Tennessee Valley Authority [TVE] Filings

10-K 1 tve-20230930.htm 10-K tve-20230930

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(MARK ONE)

x ANNUAL REPORT PURSUANT TO

SECTION 13, 15(d), OR 37 OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2023

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 (IRS 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)

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13, Section 15(d), or Section 37 of the Act.

Yes o No x

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 Emerging growth company o Smaller reporting company o

Non-accelerated filer x Accelerated filer 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. x

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). 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

Estimated aggregate market value of the common equity held by non-affiliates of TVA at March 31, 2023: N/A

Number of shares of common stock outstanding at November 13, 2023: N/A

Table of Contents


Table of Contents
GLOSSARY OF COMMON ACRONYMS.......................................................................................................................................................................................................			4
FORWARD-LOOKING INFORMATION.........................................................................................................................................................................................................			6
GENERAL INFORMATION............................................................................................................................................................................................................................			8

PART I

ITEM 1. BUSINESS......................................................................................................................................................................................................................................			9
The Corporation.................................................................................................................................................................................................................................			9
Service Area.......................................................................................................................................................................................................................................			9
Customers..........................................................................................................................................................................................................................................			11
Rates..................................................................................................................................................................................................................................................			12
Power Supply and Load Management Resources.............................................................................................................................................................................			12
Fuel Supply.........................................................................................................................................................................................................................................			20
Transmission......................................................................................................................................................................................................................................			22
Weather and Seasonality....................................................................................................................................................................................................................			23
Competition........................................................................................................................................................................................................................................			23
Research and Development...............................................................................................................................................................................................................			23
Flood Control Activities.......................................................................................................................................................................................................................			25
Environmental Stewardship Activities.................................................................................................................................................................................................			25
Economic Development Activities......................................................................................................................................................................................................			25
Regulation..........................................................................................................................................................................................................................................			26
Taxation and Tax Equivalents.............................................................................................................................................................................................................			28
Environmental Matters.......................................................................................................................................................................................................................			28
Human Capital Management..............................................................................................................................................................................................................			36

ITEM 1A. RISK FACTORS............................................................................................................................................................................................................................			43

ITEM 1B. UNRESOLVED STAFF COMMENTS............................................................................................................................................................................................			58

ITEM 1C. CYBERSECURITY.........................................................................................................................................................................................................................			58

ITEM 2. PROPERTIES..................................................................................................................................................................................................................................			58
Generating Properties........................................................................................................................................................................................................................			58
Transmission Properties.....................................................................................................................................................................................................................			60
Natural Resource Stewardship Properties.........................................................................................................................................................................................			60
Buildings.............................................................................................................................................................................................................................................			60
Disposal of Property...........................................................................................................................................................................................................................			60

ITEM 3. LEGAL PROCEEDINGS..................................................................................................................................................................................................................			61

ITEM 4. MINE SAFETY DISCLOSURES......................................................................................................................................................................................................			61

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES............			62

ITEM 6. RESERVED......................................................................................................................................................................................................................................			62

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................................................................			62
Business and Mission.........................................................................................................................................................................................................................			62
Executive Overview............................................................................................................................................................................................................................			65
Results of Operations.........................................................................................................................................................................................................................			66
Liquidity and Capital Resources.........................................................................................................................................................................................................			71
Key Initiatives and Challenges...........................................................................................................................................................................................................			76
Critical Accounting Estimates..............................................................................................................................................................................................................			84
New Accounting Standards and Interpretations.................................................................................................................................................................................			90
Legislative and Regulatory Matters....................................................................................................................................................................................................			90
Environmental Matters.......................................................................................................................................................................................................................			90
Legal Proceedings..............................................................................................................................................................................................................................			90
Risk Management Activities...............................................................................................................................................................................................................			90

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........................................................................................................................			93

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........................................................................................................................................................			94
Consolidated Balance Sheets............................................................................................................................................................................................................			94
Consolidated Statements of Operations.............................................................................................................................................................................................			96
Consolidated Statements of Comprehensive Income (Loss).............................................................................................................................................................			97
Consolidated Statements of Cash Flows...........................................................................................................................................................................................			98
Consolidated Statements of Changes in Proprietary Capital.............................................................................................................................................................			99
Notes to Consolidated Financial Statements.....................................................................................................................................................................................			100
Report of Independent Registered Public Accounting Firm (PCAOB ID 42) ......................................................................................................................................			156

Table of Contents



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...............................................................			158

ITEM 9A. CONTROLS AND PROCEDURES...............................................................................................................................................................................................			158
Disclosure Controls and Procedures..................................................................................................................................................................................................			158
Internal Control over Financial Reporting...........................................................................................................................................................................................			158
Report of Independent Registered Public Accounting Firm................................................................................................................................................................			159

ITEM 9B. OTHER INFORMATION................................................................................................................................................................................................................			160

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.....................................................................................................			160

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.............................................................................................................................			161
Directors..............................................................................................................................................................................................................................................			161
Executive Officers...............................................................................................................................................................................................................................			162
Disclosure and Financial Code of Ethics............................................................................................................................................................................................			164
Insider Trading Policy.........................................................................................................................................................................................................................			164
Committees of the TVA Board............................................................................................................................................................................................................			164

ITEM 11. EXECUTIVE COMPENSATION.....................................................................................................................................................................................................			165
Compensation Discussion and Analysis.............................................................................................................................................................................................			165
CEO Pay Ratio Disclosure.................................................................................................................................................................................................................			201
Executive Compensation Tables and Narrative Disclosures..............................................................................................................................................................			207
Director Compensation.......................................................................................................................................................................................................................			220
Compensation Committee Interlocks and Insider Participation..........................................................................................................................................................			221
Compensation Committee Report......................................................................................................................................................................................................			221

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS......................................			222

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.........................................................................................			222
Director Independence.......................................................................................................................................................................................................................			222
Related Party Transactions................................................................................................................................................................................................................			222

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES......................................................................................................................................................................			224

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.....................................................................................................................................................................			225

ITEM 16. FORM 10-K SUMMARY.................................................................................................................................................................................................................			228

SIGNATURES................................................................................................................................................................................................................................................			229

Table of Contents


GLOSSARY OF COMMON ACRONYMS
Following are definitions of some of the terms or acronyms that may be used in this Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (the "Annual Report"):

Term or Acronym						Definition
ACE						Affordable Clean Energy
ACPA						Anti-Cherrypicking Amendment

AOCI						Accumulated other comprehensive income (loss)
ARO						Asset retirement obligation
ART						Asset Retirement Trust
Bonds						Bonds, notes, or other evidences of indebtedness
CAA						Clean Air Act
CCR						Coal combustion residuals

CO2						Carbon dioxide
COVID-19						Coronavirus Disease 2019
COLA(s)						Cost-of-living adjustment(s)
CSAPR						Cross-State Air Pollution Rule
CTs						Combustion turbine unit(s)
CVA						Credit valuation adjustment
CWA						Clean Water Act
CY						Calendar year
DBOT						Down-blend offering for tritium
DCP						Deferred Compensation Plan
DEIA						Diversity, Equity, Inclusion, and Accessibility
DER						Distributed Energy Resources
DOE						Department of Energy
EIS						Environmental Impact Statement
ELGs						Effluent Limitation Guidelines

EO(s)						Executive Order(s)
EPA						Environmental Protection Agency
EPRI						Electric Power Research Institute
ERC						Enterprise Risk Council
FASB						Financial Accounting Standards Board
FERC						Federal Energy Regulatory Commission
FHP						Financial Hedging Program
FIP						Federal Implementation Plan
FPA						Federal Power Act

GAAP						Accounting principles generally accepted in the United States of America
GAC						Grid Access Charge
GHG						Greenhouse gas

IRP						Integrated Resource Plan
IwD						Inclusion with Diversity
JSCCG						John Sevier Combined Cycle Generation LLC


