVA is offering up to US$1 billion of credit support available as an option to local power companies through the deferral of wholesale power payments, based on the needs of individual local power companies, along with the Back-to-Business credit program that provides relief to certain larger customers when returning to operations. The TVA remains committed to supporting communities and customers across the Tennessee Valley during the region's ongoing recovery.
- Despite record-setting heat experienced during October 2019 and record-setting cold during November 2019, the TVA's service territory experienced overall milder weather during fiscal year 2020. Total heating and cooling degree days in the year ended Sept. 30 were 6% below normal and 9% below the same period in the prior year.
- The TVA continued to maintain 99.999% reliability in delivering energy to its customers, despite record-setting weather.
- Rainfall and runoff in the Tennessee Valley in 2020 were 150% and 156% of normal, respectively.
- The TVA's reliability and economic development efforts helped recruit or expand 188 companies into the TVA service area. Over US$8.6 billion in investments and more than 67,000 jobs were created or retained in 2020.
