Tennessee Valley Authority [TVC] Filings

10-Q 1 tve-20240630.htm 10-Q tve-20240630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

x QUARTERLY REPORT PURSUANT TO SECTION 13, 15(d), OR 37 OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number 000-52313

TENNESSEE VALLEY AUTHORITY

(Exact name of registrant as specified in its charter)


A corporate agency of the United States created by an act of Congress (State or other jurisdiction of incorporation or organization)									62-0474417 (I.R.S. Employer Identification No.)

400 W. Summit Hill Drive Knoxville, Tennessee (Address of principal executive offices)									37902 (Zip Code)

(865) 632-2101

(Registrant's telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13, 15(d), or 37 of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o

Non-accelerated filer x Smaller reporting company o

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Number of shares of common stock outstanding at July 29, 2024: N/A

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			Page
GLOSSARY OF COMMON ACRONYMS......................................................................................................................................			3
FORWARD-LOOKING INFORMATION.........................................................................................................................................			4
GENERAL INFORMATION............................................................................................................................................................			6

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.............................................................................................................................................			7
Consolidated Statements of Operations (Unaudited)............................................................................................................			7
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)............................................................................			7
Consolidated Balance Sheets (Unaudited)...........................................................................................................................			8
Consolidated Statements of Cash Flows (Unaudited)..........................................................................................................			10
Consolidated Statements of Changes in Proprietary Capital (Unaudited)............................................................................			11
Notes to Consolidated Financial Statements (Unaudited)....................................................................................................			12

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...			42
Executive Overview...............................................................................................................................................................			42
Results of Operations............................................................................................................................................................			43
Liquidity and Capital Resources............................................................................................................................................			50
Key Initiatives and Challenges..............................................................................................................................................			53
Environmental Matters..........................................................................................................................................................			54
Legal Proceedings................................................................................................................................................................			56
Off-Balance Sheet Arrangements..........................................................................................................................................			57
Critical Accounting Estimates................................................................................................................................................			57
New Accounting Standards and Interpretations....................................................................................................................			57
Legislative and Regulatory Matters.......................................................................................................................................			57

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..............................................................			57

ITEM 4. CONTROLS AND PROCEDURES..................................................................................................................................			57
Disclosure Controls and Procedures.....................................................................................................................................			57
Changes in Internal Control over Financial Reporting..........................................................................................................			57

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS..................................................................................................................................................			58

ITEM 1A. RISK FACTORS............................................................................................................................................................			58

ITEM 5. OTHER INFORMATION..................................................................................................................................................			58

ITEM 6. EXHIBITS........................................................................................................................................................................			59

SIGNATURES...............................................................................................................................................................................			60

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GLOSSARY OF COMMON ACRONYMS
Following are definitions of some of the terms or acronyms that may be used in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 (the "Quarterly Report"):

Term or Acronym						Definition




AOCI						Accumulated other comprehensive income (loss)
ARO						Asset retirement obligation
ART						Asset Retirement Trust
Bonds						Bonds, notes, or other evidences of indebtedness
Bull Run						Bull Run Fossil Plant




CCR						Coal combustion residuals






CCRMUs						CCR management units
CTs						Combustion turbine unit(s)
Cumberland						Cumberland Fossil Plant



CY						Calendar year

DCP						Deferred Compensation Plan







EIS						Environmental Impact Statement
EPA						Environmental Protection Agency


FERC						Federal Energy Regulatory Commission

FHP						Financial Hedging Program

GAAP						Accounting principles generally accepted in the United States of America
GAC						Grid access charge
GEH						GE Hitachi Nuclear Energy





Holdco						John Sevier Holdco LLC
Jacobs						Jacobs Engineering Group, Inc.
JSCCG						John Sevier Combined Cycle Generation LLC

kWh						Kilowatt hours
Legacy CCR Rule						Final legacy CCR rule
Legacy SIs						Legacy CCR surface impoundments
LPCs						Local power company customers



MLGW						Memphis Light, Gas and Water Division
mmBtu						Million British thermal unit(s)
Moody's						Moody's Investors Service, Inc.
MtM						Mark-to-market
MW						Megawatts


NAV						Net asset value
NDT						Nuclear Decommissioning Trust
NEIL						Nuclear Electric Insurance Limited


NES						Nashville Electric Service


NRC						Nuclear Regulatory Commission









PPA(s)						Power Purchase Agreement(s)




RFP(s)						Request(s) for proposals
RP						Restoration Plan
SCCG						Southaven Combined Cycle Generation LLC

SEC						Securities and Exchange Commission

SERP						Supplemental Executive Retirement Plan
SHLLC						Southaven Holdco LLC






TVA						Tennessee Valley Authority
TVA Act						Tennessee Valley Authority Act of 1933, as amended

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TVA Board						TVA Board of Directors


U.S. Treasury						United States Department of the Treasury


VIE						Variable interest entity

XBRL						eXtensible Business Reporting Language

FORWARD-LOOKING INFORMATION

This Quarterly Report contains forward-looking statements relating to future events and future performance. All statements other than those that are purely historical may be forward-looking statements. In certain cases, forward-looking statements can be identified by the use of words such as "may," "will," "should," "expect," "anticipate," "believe," "intend," "project," "plan," "predict," "assume," "forecast," "estimate," "objective," "possible," "probably," "likely," "potential," "speculate," "aim," "aspiration," "goal," "seek," "strategy," "target," the negative of such words, or other similar expressions.

Although the Tennessee Valley Authority ("TVA") believes that the assumptions underlying any forward-looking statements are reasonable, TVA does not guarantee the accuracy of these statements. Numerous factors could cause actual results to differ materially from those in any forward-looking statements. These factors include, among other things:

•New, amended, or existing laws, regulations, executive orders ("EOs"), or administrative orders or interpretations, including those related to climate change and other environmental matters, and the costs of complying with these laws, regulations, EOs, or administrative orders or interpretations;

•The cost of complying with known, anticipated, or new environmental requirements, some of which could render continued operation of many of TVA's aging coal-fired generation units not cost-effective or result in their removal from service, perhaps permanently, and which could substantially increase the cost of closing TVA's coal combustion residual ("CCR") facilities;

•Federal legislation aimed specifically at curtailing TVA's activities, including legislation that may cause TVA to lose its protected service territory, its sole authority to set rates, or its authority to manage the Tennessee River system or the real property currently entrusted to TVA; subject TVA to additional environmental regulation or additional requirements of the North American Electric Reliability Corporation ("NERC") or Federal Energy Regulatory Commission ("FERC"); require the divestiture of TVA or the sale of certain of TVA's assets; lower the debt ceiling on bonds, notes, or other evidences of indebtedness (collectively, "Bonds") specified in the Tennessee Valley Authority Act of 1933, as amended ("TVA Act"); or restrict TVA's access to its funds;

•Cyber attacks on TVA's assets or the assets of third parties upon which TVA relies;

•The failure of TVA's information technology systems;

•Significant delays and additional costs, and/or inability to obtain necessary regulatory approvals, licenses, or permits, for major projects, including for assets that TVA needs to serve its existing and future load and to meet its carbon reduction aspirations;

•Limitations on TVA's ability to borrow money, which may result from, among other things, TVA's approaching or substantially reaching the debt ceiling or TVA's losing access to the debt markets, and which may impact TVA's ability to make planned capital investments;

•Events at a nuclear facility, whether or not operated by or licensed to TVA, which, among other things, could lead to increased regulation or restriction on the construction, ownership, operation, or decommissioning of nuclear facilities or on the storage of spent fuel, obligate TVA to pay retrospective insurance premiums, reduce the availability and affordability of insurance, increase the costs of operating TVA's existing nuclear units, or cause TVA to forego future construction at these or other facilities;

•Risks associated with the operation of nuclear facilities or other generation and related facilities, including CCR facilities;

•Inability to continue to operate certain assets, especially nuclear facilities, including due to the inability to obtain, or loss of, regulatory approval for the operation of assets;

•Significant additional costs for TVA to manage and operate its CCR facilities;

•Physical attacks, threats, or other interference causing damage to TVA's facilities or interfering with TVA's operations;

•The failure of TVA's generation, transmission, navigation, flood control, and related assets and infrastructure, including CCR facilities and spent nuclear fuel storage facilities, to operate as anticipated, which may negatively affect TVA's ability to meet electricity demand and result in lost revenues, damages, or other costs that are not reflected in TVA's financial statements or projections, including due to aging or technological issues;

•Costs or liabilities that are not anticipated in TVA's financial statements for third-party claims, natural resource damages, environmental cleanup activities, or fines or penalties associated with unexpected events such as failures of a facility or infrastructure;

•Events at a TVA facility, which, among other things, could result in loss of life, damage to the environment, damage to or loss of the facility, or damage to the property of others;

•Events that negatively impact TVA's reliability, including problems at other utilities or at TVA facilities or the increase in intermittent sources of power;

•Events or changes involving transmission lines, dams, and other facilities not operated by TVA, including those that affect the reliability of the interstate transmission grid of which TVA's transmission system is a part and those that increase flows across TVA's transmission grid;

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•Disruption of supplies of fuel, purchased power, or other critical items or services, which may result from, among other things, economic conditions, weather conditions, physical or cyber attacks, political developments, international trade restrictions or tariffs, legal actions, mine closures or reduced mine production, increases in fuel exports, environmental regulations affecting TVA's suppliers, transportation or delivery constraints, including limited transmission availability, shortages of raw materials, supply chain difficulties, labor shortages, strikes, inflation, or similar events and which may, among other things, hinder TVA's ability to operate its assets and to complete projects on time and on budget;

