Daniel DassowKnoxville News Sentinel
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The Tennessee Valley Authority has generated $192 million in revenue from last year's electricity rate increase, a large chunk of which TVA will use to extend the life of its nuclear plants.
To account for high inflation and interest rates, the TVA Board of Directors approved a 4.5% rate increase in August. It was the first increase since before the COVID-19 pandemic.
For TVA's 10 million customers, the increase meant about $3.50 more on monthly residential electric bills. For TVA, it 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 generated nearly half that amount: $192 million.
Even with the increase, TVA says its rates are 70% lower than the national average. Among its peer power providers, TVA had the sixth cheapest electricity in 2023, according to data presented to the board in August.
Along with the rate increase, the board approved $15 billion to increase electricity generation and reliability over the next three years as the Tennessee Valley population grows and TVA faces higher interest payments on construction loans.
Tennessee Valley Authority votes how to spend rate increase money
The TVA board voted May 9 to allocate $143 million to extend the life of nuclear plants and make equipment and safety upgrades using the additional revenue. The remaining $49 million of what's been generated so far has not yet been allocated, but here's how the rest breaks down:
- Nuclear plant life extension: $61 million
- Equipment reliability: $49 million
- Winter resiliency and storm response: $26 million
- Wildfire mitigation: $5 million
- Safety upgrades: $2 million
Even as the base rate increased and pandemic credits expired, the effective rate – what customers actually pay after accounting for fuel costs – was lower this year compared to last year thanks to a 24% decrease in fuel costs.
KUB passes 100% of TVA increases to customers
Apart from 58 giant factories, TVA's customers buy electricity indirectly through one of the 153 local power companies it serves. The Knoxville Utilities Board buys all of its power from TVA and then sells it to Knoxville residents at a slightly higher price.
More than 80 cents of every dollar residents pay KUB goes to pay for power from TVA. KUB does not make money from TVA's rate increases, the local utility says on its website.
KUB power prices can vary month to month, depending on fuel costs for TVA plants.
Between October and March, TVA customers spent more money overall on power, thanks in large part to January's winter storm. Electricity sales were up 3.1%, and TVA made $4.1 billion from 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 utility since it suffered its first rolling blackouts in a 2022 winter storm. TVA invested more than $120 million on winter weather upgrades at its power plants, especially natural gas plants, which are vulnerable to freezing. Knox News got an inside look at those upgrades.
The investment paid off in the frigid early morning hours of Jan. 17, when TVA withstood a record power demand of 34,526 megawatts without any blackouts.
TVA seeks to run large nuclear plants for 80 years
A large portion of revenue from the rate increase will help extend the lives of TVA's seven nuclear units at three plants: Browns Ferry, Sequoyah and Watts Bar.
"This continued investment will enable 80 years of operation of our seven units, preserve 8,300 megawatts of reliable, carbon-free nuclear generation and increase output 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 no 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 U.S., generates 20% of its power. TVA completed $475 million of upgrades at Browns Ferry in 2019.
The utility has applied to the Nuclear Regulatory Commission to extend the operating license at Browns Ferry for another 20 years for a total 80-year lifespan. Without the extension, the licenses to operate Browns Ferry's units will expire between 2033 and 2036.
When the NRC approves a nuclear plant, its initial license lasts 40 years. A utility can apply to extend the license 20 years, as TVA did for Browns Ferry in 2006. Some utilities have applied to extend nuclear licenses even further to 80 years.
The NRC has approved a handful of U.S. plants to operate 80 years, but the application for Browns Ferry is pending.
Sequoyah's two units are licensed until 2040 and 2041 after an extension, and Watts Bar's Unit 1 is licensed through 2035 for its initial 40-year run. Watts Bar Unit 2 came online in 2016.
TVA's nuclear life extension program will take advantage of credits in the Inflation Reduction Act, Rausch said. Each of the seven TVA nuclear units conducts a scheduled outage and refueling every 18 months. There will be three planned outages at TVA plants this fall.
Daniel Dassow is a growth and development reporter focused on technology and energy. Phone 423-637-0878. Emaildaniel.dassow@knoxnews.com.
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