LPCs						Local power company customers



MD&A						Management's Discussion and Analysis of Financial Condition and Results of Operations
MLGW						Memphis Light, Gas and Water Division
mmBtu						Million British thermal unit(s)
MtM						Mark-to-market
MW						Megawatts
NAAQS						National Ambient Air Quality Standards

Table of Contents


NAV						Net asset value
NDT						Nuclear Decommissioning Trust
NEIL						Nuclear Electric Insurance Limited
NEPA						National Environmental Policy Act
NERC						North American Electric Reliability Corporation
NES						Nashville Electric Service
NOx						Nitrogen oxides
NPDES						National Pollutant Discharge Elimination System
NRC						Nuclear Regulatory Commission
NYSE						New York Stock Exchange


PARRS						Putable Automatic Rate Reset Securities

QTE						Qualified technological equipment and software
RCRA						Resource Conservation and Recovery Act
RECs						Renewable Energy Certificates
RFP						Request For Proposal
RP						Restoration Plan
SCCG						Southaven Combined Cycle Generation LLC
SCRs						Selective catalytic reduction systems
SEC						Securities and Exchange Commission
SERP						Supplemental Executive Retirement Plan
SHLLC						Southaven Holdco LLC
SIPs						State implementation plans
SMR						Small modular reactor(s)
SO2						Sulfur dioxide


TDEC						Tennessee Department of Environment & Conservation
TIPS						Treasury Inflation-Protected Securities
TPBAR						Tritium-producing burnable absorber rods
TVA Act						Tennessee Valley Authority Act of 1933, as amended
TVA Board						TVA Board of Directors
TVARS						Tennessee Valley Authority Retirement System
U.S. Treasury						United States Department of the Treasury
USACE						U.S. Army Corps of Engineers
VIE(s)						Variable interest entity(ies)
XBRL						eXtensible Business Reporting Language

Table of Contents

FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K for the fiscal year ended September 30, 2023 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;

•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 coal combustion residuals ("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, resulting 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;

•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, 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;

Table of Contents

•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 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

Table of Contents

•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 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 (2023, 2022, etc.) in this Annual Report on Form 10-K for the fiscal year ended September 30, 2023 are to TVA's fiscal years ending September 30 except for references to years in the biographical information about directors and executive officers in Part III, Item 10, Directors, Executive Officers, and Corporate Governance, as well as to years that are preceded by "CY," which references are to calendar years.

Notes

References to "Notes" are to the Notes to Consolidated Financial Statements contained in Part II, Item 8, Financial Statements and Supplementary Data in this Annual Report.

Property

TVA does not own real property and generally does not own real property interests (collectively, "real property"). TVA acquires real property in the name of the United States ("U.S."), and such legal title in real property is entrusted to TVA as the agent of the U.S. to accomplish the purposes of the TVA Act. TVA acquires personal property in the name of TVA. Accordingly, unless the context indicates the reference is to TVA's personal property, any statement in this Annual Report referring to TVA property shall be read as referring to the real property of the U.S. that has been entrusted to TVA as its agent.

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 Annual 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 https://www.sec.gov.

Table of Contents

PART I

ITEM 1. BUSINESS

The Corporation

General

The Tennessee Valley Authority ("TVA") is a corporate agency and instrumentality of the United States ("U.S.") that was created in 1933 by federal legislation in response to a proposal by President Franklin D. Roosevelt. TVA was created to, among other things, improve navigation on the Tennessee River, reduce the damage from destructive flood waters within the Tennessee River system and downstream on the lower Ohio and Mississippi Rivers, further the economic development of TVA's service area in the southeastern U.S., and sell the electricity generated at the facilities TVA operates. Today, TVA operates the nation's largest public power system and supplies power to a population of approximately 10 million people.

TVA also manages the Tennessee River, its tributaries, and certain shorelines to provide, among other things, year-round navigation, flood damage reduction, and affordable and reliable electricity. Consistent with these primary purposes, TVA also manages the river system and public lands to provide recreational opportunities, adequate water supply, improved water quality, cultural and natural resource protection, and economic development. TVA performs these management duties in cooperation with other federal and state agencies that have jurisdiction and authority over certain aspects of the river system. In addition, the TVA Board of Directors ("TVA Board") has established two councils — the Regional Resource Stewardship Council and the Regional Energy Resource Council — to advise TVA on its stewardship activities in the Tennessee Valley and its energy resource activities.

Initially, all TVA operations were funded by federal appropriations. Direct appropriations for the TVA power program ended in 1959, and appropriations for TVA's stewardship, economic development, and multipurpose activities ended in 1999. Since 1999, TVA has funded all of its operations almost entirely from the sale of electricity and power system financings. TVA's power system financings consist primarily of the sale of bonds, notes, or other evidences of indebtedness (collectively, "Bonds") and secondarily of alternative forms of financing, such as lease arrangements. As a wholly-owned government corporation, TVA is not authorized to issue equity securities.

TVA's Mission of Service

TVA was built for the people, created by federal legislation, and charged with a unique mission - to improve the quality of life in a seven-state region through the integrated management of the region's resources. TVA's mission focuses on three key areas:

•Energy — Delivering reliable, low cost, clean energy;

•Environment — Caring for the region's natural resources; and

•Economic Development — Creating sustainable economic growth.

TVA's Strategic Priorities

While TVA's mission has not changed since it was established in 1933, the climate in which TVA operates continues to evolve. To continue to deliver its mission of service while evolving for future success, TVA must realize five strategic priorities:

•People Advantage — Amplifying the energy, passion, and creativity within each TVA employee;

•Operational Excellence — Building on TVA's best-in-class reputation for reliable service and competitively priced power;

•Financial Strength — Investing in the future, while keeping energy costs as low as possible;

•Powerful Partnerships — Promoting progress through the shared success of TVA's customers and stakeholders; and

•Igniting Innovation — Pursuing innovative solutions for TVA and its customers and communities.

Table of Contents

Service Area

TVA's service area, the area in which it sells power, is defined by the Tennessee Valley Authority Act of 1933, as amended ("TVA Act"). TVA supplies power in most of Tennessee, northern Alabama, northeastern Mississippi, and southwestern Kentucky, and in portions of northern Georgia, western North Carolina, and southwestern Virginia. Under the TVA Act, subject to certain minor exceptions, TVA may not, without the enactment of authorizing federal legislation, enter into contracts that would have the effect of making it, or the wholesale customers that distribute TVA power ("local power company customers" or "LPCs"), a source of power supply outside the area for which TVA or its LPCs were the primary source of power supply on July 1, 1957. This provision is referred to as the "fence" because it bounds TVA's sales activities, essentially limiting TVA to power sales within a defined service area.

Note

In addition to the locations above, TVA owns approximately one megawatt ("MW") of nameplate capacity among nine operating solar installations across the Tennessee Valley region with six installations in Tennessee, two in Alabama, and one in Mississippi. See Power Supply and Load Management Resources for a description of all of TVA's power supply resources.

In addition, the Federal Power Act ("FPA") includes a provision that helps protect TVA's ability to sell power within its service area. This provision, called the "anti-cherrypicking" provision, prevents the Federal Energy Regulatory Commission ("FERC") from ordering TVA to provide access to its transmission lines to others to deliver power to customers within TVA's defined service area. As a result, the anti-cherrypicking provision reduces TVA's exposure to loss of its customers. However, there have been some efforts to circumvent the anti-cherrypicking provision, and the protection of the provision could be limited and perhaps eliminated by federal legislation at some time in the future. See Competition and Item 1A, Risk Factors — Regulatory, Legislative, and Legal Risks — TVA could lose its protected service territory.

In 2023, the revenues generated from TVA's electricity sales were $11.9 billion and accounted for virtually all of TVA's revenues. See Note 17 — Revenue for details regarding revenues by state for each of the last three years.