•Circumstances that cause TVA to change its determinations regarding the appropriate mix of generation assets;

•Costs or other challenges resulting from a failure by TVA to meet its carbon reduction aspirations;

•Actions taken, or inaction, by the United States ("U.S.") government relating to the national debt ceiling or automatic spending cuts in government programs;

•Inability to respond quickly enough to current or potential customer demands or needs or to act solely in the interest of ratepayers;

•Negative outcomes of current or future legal or administrative proceedings;

•Other unforeseeable occurrences negatively impacting TVA assets or their supporting infrastructure;

•The need for significant future contributions associated with TVA's pension plans, other post-retirement benefit plans, or health care plans;

•Increases in TVA's financial liabilities for decommissioning its nuclear facilities and retiring other assets;

•The requirement or decision to make additional contributions to TVA's Nuclear Decommissioning Trust ("NDT") or Asset Retirement Trust ("ART");

•Differences between estimates of revenues and expenses and actual revenues earned and expenses incurred;

•An increase in TVA's cost of capital, which may result from, among other things, changes in the market for Bonds, disruptions in the banking system or financial markets, changes in the credit rating of TVA or the U.S. government, or, potentially, an increased reliance by TVA on alternative financing should TVA approach its debt limit;

•The inaccuracy of certain assumptions about the future, including economic forecasts, anticipated energy and commodity prices, cost estimates, construction schedules, power demand forecasts, the appropriate generation mix to meet demand, and assumptions about potential regulatory environments;

•Significant decline in the demand for electricity that TVA produces, which may result from, among other things, economic downturns or recessions, loss of customers, reductions in demand for electricity generated from non-renewable sources or centrally located generation sources, increased utilization of distributed energy resources, increased energy efficiency and conservation, or improvements in alternative generation and energy storage technologies;

•Changes in customer preferences for energy produced from cleaner generation sources;

•Addition or loss of customers by TVA or TVA's local power company customers ("LPCs");

•Potential for increased demand for energy resulting from, among other things, an increase in the population of TVA's service area;

•Changes in technology, which, among other things, may affect relationships with customers and require TVA to change how it conducts its operations;

•Changes in the economy and volatility in financial markets;

•Reliability or creditworthiness of counterparties including but not limited to customers, suppliers, renewable resource providers, and financial institutions;

•Changes in the market price of commodities such as purchased power, coal, uranium, natural gas, fuel oil, crude oil, construction materials, reagents, or emission allowances;

•Changes in the market price of equity securities, debt securities, or other investments;

•Changes in interest rates, currency exchange rates, or inflation rates;

•Failure to attract or retain an appropriately qualified, diverse, and inclusive workforce;

•Changes in the membership of the TVA Board of Directors ("TVA Board") or TVA senior management, which may impact how TVA operates;

•Weather conditions, including changing weather patterns, extreme weather conditions, and other events such as flooding, droughts, wildfires, heat waves, and snow or ice storms that may result from climate change, which may hamper TVA's ability to supply power, cause customers' demand for power to exceed TVA's then-present power supply, or otherwise negatively impact net revenue;

•Events affecting the supply or quality of water from the Tennessee River system or Cumberland River system, or elsewhere, which could interfere with TVA's ability to generate power;

•Catastrophic events, such as fires, earthquakes, explosions, solar events, electromagnetic pulses, geomagnetic disturbances, droughts, floods, hurricanes, tornadoes, polar vortexes, icing events, pipeline explosions, or other casualty events, wars, national emergencies, terrorist activities, pandemics, widespread public health crises, geopolitical events, or other similar destructive or disruptive events;

•Inability to use regulatory accounting for certain costs;

•Ineffectiveness of TVA's financial control system to control issues and instances of fraud or to prevent or detect errors;

•Ineffectiveness of TVA's disclosure controls and procedures or its internal control over financial reporting;

•Adverse effects from regional health emergencies;

•Inability of TVA to implement its business strategy successfully, including due to the increased use in the public of distributed energy resources or energy-efficiency programs;

•Inability of TVA to adapt its business model to changes in the utility industry and customer preferences and to remain cost competitive;

•Inability of TVA to achieve or maintain its cost reduction goals, which may require TVA to increase rates and/or issue

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more debt than planned;

•The emergence of artificial intelligence and its potential application to various business practices, including TVA's operations and the operations of TVA's stakeholders;

•Loss of quorum of the TVA Board, which may limit TVA's ability to adapt to meet changing business conditions;

•Negative impacts on TVA's reputation; or

•Other unforeseeable events.

See also Part I, Item 1A, Risk Factors, and Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in TVA's Annual Report on Form 10-K for the year ended September 30, 2023 (the "Annual Report"), and Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report for a discussion of factors that could cause actual results to differ materially from those in any forward-looking statement. New factors emerge from time to time, and it is not possible for TVA to predict all such factors or to assess the extent to which any factor or combination of factors may impact TVA's business or cause results to differ materially from those contained in any forward-looking statement. TVA undertakes no obligation to update any forward-looking statement to reflect developments that occur after the statement is made, except as required by law.

GENERAL INFORMATION

Fiscal Year

References to years (2024, 2023, etc.) in this Quarterly Report are to TVA's fiscal years ending September 30. Years that are preceded by "CY" are references to calendar years.

Notes

References to "Notes" are to the Notes to Consolidated Financial Statements contained in Part I, Item 1, Financial Statements in this Quarterly Report.

Available Information

TVA files annual, quarterly, and current reports with the Securities and Exchange Commission ("SEC") under Section 37 of the Securities Exchange Act of 1934 (the "Exchange Act"). TVA's SEC filings are available to the public at www.tva.com, free of charge, as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. Information contained on or accessible through TVA's website shall not be deemed to be incorporated into, or to be a part of, this Quarterly Report or any other report or document that TVA files with the SEC. All TVA SEC reports are available to the public without charge from the website maintained by the SEC at www.sec.gov.

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TENNESSEE VALLEY AUTHORITY

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in millions)


	Three Months Ended June 30				Nine Months Ended June 30
	2024		2023		2024		2023
Operating revenues
Revenue from sales of electricity	$	2,830	$	2,664	$	8,654	$	8,551
Other revenue	49		34		144		121
Total operating revenues	2,879		2,698		8,798		8,672
Operating expenses
Fuel	424		530		1,561		1,845
Purchased power	408		350		1,139		1,234
Operating and maintenance	915		896		2,671		2,546
Depreciation and amortization	542		548		1,593		1,631
Tax equivalents	131		137		405		435
Total operating expenses	2,420		2,461		7,369		7,691
Operating income	459		237		1,429		981
Other income, net	14		20		55		57
Other net periodic benefit cost	25		51		74		153
Interest expense	267		264		795		794
Net income (loss)	$	181	$	(58)	$	615	$	91
The accompanying notes are an integral part of these consolidated financial statements.

TENNESSEE VALLEY AUTHORITY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(in millions)


	Three Months Ended June 30				Nine Months Ended June 30
	2024		2023		2024		2023
Net income (loss)	$	181	$	(58)	$	615	$	91
Other comprehensive income (loss)
Net unrealized gain on cash flow hedges	1		5		17		79
Net unrealized (gain) reclassified to earnings from cash flow hedges	(7)		(22)		(20)		(65)
Total other comprehensive income (loss)	(6)		(17)		(3)		14
Total comprehensive income (loss)	$	175	$	(75)	$	612	$	105
The accompanying notes are an integral part of these consolidated financial statements.

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TENNESSEE VALLEY AUTHORITY

CONSOLIDATED BALANCE SHEETS (Unaudited)

(in millions)


ASSETS
	June 30, 2024		September 30, 2023
Current assets
Cash and cash equivalents	$	501	$	501


Accounts receivable, net	1,678		1,745
Inventories, net	1,191		1,108
Regulatory assets	178		178
Other current assets	142		134
Total current assets	3,690		3,666

Property, plant, and equipment
Completed plant	70,839		68,199
Less accumulated depreciation	(38,517)		(35,871)
Net completed plant	32,322		32,328
Construction in progress	4,133		3,238
Nuclear fuel	1,308		1,344
Finance leases	750		572
Total property, plant, and equipment, net	38,513		37,482

Investment funds	4,693		4,123

Regulatory and other long-term assets
Regulatory assets	8,809		5,566
Operating lease assets, net of amortization	160		177
Other long-term assets	335		330
Total regulatory and other long-term assets	9,304		6,073

Total assets	$	56,200	$	51,344
The accompanying notes are an integral part of these consolidated financial statements.

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TENNESSEE VALLEY AUTHORITY

CONSOLIDATED BALANCE SHEETS (Unaudited)

(in millions)


LIABILITIES AND PROPRIETARY CAPITAL
	June 30, 2024		September 30, 2023
Current liabilities
Accounts payable and accrued liabilities	$	2,711	$	2,618

Accrued interest	255		272
Asset retirement obligations	283		272


Regulatory liabilities	182		222
Short-term debt, net	1,112		432
Current maturities of power bonds	2,022		1,022
Current maturities of long-term debt of variable interest entities	36		35

Total current liabilities	6,601		4,873

Other liabilities
Post-retirement and post-employment benefit obligations	2,375		2,527
Asset retirement obligations	10,488		7,217
Finance lease liabilities	729		576
Other long-term liabilities	1,490		1,211

Regulatory liabilities	91		107
Total other liabilities	15,173		11,638

Long-term debt, net
Long-term power bonds, net	16,848		17,844
Long-term debt of variable interest entities, net	915		933

Total long-term debt, net	17,763		18,777

Total liabilities	39,537		35,288

Contingencies and legal proceedings (Note 20)

Proprietary capital
Power program appropriation investment	258		258
Power program retained earnings	15,917		15,302
Total power program proprietary capital	16,175		15,560
Nonpower programs appropriation investment, net	520		525
Accumulated other comprehensive loss	(32)		(29)
Total proprietary capital	16,663		16,056

Total liabilities and proprietary capital	$	56,200	$	51,344
The accompanying notes are an integral part of these consolidated financial statements.

