TVA reports revenues are up

By Abby Morris
Star Staff
amorris@starhq.com

   According to financial reports, the Tennessee Valley Authority experienced a 5.6 percent increase in operating revenue during the first quarter of fiscal year 2004 compared to the same time last year.
   "Sales for the first quarter of 2004 were slightly better than the same period last year, due largely to increased production by certain industrial customers as a result of a stronger economy," said the TVA Board of Directors Glenn McCullough, Jr., Skila Harris and Bill Baxter, in a letter sent to TVA stockholders. "An increase in TVA electric rates that took effect at the beginning of the fiscal year also contributed to an increase in total operating revenues for the quarter."
   On August 27, 2003, the TVA Board of Directors voted to add a 6.1 percent increase in electric revenue and to change the rate structure to more evenly distribute TVA's costs to serve various customer groups. They also voted to make manufacturing rates more competitive.
   The rate increase and restructuring was expected to cause a 7.4 percent increase in wholesale residential and non-manufacturing rates and a 2 percent decrease in wholesale rates for large manufacturers, according to the TVA.
   At the same time the board approved the rate increase, it also adopted a budget for the 2004 fiscal year that allocates $418 million for clean air capital investment, $251 million for transmission system improvements, and $225 million for debt reduction.
   "We are installing the latest clean air technology at our coal-fired plants because it is the right thing to do," said TVA Chairman McCullough at the time of the vote. "This 10-year environmental adjustment in our rates will help pay the $1 million a day we are investing to do our part in providing clean air and clear skies to the people of the Valley in the 21st century."
   The TVA estimates that the rate increase and restructuring will generate about $365 million in additional revenue for the power provider during the 2004 fiscal year.
   Despite the first quarter 2004 increase in operating revenue, TVA also saw a $1.4 billion increase in operating expenses, up nearly 11 percent from the first quarter of the last fiscal year.
   While operating revenues and operating expenses increased, operating income decreased by $41 million.
   One goal TVA hoped to reach through the rate increase, the reduction of its multi-billion dollar debt, began to show some improvement during the first quarter of the fiscal year. "During the first quarter of 2004, TVA reduced the outstanding balance of its bonds and notes by $1.5 billion by applying the proceeds of a prepayment arrangement with its largest customer, Memphis Light, Gas and Water, and recorded an equivalent liability in the form of deferred revenue," states information released by TVA. "Under the arrangement, TVA has a 15-year, $1.5 billion obligation to provide MLGW with a monthly credit on a portion of its electricity needs."
   The TVA also reduced the amount of money it spent on interest on debt by $13 million during the first quarter, bringing the amount down from $346 million in 2003 to $333 million in 2004.
   The report issued by the TVA also highlighted the environmental impact its programs had during the first quarter of the 2004 fiscal year.
   "According to the U.S. Army Corps of Engineers, TVA's reservoir operations prevented $14 million in flood damages in Kingsport, Tenn., and $3.9 million in Elizabethton, Tenn.," the report said.
   TVA also reported advancements in the economic sector by approving $2.6 million in economic development loans for business growth in the Tennesse Valley. "The loans are expected to leverage an additional $9.5 million in capital investment and help attract or retain 644 jobs," the report said. "Loans to women- or minority-owned businesses in the Valley totaled $578,000."