The Tennessee Valley Authority generated $192 million in revenue from electricity price increases last year, a large portion of which the Tennessee Valley Authority will use to extend the life of its nuclear plants.
To account for rising inflation and interest rates, the TVA Board of Directors approved a 4.5% interest rate increase in August. This was the first increase since before the Covid-19 pandemic.
For TVA’s 10 million customers, the increase meant about $3.50 more on their monthly residential electricity bills. For TVA, that means an additional $405 million this fiscal year, according to the utility’s quarterly financial report.
By March, six months into TVA’s fiscal year, the increase had produced nearly half that amount: $192 million.
The Tennessee Valley Authority votes on how to spend the money to increase the interest rate
The TVA Board of Directors voted May 9 to allocate $143 million to extend the life of nuclear plants and make equipment and safety improvements using the additional revenue. The remaining $49 million of what’s been generated hasn’t been allocated yet, but here’s how the rest is broken down:
- Extending the life of the nuclear plant: $61 million
- Equipment reliability: $49 million
- Winter resilience and storm response: $26 million
- Wildfire mitigation: $5 million
- Safety upgrades: $2 million
Even with the base rate increase and the expiration of pandemic credits, the effective rate — what customers actually pay after accounting for fuel costs — was lower this year than last year thanks to a 24% drop in fuel costs.
KUB passes on 100% of TVA increases to customers
Aside from the 58 giant plants, TVA customers buy electricity indirectly through one of the 153 local power companies it serves. The Knoxville Utilities Board buys all of its energy from TVA and then sells it to Knoxville residents at a slightly higher price.
More than 80 cents of every dollar residents pay KUB pays for power from TVA. KUB does not make money from TVA rate increases, KUB says on its website.
KUB energy prices can vary from month to month, depending on the fuel costs of TVA stations.
Between October and March, TVA customers spent more money overall on energy, thanks in large part to January’s winter storm. Electricity sales rose 3.1%, and TVA generated $4.1 billion in electricity sales in the first half of the fiscal year. That’s $50 million more than expected.
Winter weather upgrades have been top of mind for the facility since it suffered its first power outages in a winter storm in 2022. TVA has invested more than $120 million in improving winter weather at its power plants, especially natural gas plants, which are vulnerable to freezes. Knox News got an inside look at those upgrades.
This investment paid off in the frigid early morning hours of January 17, when TVA withstood a record power demand of 34,526 megawatts without any power outages.
TVA seeks to operate large nuclear plants for 80 years
A significant portion of the revenue generated by the rate increase will help extend the life of TVA’s seven nuclear units at three stations: Browns Ferry, Sequoyah and Watts Bar.
“This continued investment will enable our seven units to operate for 80 years, maintain 8,300 megawatts of reliable, carbon-free nuclear generation and increase production by an additional 244 megawatts,” Tim Rausch, TVA’s chief nuclear officer, said at the May board meeting. . .
The plants provide 43% of TVA’s electricity generation and produce zero carbon emissions, a central strength as the utility hopes to reach net-zero emissions by 2050.
Browns Ferry in Alabama, TVA’s largest single plant and the third largest nuclear plant in the United States, generates 20% of its energy. TVA completed $475 million in upgrades at Browns Ferry in 2019.
The facility has applied to the Nuclear Regulatory Commission to extend its operating license at Browns Ferry for another 20 years, bringing the total lifespan to 80 years. Without the extension, licenses to operate the Browns Ferry units will expire between 2033 and 2036.
When the NRC approves the construction of a nuclear plant, its initial license lasts for 40 years. Utilities can apply for a 20-year license extension, as TVA did with Browns Ferry in 2006. Some utilities have applied to extend nuclear licenses to 80 years.
The NRC has agreed to operate a few U.S. plants for 80 years, but Browns Ferry’s application is still pending.
The Sequoyah units are licensed through 2040 and 2041 after an extension, and the Watts Bar 1 unit is licensed through 2035 for its initial 40-year operation. The Watts Bar 2 online module was launched in 2016.
Rausch said TVA’s Nuclear Life Extension Program will benefit from appropriations in the Inflation Reduction Act. Each of TVA’s seven nuclear units conducts scheduled outages and refueling every 18 months. There will be three outages planned at TVA stations this fall.
Daniel Dassault is a growth and development reporter focusing on technology and energy. Phone 423-637-0878. Email daniel.dassow@knoxnews.com.
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