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TENNESSEE VALLEY AUTHORITY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For the Nine Months Ended June 30

(in millions)


	2024		2023
Cash flows from operating activities
Net income	$	615	$	91
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization(1)	1,610		1,647
Amortization of nuclear fuel cost	282		268
Non-cash retirement benefit expense	104		186

Other regulatory amortization and deferrals	(49)		26



Changes in current assets and liabilities
Accounts receivable, net	74		401
Inventories and other current assets, net	(122)		(190)
Accounts payable and accrued liabilities	(56)		(120)
Accrued interest	(19)		(24)

Pension contributions	(229)		(231)


Settlements of asset retirement obligation	(214)		(246)
Other, net	(57)		(32)
Net cash provided by operating activities	1,939		1,776

Cash flows from investing activities
Construction expenditures	(2,381)		(1,825)

Nuclear fuel expenditures	(190)		(267)
Purchases of investments	(3)		—
Acquisition of leasehold interests in combustion turbine assets	—		(155)
Loans and other receivables
Advances	(4)		(7)
Repayments	5		6
Other, net	27		15
Net cash used in investing activities	(2,546)		(2,233)

Cash flows from financing activities
Long-term debt
Issues of power bonds	—		992

Redemptions and repurchases of power bonds	(22)		(29)

Redemptions of debt of variable interest entities	(17)		(22)
Short-term debt issues, net	678		(450)
Payments on leases and leasebacks	(46)		(36)

Financing costs, net	—		(4)



Other, net	14		6
Net cash provided by financing activities	607		457
Net change in cash, cash equivalents, and restricted cash	—		—
Cash, cash equivalents, and restricted cash at beginning of period	521		520
Cash, cash equivalents, and restricted cash at end of period	$	521	$	520





Note (1) Includes amortization of debt issuance costs and premiums/discounts.
The accompanying notes are an integral part of these consolidated financial statements.

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TENNESSEE VALLEY AUTHORITY

CONSOLIDATED STATEMENTS OF CHANGES IN PROPRIETARY CAPITAL (Unaudited)

For the Three Months Ended June 30, 2024 and 2023


	Power Program Appropriation Investment		Power Program Retained Earnings		Nonpower Programs Appropriation Investment, Net		Accumulated Other Comprehensive Income (Loss)		Total
Balance at March 31, 2023	$	258	$	14,950	$	529	$	(55)	$	15,682
Net income (loss)	—		(56)		(2)		—		(58)
Total other comprehensive loss	—		—		—		(17)		(17)
Return on power program appropriation investment	—		(1)		—		—		(1)

Balance at June 30, 2023	$	258	$	14,893	$	527	$	(72)	$	15,606

Balance at March 31, 2024	$	258	$	15,736	$	521	$	(26)	$	16,489
Net income (loss)	—		182		(1)		—		181
Total other comprehensive loss	—		—		—		(6)		(6)
Return on power program appropriation investment	—		(1)		—		—		(1)
Balance at June 30, 2024	$	258	$	15,917	$	520	$	(32)	$	16,663
The accompanying notes are an integral part of these consolidated financial statements.

TENNESSEE VALLEY AUTHORITY

CONSOLIDATED STATEMENTS OF CHANGES IN PROPRIETARY CAPITAL (Unaudited)

For the Nine Months Ended June 30, 2024 and 2023


	Power Program Appropriation Investment		Power Program Retained Earnings		Nonpower Programs Appropriation Investment, Net		Accumulated Other Comprehensive Income (Loss)		Total
Balance at September 30, 2022	$	258	$	14,800	$	533	$	(86)	$	15,505
Net income (loss)	—		97		(6)		—		91
Total other comprehensive income	—		—		—		14		14
Return on power program appropriation investment	—		(4)		—		—		(4)

Balance at June 30, 2023	$	258	$	14,893	$	527	$	(72)	$	15,606

Balance at September 30, 2023	$	258	$	15,302	$	525	$	(29)	$	16,056
Net income (loss)	—		620		(5)		—		615
Total other comprehensive loss	—		—		—		(3)		(3)
Return on power program appropriation investment	—		(5)		—		—		(5)
Balance at June 30, 2024	$	258	$	15,917	$	520	$	(32)	$	16,663
The accompanying notes are an integral part of these consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Dollars in millions except where noted)


Note		Page
1	Summary of Significant Accounting Policies	12
2	Impact of New Accounting Standards and Interpretations	14
3	Accounts Receivable, Net	15
4	Inventories, Net	15
5	Other Current Assets	15
6	Plant Closures	15

7	Other Long-Term Assets	16
8	Regulatory Assets and Liabilities	18
9	Variable Interest Entities	19
10	Other Long-Term Liabilities	21
11	Asset Retirement Obligations	22
12	Debt and Other Obligations	23

13	Risk Management Activities and Derivative Transactions	24
14	Fair Value Measurements	29
15	Revenue	35
16	Other Income, Net	38
17	Supplemental Cash Flow Information	38
18	Benefit Plans	38
19	Collaborative Arrangement	39
20	Contingencies and Legal Proceedings	39

1. Summary of Significant Accounting Policies

General

The Tennessee Valley Authority ("TVA") prepares its consolidated interim financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") for consolidated interim financial information. Accordingly, TVA's consolidated interim financial statements do not include all of the information and notes required by GAAP for annual financial statements. As such, they should be read in conjunction with the audited financial statements for the year ended September 30, 2023, and the notes thereto, which are contained in TVA's Annual Report on Form 10-K for the year ended September 30, 2023 (the "Annual Report"). In the opinion of management, all adjustments (consisting of items of a normal recurring nature) considered necessary for fair presentation are included on the consolidated interim financial statements.

Fiscal Year

TVA's fiscal year ends September 30. Years (2024, 2023, etc.) refer to TVA's fiscal years unless they are preceded by "CY," in which case the references are to calendar years.

Basis of Presentation

The accompanying consolidated interim financial statements, which have been prepared in accordance with GAAP, include the accounts of TVA and variable interest entities ("VIEs") of which TVA is the primary beneficiary. See Note 9 — Variable Interest Entities. Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements requires TVA to estimate the effects of various matters that are inherently uncertain as of the date of the consolidated financial statements. Although the consolidated financial statements are prepared in conformity with GAAP, TVA is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the amounts of revenues and expenses, reported during the reporting period. Each of these estimates varies in regard to the level of judgment involved and its potential impact on TVA's financial results. Estimates are considered critical either when a different estimate could have reasonably been used, or where changes in the estimate are reasonably likely to occur from period to period, and such use or change would materially impact TVA's financial condition, results of operations, or cash flows.

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Cash, Cash Equivalents, and Restricted Cash

Cash includes cash on hand, non-interest bearing cash, and deposit accounts. All highly liquid investments with original maturities of three months or less are considered cash equivalents. Cash and cash equivalents that are restricted, as to withdrawal or use under the terms of certain contractual agreements, are recorded in Other long-term assets on the Consolidated Balance Sheets. Restricted cash and cash equivalents include cash held in trusts that are currently restricted for TVA economic development loans and for certain TVA environmental programs in accordance with agreements related to compliance with certain environmental regulations.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the Consolidated Balance Sheets and Consolidated Statements of Cash Flows:


Cash, Cash Equivalents, and Restricted Cash (in millions)
	At June 30, 2024		At September 30, 2023
Cash and cash equivalents	$	501	$	501

Restricted cash and cash equivalents included in Other long-term assets	20		20
Total cash, cash equivalents, and restricted cash	$	521	$	521

Allowance for Uncollectible Accounts

TVA recognizes an allowance that reflects the current estimate for credit losses expected to be incurred over the life of the financial assets based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. The appropriateness of the allowance is evaluated at the end of each reporting period.

To determine the allowance for trade receivables, TVA considers historical experience and other currently available information, including events such as customer bankruptcy and/or a customer failing to fulfill payment arrangements by the due date. TVA's corporate credit department also performs an assessment of the financial condition of customers and the credit quality of the receivables. In addition, TVA reviews other reasonable and supportable forecasts to determine if the allowance for uncollectible amounts should be further adjusted in accordance with the accounting guidance for Current Expected Credit Losses.

To determine the allowance for loans receivables, TVA aggregates loans into the appropriate pools based on the existence of similar risk characteristics such as collateral types and internal assessed credit risks. In situations where a loan exhibits unique risk characteristics and is no longer expected to experience similar risks to the rest of its pool, the loan will be evaluated separately. TVA derives an annual loss rate based on historical loss and then adjusts the rate to reflect TVA's consideration of available information on current conditions and reasonable and supportable future forecasts. This information may include economic and business conditions, default trends, and other internal and external factors. For periods beyond the reasonable and supportable forecast period, TVA uses the current calculated long-term average historical loss rate for the remaining life of the loan portfolio.

The allowance for uncollectible accounts was less than $1 million at both June 30, 2024, and September 30, 2023, for trade accounts receivable. Additionally, loans receivable of $120 million and $104 million at June 30, 2024, and September 30, 2023, respectively, are included in Accounts receivable, net and Other long-term assets, for the current and long-term portions, respectively. Loans receivables are reported net of allowances for uncollectible accounts of $2 million and $3 million at June 30, 2024 and September 30, 2023, respectively.

