TVA Keeps Reliability High, Prices Low, During Challenging Year, CEO Tells Board of Directors

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Nov 04, 2010, 02:41 ET

ATHENS, Ala., Nov. 4, 2010 /PRNewswire-USNewswire/ -- The Tennessee Valley Authority delivered good performance in 2010, keeping reliability high and prices competitive, despite stress that extreme weather placed on TVA's electric power infrastructure, President and CEO Tom Kilgore told the utility's board of directors Thursday.

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Increased power demand during a record-hot summer and an unusual winter cold snap caused TVA to call higher-cost peak-power generation facilities into service more often, to purchase extra power from other companies during high-use times and to work harder to manage weather-related strains on high-voltage transmission lines and other facilities.

But TVA's employees met the challenges, keeping the power on 99.999 percent of the time, among the best in the utility industry, for the 11^th straight year and holding average retail prices to 7.7 cents per kilowatt-hour, down from 8.4 cents in 2009 and well below the U.S. average for electric bills.

The 2010 fiscal year, which ended Sept. 30, marked a major turnaround from 2009, when sales and revenues dropped during the economic recession, Kilgore told the board, which held its November meeting at TVA's Browns Ferry Nuclear Plant.

"It was a good year for TVA operationally and financially, which means it was a good year for TVA's customers," Kilgore said, emphasizing that TVA expects no increase in its base rates for fiscal 2011. "The work our employees did to manage a hot and difficult summer resulted in millions of dollars in savings for TVA and the people we serve."

TVA staff reported that TVA's tax equivalent payments to state and local governments reached $550 million in fiscal year 2010, a 9 percent increase from 2009. Under the TVA Act, which established the federal utility in 1933, TVA makes payments to eight states and 144 local governments where it owns facilities. The payments compensate state and local governments that cannot levy property taxes on federal entities. Tax equivalent payments have been part of TVA's operations and corporate citizenship since its early years.

Discussing TVA's renewed vision to be one of the nation's leading producers of cleaner low-cost electricity by 2020, Kilgore remarked that the Browns Ferry plant will play a key role in TVA's future because nuclear power produces no air emissions, including carbon. TVA plans to pursue its vision by focusing on more nuclear power and energy efficiency in the future.

"Browns Ferry is TVA's first and largest nuclear plant," Kilgore said, pointing out that the plant's Unit 1 reactor recently completed 586 days of continuous generation. The plant's Unit 3 reactor ran for 669 continuous days in 2002, one of the longest runs in industry history that produced 18 million megawatt-hours of electricity, a world record at the time.

The hot summer weather had an impact on Browns Ferry when rising river temperatures forced TVA to cut back the plant's output to prevent warm water produced by reactor cooling systems from entering the Tennessee River and potentially harming fish. To address high river temperatures in the future, the TVA board approved funding to build additional cooling towers at the plant.

Kilgore also reaffirmed TVA's commitment to reducing peak power use across the seven-state region served by the utility. He said TVA had surpassed its 2010 goal to reduce the need for peak power by 102 megawatts through energy efficiency and demand management programs. Fiscal year 2010's incremental reduction of 114 megawatts means TVA has cumulatively reduced peak power demand by 317 megawatts during the past three years - about one-third to one-half of a new power plant.

Peak power times usually occur on hot summer afternoons and cold winter mornings when people use more electricity, forcing utilities to switch on higher-cost generation plants to meet the additional demand. Reducing peak demand, therefore, lowers costs for utilities and, ultimately, for consumers.

The board also reviewed fiscal 2011 executive compensation and incentive pay plans, which are based on achieving business goals that help make TVA operations more efficient and hold down costs.

The Tennessee Valley Authority, a corporation owned by the U.S. government, provides electricity for utility and business customers in most of Tennessee and parts of Alabama, Mississippi, Kentucky, Georgia, North Carolina and Virginia – an area of 80,000 square miles with a population of 9 million. TVA operates 29 hydroelectric dams, 11 coal-fired power plants, three nuclear plants and 11 natural gas-fired power facilities and supplies up to 33,700 megawatts of electricity, delivered over 16,000 miles of high-voltage power lines. TVA also provides flood control, navigation, land management and recreation for the Tennessee River system and works with local utilities and state and local governments to promote economic development across the region. TVA, which makes no profits and receives no taxpayer money, is funded by sales of electricity to its customers. Electricity prices in TVA's service territory are below the national average.

SOURCE Tennessee Valley Authority