Table of Contents

Customers

TVA is primarily a wholesaler of power, selling power to LPCs that then resell power to their customers at retail rates. TVA's LPCs consist of (1) municipalities and other local government entities ("municipalities") and (2) customer-owned entities ("cooperatives"). These municipalities and cooperatives operate public power electric systems whose primary purpose is not to make a profit but to supply electricity to the general public or the cooperatives' members. TVA also sells power directly to certain end-use customers, primarily large commercial and industrial loads and federal agencies with loads larger than 5,000 kilowatts. Whether TVA or an LPC serves a new power customer is determined by the applicable TVA-LPC wholesale power contract. Each contract contains a formula that balances the size of the LPC and the amount of any TVA infrastructure investment to determine which party is entitled to serve the new customer. In addition, power in excess of the needs of the TVA system may, where consistent with the provisions of the TVA Act, be sold under exchange power arrangements with other specific electric systems. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Financial Results — Operating Revenues and Note 17 — Revenue for details regarding TVA's operating revenues.

Local Power Company Customers

Revenues from LPCs accounted for approximately 91 percent of TVA's total operating revenues for 2023. TVA had wholesale power contracts with 153 LPCs at September 30, 2023. Each of these contracts requires the LPC to purchase from TVA all of the electric power required for service to the LPC's customers; however, Power Supply Flexibility Agreements available to LPCs that have executed long-term Partnership Agreements with TVA allow LPCs to locally generate or purchase up to approximately five percent of their average total hourly energy sales over a certain time period in order to meet their individual customers' needs. Revised flexibility agreements were made available to LPCs in August 2023 which permit projects to be located anywhere in TVA's service area, either connected to the LPC distribution system or TVA's transmission system, and makes it easier for LPCs to partner in projects. As of September 30, 2023, 89 LPCs had signed a Power Supply Flexibility Agreement. LPCs purchase power under contracts with terms of five or 20 years to terminate.

TVA's two largest LPCs — Memphis Light, Gas and Water Division ("MLGW") and Nashville Electric Service ("NES") — have contracts with a five-year and a 20-year termination notice period, respectively. Sales to MLGW and NES accounted for nine percent and eight percent, respectively, of TVA's total operating revenues for 2023.

TVA and LPCs continue to work together to meet the changing needs of consumers around the Tennessee Valley. TVA has a Partnership Agreement option that better aligns the length of LPC power contracts with TVA's long-term commitments. Under the partnership arrangement, the LPC power contracts automatically renew each year and have a 20-year termination notice. The partnership arrangements can be terminated under certain circumstances, including TVA's failure to limit rate increases as provided for in the agreements going forward. Participating LPCs receive benefits including a 3.1 percent wholesale bill credit in exchange for their long-term commitment, which enables TVA to recover its long-term financial commitments over a commensurate period. As of September 30, 2023, 147 LPCs had signed the Partnership Agreement with TVA.

The power contracts between TVA and LPCs provide for the purchase of power by LPCs at the wholesale rates established by the TVA Board. Under the TVA Act, the TVA Board is authorized to regulate LPCs to carry out the purposes of the TVA Act through contract terms and conditions as well as through rules and regulations. TVA regulates LPCs primarily through the provisions of TVA's wholesale power contracts. All of the power contracts between TVA and the LPCs require that power purchased from TVA be sold and distributed to the ultimate consumer without discrimination among consumers of the same class and prohibit direct or indirect discriminatory rates, rebates, or other special concessions. In addition, there are a number of wholesale power contract provisions through which TVA seeks to ensure that the electric system revenues of the LPCs are used only for electric system purposes. Furthermore, almost all of these contracts specify the resale rates and charges at which the LPC must resell TVA power to its customers. These rates are revised from time to time, subject to TVA approval, to reflect changes in costs, including changes in the wholesale cost of power.

TVA also regulates LPC policies for customer deposits, termination of service for non-payment, providing information to consumers, and billing through a service practice policy framework. TVA's regulatory framework provides for consistent regulatory policy for ratepayers across the Tennessee Valley, while recognizing local considerations. The regulatory provisions in TVA's wholesale power contracts are designed to carry out the objectives of the TVA Act, including the objective of providing for an adequate supply of power at the lowest feasible rates. See Rates — Rate Methodology below.

Other Customers

Revenues from directly served industrial customers accounted for approximately seven percent of TVA's total operating revenues in 2023. Contracts with these customers are subject to termination by the customer or TVA upon a minimum notice period that varies according to a number of factors, including the customer's contract demand and the period of time service has been provided. TVA also serves seven federal customers, including U.S. Department of Energy ("DOE") facilities and military installations, which accounted for approximately one percent of TVA's total operating revenues in 2023.

Table of Contents

Other Revenue

Other revenue consists primarily of wheeling and network transmission charges, sales of excess steam that is a by-product of power production, delivery point charges for interconnection points between TVA and the customer, Renewable Energy Certificate ("REC") sales, and certain other ancillary goods or services. Other revenue accounted for approximately one percent of TVA's total operating revenues in 2023.

Rates

Rate Authority

The TVA Act gives the TVA Board sole responsibility for establishing the rates TVA charges for power. These rates are not subject to judicial review or to review or approval by any state or other federal regulatory body. Under the TVA Act, TVA is required to charge rates for power that will produce gross revenues sufficient to provide funds for:

•Operation, maintenance, and administration of its power system;

•Payments to states and counties in lieu of taxes ("tax equivalents");

•Debt service on outstanding indebtedness;

•Payments to the United States Department of the Treasury ("U.S. Treasury") in repayment of and as a return on the government's appropriation investment in TVA's power facilities (the "Power Program Appropriation Investment"); and

•Such additional margin as the TVA Board may consider desirable for investment in power system assets, retirement of outstanding Bonds in advance of their maturity, additional reduction of the Power Program Appropriation Investment, and other purposes connected with TVA's power business, having due regard for the primary objectives of the TVA Act, including the objective that power shall be sold at rates as low as are feasible. See Note 23 — Related Parties.

TVA fulfilled its requirement to repay $1.0 billion of the Power Program Appropriation Investment in 2014; therefore, the repayment of this amount is no longer a component of rate setting.

Rate Methodology

TVA uses a seasonal time of use wholesale rate structure comprised of base demand and energy rates, a fuel rate, and a grid access charge ("GAC"). In setting the base rates, TVA uses a debt-service coverage methodology to derive annual revenue requirements in a manner similar to that used by other public power entities that also use the debt-service coverage rate methodology. Under the debt-service coverage methodology, rates are calculated so that an entity will be able to cover its operating costs and to satisfy its obligations to pay principal and interest on debt, plus an additional margin. This ratemaking approach is particularly suitable for use by entities financed primarily, if not entirely, by debt, such as TVA, and helps ensure that TVA produces gross revenues sufficient to fund requirements specified in the TVA Act listed under Rate Authority above. TVA's rate structure includes a focus on TVA's long-term pricing by aligning rates with underlying cost drivers.

TVA recovers fuel costs and tax equivalent payments associated with fuel cost adjustments through a monthly rate reflecting the forecasted costs of fuel. Fuel costs are allocated to three groups of customers: (1) Standard Service (residential and small commercial customers), (2) large general service customers with contract demands greater than 5 MW, and (3) large manufacturing customers with contract demands greater than 5 MW. Fuel costs are allocated to these three classes of customers in relation to their hourly loads and TVA's hourly incremental dispatch cost. Total monthly fuel costs include costs for natural gas, fuel oil, coal, purchased power, emission allowances, nuclear fuel, and other fuel-related commodities as well as realized gains and losses on derivatives purchased to hedge the costs of such commodities.

Power Supply and Load Management Resources

General

TVA seeks to balance production capabilities with power supply requirements by promoting the conservation and efficient use of electricity and, when necessary, buying, building, or leasing assets or entering into power purchase agreements ("PPAs"). TVA also seeks to employ a diverse mix of energy generating sources and works toward obtaining greater amounts of its power supply from clean (low or zero carbon-emitting) resources.