Pre-Commercial Plant Operations

As part of the process of completing the construction of a generating unit, the electricity produced is used to serve the demands of the electric system. TVA estimates revenues earned during pre-commercial operations at the fair value of the energy delivered based on TVA's hourly incremental dispatch cost. Pre-commercial plant operations began on Paradise Combustion Turbine Units ("CTs") 5-7 in the first quarter of 2024, and the units became operational on December 29, 2023. Estimated revenue of $3 million related to this project was capitalized to offset project costs for the nine months ended June 30, 2024, all of which was recognized in the three months ended December 31, 2023. TVA also capitalized related fuel costs for this project of $3 million for the nine months ended June 30, 2024, all of which was recognized in the three months ended December 31, 2023.

Depreciation

TVA accounts for depreciation of its properties using the composite depreciation convention of accounting. Under the composite method, assets with similar economic characteristics are grouped and depreciated as one asset. Depreciation is generally computed on a straight-line basis over the estimated service lives of the various classes of assets. The estimation of

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asset useful lives requires management judgment, supported by external depreciation studies of historical asset retirement experience. Depreciation rates are determined based on external depreciation studies that are updated approximately every five years, with the latest study implemented during the first quarter of 2022. Depreciation expense was $463 million and $482 million for the three months ended June 30, 2024 and the three months ended June 30, 2023, respectively. Depreciation expense was $1.4 billion for both the nine months ended June 30, 2024 and 2023. See Note 6 — Plant Closures for a discussion of the impact of plant closures.

2. Impact of New Accounting Standards and Interpretations

The following are accounting standard updates issued by the Financial Accounting Standards Board that TVA adopted during 2024:



























Accounting for Contract Assets and Contract Liabilities from Contracts with Customers
Description			This guidance requires an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with revenue with customers. It is expected that an acquirer will generally recognize and measure acquired contract assets and contract liabilities in a manner consistent with how the acquiree recognized and measured contract assets and contract liabilities in the acquiree’s financial statements. The entity should apply the standard prospectively to business combinations occurring on or after the effective date of the standard.
Effective Date for TVA			TVA adopted the standard on October 1, 2023, on a prospective basis.
Effect on the Financial Statements or Other Significant Matters			Adoption of this standard did not have a material impact on TVA's financial condition, results of operations, or cash flows.



























Troubled Debt Restructurings and Vintage Disclosures
Description			This guidance eliminates the recognition and measurement guidance on troubled debt restructuring for creditors that have adopted Financial Instruments-Credit Losses and requires enhanced disclosures about loan modifications for borrowers experiencing financial difficulty. Additionally, the guidance requires public business entities to present current-period gross write-offs by year of origination in their vintage disclosures. The entity should apply the standard prospectively except for the transition method related to the recognition and measurement of troubled debt restructuring. For the transition method, an entity has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption.
Effective Date for TVA			TVA adopted the standard on October 1, 2023, on a prospective basis.
Effect on the Financial Statements or Other Significant Matters			Adoption of this standard did not have a material impact on TVA's financial condition, results of operations, or cash flows.

The following accounting standards or rules have been issued but as of June 30, 2024, were not effective and have not been adopted by TVA:



























Improvements to Reportable Segment Disclosures
Description			This guidance improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendment requires a public entity to disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit and loss. It also requires a public entity that has a single reportable segment to provide all of the disclosures required by the amendment and all existing segment disclosures. The amendment is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024. Upon adoption, a public entity should apply the amendments retrospectively to all prior periods presented in the financial statements.
Effective Date for TVA			Fiscal years beginning October 1, 2024 and interim periods beginning October 1, 2025.
Effect on the Financial Statements or Other Significant Matters			The adoption of this standard will not have an impact on TVA's financial condition, results of operations, or cash flows. TVA is currently evaluating the impact of any increased segment disclosures.


Enhancement and Standardization of Climate-Related Disclosures for Investors
Description			In March 2024, the SEC adopted its climate-related final rules (SEC Release No. 34-99678, The Enhancement and Standardization of Climate-Related Disclosures for Investors), and in April 2024, the SEC voluntarily stayed the new rules as a result of pending legal challenges. The new rules, if implemented as adopted, will require registrants to provide certain climate-related information in their annual reports and registration statements and will also require the dollar impact of severe weather events and other natural conditions, as well as amounts related to carbon offsets and renewable energy credits or certificates, to be disclosed in the audited financial statements in certain circumstances. The disclosure requirements are currently expected to begin phasing in for fiscal years beginning on or after January 1, 2027 for non-accelerated filers.
Effective Date for TVA			Fiscal year beginning October 1, 2027.
Effect on the Financial Statements or Other Significant Matters			TVA is currently evaluating the impact of the rule on its disclosures.

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3. Accounts Receivable, Net

Accounts receivable primarily consist of amounts due from customers for power sales. The table below summarizes the types and amounts of TVA's accounts receivable:


Accounts Receivable, Net (in millions)
	At June 30, 2024		At September 30, 2023
Power receivables	$	1,574	$	1,627
Other receivables	104		118

Accounts receivable, net(1)	$	1,678	$	1,745

Note

(1) Allowance for uncollectible accounts was less than $1 million at both June 30, 2024, and September 30, 2023, and therefore is not represented in the table above.

4. Inventories, Net

The table below summarizes the types and amounts of TVA's inventories:


Inventories, Net (in millions)
	At June 30, 2024		At September 30, 2023
Materials and supplies inventory	$	926	$	849
Fuel inventory	328		313
Renewable energy certificates/emissions allowance inventory, net	12		15
Allowance for inventory obsolescence	(75)		(69)
Inventories, net	$	1,191	$	1,108

5. Other Current Assets

Other current assets consisted of the following:


Other Current Assets (in millions)
	At June 30, 2024		At September 30, 2023(1)
Inventory work-in-progress	$	43	$	28
Prepaid software maintenance	29		18
Prepaid insurance	22		16
Current portion of prepaid long-term service agreements	9		25
Commodity contract derivative assets	9		21
Prepaid cloud assets	9		7
Other	21		19
Other current assets	$	142	$	134

Note

(1) At September 30, 2023, $7 million previously classified as Other (a component of Other current assets) has been reclassified to Prepaid cloud assets (a component of Other current assets) to conform to current year presentation.

Commodity Contract Derivative Assets. TVA enters into certain derivative contracts for natural gas that require physical delivery of the contracted quantity of the commodity as well as certain financial derivative contracts to hedge exposure to the price of natural gas. Commodity contract derivative assets classified as current include deliveries or settlements that will occur within 12 months or less. See Note 13 — Risk Management Activities and Derivative Transactions — Derivatives Not Receiving Hedge Accounting Treatment — Commodity Derivatives and — Commodity Derivatives under the FHP for a discussion of TVA's commodity contract derivatives.

6. Plant Closures

Background

TVA must continuously evaluate all generating assets to ensure an optimal energy portfolio that provides safe, clean, and reliable power while maintaining flexibility and fiscal responsibility to the people of the Tennessee Valley. Based on results of

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assessments presented to the TVA Board of Directors ("TVA Board") in 2019, the retirement of Bull Run Fossil Plant ("Bull Run") by December 2023 was approved, and as of September 30, 2023, the facility was retired. In January 2023, TVA issued its Record of Decision to retire the two coal-fired units at Cumberland Fossil Plant ("Cumberland") by the end of CY 2026 and CY 2028. In April 2024, TVA issued its Record of Decision to retire the nine coal-fired units at Kingston Fossil Plant ("Kingston") by CY 2027. In addition, TVA is evaluating the impact of retiring the balance of the coal-fired fleet by 2035, and that evaluation includes environmental reviews, public input, and TVA Board approval.

Financial Impact

TVA's policy is to adjust depreciation rates to reflect the most current assumptions, ensuring units will be fully depreciated by the applicable retirement dates. As a result of TVA's decision to accelerate the retirement of Bull Run, TVA recognized a cumulative $659 million of accelerated depreciation from the second quarter of 2019 through September 30, 2023. Of this amount, $37 million was recognized during the three months ended June 30, 2023 and $110 million was recognized during the nine months ended June 30, 2023. TVA's decision to retire the two units at Cumberland is estimated to result in approximately $16 million of additional depreciation quarterly, which does not include any potential impact from additions or retirements to net completed plant. TVA estimates it has recognized a cumulative $96 million of additional depreciation since January 2023, related to this decision. In addition, TVA's decision to retire the nine units at Kingston is estimated to result in approximately $9 million of additional depreciation quarterly, which does not include any potential impact from additions or retirements to net completed plant.

TVA also recognized $11 million in Operating and maintenance expense related to additional inventory reserves and write-offs related to idling plans for the coal-fired fleet, including Kingston and Cumberland, during both the nine months ended June 30, 2024 and 2023. Of this amount, $4 million and $3 million were recognized during the three months ended June 30, 2024 and 2023, respectively.

7. Other Long-Term Assets

The table below summarizes the types and amounts of TVA's other long-term assets:


Other Long-Term Assets (in millions)
	At June 30, 2024		At September 30, 2023(1)

Loans and other long-term receivables, net	$	109	$	97
Prepaid long-term service agreements	52		64
EnergyRight® receivables, net	44		47
Cloud assets	31		15
Prepaid capital assets	9		28
Commodity contract derivative assets	9		12


Other	81		67
Total other long-term assets	$	335	$	330

Note

(1) At September 30, 2023, $15 million previously classified as Other (a component of Other long-term assets) has been reclassified to Cloud assets (a component of Other long-term assets) to conform to current year presentation.

