Increased expenses results in TVA quarterly loss
by Wally Northway
Published: February 3,2011
NORTH MISSISSIPPI — Unseasonably cold temperatures in December led to increased demand for electricity from the Tennessee Valley Authority, which drove up operating costs and resulted in a net loss during the first quarter of the 2011 fiscal year, TVA reports.
The federal utility recorded a net loss of $48 million for the three-month period, which ended Dec. 31, as part of its Form 10-Q filing with the Securities and Exchange Commission. TVA said the loss, compared to net income for reinvestment of $150 million in the first quarter of the 2010 fiscal year, was attributed mainly to a 17 percent increase in operating and maintenance expenses over the prior year.
Those expenses included maintenance projects at various plants to improve reliability, security upgrades, benefit expenses, support for energy efficiency and demand response initiatives, and costs related to unexpected outages at two nuclear plants in December.
Fuel and power purchased from other utilities to meet peak demand totaled more than $1 billion in the first quarter, compared with $608 million in the same period last year.
The cost of fuel for TVA’s own generating sources jumped 13 percent during the quarter from a year ago. Expenses also increased because TVA generated 45 percent less hydroelectric power during the period. TVA purchased 31 percent more power during the quarter than a year ago.
“By not increasing base prices, TVA expected to have a slight net operating loss in the first quarter,” CFO John Thomas said. “As sales increase during the winter and summer months, we will return to a positive net income, to be reinvested in the power system.”
Colder-than-normal weather in December boosted sales of electricity by 2 percent for the quarter. The increase was primarily in sales to residential customers as TVA set all-time records for the month of December in both 24-hour usage and peak demand.
Operating revenues in the first quarter were up $479 million, or 20 percent, to $2.8 billion as compared to $2.3 billion a year ago. While base power rates did not change, revenues rose, mainly because of increases in the fuel cost adjustment, a monthly charge that allows TVA to recover the cost of various types of fuel, including coal and natural gas. The fuel cost adjustment produced $457 million in revenues to help offset increases in fuel and power purchases during the quarter.
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