TVA is making investments in its generating portfolio and infrastructure to modernize the fleet and help meet growing demand for electricity while also allowing TVA to maintain competitive rates and high reliability and work toward an increasingly clean power system. As TVA continues to evaluate the impact of retiring its coal-fired fleet by 2035 and works to accelerate the growth of renewables, it also continues to evaluate adding flexible lower carbon-emitting gas plants as a strategy to maintain reliability. Commercial plant operations began on Colbert Combustion Turbine Units 9-11 in July 2023, and TVA has ongoing gas projects at TVA’s Paradise, Johnsonville, and Cumberland sites. In addition, TVA is committed to investing in the future of nuclear with the evaluation of emerging advanced nuclear technologies, such as small modular reactors ("SMRs"), while also

Table of Contents

investing in its existing nuclear assets and working to renew its nuclear generation fleet licenses. TVA has been implementing the Hydro Life Extension Program with a focus on improving the availability and flexibility of the hydroelectric fleet and exploring new hydroelectric pumped-storage power to support the grid. It is also investing in research and development for technology around hydrogen fuel and carbon capture, utilization, and storage. In 2022, the Inflation Reduction Act of 2022 ("Inflation Reduction Act") was signed into law, which makes certain tax-exempt entities, including TVA, eligible for a direct-pay option for certain tax credits that encourage investment in clean energy, in some circumstances. TVA is currently exploring funding opportunities of various types, including opportunities involving pumped-storage, solar, carbon capture, hydrogen, and transmission, among others; however, this exploration does not guarantee that TVA or its partners will receive any funds. See Research and Development below, Item 1A, Risk Factors — Operational Risks, and Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio.

Power generating facilities operated by TVA at September 30, 2023, included three nuclear sites, 17 natural gas and/or oil-fired sites, four coal-fired sites, 29 conventional hydroelectric sites, one pumped-storage hydroelectric site, one diesel generator site, and nine operating solar installations. See Item 2, Properties — Generating Properties — Net Capability for a discussion of the units at these facilities. TVA also acquires power under PPAs of varying durations, including short-term contracts of less than 24-hours in duration. See Power Purchase and Other Agreements below.

The following table shows TVA's generation and purchased power by generating source as a percentage of all electric power generated and purchased (based on kilowatt hours ("kWh")) for the periods indicated:


Total Power Supply by Generating Source For the years ended September 30
Generation Resource(1)	2023	2022	2021
Nuclear	42%	39%	41%
Natural gas and/or oil-fired	22%	22%	21%
Coal-fired	13%	13%	15%
Hydroelectric	8%	8%	10%
Purchased power	15%	18%	13%

Note

(1) TVA's non-hydro renewable resources from TVA facilities are less than one percent for all periods shown, and therefore are not represented on the table above. Purchased power contains the majority of non-hydro renewable energy supply. TVA sells the RECs resulting from some of its purchased power to certain customers. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Renewable Power Purchase Agreements.

While TVA continues down the path of reducing power generation from carbon-emitting sources, there will be fluctuations in usage due to electricity demands. Also, TVA continues to make operational decisions to keep the system reliable and to deliver low-cost energy.

Nuclear

At September 30, 2023, TVA had three nuclear sites consisting of seven units in operation. The units at Browns Ferry Nuclear Plant ("Browns Ferry") are boiling water reactor units, and the units at Sequoyah Nuclear Plant ("Sequoyah") and Watts Bar Nuclear Plant ("Watts Bar") are pressurized water reactor units. Operating information for each of these units is included in the table below.


TVA Nuclear Power At September 30, 2023
Nuclear Unit	Summer Net Capability (MW)	Net Capacity Factor for 2023 (%)	Date of Expiration of Operating License
Browns Ferry Unit 1	1,227	90.0	2033
Browns Ferry Unit 2	1,208	89.2	2034
Browns Ferry Unit 3	1,227	90.3	2036
Sequoyah Unit 1	1,152	88.0	2040
Sequoyah Unit 2	1,140	89.4	2041
Watts Bar Unit 1	1,157	88.0	2035
Watts Bar Unit 2	1,121	100.0	2055

Nuclear Fleet License Extensions. TVA is seeking to renew all nuclear generation units' licenses for an additional 20 years. The first license renewal application is expected to be submitted to the Nuclear Regulatory Commission ("NRC") in January 2024 for the three units at Browns Ferry. See Part II, Item 7, Management's Discussion and Analysis of Financial

Table of Contents

Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Nuclear Fleet License Extensions.

Other Nuclear Initiatives. TVA has an Early Site Permit to potentially construct and operate SMRs at TVA's Clinch River Nuclear Site in Oak Ridge, Tennessee, and in 2022, the TVA Board approved a programmatic approach to exploring advanced nuclear technology (the "New Nuclear Program"). See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Small Modular Reactors.

Other Nuclear Matters. Operating nuclear facilities subjects TVA to waste disposal, decommissioning, and insurance requirements, as well as litigation risks. See Fuel Supply — Nuclear Fuel below for a discussion of spent nuclear fuel and low-level radioactive waste and Note 22 — Commitments and Contingencies — Contingencies for a discussion of TVA's nuclear decommissioning liabilities and the related trust and nuclear insurance, which discussions are incorporated herein by reference.

Natural Gas and/or Oil-Fired

At September 30, 2023, TVA's natural gas and oil-fired fleet consisted of 104 combustion turbine power blocks (84 simple-cycle units, one cogeneration unit, and 14 combined-cycle power units, accounting for 12,638 MW of summer net capability, and five idled units at Allen Combustion Turbine Facility: Units 2, 3, 11, 17, and 18). Sixty-five of the simple-cycle units are currently capable of quick-start response allowing full generation capability in approximately 10 minutes. The economic dispatch of natural gas-fired plants depends on both the day-to-day price of natural gas and the price of other available intermediate resources such as coal-fired plants. TVA uses simple-cycle units to meet peaking or backup power needs. As TVA evaluates the retirement of its coal-fired fleet and works to accelerate the growth of renewables, it also continues to evaluate adding flexible lower carbon-emitting gas plants as a strategy to maintain reliability. The natural gas-fired fleet supports renewable expansion by providing reliability across all hours, as well as the flexibility to help manage ramping and intermittency. Commercial plant operations began on Colbert Combustion Turbine Units 9-11 on July 25, 2023. Pre-commercial plant operations began on Paradise Combustion Turbine Units 5-7 in the first quarter of 2024, and all three new units are anticipated to enter commercial operations by the end of calendar year ("CY") 2023. TVA has other ongoing projects at TVA's Johnsonville and Cumberland sites. TVA may decide to make further strategic investments in natural gas-fired facilities in the future by purchase, construction, or lease, to help support portfolio diversification and system reliability.

See Item 2, Properties — Generating Properties, Note 8 — Leases, Note 11 — Variable Interest Entities, and Note 14 — Debt and Other Obligations for a discussion of lease arrangements into which TVA has entered in connection with certain combustion turbine units ("CTs"). See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Natural Gas-Fired Units for a discussion of ongoing projects at certain natural gas-fired facilities.

Coal-Fired

At September 30, 2023, TVA had four coal-fired plants consisting of 24 active units, accounting for 5,815 MW of summer net capability. TVA considers units to be in an active state when the unit is generating, available for service, or temporarily unavailable due to equipment failures, inspections, or repairs. In 2019, the TVA Board approved the retirement of Bull Run Fossil Plant ("Bull Run") by December 2023, and on September 30, 2023, the facility was retired.

Coal-fired plants have been subject to increasingly stringent regulatory requirements over the last few decades, including those under the Clean Air Act ("CAA"), the Clean Water Act ("CWA"), and the Resource Conservation and Recovery Act ("RCRA"). TVA has committed to a programmatic approach for the evaluation of its sites where coal combustion residuals ("CCR") are stored to meet all applicable state and federal regulations. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Coal Combustion Residuals — Coal Combustion Residuals Facilities.