Loans and Other Long-Term Receivables. TVA's loans and other long-term receivables primarily consist of economic development loans for qualifying organizations and a receivable for reimbursements to recover the cost of providing long-term, on-site storage for spent nuclear fuel. The current and long-term portions of the loans receivable are reported in Accounts receivable, net and Other long-term assets, respectively, on TVA's Consolidated Balance Sheets. At June 30, 2024 and September 30, 2023, the carrying amount of the loans receivable, net of discount, reported in Accounts receivable, net was $11 million and $7 million, respectively.

EnergyRight® Receivables. In association with the EnergyRight® program, TVA's local power company customers ("LPCs") offer financing to end-use customers for the purchase of energy-efficient equipment. Depending on the nature of the energy-efficiency project, loans may have a maximum term of five years or 10 years. TVA purchases the resulting loans receivable from its LPCs. The loans receivable are then transferred to a third-party bank with which TVA has agreed to repay in full any loans receivable that have been in default for 180 days or more or that TVA has determined are uncollectible. Given this continuing involvement, TVA accounts for the transfer of the loans receivable as secured borrowings. The current and long-term portions of the loans receivable are reported in Accounts receivable, net and Other long-term assets, respectively, on TVA's Consolidated Balance Sheets. At both June 30, 2024, and September 30, 2023, the carrying amount of the loans receivable, net of discount, reported in Accounts receivable, net was $12 million. See Note 10 — Other Long-Term Liabilities for information regarding the associated financing obligation.

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Allowance for Loan Losses. The allowance for loan loss is an estimate of expected credit losses, measured over the estimated life of the loan receivables, that considers reasonable and supportable forecasts of future economic conditions in addition to information about historical experience and current conditions. See Note 1 — Summary of Significant Accounting Policies — Allowance for Uncollectible Accounts.

The allowance components, which consist of a collective allowance and specific loans allowance, are based on the risk characteristics of TVA's loans. Loans that share similar risk characteristics are evaluated on a collective basis in measuring credit losses, while loans that do not share similar risk characteristics with other loans are evaluated on an individual basis.


Allowance Components (in millions)
	At June 30, 2024		At September 30, 2023
EnergyRight® loan reserve	$	1	$	1
Economic development loan specific loan reserve	1		1
Economic development loan collective reserve	—		1

Total allowance for loan losses	$	2	$	3

Prepaid Long-Term Service Agreements. TVA has entered into various long-term service agreements for major maintenance activities at certain of its combined cycle plants. TVA uses the direct expense method of accounting for these arrangements. TVA accrues for parts when it takes ownership and for contractor services when they are rendered. Under certain of these agreements, payments made exceed the value of parts received and services rendered. The current and long-term portions of the resulting prepayments are reported in Other current assets and Other long-term assets, respectively, on TVA's Consolidated Balance Sheets. At June 30, 2024, and September 30, 2023, prepayments of $9 million and $25 million, respectively, were recorded in Other current assets.

Cloud Assets. TVA has capitalized the implementation costs of hosting arrangements that are considered service contracts as cloud assets. The cloud assets are amortized over the term of the associated hosting arrangements. The current and long-term portions of the cloud assets are reported in Other current assets and Other long-term assets, respectively, on TVA’s Consolidated Balance Sheets. At June 30, 2024, and September 30, 2023, the carrying amount of the cloud assets reported in Other current assets was $9 million and $7 million, respectively.

Commodity Contract Derivative Assets. TVA enters into certain derivative contracts for natural gas that require physical delivery of the contracted quantity of the commodity as well as certain financial derivative contracts to hedge exposure to the price of natural gas. See Note 13 — Risk Management Activities and Derivative Transactions — Derivatives Not Receiving Hedge Accounting Treatment — Commodity Derivatives and — Commodity Derivatives under the FHP for a discussion of TVA's commodity contract derivatives.

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8. Regulatory Assets and Liabilities

TVA records certain assets and liabilities that result from the regulated ratemaking process that would not be recorded under GAAP for non-regulated entities. As such, certain items that would generally be reported in earnings or that would impact the Consolidated Statements of Operations are recorded as regulatory assets or regulatory liabilities. Regulatory assets generally represent incurred costs that have been deferred because such costs are probable of future recovery in customer rates. Regulatory liabilities generally represent obligations to make refunds to customers for previous collections for costs that are not likely to be incurred or deferral of gains that will be credited to customers in future periods. Components of regulatory assets and regulatory liabilities are summarized in the table below.


Regulatory Assets and Liabilities (in millions)
	At June 30, 2024		At September 30, 2023
Current regulatory assets

Unrealized losses on commodity derivatives	$	122	$	136
Unrealized losses on interest rate derivatives	34		31



Fuel cost adjustment receivable	22		11

Total current regulatory assets	178		178

Non-current regulatory assets
Non-nuclear decommissioning costs	6,183		2,922
Retirement benefit plans deferred costs	1,432		1,440

Nuclear decommissioning costs	471		728
Unrealized losses on interest rate derivatives	344		272

Environmental compliance and remediation costs	169		—
Unrealized losses on commodity derivatives	59		52

Other non-current regulatory assets	151		152
Total non-current regulatory assets	8,809		5,566
Total regulatory assets	$	8,987	$	5,744

Current regulatory liabilities
Fuel cost adjustment tax equivalents	$	173	$	201

Unrealized gains on commodity derivatives	9		21
Total current regulatory liabilities	182		222

Non-current regulatory liabilities
Retirement benefit plans deferred credits	82		95
Unrealized gains on commodity derivatives	9		12
Total non-current regulatory liabilities	91		107

Total regulatory liabilities	$	273	$	329

Non-Nuclear Decommissioning Costs. Non-nuclear decommissioning costs include (1) certain deferred charges related to the future closure and decommissioning of TVA's non-nuclear long-lived assets, (2) recognition of changes in the liability, (3) recognition of changes in the value of TVA's Asset Retirement Trust, and (4) certain other deferred charges under the accounting rules for asset retirements obligations ("AROs"). During the three months ended June 30, 2024, TVA recorded additional estimated AROs of $3.1 billion as a result of the Environmental Protection Agency's ("EPA's") final legacy CCR rule ("Legacy CCR Rule") and recorded a corresponding regulatory asset of $3.1 billion due to these AROs being associated with closed sites and asset retirement costs having been fully depreciated. See Note 11 — Asset Retirement Obligations.

Environmental Compliance and Remediation Costs. TVA uses regulatory accounting for certain amounts associated with compliance with an order, regulation, settlement, or lawsuit, or certain costs associated with environmental remediation activities, including but not limited to those involving environmental cleanup activities and groundwater activities. Costs will be recovered in rates based on the average life of debt financed to fund actual expenditures. See Note 20 — Contingencies and Legal Proceedings — Contingencies — Environmental Matters.

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9. Variable Interest Entities

A variable interest entity ("VIE") is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support or (ii) has equity investors who lack the characteristics of owning a controlling financial interest. When TVA determines that it has a variable interest in a VIE, a qualitative evaluation is performed to assess which interest holders have the power to direct the activities that most significantly impact the economic performance of the entity and have the obligation to absorb losses or receive benefits that could be significant to the entity. The evaluation considers the purpose and design of the business, the risks that the business was designed to create and pass along to other entities, the activities of the business that can be directed and which party can direct them, and the expected relative impact of those activities on the economic performance of the business through its life. TVA has the power to direct the activities of an entity when it has the ability to make key operating and financing decisions, including, but not limited to, capital investment and the issuance of debt. Based on the evaluation of these criteria, TVA has determined it is the primary beneficiary of certain entities and as such is required to account for the VIEs on a consolidated basis.

John Sevier VIEs

In 2012, TVA entered into a $1.0 billion construction management agreement and lease financing arrangement with John Sevier Combined Cycle Generation LLC ("JSCCG") for the completion and lease by TVA of the John Sevier Combined Cycle Facility ("John Sevier CCF"). JSCCG is a special single-purpose limited liability company formed in January 2012 to finance the John Sevier CCF through a $900 million secured note issuance (the "JSCCG notes") and the issuance of $100 million of membership interests subject to mandatory redemption. The membership interests were purchased by John Sevier Holdco LLC ("Holdco"). Holdco is a special single-purpose entity, also formed in January 2012, established to acquire and hold the membership interests in JSCCG. A non-controlling interest in Holdco is held by a third party through nominal membership interests, to which none of the income, expenses, and cash flows are allocated.

The membership interests held by Holdco in JSCCG were purchased with proceeds from the issuance of $100 million of secured notes (the "Holdco notes") and are subject to mandatory redemption pursuant to a schedule of amortizing, semi-annual payments due each January 15 and July 15, with a final payment due in January 2042. The payment dates for the mandatorily redeemable membership interests are the same as those of the Holdco notes. The sale of the JSCCG notes, the membership interests in JSCCG, and the Holdco notes closed in January 2012. The JSCCG notes are secured by TVA's lease payments, and the Holdco notes are secured by Holdco's investment in, and amounts receivable from, JSCCG. TVA's lease payments to JSCCG are equal to and payable on the same dates as JSCCG's and Holdco's semi-annual debt service payments. In addition to the lease payments, TVA pays administrative and miscellaneous expenses incurred by JSCCG and Holdco. Certain agreements related to this transaction contain default and acceleration provisions.

Due to its participation in the design, business activity, and credit and financial support of JSCCG and Holdco, TVA has determined that it has a variable interest in each of these entities. Based on its analysis, TVA has concluded that it is the primary beneficiary of JSCCG and Holdco and, as such, is required to account for the VIEs on a consolidated basis. Holdco's membership interests in JSCCG are eliminated in consolidation.

