TVA Staff To Recommend Proposed Rate Increase to Board
June 13, 2005
Citing increased costs for coal, natural gas, purchased power and other expenses, TVA’s executive staff will recommend that the TVA Board approve an increase in firm electric rates to be effective Oct. 1, 2005.
The staff will make the recommendation at TVA’s next Board meeting. The TVA Board must act to approve any rate increase before it can be implemented.
The proposed increase is expected to increase TVA revenue by approximately $524 million in the 2006 fiscal year.
The rising costs of fuel and power purchased from other suppliers are driving forces behind the need for additional revenue, which is an industry-wide issue. For TVA, fuel and purchased power costs are expected to increase by more than $700 million from fiscal year 2004 through 2006.
“TVA has seen coal prices increase by 25 percent and the price of natural gas increase by 32 percent during the past two years,” said TVA President and Chief Operating Officer Tom Kilgore. “Over the same time frame, the price of power we purchase from other suppliers has increased by 26 percent. TVA can no longer continue to absorb these costs with its current rates.”
He said that in each instance, although prices have increased, TVA has been able to hold the change in fuel and purchased power cost well below the change in market prices for coal, natural gas and purchased power.
“We’ve done a good job managing our fuel budgets, but there is no way to hold our rates flat with these inflationary pressures,” he said. “While our coal costs have increased by 25 percent in the past two years, the market price for a similar mix of coals has increased by more than 60 percent.”
In addition to fuel and purchased power costs, other TVA expenses have increased, but less dramatically.
Kilgore said that overall TVA is controlling costs in all other areas while gaining the maximum efficiency from its generating units. TVA has reduced its capital and operating and maintenance budgets for the 2004-2006 timeframe by more than $190 million.
In 2004, TVA’s fossil-fueled generation fleet set an all-time record for summer reliability, saving TVA an estimated $123 million. Also in 2004, TVA achieved its highest level of nuclear generation, and plans are on schedule to bring more low-cost nuclear generation on line in 2007 with the restart of the 1,280-megawatt Browns Ferry Unit 1 near Athens, Ala. When completed, this nuclear unit will help reduce TVA’s dependence on higher-priced fuel and purchased power.
TVA is the nation’s largest public power provider and is completely self-financed. TVA provides power to large industries and 158 power distributors that serve approximately 8.5 million consumers in seven southeastern states.
Media Contact
John Moulton
TVA News Bureau, Knoxville, (865) 632-6000
