TVA faced milder weather, lower fuel costs during FY ‘23
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TVA faced milder weather, lower fuel costs during FY ‘23

Tennessee Valley Authority (TVA) faced both milder weather and lower fuel costs in FY 2023 compared with the previous year, according to the federal utility’s latest SEC filing.

TVA’s operating revenues were $12.1 billion in FY 2023, falling from $12.5 billion in FY 2022. The company cited lower fuel rates (primarily due to lower natural gas prices) and lower sales volumes driven by milder weather.

Although TVA faced days of single-digit temperatures and record-setting demand due to Winter Storm Elliott in December 2022, the utility said these impacts were more than offset by milder weather during the remainder of 2023.

Total operating expenses increased from $10.1 billion in 2022 to $10.4 billion in 2023, according to the utility’s annual report filed with regulators.

TVA said O&M costs increased by $386 million, primarily due to increases in payroll and benefit costs ($110 million), expenditures related to TVA’s New Nuclear Program ($73 million), outage and contract labor expenses ($83 million) and post-employment benefit expenses ($37 million).

Depreciation and amortization expenses increased $159 million, primarily driven by an increase in depreciation expenses associated with the planned retirements of the Cumberland and Bull Run coal-fired plants and an increase in amortization expense of decommissioning costs. TVA said these increases were partially offset by a $288 million decrease in purchased power expenses, primarily due to lower demand for energy from overall milder weather and higher availability of nuclear generation.

Fuel expenses fell $18 million in FY 2023, primarily due to lower natural gas prices and nuclear fuel efficiency gains. Partially offsetting these decreases was an increase in fuel cost recovery from unplanned fuel costs that were deferred in the summer of 2022.

Purchased power expenses fell $288 million, primarily due to lower energy demand due to milder weather and higher availability of nuclear generation. This was partially offset by an increase in fuel cost recovery from unplanned purchased power costs that were deferred in the summer of 2022.

Future of coal, gas

TVA continues to evaluate the impact of retiring its coal-fired fleet by 2035.

The utility said it plans to retire the two coal-fired units at Cumberland, which make up 2,470 MW of TVA’s summer net capacity. The first unit is scheduled to be retired at the end of 2026, while the second unit is expected to be retired by the end of 2028.

TVA plans to replace one unit with a 1,450 MW combined-cycle plant at Cumberland. In the filing to regulators, TVA said it could spend up to $1.2 billion on construction to replace part of the generation from the other unit.

MORE: Tennessee Valley Authority considers replacing coal with gas

The utility is also weighing the potential retirement of Kingston Fossil Plant and asked for public input this year. TVA could spend up to $2.8 billion on the construction of facilities to replace part of that generation.

As part of its strategy, TVA is evaluating adding flexible and fast-ramping natural gas-fired plants to maintain reliability. During 2019, the TVA Board approved an expansion of peaking gas replacement capacity at two combustion turbine gas facilities.

Commercial operations began at Colbert Combustion Turbine (CT) Units 9-11 in July 2023, with a total summer net capability of 681 MW. As of September 30, 2023, TVA had spent $329 million on this expansion, and TVA expects to spend an additional $56 million. Pre-commercial plant operations have begun on Paradise Combustion Turbine Units 5-7, and all three units are expected to come online by the end of 2023, with an expected summer net capability of 681 MW.

A 500 MW aeroderivative combustion turbine project at TVA’s Johnsonville site has been approved for $599 million. The utility anticipates that project to enter commercial operations by the end of 2024.

TVA is also exploring a 200 MW aeroderivative CT project at TVA’s Allen site and a 500 MW simple cycle CT project at TVA’s Caledonia site, contingent on the outcome of environmental reviews.

Read the full SEC filing here

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