TVA continues to work toward a balanced generation plan with greater reliance on lower-cost and cleaner energy generation technologies. Since September 30, 2010, TVA has reduced its summer net capability of coal-fired units by 8,418 MW. Following the publication of the 2019 Integrated Resource Plan ("IRP"), TVA conducted end-of-life evaluations of the remaining coal fleet to inform long-term planning. These evaluations confirmed that the aging coal fleet is among the oldest in the nation and is experiencing deterioration of material condition and performance challenges. The performance challenges are projected to increase due to the coal fleet’s advancing age and the difficulty of adapting the coal fleet’s generation within the changing generation profile. TVA is evaluating the impact of retiring the balance of the coal-fired fleet by 2035, and that evaluation includes environmental review, public input, and TVA Board approval. 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. Environmental reviews and the public input process evaluating the potential retirement of Kingston Fossil Plant ("Kingston") are underway. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio.

Table of Contents

Diesel Generators

At September 30, 2023, TVA had one diesel generator plant consisting of five units, and this facility accounted for 9

MW of summer net capability. These units are not currently dispatched for generation to the transmission grid.

Hydroelectric Pumped-Storage

At September 30, 2023, TVA had four units at Raccoon Mountain Pumped-Storage Plant ("Raccoon Mountain") with a total net summer capability of 1,700 MW. These units are utilized to balance the transmission system as well as generate power. TVA uses electricity generated by its fleet during periods of low demand to operate pumps that fill the reservoir at Raccoon Mountain. Then, during periods of high or peak demand, the water is released and the pumps reverse to work as power generating turbines.

New hydroelectric pumped-storage is one of several technologies that TVA is exploring to ensure the reliability and resiliency of the grid, particularly as intermittent renewables like solar continue to be added to the generation mix. In 2023, TVA announced sites for a potential future pumped-storage facility. A programmatic environmental impact statement will rank these sites for overall favorability across a wide range of environmental, social, and technical factors. Early exploratory drilling has begun on the sites.

Renewable Energy Resources

As more consumers and businesses are seeking cleaner energy, the utility industry is evolving to meet those needs. As TVA also evolves, it will see impacts to the way it does business through the pricing of products, transmission of energy, and development of new products and services for its customers in support of changing customer preferences. Many companies are focusing on sustainability and requiring more energy efficiency and renewable energy options. In addition, TVA seeks to obtain greater amounts of its power supply from clean resources to work towards carbon emission reductions. As a result, TVA is working to increase its renewable energy portfolio, by investing in existing hydroelectric assets through the Hydro Life Extension Program, securing renewable PPAs, and exploring self-directed solar projects. TVA also encourages renewable power and offers renewable resources through various current programs and offerings, including the Green Invest Program which matches customer demand with renewable supply and is aimed to meet the needs of customers at scale. TVA issued a carbon-free request for proposal ("RFP") in 2022 for up to 5,000 MW of carbon-free and renewable energy projects, which included a broad range of potential generation sources. See Power Purchase and Other Agreements for information on TVA’s PPAs, including renewable agreements, and Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Renewable Power Purchase Agreements for a discussion of TVA's RFPs.

Conventional Hydroelectric Dams. At September 30, 2023, TVA's hydroelectric fleet consisted of 29 conventional hydroelectric dams throughout the Tennessee River system with 106 active generating units that accounted for 3,739 MW of summer net capability. Wilbur Hydroelectric Facility Units 1-3 were in long-term outage and unavailable for service at September 30, 2023. The amount of electricity that TVA is able to generate from its hydroelectric plants depends on a number of factors, including the amount of precipitation and runoff, initial water levels, generating unit availability, and the need for water for competing water management objectives. When these factors are unfavorable, TVA must increase its reliance on higher cost generation plants and purchased power. In addition, TVA receives a portion of energy generated by eight of the U.S. Army Corps of Engineers ("USACE") dams on the Cumberland River system, and electric generation from the USACE dams is dependent on the same factors that affect generation from the TVA-owned dams. See Dam Safety Assurance Program and Weather and Seasonality below.

Hiwassee Hydro Unit 2 has a unique reversible turbine/generator that acts as a pump and a turbine enhancing TVA's ability to balance baseload generation. At September 30, 2023, Hiwassee Hydro Unit 2 accounted for 86 MW of the conventional hydroelectric summer net capability.

TVA's Hydro Life Extension Program began in 2021 with a focus on recovering and preserving TVA's extensive hydroelectric fleet, improving efficiency and flexibility, and ensuring long-term reliability of this vital clean energy asset. Hydroelectric generation will continue to be an important part of TVA's energy mix in the future. It plays a vital role in carbon reduction initiatives, the ability to integrate other renewables into the power portfolio, and TVA's ability to meet changing customer preferences for cleaner energy sources.

In January 2023, TVA signed a Memorandum of Understanding ("MOU") with the DOE to enhance collaboration on hydropower technology development. Joint efforts will focus on evaluating and demonstrating different approaches for operating hydropower plants to meet the electricity grid's changing needs.

Dam Safety Assurance Program. TVA has an established dam safety program, which includes procedures based on the Federal Guidelines for Dam Safety, with the objective of reducing the risk of a dam safety event. The program analyzes, evaluates, and manages risks through a systematic and thorough process that facilitates decision-making for the safety of a structure, identifying necessary actions to reduce risk, including remediation projects, and prioritization of actions for TVA's river

Table of Contents

dams. Prioritization is driven by reducing risk to the public and asset preservation. TVA also continues to provide routine care of the dams as part of the dam safety program through inspections, monitoring, and maintenance, among other activities.

Self-Directed Solar. During 2019, the TVA Board approved the opportunity for TVA to explore being directly involved in the development of a utility-scale solar project, contingent on the successful completion of environmental reviews under the National Environmental Policy Act ("NEPA") and other applicable laws. In 2021, TVA purchased land for this development, and in 2022, environmental reviews were complete. The challenges affecting the U.S. solar industry are also being seen in TVA's self-directed solar project. This has resulted in a delay in the estimated completion, with the project now expected to be complete by the end of CY 2027. The project has also experienced cost increases due to escalations from supply chain limitations.

In November 2022, the TVA Board approved the opportunity for TVA to explore the development of an additional utility-scale solar project, contingent on successfully completing environmental reviews under NEPA and other applicable laws and obtaining the necessary state permits. The project would utilize TVA-owned land, deploying a solar cap system on the closed CCR facility at the TVA Shawnee Fossil Plant in Paducah, Kentucky. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Self-Directed Solar.

Other Renewable Energy Resources. In addition to the hydroelectric units above, TVA owns nine operating solar installations that account for approximately one MW of nameplate capacity. Other renewable energy resources also include renewable energy purchases, a majority associated with TVA renewable programs. See Power Purchase and Other Agreements for information on renewable PPAs. TVA's current renewable programs and offerings include:

Small-scale Solutions. The Green Connect Program connects residential customers who are interested in on-site solar photovoltaic ("PV") and/or battery storage systems with qualified solar and battery storage installers who agree to install to Green

Connect Program Standards. These qualified installers, who are members of TVA's Quality Contractor Network, are insured and

licensed and have also completed special training on TVA guidelines. Participants have access to objective information and the benefit of installation verifications with regard to whether their solar PV system has met the Green Connect Program Standards.

Utility-scale Solutions. The Green Invest Program matches customer demand with renewable supply through a Green Invest Agreement. The goal of the Green Invest Program is to meet the long-term sustainability needs of customers at scale. TVA procures the needed renewable supply through a diversified approach, which could include a competitive procurement process, strategic partnerships, or construction of renewable facilities to meet these needs. As of September 30, 2023, more than 2,000 MW of renewable PPAs have been matched to customers through the Green Invest Program. In addition, Generation Flexibility is a solution available to LPCs participating in TVA's Partnership Agreement and supports the deployment of up to 2,000 MW of distributed solar to provide clean, local generation. See Note 17 — Revenue.

