The effect of high fuel costs was evident in Tennessee Valley Authority’s (TVA) latest financial statement filed with the Securities and Exchange Commission.

Total operating expenses rose $2.5 billion for the year that ended Sept. 30, as compared to the prior year.

Fuel and purchased power expenses made up $1.8 billion of the increase, primarily due to higher natural gas and coal prices, along with increased market prices of purchased power. TVA said its fuel expenses alone rose by $830 million year-over-year.

TVA said the average price of natural gas was almost 90% higher in 2022 as compared to 2021. It said it hedges much of the fuel that it uses, and said that more than half of its power supply comes from sources that are not exposed to swings in fuel prices.

Global demand for natural gas triggered by Russia’s war in Ukraine has driven up fuel prices in 2022. The U.S. Energy Information Administration (EIA) continues to forecast progressively higher natural gas and coal prices, at least in the short term.

TVA also cited less availability of lower-cost nuclear generation due to the outage at Watts Bar Unit 2 for its steam generator replacement project. The Steam Generating Team (SGT), a joint venture between Framatome and United Engineers & Constructors, Inc., said in early November it completed the project at the 1,150 MW nuclear facility in eastern Tennessee. 

As a result, TVA reported an increase $10 million in costs driven by an increase in nuclear outage days.

Depreciation and amortization expenses rose $521 million as compared to the prior year, according to the filing. TVA said the increase was driven by a new study that included assumptions to potentially retire the remainder of TVA’s coal-fired fleet by 2035. 

Operations and maintenance expenses rose by $96 million year-over-year due to increased payroll and benefit costs reflected in cost of living increases and additional employees. Some $21 million of the increased costs was due to investments in new technology and the procurement of contract labor.

TVA also reported an $18 million net increase in inventory reserves and project write-offs for TVA’s coal-fired plants and $18 million of increased costs primarily related to natural gas, hydroelectric, and coal maintenance projects.

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