TVA Board Approves Rate Increase, Rate Change; Adopts 2004 Budget
Aug. 27, 2003
The TVA Board today approved rate actions to fund clean-air improvements for the next 10 years and to help retain manufacturing jobs in the Tennessee Valley.
The three-member Board, meeting at TVA headquarters in Knoxville, Tenn., approved a 6.1-percent increase in electric revenues. The Board also approved a change in the rate structure to more equitably distribute TVA’s costs to serve various customer groups and to make manufacturing rates more competitive.
The Board adopted a 2004 fiscal year budget that earmarks $418 million for clean air capital investment, $251 million for transmission system improvements, and $225 million for debt reduction.
“We are installing the latest clean air technology at our coal-fired plants because it is the right thing to do,” said TVA Chairman Glenn McCullough Jr. “This 10-year environmental adjustment in our rates will help pay the $1 million a day we are investing to do our part in providing clean air and clear skies to the people of the Valley in the 21st century.”
The rate actions will have the net result of an average 7.4-percent increase in wholesale residential and non-manufacturing rates and a 2-percent decrease in wholesale rates for large manufacturers. The rate increase will generate about $365 million in additional revenue for TVA during the 2004 fiscal year, beginning Oct. 1.
“Since January, we have listened to our distributor partners and revised the rate proposals in response to suggestions they have made,” said TVA Director Skila Harris. “We differ, however, on the economic benefits to the Valley of improving the competitiveness of rates for manufacturing. We tried to achieve a fair balance in the actions we took today, recognizing our responsibility to consumers, to environmental stewardship and to economic development.”
TVA Director Bill Baxter said, “Even with the rate increase, TVA residential rates are among the lowest in the country and the region. Because electricity is a major cost for large manufacturers and because their rates are already higher than the regional average, we do not want to further disadvantage those customers.”
TVA Chief Financial Officer Michael Rescoe discussed the financial highlights of 2003 and presented the 2004 budget to the board. He said TVA expects to reduce debt by $375 million during 2003 for a total reduction of $2.8 billion since 1997. Interest expense is 19 percent of revenue, down from a high of 34 percent in 1997.
Rescoe said the 2004 budget, which forecasts $7.6 billion in revenue, is designed to give TVA increasing financial flexibility to support operational efficiency, maintain and improve system reliability, enhance generation and transmission capacity, make prudent investments to meet clean air requirements, and support job growth. It includes $366 million for the restart of Browns Ferry Nuclear Plant Unit 1.
TVA Executive Vice President of Customer Service and Marketing Mark Medford said the net result of the rate actions will result in a 2-percent decrease in firm prices for manufacturing industries with loads of 1 megawatt or greater. He said the rate change is revenue-neutral for TVA, but it better positions TVA rates relative to the market.
TVA is the nation’s largest public power producer and is completely self-financed. TVA provides power to large industries and 158 power distributors that serve 8.3 million consumers in seven southeastern states.
Media Contact:
Gil Francis, Knoxville (865-632-8031) or TVA News Bureau, Knoxville (865-632-6000)
