TVA Adopts Budget with More Than $2 Billion of 'Cleaner Energy' Projects

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--For the fiscal year that began October 1, the Tennessee Valley Authority (NYSE:TVE) (TVA) (Knoxville, Tennessee) plans to spend more than $2 billion on "cleaner power," including continued construction of two large natural gas-fired power plants and installation of pollution-control equipment at two coal-fired units, the U.S. corporate agency said.

TVA also lowered its operating budget for fiscal 2017 and it plans to continue reducing its debt, currently standing at about $23.2 billion as of June 30, according to the agency's 10-Q form, filed at the U.S. Securities and Exchange Commission. At $10.37 billion, TVA's fiscal 2017 budget is $330 million less than its fiscal 2016 budget. This past July, TVA offered all 3,500 employees in its nuclear group an opportunity to apply to a voluntary reduction in force (RIF) program. At least two or three other TVA business units are expected to offer its employees a voluntary RIF, TVA spokesman Jim Hopson told Industrial Info.

Hopson said he expects the nuclear RIF to be completed later this fall, and it was premature to disclose how many employees in its nuclear group or any other business unit might take early retirement. "These RIFs are part of an ongoing process to make sure we have the right people in the right jobs so we can deliver the lowest-cost power possible," Hopson said. "We want to make sure all our employees are treated with respect and dignity as we realign our generating portfolio."

In a statement announcing TVA's fiscal 2017 budget, President and Chief Executive Bill Johnson said: "Our work is bounded by certain strategic imperatives--rates, debt, assets and stewardship--that require us to deliver excellent performance in order to maintain low rates, be responsible stewards, live within our means and manage TVA's power system to deliver reliable, low-cost energy."

"This budget is in keeping with TVA's long-term financial plan, which has helped us manage our business to a lower cost structure as businesses and consumers use less energy," Johnson continued. "It reflects a modest, incremental rate increase that ensures we make necessary investments in the power system and manage down debt."

The four "cleaner power" projects under way at TVA that will continue in fiscal 2017 are:

• Construction of the 1,000-megawatt (MW), gas-fired Thomas H. Allen Power Station in Memphis, Tennessee. Construction of this $975 million project is about 25% complete, TVA said. Construction began in early 2016 and is scheduled to be completed in mid-2018.
• Construction of the 1,000-MW, gas-fired unit at the Paradise Fossil Plant in Drakesboro, Kentucky. This unit addition, at which construction began several years ago, is scheduled to be operating by mid-2017. This project has a total investment value (TIV) of about $1.1 billion.
• Installation of pollution-control equipment at the Gallatin Power Station in Gallatin, Tennessee. Installation of equipment to reduce emissions of sulfur dioxide (SO2), oxides of nitrogen (NOx) and mercury (Hg) is expected to cost about $1 billion. Construction began in 2013 and is scheduled to be completed next August. The equipment will be installed on generating units with a combined generating capacity of 1,254 MW.
• Installation of pollution-control equipment at the Shawnee Power Station in West Paducah, Tennessee, which is expected to cost about $200 million. As with the Gallatin station, TVA is installing equipment to reduce SO2, NOx and mercury emissions at Shawnee Units 1 and 4, which have a combined generating capacity of about 350 MW.

TVA recently finished construction of Unit 2 at the Watts Bar Nuclear Power Station. For more on that, see July 12, 2016, article - Construction Complete, Watts Bar Unit 2 Conducts Power Ascension Tests. Last week, the 1,150-MW unit completed final power ascension tests, and it is in the "pre-commercial" stage of operation. After the unit runs in pre-commercial mode for a while, TVA can then officially designate it as commercially operating.

In his report to the TVA board of directors, CEO Johnson said renewable energy is playing a more important role as TVA continues efforts to diversify its generating portfolio. In the prior fiscal year, about 13% of TVA's electricity came from renewable resources it either owned or purchased power from. That sum includes hydropower.

Johnson also noted TVA's energy demand has essentially been flat for the last five years, despite what he called "healthy economic growth." He added, "We expect load growth to stay flat for the foreseeable future. Our market is changing, and we and our customers are working to adapt to new business conditions that include reduced energy needs and increased demand for energy efficiencies and renewables."

To respond to changing market conditions, the agency recently announced the establishment of a new business unit focused on distributed energy resources, including rooftop solar, and the energy delivery marketplace.

"As is often the case, TVA reflects broad strategic changes taking place in the Electric Power Industry," said Britt Burt, Industrial Info's vice president of research for the Global Power Industry. "TVA is experiencing flat load growth, closing uneconomic coal-fired generation, building new gas-fired generation, increasing the role of renewables and cleaning up emissions from coal-fired plants that still are economic. In many ways, what's going on at TVA is a microcosm of all the most important strategic trends in the Power Industry."

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