Southaven VIE

In 2013, TVA entered into a $400 million lease financing arrangement with Southaven Combined Cycle Generation LLC ("SCCG") for the lease by TVA of the Southaven Combined Cycle Facility ("Southaven CCF"). SCCG is a special single-purpose limited liability company formed in June 2013 to finance the Southaven CCF through a $360 million secured notes issuance (the "SCCG notes") and the issuance of $40 million of membership interests subject to mandatory redemption. The membership interests were purchased by Southaven Holdco LLC ("SHLLC"). SHLLC is a special single-purpose entity, also formed in June 2013, established to acquire and hold the membership interests in SCCG. A non-controlling interest in SHLLC is held by a third party through nominal membership interests, to which none of the income, expenses, and cash flows of SHLLC are allocated.

The membership interests held by SHLLC were purchased with proceeds from the issuance of $40 million of secured notes (the "SHLLC notes") and are subject to mandatory redemption pursuant to a schedule of amortizing, semi-annual payments due each February 15 and August 15, with a final payment due on August 15, 2033. The payment dates for the mandatorily redeemable membership interests are the same as those of the SHLLC notes, and the payment amounts are sufficient to provide returns on, as well as returns of, capital until the investment has been repaid to SHLLC in full. The rate of return on investment to SHLLC is seven percent, which is reflected as interest expense in the Consolidated Statements of Operations. SHLLC is required to pay a pre-determined portion of the return on investment to Seven States Southaven, LLC on each lease payment date as agreed in SHLLC's formation documents (the "Seven States Return"). The current and long-term portions of the Membership interests of VIE subject to mandatory redemption are included in Accounts payable and accrued liabilities and Other long-term liabilities, respectively.

The payment dates for the mandatorily redeemable membership interests are the same as those of the SHLLC notes. The SCCG notes are secured by TVA's lease payments, and the SHLLC notes are secured by SHLLC's investment in, and amounts receivable from, SCCG. TVA's lease payments to SCCG are payable on the same dates as SCCG's and SHLLC's semi-annual debt service payments and are equal to the sum of (i) the amount of SCCG's semi-annual debt service payments,

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(ii) the amount of SHLLC's semi-annual debt service payments, and (iii) the amount of the Seven States Return. In addition to the lease payments, TVA pays administrative and miscellaneous expenses incurred by SCCG and SHLLC. Certain agreements related to this transaction contain default and acceleration provisions.

In the event that TVA were to choose to exercise an early buy out feature of the Southaven facility lease, in part or in whole, TVA must pay to SCCG amounts sufficient for SCCG to repay or partially repay on a pro rata basis the membership interests held by SHLLC, including any outstanding investment amount plus accrued but unpaid return. TVA also has the right, at any time and without any early redemption of the other portions of the Southaven facility lease payments due to SCCG, to fully repay SHLLC's investment, upon which repayment SHLLC will transfer the membership interests to a designee of TVA.

TVA participated in the design, business activity, and financial support of SCCG and has determined that it has a direct variable interest in SCCG resulting from risk associated with the value of the Southaven CCF at the end of the lease term. Based on its analysis, TVA has determined that it is the primary beneficiary of SCCG and, as such, is required to account for the VIE on a consolidated basis.

Impact on Consolidated Financial Statements

The financial statement items attributable to carrying amounts and classifications of JSCCG, Holdco, and SCCG at June 30, 2024, and September 30, 2023, as reflected on the Consolidated Balance Sheets, are as follows:


Summary of Impact of VIEs on Consolidated Balance Sheets (in millions)
	At June 30, 2024		At September 30, 2023




Current liabilities
Accrued interest	$	21	$	9
Accounts payable and accrued liabilities	1		1
Current maturities of long-term debt of variable interest entities	36		35
Total current liabilities	58		45
Other liabilities
Other long-term liabilities	16		17
Long-term debt, net
Long-term debt of variable interest entities, net	915		933
Total liabilities	$	989	$	995

Interest expense of $12 million for both the three months ended June 30, 2024 and 2023, and $35 million and $36 million for the nine months ended June 30, 2024 and 2023, respectively, is included in the Consolidated Statements of Operations related to debt of VIEs and membership interests of VIEs subject to mandatory redemption.

Creditors of the VIEs do not have any recourse to the general credit of TVA. TVA does not have any obligations to provide financial support to the VIEs other than as prescribed in the terms of the agreements related to these transactions.

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10. Other Long-Term Liabilities

Other long-term liabilities consist primarily of liabilities related to certain derivative agreements as well as liabilities related to operating leases. The table below summarizes the types and amounts of Other long-term liabilities:


Other Long-Term Liabilities (in millions)
	At June 30, 2024		At September 30, 2023(1)
Interest rate swap liabilities	$	658	$	627
Environmental compliance and remediation costs	165		—
Currency swap liabilities	116		131
Operating lease liabilities	103		93
Long-term project cost accruals	101		10
Commodity contract derivative liabilities	59		52

EnergyRight® financing obligation	52		55
Advances for construction	49		56
Long-term deferred revenue	48		45
Long-term deferred compensation	45		41

Other	94		101
Total other long-term liabilities	$	1,490	$	1,211

Note

(1) At September 30, 2023, $10 million previously classified as Other (a component of Other long-term liabilities) has been reclassified to Long-term project cost accruals (a component of Other long-term liabilities) to conform with current year presentation.

Interest Rate Swap Liabilities. TVA uses interest rate swaps to fix variable short-term debt to a fixed rate. The values of these derivatives are included in Other current assets, Accounts payable and accrued liabilities, Accrued interest, and Other long-term liabilities on the Consolidated Balance Sheets. See Note 13 — Risk Management Activities and Derivative Transactions — Overview of Accounting Treatment and Derivatives Not Receiving Hedge Accounting Treatment — Interest Rate Derivatives for information regarding the interest rate swap liabilities.

Operating Lease Liabilities. TVA's operating leases consist primarily of railcars, equipment, real estate/land, and power generating facilities. At June 30, 2024, and September 30, 2023, the current portion of TVA's operating leases reported in Accounts payable and accrued liabilities was $60 million and $71 million, respectively.

Currency Swap Liabilities. To protect against exchange rate risk related to British pound sterling denominated Bond transactions, TVA entered into foreign currency hedges. The values of these derivatives are included in Accounts payable and accrued liabilities and Other long-term liabilities on the Consolidated Balance Sheets. See Note 13 — Risk Management Activities and Derivative Transactions — Overview of Accounting Treatment and Cash Flow Hedging Strategy for Currency Swaps for more information regarding the currency swap liabilities.

Commodity Contract Derivative Liabilities. TVA enters into certain derivative contracts for natural gas that require physical delivery of the contracted quantity of the commodity as well as certain financial derivative contracts to hedge exposure to the price of natural gas. See Note 13 — Risk Management Activities and Derivative Transactions — Derivatives Not Receiving Hedge Accounting Treatment — Commodity Derivatives and — Commodity Derivatives under the FHP for a discussion of TVA's commodity contract derivatives.

EnergyRight® Financing Obligation. TVA purchases certain loans receivable from its LPCs in association with the EnergyRight® program. The current and long-term portions of the resulting financing obligation are reported in Accounts payable and accrued liabilities and Other long-term liabilities, respectively, on TVA's Consolidated Balance Sheets. At June 30, 2024 and September 30, 2023, the carrying amount of the financing obligation reported in Accounts payable and accrued liabilities was $13 million and $14 million, respectively. See Note 7 — Other Long-Term Assets for information regarding the associated loans receivable.

Long-Term Deferred Compensation. TVA provides compensation arrangements to engage and retain certain employees, both executive and non-executive, which are designed to provide participants with the ability to defer compensation to future periods. The current and long-term portions are recorded in Accounts payable and accrued liabilities and Other long-term liabilities, respectively, on TVA’s Consolidated Balance Sheets. At June 30, 2024 and September 30, 2023, the current amount of deferred compensation recorded in Accounts payable and accrued liabilities was $66 million and $65 million, respectively.

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Advances for Construction. TVA receives refundable and non-refundable advances for construction that are generally intended to defray all or a portion of the costs of building or extending TVA’s existing power assets. Amounts received are deferred as a liability with the long-term portion representing amounts that will not be recognized within the next 12 months. As projects meet milestones or other contractual obligations, the refundable portion is refunded to the customer and the non-refundable portion is recognized as contributions in aid of construction and offsets the cost of plant assets. At June 30, 2024 and September 30, 2023, the current amount of advances for construction recorded in Accounts payable and accrued liabilities was $68 million and $39 million, respectively.

Long-Term Deferred Revenue. Long-term deferred revenue represents payments received that exceed services rendered resulting in the deferral of revenue. The long-term portion represents amounts that will not be recognized within the next 12 months primarily related to fiber and transmission agreements. The current and long-term portions of the deferral are reported in Accounts payable and accrued liabilities and Other long-term liabilities, respectively, on TVA’s Consolidated Balance Sheets. At June 30, 2024 and September 30, 2023, the current amount of deferred revenue recorded in Accounts payable and accrued liabilities was $24 million and $21 million, respectively.

Environmental Compliance and Remediation Costs. Environmental compliance and remediation costs represents certain costs associated with environmental remediation activities, including but not limited to those involving environmental cleanup activities and groundwater activities. The current and long-term portions of environmental compliance and remediation costs are reported in Accounts payable and accrued liabilities and Other long-term liabilities, respectively, on TVA's Consolidated Balance Sheets. At June 30, 2024, the current amount of the environmental compliance and remediation costs reported in Accounts payable and accrued liabilities was $4 million. There were no current amounts at September 30, 2023.

