Historic Drought Conditions Raise TVA Electric Rates

TVA announced today that the historic drought conditions and resulting loss of hydropower will result in an electric rate increase effective October 1. According to TVA Spokesman John Moulton, the lack of rain during the past seven months have cut TVA’s least expensive generation resource, hydropower, by more than 40 percent. The period of January through July is among the driest on record in 118 years. As a result on October 1 TVA will raise rates by four-tenths of a cent per kilowatt-hour, or 0.432 cents. The impact will vary across the Valley, but residential consumers can expect an increase ranging from about $3 to $6 in their monthly bills.

However TVA says its income and revenue both grew in the third quarter of 2007. For the three months ending June 30th, TVA reported net income of $194 million, compared to $162 million for the same period in 2006. Operating expenses and sales were essentially flat. For the first three quarters, net income was $371 million, up from $123 million a year ago.

Total operating expenses grew about 2 percent for the first nine months of the fiscal year, compared to fiscal 2006, and power sales were up slightly.

“Extremely dry conditions across the Tennessee Valley this year have reduced our hydro generation by more than 40 percent, driving our fuel and purchased-power costs higher than we planned,” said TVA President & Chief Executive Officer Tom Kilgore. “We are working hard to manage our resources and costs during these extraordinary conditions, but there is no way for us to avoid buying more power to offset the significant loss of hydro production.”

The Fuel Cost Adjustment (FCA) is a routine quarterly rate adjustment that TVA uses to help manage the volatility of fuel and purchased-power costs. It allows TVA to reconcile its forecasts for fuel and purchased-power costs with the actual costs.

As a result of the drought conditions, the levels of upstream tributary reservoirs on the Tennessee River system are an average of 19 feet below normal, leaving very little water to operate the hydroelectric plants. Water levels in the main river reservoirs are near normal because TVA must allow for navigation, maintain water quality, protect aquatic habitat and ensure an adequate water supply.

Kilgore said the current situation illustrates a critical need for a comprehensive approach to meet the growing power demand in the Valley.

“Energy efficiency and conservation play a key role in that effort,” he said. “Consumers can help manage future electric bills by taking a few simple steps to improve energy conservation in their homes.”

The time of day that electricity is used has a significant impact on the FCA amount consumers will see on their electric bills. TVA’s costs to produce power are highest between the hours of 2 p.m. and 8 p.m. when electricity demand is typically greatest. A few cost-saving steps Valley residents can take to help improve energy efficiency in their homes include the following:

-- Turn up cooling-system thermostats from to 75 to 78 degrees. Raise the thermostat even more when no one is home.

-- Avoid running dishwashers, washing machines and electric clothes dryers between the hours of 2 p.m. and 8 p.m.

-- Use the “sleep mode” on computers.

-- Keep curtains closed on the south, east and west sides of the house during the day.

-- Use the microwave instead of a stove burner or oven for cooking.

-- Make sure your air-conditioner filter is changed regularly