TVA Board Approves Rate Reduction, Fuel Cost Adjustment for 2007
July 28, 2006
The TVA Board today approved a 4.5-percent reduction in firm wholesale power rates along with a fuel cost adjustment mechanism that will allow TVA to automatically adjust rates up or down as fuel and purchased power costs rise and fall. The rate reduction and fuel cost adjustment mechanism are effective Oct. 1.
The rate reduction is worth approximately $405 million to TVA customers in the 2007 fiscal year. The Board also approved a 2007 fiscal year budget with projected revenues of $9.3 billion.
“Employees at TVA are focused on controlling operating and maintenance costs and capital expenditures, completing the restart of Unit 1 at Browns Ferry Nuclear Plant and increasing productivity to help make this rate reduction possible,” said TVA President and Acting Chief Executive Officer Tom Kilgore. “The fuel cost adjustment will help reduce the need for large rate actions in the future by better matching revenues to unpredictable changes in the cost of fuel and purchased power.
The 2007 budget presents some challenges, but our employees have demonstrated they are resourceful in finding ways to improve productivity so that we can continue providing affordable, reliable power to the people of the Tennessee Valley.” The 2007 budget presented to the Board at a meeting in Knoxville, Tenn., by TVA Chief Financial Officer Mike Rescoe includes a productivity target to hold growth in non-fuel operation and maintenance costs to less than or equal to the expected growth in power sales. The budget also includes a reduction in TVA’s total financial obligations of $529 million and a cash balance target of $500 million.
Rescoe said the fuel cost adjustment mechanism will adjust rates quarterly up or down to reflect the forecasted difference in fuel and purchased power costs from the baseline amount. The baseline amount is established from the 2007 budget, and the fuel cost adjustment will start at zero for the first quarter. Many utilities across the nation and most of TVA’s neighboring utilities use similar mechanisms to adjust their rates
The budget projects capital expenditures of $286 million for clean air projects and $81 million to complete the restart of Browns Ferry Unit 1 in Athens, Ala. It also includes $20 million for a detailed engineering study of the cost and schedule to complete Unit 2 at Watts Bar Nuclear Plant near Spring City, Tenn., to determine if it is a viable option to meet future power demand. No decision has been made to build any new generating plant beyond the restart of Browns Ferry Unit 1. The study will provide information needed to determine the best option for a new generating plant to meet future power demand in the Tennessee Valley.
TVA is the nation’s largest public power provider and is completely self-financed 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
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TVA News Bureau, Knoxville, (865) 632-6000