Long-Term Project Cost Accruals. Long-term project cost accruals represent the unpaid liability associated with major construction projects and other project expenditures. TVA accrues these costs based on level of completion of the vendor's performance obligation, and the long-term portion represents amounts that will not be paid within the next 12 months. The current and long-term portions of Long-term project cost accruals are reported in Accounts payable and accrued liabilities and Other long-term liabilities, respectively, on TVA's Consolidated Balance Sheets. At June 30, 2024 and September 30, 2023, the current amount of the long-term project cost accruals reported in Accounts payable and accrued liabilities was $77 million and $14 million, respectively.

11. Asset Retirement Obligations

During the nine months ended June 30, 2024, TVA's total ARO liability increased $3.3 billion as a result of increases from additional non-nuclear obligations, revisions in estimate to non-nuclear AROs, and periodic accretion, partially offset by revisions in estimate to nuclear AROs and settlements related to retirement projects that were conducted during the period. The nuclear and non-nuclear accretion amounts were deferred as regulatory assets. During the nine months ended June 30, 2024, $141 million of the related regulatory assets were amortized into expense as these amounts were collected in rates. See Note 8 — Regulatory Assets and Liabilities. TVA maintains investment trusts to help fund its decommissioning obligations. See Note 14 — Fair Value Measurements — Investment Funds and Note 20 — Contingencies and Legal Proceedings — Contingencies — Decommissioning Costs for a discussion of the trusts' objectives and the current balances of the trusts.


Asset Retirement Obligation Activity (in millions)
	Nuclear		Non-Nuclear		Total
Balance at September 30, 2023	$	3,808	$	3,681	$	7,489	(1)
Settlements	(4)		(186)		(190)
Revisions in estimate (non-cash)	(161)		297		136
Additional obligations (non-cash)	—		3,136		3,136

Accretion (recorded as regulatory asset)	128		72		200

Balance at June 30, 2024	$	3,771	$	7,000	$	10,771	(1)

Note

(1) Includes $283 million and $272 million at June 30, 2024, and September 30, 2023, respectively, in Current liabilities.

On May 8, 2024, EPA published its Legacy CCR Rule, which expands the scope of the existing regulatory requirements of EPA's 2015 CCR rule, as revised ("2015 CCR Rule"), to include two additional classes of CCR units: legacy CCR surface impoundments ("Legacy SIs") and CCR management units ("CCRMUs"). Legacy SIs include inactive surface impoundments at retired generating facilities that were exempt from the 2015 CCR Rule. CCRMUs are a newly defined category that includes previously unregulated areas at CCR facilities where CCR was beneficially reused in an unencapsulated manner, disposed, placed, or managed on land outside of CCR units regulated by the 2015 CCR Rule. TVA records the fair value of a liability for an ARO in the period in which it is incurred if a reasonable estimate of fair value can be made. As a result of the enactment of the final rule, TVA recorded additional estimated AROs and regulatory assets of $3.1 billion during the three months ended June 30, 2024, in order to comply with the requirements related to these two additional classes of CCR units. Key assumptions used to determine this estimate include the preliminary identification of Legacy SIs and CCRMUs at TVA facilities impacted by the rule,

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the anticipated number of acres per newly regulated CCR unit, the expected closure method, a cost benchmark per acre based on sites currently being remediated, the potential duration of closure activities, and the escalation and discount factors. There are legal challenges to the Legacy CCR Rule that may impact the number and scope of newly regulated units and the determinations on final closure requirements and performance standards. Revisions to the additional estimated non-nuclear AROs from the Legacy CCR Rule will be made whenever factors indicate that the timing or amounts of estimated cash flows have changed. See also Note 20 — Contingencies and Legal Proceedings — Environmental Matters.

Revisions in other non-nuclear estimates increased the liability balance by $297 million for the nine months ended June 30, 2024. The increase was primarily attributable to a change in closure liabilities of $231 million at Gallatin Fossil Plant based on scope changes, new vendor bids, and updated cost estimates for activities associated with final closure and $76 million at Cumberland based on scope changes to the interim closure plan and updated cost estimates for activities associated with final closure.

Revisions in nuclear estimates decreased the liability balance by $161 million for the nine months ended June 30, 2024. The decrease was primarily attributable to an estimate revision of $164 million following the filing of a subsequent license renewal ("SLR") application with the Nuclear Regulatory Commission ("NRC") for Browns Ferry Nuclear Plant ("Browns Ferry"). If approved, the SLR will allow for an additional 20 years of operations for each of Browns Ferry's three units, resulting in a total operating life of 80 years.

12. Debt and Other Obligations

Debt Outstanding

Total debt outstanding at June 30, 2024, and September 30, 2023, consisted of the following:


Debt Outstanding (in millions)
	At June 30, 2024		At September 30, 2023
Short-term debt
Short-term debt, net of discounts	$	1,112	$	432
Current maturities of power bonds issued at par	2,022		1,022
Current maturities of long-term debt of VIEs issued at par	36		35

Total current debt outstanding, net	3,170		1,489
Long-term debt
Long-term power bonds(1)	16,966		17,970
Long-term debt of VIEs, net	915		933

Unamortized discounts, premiums, issue costs, and other	(118)		(126)
Total long-term debt, net	17,763		18,777
Total debt outstanding	$	20,933	$	20,266

Note

(1) Includes total net exchange gain from currency transactions of $91 million and $109 million at June 30, 2024, and September 30, 2023, respectively.

Debt Securities Activity

The table below summarizes the long-term debt securities activity for the period from October 1, 2023, to June 30, 2024:

Debt Securities Activity

Date

Amount

(in millions)

Redemptions/Maturities(1)

2009 Series B

December 2023

2009 Series B

June 2024

Total redemptions/maturities of power bonds

Debt of variable interest entities

Total redemptions/maturities of debt

Note

(1) All redemptions were at 100 percent of par.

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Credit Facility Agreements

TVA has funding available under four long-term revolving credit facilities totaling $2.7 billion. See the table below for additional information on the four long-term revolving credit facilities. The interest rate on any borrowing under these facilities varies based on market factors and the rating of TVA's senior unsecured, long-term, non-credit-enhanced debt. TVA is required to pay an unused facility fee on the portion of the total $2.7 billion that TVA has not borrowed or committed under letters of credit. This fee, along with letter of credit fees, may fluctuate depending on the rating of TVA's senior unsecured, long-term, non-credit-enhanced debt. At June 30, 2024, and September 30, 2023, there were $446 million and $535 million, respectively, of letters of credit outstanding under these facilities, and there were no borrowings outstanding. TVA's letters of credit are primarily posted as collateral under TVA's interest rate swaps. See Note 13 — Risk Management Activities and Derivative Transactions — Other Derivative Instruments — Collateral. TVA may also post collateral for TVA's currency swaps, for commodity derivatives under the Financial Hedging Program ("FHP"), or for certain transactions with third parties that require TVA to post letters of credit.

The following table provides additional information regarding TVA's funding available under the four long-term revolving credit facilities:


Summary of Long-Term Credit Facilities At June 30, 2024 (in millions)
Maturity Date	Facility Limit		Letters of Credit Outstanding		Cash Borrowings		Availability

March 2026	$	150	$	38	$	—	$	112

September 2026	1,000		85		—		915
March 2027	1,000		109		—		891
February 2028	500		214		—		286
Total	$	2,650	$	446	$	—	$	2,204

TVA and the United States ("U.S.") Department of the Treasury ("U.S. Treasury"), pursuant to the Tennessee Valley Authority Act of 1933, as amended ("TVA Act"), have entered into a memorandum of understanding under which the U.S. Treasury provides TVA with a $150 million credit facility. This credit facility was renewed for 2024 with a maturity date of September 30, 2024. Access to this credit facility or other similar financing arrangements with the U.S. Treasury has been available to TVA since the 1960s. TVA can borrow under the U.S. Treasury credit facility only if it cannot issue bonds, notes, or other evidences of indebtedness (collectively, "Bonds") in the market on reasonable terms, and TVA considers the U.S. Treasury credit facility a secondary source of liquidity. The interest rate on any borrowing under this facility is based on the average rate on outstanding marketable obligations of the U.S. with maturities from date of issue of 12 months or less. There were no outstanding borrowings under the facility at June 30, 2024. The availability of this credit facility may be impacted by how the U.S. government addresses the possibility of approaching its debt limit.

13. Risk Management Activities and Derivative Transactions

TVA is exposed to various risks related to commodity prices, investment prices, interest rates, currency exchange rates, and inflation as well as counterparty credit and performance risks. To help manage certain of these risks, TVA has historically entered into various derivative transactions, principally commodity option contracts, forward contracts, swaps, swaptions, futures, and options on futures.

Overview of Accounting Treatment

TVA recognizes certain of its derivative instruments as either assets or liabilities on its Consolidated Balance Sheets at fair value. The accounting for changes in the fair value of these instruments depends on (1) whether TVA uses regulatory accounting to defer the derivative gains and losses, (2) whether the derivative instrument has been designated and qualifies for hedge accounting treatment, and (3) if so, the type of hedge relationship (for example, cash flow hedge).