Other Renewable Solutions. The Green Switch Program allows customers to support solar renewable resources through purchasing renewable solar energy generated in the Tennessee Valley. The product is sold in blocks of 200 kWh or matches 100 percent of a customer's electricity usage (available through select LPCs). During the year ended September 30, 2023, participants purchased 91,268 MWh through the Green Switch Program. The Green Flex Program gives commercial and industrial customers the ability to meet sustainability goals and to make renewable energy claims through RECs from wind generation located outside TVA's service area. During the year ended September 30, 2023, participants purchased approximately 650,000 RECs through the Green Flex Program.

TVA tracks its renewable energy commitments and claims through the management of RECs. The RECs, which each represent one megawatt-hour ("MWh") of renewable energy generation, are principally associated with wind, solar, biomass, and low-impact hydroelectric. TVA continues to evaluate ways to adjust to customer preferences and requirements for cleaner and greener energy, including the acquisition of RECs from renewable purchased power that can be sold to customers to meet their needs. Overall, TVA will procure needed renewable supply through a diversified approach, which could include a competitive procurement process, strategic partnerships, or construction of renewable facilities to meet these needs.

Table of Contents

Total Renewable Energy Resources. As of September 30, 2023, TVA's total renewable energy resources amounted to 8,668 MW. Of this amount, 6,801 MW are operating while 1,867 MW are contracted but not yet online. In addition, TVA has 299 MW from self-directed solar projects currently under development.

Notes

(1) Contracted resources are executed PPAs expected to come online at a future date.

(2) Hydroelectric power consists of 3,739 MW from TVA-owned conventional hydroelectric facilities and 779 MW from renewable PPAs.

(3) TVA sells the RECs resulting from some of its purchased power to certain customers. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Renewable Power Purchase Agreements.

TVA's operating renewables by location and by source are detailed below:

Notes

(1) In-Valley refers to the renewable energy that is sourced within TVA's service territory. Out-of-Valley refers to the renewable energy that is sourced outside of TVA's service territory and solely consists of wind power.

(2) See Power Purchase and Other Agreements below. PPAs also include capability from various historical renewable energy programs primarily with individuals and small businesses.

Distributed Energy Resources

Consumer desire for energy choice, among other things, is driving the expectation for flexible options in the electric industry. TVA and LPCs are working together to leverage the strengths of the Tennessee Valley public power model to provide distributed energy solutions that are economical, sustainable, and flexible. TVA will focus on the safety and reliability impacts of these resources as they are interconnected to the grid and will aim to ensure that the pricing of electricity remains as low as feasible. Additional regulatory considerations and analysis may be required as the distributed energy resources ("DER") market, technologies, and programs evolve.

Table of Contents

In 2017, the TVA Board authorized up to $300 million to be spent over the next 10 years, subject to annual budget availability and necessary environmental reviews, to build an enhanced fiber optic network that will better connect TVA's operational assets. Fiber is a vital part of TVA's modern communication infrastructure and is needed to help manage DER as they enter the market. The new fiber optic lines will also improve the reliability and resiliency of the generation and transmission system. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Fiber Optic Network.

New energy management systems and energy storage technologies present opportunities for more sophisticated and integrated operation of the entire grid. The advent of electric vehicles and small-scale renewable generation has hastened the development of energy storage technologies that have the potential to mitigate the intermittent supply issues associated with many renewable generation options. Implementation of these technologies in conjunction with two-way communication to the site creates the potential for more efficient usage of other DER on the grid.

TVA is partnering with LPCs and others to support the electrification of transportation in the Tennessee Valley in a multi-year EV initiative. The initiative focuses on reducing or eliminating EV market barriers with EV policies, improving charging infrastructure availability, expanding EV availability and offerings, and spreading EV consumer awareness. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Electric Vehicles.

On-site energy management technologies and the proliferation of companies interested in providing services to support and aggregate the impacts of such systems provide another DER opportunity. Such systems can afford the consumer benefits through reduced consumption, increased comfort, detailed energy use data, and savings from time-sensitive rate structures. TVA and LPCs must consider the integration of the impacts from changes in energy usage patterns resulting from the operation of such systems.

Demand response systems that take advantage of the increasing sophistication in communication to homes, businesses, and distribution system assets also afford the opportunity for more granular control of system demand. Technologies can manage individual customer systems to shift usage from peak to off-peak periods and create significant reductions in the need for peak generation output or curtail usage for short periods to balance system demand. More sophisticated distribution control systems can also lower peak demand through control of excess voltage on the grid on either a dispatchable or continuous basis. Some large industrial customers also have the capacity to respond within a designated notice period and can augment operational flexibility by providing ancillary services. See Demand Management Portfolio below.

Demand Management Portfolio

TVA continues to make investments in its demand management portfolio, consisting of energy efficiency and demand response programs, as part of its commitment to meet the Tennessee Valley’s growing energy needs and to support a decarbonized and more resilient grid. TVA is expanding its portfolio and plans to invest $1.5 billion in its demand management portfolio from 2024 – 2028. Over this five-year period, TVA anticipates approximately 2,200 gigawatt hours of net incremental energy efficiency savings and over 2,200 MW of demand response portfolio capacity in 2028. These amounts are forward-looking and subject to various uncertainties. See Forward-Looking Information and Item 1A, Risk Factors.

Virtual Power Plant. TVA's Virtual Power Plant consists of energy efficiency and demand response programs aimed at balancing system needs by lowering costs, shaping energy usage, increasing capacity, and decarbonizing the grid. These programs support helping end-use consumers save on their bills and reduce some of the need for new generation in the future and are offered to both end-use residential customers and businesses and industries. TVA anticipates additional demand management programs to be developed over the coming years to help support the future direction of the Virtual Power Plant. See Distributed Energy Resources above for further discussion on demand response systems.

Community Energy Efficiency Programs. TVA also has energy programming focused on expanding partnerships, improving program access, and catalyzing investment in communities where all individuals can benefit from TVA's resources. TVA's Community Energy Efficiency Programs include (1) the Home Uplift Program which completes home evaluations and makes high-impact home energy upgrades for qualifying homeowners at no cost to the homeowners, (2) the School Uplift Program which assists schools with adopting strategic energy management practices, and (3) the Small Business Uplift Program which assists small businesses located within underserved communities with energy evaluations and energy improvement investments provided by TVA at no cost to the small business.

Power Purchase and Other Agreements

TVA acquires power from a variety of power producers generally through long-term and short-term PPAs as well as through spot market purchases. During 2023, TVA acquired approximately 92 percent of the power that it purchased through the long-term PPAs described below, including agreements for long-term renewable generation resources, approximately six percent through short-term PPAs, and approximately two percent on the spot market. During 2022, TVA acquired approximately 94 percent of the power that it purchased through long-term PPAs, approximately three percent through short-term PPAs, and

Table of Contents

approximately three percent on the spot market.

TVA's capability provided by PPAs is primarily provided under contracts that expire through 2043 and are described in the table below.


Power Purchase Agreements(1) At September 30, 2023
Type of Facility	Location	Number of Contracts	Contract Capacity (MW)(2)	Contract Termination Date
Renewable PPAs
Operating
Solar	Tennessee	6	413	2032 - 2043
Solar	Alabama	2	302	2037 - 2041
Total Operating Solar		8	715
Wind	Tennessee	1	25	2025
Wind	Iowa	2	299	2030 - 2031
Wind	Kansas	2	366	2032 - 2033
Wind	Illinois	3	550	2032 - 2033
Total Operating Wind		8	1,240
Hydroelectric	Tennessee, Kentucky, and North Carolina	2	779	2025 and upon three years' notice
Landfill Gas	Tennessee	1	5	2031
Subtotal Operating		19	2,739
Contract Renewable Resources(3)			322
Total Renewable Operating PPAs			3,061

Contracted (not yet online)



Solar(4)		16	1,867
Total Renewable Contracted PPAs		16	1,867


Nonrenewable PPAs
Operating
Diesel	Tennessee	4	59	2028 - 2032
Diesel	Alabama	1	10	2035
Diesel	Mississippi	2	46	2028
Total Operating Diesel		7	115
Natural Gas	Alabama	3	2,068	2024 - 2033
Natural Gas(5)	Georgia	3	742	2023 - 2025
Natural Gas	Illinois	1	495	2025
Natural Gas	Pennsylvania	1	500	2024
Total Operating Natural Gas		8	3,805
Delivered Energy(6)	Various	3	1,050	2023
Lignite	Mississippi	1	440	2032
Total Nonrenewable Operating PPAs		19	5,410

Contracted (not yet online)






Battery Storage(4)		3	150
Delivered Energy(4)(6)		1	500
Total Nonrenewable Contracted PPAs		4	650

Notes

(1) TVA sells the RECs resulting from some of its purchased power to certain customers. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Renewable Power Purchase Agreements.

