The Tennessee Valley Authority Board of Directors approved a new commercial rate structure intended to support the expansion of electric vehicle charging infrastructure across the region during its meeting on Friday, while also recognizing the accomplishments of TVA employees as they serve the public during the extraordinary conditions of COVID-19.
As one of the fastest growing automotive production regions in the country, the Tennessee Valley is emerging as a key player in the development of electric vehicles. With abundant, reliable and increasingly cleaner electric power, TVA and its public power partners are in the best position to help enable the broader adoption of electric vehicles, which provide significant environmental and cost advantages.
“TVA is an industry leader in delivering low-cost, clean energy, and we intend to take a leadership role in electric vehicle transportation,” said Jeff Lyash, TVA president and CEO. “According to the Environmental Protection Agency, traditional forms of transportation are a leading source of carbon emissions while a single electric vehicle can reduce those emissions by 8,600 pounds per year.”
“TVA has reduced carbon emission by nearly 60% since 2005 and we have concrete plans to reach 70% by 2030. Actively supporting the electrification of transportation multiplies our own carbon reduction efforts and moves the entire region toward greater sustainability and economic opportunity in the future.”
The board’s ability to take such forward-looking action during a continuing pandemic is the result of the hard work and focus of TVA employees during fiscal year 2020, which resulted in record-setting performance. TVA’s Transmission team set an all-time record for system reliability while maintaining 99.999% reliability since 2000. The River Operations team also successfully managed the largest annual rainfall total in 138 years of recordkeeping while helping to prevent more than $1 billion in flood damage.
In addition, during FY20, the TVA team:
- Achieved industry-leading safety performance even while implementing new COVID-19 safety protocols to protect employee health and rapidly responding to storm damage in middle Tennessee and Chattanooga.
- Conducted scheduled maintenance and capital improvements to its generation fleet during pandemic conditions, resulting in improved system performance and decreased fuel costs that help keep rates low.
- Provided nearly 60% of the region’s electric power from carbon-free sources – the largest percentage of clean power produced by any southeastern U.S. utility.
- Increased solar energy capacity by nearly 70% with nearly 1,200 additional megawatts of solar energy under contract that will be online within the next two years, leading the National Renewable Energy Laboratory to name TVA a Top Ten national leader in renewable energy sales for the seventh consecutive year.
- Supported the approval of long-term partnership agreements with 93% of the local power companies TVA serves, resulting in $163 million in annual partnership credits returned to the LPCs.
- Worked with state and local economic development partners to help attract or retain 67,000 jobs and over $8.6 billion in capital investment to the region, even during pandemic conditions.
“I am incredibly proud of our employees’ dedication and commitment to TVA’s mission of service, especially considering the unprecedented challenges of the pandemic,” said Mr. Lyash.
Overall, TVA’s FY20 operating revenue was down about 5% from projections due to a combination of weather factors and the impacts of the pandemic. That shortfall was offset by improved operational performance that lowered operating and maintenance costs, reduced fuel costs and exceeded TVA’s debt reduction target by more than $400 million, reducing debt to its lowest level in 30 years. FY20 net income is estimated at $1.4 billion.
Final FY20 financial information will be reported in TVA’s 10-K filing with the Securities and Exchange Commission, which will be publicly available Tuesday, Nov. 17.
“The team delivered exceptional financial results in FY20, which created the flexibility to allow TVA to take a number of special steps, such as the $200 million Pandemic Relief Credit and the Community Care Fund, that help with the ongoing impacts of COVID-19 in our communities without significantly impacting our financial position,” said John Thomas, TVA’s chief financial officer. “Combined with the 3.1% long-term partnership credits, we’ve effectively lowered our effective wholesale rate 5.5% in just a little over a year.”
“Combining both the base rate and fuel costs, TVA’s effective rates today are lower than they were ten years ago and our financial strength should allow us to keep those rates stable through at least the end of this decade.”
Formalizing the temporary FY21 spending authority it granted at its August meeting, the board approved a full FY21 budget of $9.8 billion, which includes $2.4 billion in continuing capital improvements to generating, transmission and infrastructure assets.
In other business, the board:
- Established specific FY21 performance goals consistent with TVA’s strategic priorities.
- Approved payment of the “at-risk” portion of employees’ FY20 compensation based on achievement of FY20 performance goals.
- Received an update on the independent consultant’s ongoing review of executive compensation.
- Extended authorization for regulatory flexibility through June 2021 to allow local power companies to continue to make the right decisions to support their communities during the ongoing pandemic.