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The following tables summarize the accounting treatment that certain of TVA's financial derivative transactions receive:


Summary of Derivative Instruments That Receive Hedge Accounting Treatment (part 1) Amount of Mark-to-Market Gain (Loss) Recognized in Accumulated Other Comprehensive Income (Loss) (in millions)
			Three Months Ended June 30				Nine Months Ended June 30
Derivatives in Cash Flow Hedging Relationship	Objective of Hedge Transaction	Accounting for Derivative Hedging Instrument	2024		2023		2024		2023
Currency swaps	To protect against changes in cash flows caused by changes in foreign currency exchange rates (exchange rate risk)	Unrealized gains and losses are recorded in AOCI and reclassified to Interest expense to the extent they are offset by gains and losses on the hedged transaction	$	1	$	5	$	17	$	79


Summary of Derivative Instruments That Receive Hedge Accounting Treatment (part 2)(1) Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) to Interest Expense (in millions)
	Three Months Ended June 30				Nine Months Ended June 30
Derivatives in Cash Flow Hedging Relationship	2024		2023		2024		2023
Currency swaps	$	7	$	22	$	20	$	65

Note

(1) There were no amounts excluded from effectiveness testing for any of the periods presented. Based on forecasted foreign currency exchange rates, TVA expects to reclassify approximately $10 million of gains from Accumulated other comprehensive income (loss) ("AOCI") to Interest expense within the next 12 months to offset amounts anticipated to be recorded in Interest expense related to the forecasted exchange loss on the debt.


Summary of Derivative Instruments That Do Not Receive Hedge Accounting Treatment Amount of Gain (Loss) Recognized in Income on Derivatives(1) (in millions)
			Three Months Ended June 30				Nine Months Ended June 30
Derivative Type	Objective of Derivative	Accounting for Derivative Instrument	2024		2023		2024		2023
Interest rate swaps	To fix short-term debt variable rate to a fixed rate (interest rate risk)	Mark-to-market gains and losses are recorded as regulatory liabilities and assets, respectively Realized gains and losses are recognized in Interest expense when incurred during the settlement period and are presented in operating cash flow	$	(8)	$	(10)	$	(23)	$	(36)


Commodity derivatives under the FHP	To protect against fluctuations in market prices of purchased commodities (price risk)	Mark-to-market gains and losses are recorded as regulatory liabilities and assets, respectively Realized gains and losses are recognized in Fuel expense or Purchased power expense as the contracts settle to match the delivery period of the underlying commodity(2)	(72)		(97)		(227)		(256)

Notes

(1) All of TVA's derivative instruments that do not receive hedge accounting treatment have unrealized gains (losses) that would otherwise be recognized in income but instead are deferred as regulatory assets and liabilities. As such, there were no related gains (losses) recognized in income for these unrealized gains (losses) for the three and nine months ended June 30, 2024 and for the three and nine months ended June 30, 2023.

(2) Of the amount recognized for the three months ended June 30, 2024, $59 million and $13 million were reported in Fuel expense and Purchased power expense, respectively, and of the amount recognized for the three months ended June 30, 2023, $78 million and $19 million were reported in Fuel expense and Purchased power expense, respectively. Of the amount recognized for the nine months ended June 30, 2024, $186 million and $41 million were reported in Fuel expense and Purchased power expense, respectively, and of the amount recognized for the nine months ended June 30, 2023, $205 million and $51 million were reported in Fuel expense and Purchased power expense, respectively.

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Fair Values of TVA Derivatives

(in millions)

At June 30, 2024

At September 30, 2023

Derivatives That Receive Hedge Accounting Treatment:

Balance

Balance Sheet Presentation

Balance

Balance Sheet Presentation

Currency swaps

£250 million Sterling

(58)

Accounts payable and accrued liabilities $(5); Other long-term liabilities $(53)

(72)

Accounts payable and accrued liabilities $(6); Other long-term liabilities $(66)

£150 million Sterling

(66)

Accounts payable and accrued liabilities $(3); Other long-term liabilities $(63)

(69)

Accounts payable and

accrued liabilities $(4); Other long-term liabilities $(65)

Derivatives That Do Not Receive Hedge Accounting Treatment:

Balance

Balance Sheet Presentation

Balance

Balance Sheet Presentation

Interest rate swaps

$1.0 billion notional

(520)

Accounts payable and

accrued liabilities $(22); Accrued interest $(5);

Other long-term liabilities

$(493)

(499)

Other current assets $1; Accrued interest $(27); Other long-term liabilities $(473)

$476 million notional

(172)

Accounts payable and

accrued liabilities $(6); Accrued interest $(1);

Other long-term liabilities

$(165)

(159)

Other current assets $3; Accrued interest $(8);

Other long-term liabilities

$(154)

Commodity contract derivatives

Other current assets $9; Other long-term assets $9; Accounts payable and accrued liabilities $(2); Other long-term liabilities $(2)

Other current assets $21; Other long-term assets $12; Accounts payable and accrued liabilities $(1); Other long-term liabilities $(1)

Commodity derivatives under the FHP

(177)

Accounts payable and accrued liabilities $(120); Other long-term liabilities $(57)

(186)

Accounts payable and accrued liabilities $(135); Other long-term liabilities $(51)

Cash Flow Hedging Strategy for Currency Swaps

To protect against exchange rate risk related to British pound sterling denominated Bond transactions, TVA entered into foreign currency hedges at the time the Bond transactions occurred. TVA had two currency swaps outstanding at June 30, 2024, with total currency exposure of £400 million and expiration dates in 2032 and 2043.

When the dollar strengthens against the British pound sterling, the exchange gain on the Bond liability and related accrued interest is offset by an equal amount of loss on the swap contract that is reclassified out of AOCI. Conversely, the exchange loss on the Bond liability and related accrued interest is offset by an equal amount of gain on the swap contract that is reclassified out of AOCI. All such exchange gains or losses on the Bond liability and related accrued interest are included in Long-term debt, net and Accrued interest, respectively. The offsetting exchange losses or gains on the swap contracts are recognized in AOCI. If any gain (loss) were to be incurred as a result of the early termination of the foreign currency swap contract, the resulting income (expense) would be amortized over the remaining life of the associated Bond as a component of Interest expense. The values of the currency swap liabilities are included in Accounts payable and accrued liabilities and Other long-term liabilities on the Consolidated Balance Sheets.

Derivatives Not Receiving Hedge Accounting Treatment

Interest Rate Derivatives. Generally TVA uses interest rate swaps to fix variable short-term debt to a fixed rate, and TVA uses regulatory accounting treatment to defer the mark-to-market ("MtM") gains and losses on its interest rate swaps. The net deferred unrealized gains and losses are classified as regulatory liabilities or assets on TVA's Consolidated Balance Sheets and are included in the ratemaking formula when gains or losses are realized. The values of these derivatives are included in Other current assets, Accounts payable and accrued liabilities, Accrued interest, and Other long-term liabilities on the Consolidated Balance Sheets, and realized gains and losses, if any, are included on TVA's Consolidated Statements of Operations. For the three months ended June 30, 2024 and the three months ended June 30, 2023, the changes in fair market value of the interest rate swaps resulted in the reduction in unrealized losses of $32 million and $85 million, respectively. For the nine months ended June 30, 2024 and the nine months ended June 30, 2023, the changes in fair market value of the interest rate swaps resulted in the increase in unrealized losses of $63 million and the reduction in unrealized losses of $33 million, respectively. TVA may hold short-term debt balances lower than the notional amount of the interest rate swaps from time to time

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due to changes in business conditions and other factors. While actual balances vary, TVA generally plans to maintain average balances of short-term debt equal to or in excess of the combined notional amount of the interest rate swaps.

Commodity Derivatives. TVA enters into certain derivative contracts for natural gas that require physical delivery of the contracted quantity of the commodity. TVA may also enter into short-term power purchase agreements ("PPAs") with a term of less than one year that provide an option to financially settle contracted power deliveries. This option creates an embedded derivative in the hosting PPA. TVA marks to market these contracts and defers the unrealized gains (losses) as regulatory liabilities (assets). At June 30, 2024, TVA's natural gas contract derivatives had terms of up to five years.

Commodity Contract Derivatives

At June 30, 2024

At September 30, 2023

Number of Contracts

Notional Amount

Fair Value (MtM)

(in millions)

Number of Contracts

Notional Amount

Fair Value (MtM)

(in millions)

Natural gas contract derivatives

353 million mmBtu

318 million mmBtu

Commodity Derivatives under the FHP. Currently, TVA is hedging exposure to the price of natural gas under the FHP. There is no Value at Risk aggregate transaction limit under the current FHP structure, but the TVA Board reviews and authorizes the use of tolerances and measures annually. TVA's FHP policy prohibits trading financial instruments under the FHP for speculative purposes. At June 30, 2024, TVA's natural gas swap contracts under the FHP had remaining terms of up to four years.


Commodity Derivatives under Financial Hedging Program(1)
	At June 30, 2024					At September 30, 2023
	Number of Contracts	Notional Amount		Fair Value (MtM) (in millions)		Number of Contracts	Notional Amount		Fair Value (MtM) (in millions)


Natural gas swap contracts	153	263	million mmBtu	$	(177)	221	388	million mmBtu	$	(186)

Note

(1) Fair value amounts presented are based on the net commodity position with the counterparty. Notional amounts disclosed represent the net value of contractual amounts.

TVA defers all FHP unrealized gains (losses) as regulatory liabilities (assets) and records the realized gains or losses in Fuel expense and Purchased power expense to match the delivery period of the underlying commodity.

Offsetting of Derivative Assets and Liabilities

The amounts of TVA's derivative instruments as reported on the Consolidated Balance Sheets are shown in the table below:


Derivative Assets and Liabilities(1) (in millions)
	At June 30, 2024		At September 30, 2023
Assets
Commodity contract derivatives	$	18	$	33
Interest rate swaps	—		4

Total derivatives subject to master netting or similar arrangement	$	18	$	37



Liabilities
Currency swaps	$	124	$	141
Interest rate swaps(2)	692

Tennessee Valley Authority [TVC] Filings

Tennessee Valley Authority [TVE] Filings