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TVA reports increase in net income despite lower demand

KNOXVILLE, Tenn. ― The Tennessee Valley Authority reports that the public-owned utility ended fiscal 2013 with net income of $271 million on $11 billion in operating revenues despite a decline in sales, while record levels of low-cost hydroelectric generation helped offset higher fuel costs.

TVA president and CEO Bill Johnson said, “We experienced lower demand for power during the year due to the shutdown of a major customer facility, a slow-growing economy and adoption of energy conservation by customers. We expect to see low growth in power demand into the next decade, and we are committed to living within our means to keep rates low for our customers and the people of the Tennessee Valley.”

Sales to local power companies were up slightly in 2013 as compared with 2012, as more normal weather patterns returned in 2013, favorably impacting demand. Sales to industrial customers directly served by TVA were off 15 percent from the prior year, primarily due to the U.S. Enrichment Corp.’s closure of its uranium enrichment facility near Paducah, Ky.  Lower sales to directly served industrial customers were offset by higher off-system sales resulting from excess generation, TVA said in its 2013 annual financial report to the U.S. Securities and Exchange Commission.

Total revenues declined 2 percent in 2013 compared with the prior year. The decrease was driven by a decline in base revenue as local power companies implemented new TVA wholesale rate structures, and lower fuel cost recovery revenues as a result of lower electricity sales.

Lower-cost nuclear generation was down 6 percent in 2013 versus 2012 due to four nuclear refueling outages and a steam generator replacement project, compared with two nuclear refueling outages the previous year.  As a result, fuel expense increased $140 million in 2013 compared with 2012.

Record levels of rainfall in 2013 produced 42 percent more low-cost hydroelectric generation compared with 2012, which helped to partially offset higher cost generation resources.

Operating and maintenance expenses were reduced by $82 million in 2013 compared with 2012. The decrease was driven by fewer outage costs and lower scheduled maintenance for coal-fired units due to retirement or idling of less efficient coal units, and decreased costs related to post-employment benefits. Offsetting the decreases were expenses related to the four nuclear outages and other projects in 2013.

“Our company-wide efforts to enhance productivity and reduce costs will keep TVA competitive as we remain committed to fulfilling TVA’s mission,” Chief Financial Officer John Thomas said. “The actions our employees took throughout the year allowed us to end 2013 with a positive position and remain financially healthy.”

TVA reported net income of $271 million on $11 billion in operating revenues for fiscal 2013, compared with net income of $60 million on $11.2 billion in revenues last year.

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