(2) Represents capability specified in TVA's PPA contracts. The measurement for nonrenewable resources is contracted capacity, adjusted for any contractual summer output constraints. The measurement for renewable resources is contracted capacity of the renewable resources' nameplate capacity. Nameplate

Table of Contents

capacity does not account for real-time operating constraints, such as intermittency of renewable resources associated with weather, delivery mechanisms, or other factors.

(3) Contract Renewable Resources is capability from various historical renewable energy programs that consist of PPAs primarily with individuals and small businesses.

(4) Power delivery is expected to commence between 2024 - 2025. See challenges associated with contracted PPAs not yet online in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Renewable Power Purchase Agreements.

(5) Included in the table above is 200 MW of power delivery in Georgia that expired on September 30, 2023.

(6) Delivered energy is sourced from multiple generating assets and originates from various states.

Under federal law, TVA is required to purchase energy from qualifying facilities (cogenerators and small power producers) at TVA's avoided cost of either generating this energy itself or purchasing this energy from another source. TVA fulfills this requirement through the Dispersed Power Production Program. At September 30, 2023, there were 955 generation sources, with a combined qualifying capacity of 285 MW, whose power TVA purchases under this program.

Fuel Supply

General

TVA's consumption of various types of fuel depends largely on the demand for electricity by TVA's customers, the availability of various generating units, and the availability and cost of fuel. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Financial Results — Operating Expenses.

Nuclear Fuel

Current Fuel Supply. Converting uranium to nuclear fuel generally involves four stages: the mining and milling of uranium ore to produce uranium concentrates; the conversion of uranium concentrates to uranium hexafluoride gas; the enrichment of uranium hexafluoride; and the fabrication of the enriched uranium hexafluoride into fuel assemblies. TVA plans to continue using contracts of various products, lengths, and terms as well as inventory to meet the projected nuclear fuel needs of its nuclear fleet. The net book value of TVA's nuclear fuel was $1.3 billion and $1.5 billion at September 30, 2023 and 2022, respectively. See Note 15 — Risk Management Activities and Derivative Transactions — Counterparty Risk.

TVA, the DOE, and certain nuclear fuel contractors have entered into agreements, referred to as the Down-blend Offering for Tritium ("DBOT"), that provide for the production, processing, and storage of low-enriched uranium that is to be made using surplus DOE highly enriched uranium and other uranium. Low-enriched uranium can be fabricated into fuel for use in a nuclear power plant. Production of the low-enriched uranium began in 2019 and is contracted to continue through September 2025. Contract activity after that date will consist of storage and flag management. Flag management ensures that the uranium is free from foreign obligations, and unencumbered by policy restrictions, so that it can be used in connection with the production of tritium. Under the terms of the interagency agreement between the DOE and TVA, the DOE will reimburse TVA for a portion of the costs of converting the highly enriched uranium to low-enriched uranium. See Note 1 — Summary of Significant Accounting Policies — Down-blend Offering for Tritium for a more detailed discussion of the DBOT project.

Low-Level Radioactive Waste. Certain materials and supplies used in the normal operation of nuclear electrical generating units are potentially exposed to low levels of radiation. TVA sends shipments of low-level radioactive waste to burial facilities in Clive, Utah and Andrews, Texas. TVA is capable of storing some low-level radioactive waste at its own facilities for an extended period of time, if necessary.

Spent Nuclear Fuel. All three nuclear sites have dry cask storage facilities. Sequoyah will need additional capacity by 2029. Watts Bar and Browns Ferry will need additional capacity by 2037. To recover the cost of providing long-term, on-site storage for spent nuclear fuel, TVA filed a breach of contract suit against the U.S. in the U.S. Court of Federal Claims in 2001. As a result of this lawsuit and related agreements, TVA has collected approximately $442 million through 2023.

Tritium-Related Services. TVA and the DOE are engaged in a long-term interagency agreement under which TVA will, at the DOE's request, irradiate tritium-producing burnable absorber rods ("TPBARs") to assist the DOE in producing tritium for the Department of Defense ("DOD"). This agreement, which ends in 2035, requires the DOE to reimburse TVA for the costs that TVA incurs in connection with providing irradiation services and to pay TVA an irradiation services fee at a specified rate per TPBAR over the period when irradiation occurs.

In general, TPBARs are irradiated for one operating cycle, which lasts about 18 months. At the end of the cycle, TVA removes the irradiated rods and loads them into a shipping cask. The DOE then ships them to its tritium-extraction facility. TVA loads a fresh set of TPBARs into the reactor during each refueling outage. Irradiating the TPBARs does not affect TVA's ability to safely operate the reactors to produce electricity.

TVA has provided irradiation services using Watts Bar Unit 1 since 2003 and Watts Bar Unit 2 since 2021. TVA has increased its production to within currently licensed limits for Watts Bar Unit 1 and expects to be at licensed limits for Watts Bar Unit 2 in April 2025. The DOE notified TVA of future increased needs for tritium, and TVA submitted a License Amendment Request in 2023 to fulfill this request. The DOE's decision also allows for irradiation of TPBARs at Sequoyah in the future;

Table of Contents

however, TVA does not have plans to employ Sequoyah units for tritium production in the near term.

Natural Gas and Fuel Oil

During 2023, TVA purchased a significant amount of its natural gas requirements from a variety of suppliers under contracts with terms of up to three years and purchased substantially all of its fuel oil requirements on the spot market. The net book value of TVA's natural gas inventory was $25 million and $54 million at September 30, 2023 and 2022, respectively. The net book value of TVA's fuel oil inventory was $84 million at both September 30, 2023 and 2022. At September 30, 2023, 83 of the combustion turbine assets were dual-fuel capable, and TVA has fuel oil stored on each of these sites as a backup to natural gas.

TVA purchases natural gas from multiple suppliers on a daily, monthly, seasonal, and term basis. During 2023, daily, monthly, seasonal, and term contracts accounted for 20 percent, four percent, 24 percent, and 52 percent of purchases, respectively. TVA plans to continue using contracts of various lengths and terms to meet the projected natural gas needs of its natural gas fleet. During 2023, TVA arranged for the transportation of natural gas on eight separate pipelines, with approximately 69 percent being transported on two pipelines. During 2023, TVA maintained a total of approximately 1,716,000 million British thermal unit(s) ("mmBtu") per day of firm transportation capacity on eight major pipelines, with approximately 60 percent of total firm transportation capacity being maintained on two pipelines.

TVA utilizes natural gas storage services at seven facilities with a total capacity of 7.75 billion per cubic feet ("Bcf") of firm service and 6.275 Bcf of interruptible service to manage the daily balancing requirements of the eight pipelines used by TVA, with approximately 55 percent of the total storage capacity being maintained at two facilities. During 2023, storage levels were generally maintained at between 40 and 80 percent of the maximum contracted capacity at each facility. As TVA's natural gas requirements grow, it is anticipated that additional storage capacity may need to be acquired to meet the needs of the generating assets. In 2024, TVA expects to increase its storage portfolio by approximately seven percent.

Coal

Coal consumption at TVA's coal-fired generating facilities during both 2023 and 2022 was approximately 12 million tons. At September 30, 2023 and 2022, TVA had 21 days and 25 days of system-wide coal supply at full burn rate, respectively, with net book values of $204 million and $165 million, respectively.

