TVA Board Calls for 2007 Budget with a Rate Reduction
June 28, 2006
The TVA Board today approved a recommendation by the Board Finance Committee directing TVA staff to develop a budget for the 2007 fiscal year that would allow for a reduction in firm wholesale power rates of 3.5 to 5 percent in conjunction with a fuel cost adjustment mechanism.
The rate reduction and other budget parameters approved by the Board today at a meeting in Knoxville, Tenn., will require improvements in productivity across TVA and the implementation of a fuel cost adjustment mechanism that would automatically adjust TVA rates up or down as fuel and purchased power costs rise and fall.
The Board will consider the budget, rate reduction and fuel cost adjustment at its next meeting scheduled for July 28 in Knoxville. If approved, the reduction in wholesale power rates and fuel cost adjustment would be effective Oct. 1. The amount of reduction in retail rates charged by local distributors of TVA power would vary.
“Limiting an increase in non-fuel operating and maintenance costs, the wind down in spending on Browns Ferry Unit 1 as it nears completion and the fuel cost adjustment would make a rate reduction possible in 2007,” said TVA President and Acting Chief Executive Officer Tom Kilgore. “The TVA Board and TVA management are focused on increased productivity to help make this rate decrease possible. The fuel cost adjustment will make financial performance more reliable and predictable by helping ensure that we recover fuel and purchased power costs as they occur.”
The Board also directed TVA staff to include a reduction of $529 million in TVA’s total financing obligations and a cash balance target of $500 million as other parameters in developing the 2007 budget.
Sharply rising fuel and purchased power costs forced TVA to increase wholesale rates by 9.95 percent in April to help TVA recover a portion of the costs over the remainder of the 2006 fiscal year. The base amount for the fuel and purchased power cost adjustment will be set so that the fuel adjustment starts at zero in the first quarter of the 2007 fiscal year.
The fuel cost adjustment would allow TVA to recover fuel and purchased power costs quarterly based on the forecast for the three months ahead. Many utilities across the United States and most of the neighboring utilities use similar mechanisms to adjust their rates.
In other matters, the Board announced that a public hearing on TVA land policy will be held by the TVA Board Community Relations Committee in conjunction with a meeting of the Regional Resource Stewardship Council Aug. 16-17 in Knoxville.
TVA is the nation’s largest public power provider and is completely self-financing with revenues of $7.8 billion in 2005. TVA provides power to large industries and 158 power distributors that serve approximately 8.6 million consumers in seven southeastern states. TVA also manages the Tennessee River and its tributaries to provide multiple benefits, including flood damage reduction, navigation, water quality and recreation.
Media Contact
John Moulton, Knoxville, (865) 632-8048
TVA News Bureau, Knoxville, (865) 632-6000