TVA utilizes both short-term and long-term coal contracts. During 2023, long-term contracts made up 92 percent of coal purchases, and short-term contracts accounted for the remaining eight percent. TVA plans to continue using contracts of various lengths, terms, and coal quality to meet its expected consumption and inventory requirements. During 2023 and 2022, TVA purchased coal by basin as follows:

Table of Contents

The following charts present the proportion of each delivery method TVA utilizes for its coal supply for the periods indicated:

Coal inventory increased at September 30, 2023 as compared to September 30, 2022. TVA experienced challenges in 2022 related to coal supply as a result of supply limitations and transportation challenges. Coal supply availability and transportation performance improved during the first quarter of 2023. Mild weather prior to late December 2022, which continued in the second through fourth quarters of 2023, required lower than forecasted coal-fired generation, enabling inventory stockpiles to increase, and current market conditions reflect an approximate balance between demand and available supply, due to weaker export markets and lower natural gas prices. TVA also invested in additional multi-year coal supply contracts to help provide stability in coal supply availability. These investments are expected to support fuel resiliency with TVA's overall coal supply.

Transmission

The TVA transmission system is one of the largest high-voltage transmission systems in North America. TVA's transmission system has 69 interconnections with 13 neighboring electric systems and delivered approximately 157 billion kWh of electricity to TVA customers in 2023. In carrying out its responsibility for transmission grid reliability in the TVA service area, the TVA transmission grid has operated with 99.999 percent reliability since 2000. See Item 2, Properties — Transmission Properties.

Pursuant to its Transmission Service Guidelines, TVA offers transmission services to eligible customers to transmit wholesale power in a manner that is comparable to TVA's own use of the transmission system. TVA has also adopted and operates in accordance with its published Transmission Standards of Conduct and separates its transmission function from its power marketing function. As a Balancing Authority, Distribution Provider, Generator Owner, Generator Operator, Planning Coordinator, Reliability Coordinator, Resource Planner, Transmission Owner, Transmission Operator, Transmission Planner, and Transmission Service Provider, as those terms are defined for purposes of NERC regulations, TVA is also subject to federal reliability standards that are set forth by the NERC and approved by FERC. See Regulation.

Additional transmission upgrades may be required to maintain reliability. Upgrades may include enhancements to existing lines and substations or new installations as necessary to provide adequate power transmission capacity, maintain voltage support, and ensure generating plant and transmission system stability. In addition to upgrades to maintain reliability, TVA’s Grid of Tomorrow initiative aims to increase grid flexibility to enable greater use of renewable resources such as solar, wind, and other forms of distributed generation and includes making data and communications upgrades as demonstrated by investments in the new system operations center, energy management system, and fiber optic network. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio.

In recognition of the challenges of integrating intermittent and inverter-based resources to the power system, TVA established the Future Grid Performance initiative. The primary goal is to maintain a stable and reliable grid while fostering the evolution of the energy system of the future, one of TVA's strategic elements of Operational Excellence. Secondary goals include improving processes to facilitate an evolving resource mix with new technologies, optimizing approaches and tools to ensure system stability and performance in the future grid, and evaluating and adopting new grid technologies. This initiative seeks to address grid needs to keep the grid reliable and stable as TVA transitions to an energy system that has a greater share of intermittent and inverter-based resources, such as renewables and battery storage, connected to the transmission system.

In addition, TVA is working on various projects with universities, Electric Power Research Institute ("EPRI"), and others to help enable a dynamic and multi-directional grid. TVA is also working in partnership with LPCs to modernize their distribution

Table of Contents

systems by developing a shared vision and roadmap for transforming the Tennessee Valley’s transmission and distribution systems into an integrated regional grid.

These initiatives support TVA’s decarbonization efforts while helping ensure TVA continues to achieve its mission to deliver reliable power at the lowest feasible rate. Investments in a modernized grid will help enable enhanced monitoring and control of TVA’s transmission and generation portfolio.

Weather and Seasonality

Weather affects both the demand for and the market prices of electricity. TVA's power system is generally a dual-peaking system in which the demand for electricity peaks during the summer and winter months to meet cooling and heating needs. TVA uses degree days to measure the impact of weather on its power operations. Degree days measure the extent to which the TVA system 23-station average temperatures vary from 65 degrees Fahrenheit. See Item 1, Business — Flood Control Activities, Item 1, Business — Environmental Matters — Climate Change — Physical Impacts of Climate Change, and

Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Sales of Electricity.

Competition

TVA provides electricity in a service area that is largely free of competition from other electric power providers. This service area is defined primarily by provisions of law and long-term contracts. The region in which TVA or LPCs that distribute TVA power may provide power is limited and is often referred to as the "fence." Under the FPA, the Anti-Cherrypicking Amendment ("ACPA") limits the ability of others to use the TVA transmission system for the purpose of serving customers within TVA's service area. State service territory laws limit unregulated third parties' ability to sell electricity to consumers. All TVA wholesale power contracts are all requirements contracts; however, Power Supply Flexibility Agreements available to LPCs that have executed long-term Partnership Agreements with TVA allow LPCs to locally generate or purchase up to approximately five percent of their average total hourly energy sales over a certain time period in order to meet their individual customers' needs. Revised flexibility agreements were made available to LPCs in August 2023 which permit projects to be located anywhere in TVA's service area, either connected to the LPC distribution system or TVA's transmission system, and makes it easier for LPCs to partner in projects. In addition, other utilities may use their own transmission lines to serve customers within TVA's service area, and third parties are able to avoid the restrictions on serving end-use customers by selling or leasing generating assets to a customer rather than selling electricity. These threats underscore the need for TVA to design rates and strategically price its products and services to be competitive. There have also been some efforts to erode the ACPA, and the protection of the provision could be limited and perhaps eliminated by federal legislation at some time in the future.

TVA also faces competition in the form of emerging technologies. Improvements in energy efficiency technologies, smart technologies, and energy storage technologies may reduce the demand for centrally provided power. The growing interest by customers in generating their own power through DER has the potential to lead to a reduction in the load served by TVA as well as cause TVA to re-evaluate how it operates the overall grid system to continue to provide highly reliable power at affordable rates. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Fiber Optic Network.

Finally, TVA and other utility companies are facing an evolving marketplace of increased competition driven by customer choice and behavior. As technology develops, consumers' demands for access to diverse products and services may increase, and customers could choose another utility to meet some or all of their power needs where available, pursue self-generation to meet some or all of their power needs, or move their operations outside of TVA's service territory.

Research and Development

Investments in TVA's research portfolio are supported through partnership and collaboration with LPCs, EPRI, the DOE, federal agencies, peer utilities, universities, and industry vendors and through participation in professional societies and other research consortiums.

Annual investments made in science and technological innovation help meet future business and operational challenges. Each year, TVA's annual research portfolio is updated based on a broad range of operational and industry drivers to assess key technology gaps, performance issues, or other significant issues, addressed through research and development. Core research activities directly support optimization of TVA's generation and transmission assets, air and water quality, energy utilization, and distributed/clean energy integration. TVA also provides research and development services on behalf of LPCs by helping optimize their distribution systems and helping minimize technology gaps in energy utilization and consumer technologies.

Beginning in 2020, TVA placed a high priority on providing innovation and research which aligns to and supports its transformative initiatives: advanced nuclear, decarbonization, energy storage, regional grid transformation, electric vehicles, connected communities, and the newest - future grid performance. TVA has placed an emphasis on research leading to the understanding and application of clean resources to support the reduction of carbon emissions from its power supply. This

Table of Contents

research supports both TVA and national strategic interests to reduce carbon emissions and is designed to both catalyze and support TVA’s decarbonization initiative.

TVA is committed to investing in the future of nuclear and continues to evaluate the licensing and design of emerging nuclear technologies, such as advanced light water SMRs and advanced non-light water reactors, as part of technology innovation efforts aimed at developing the energy system of the future, one of TVA's strategic elements of Operational Excellence. In December 2019, TVA became the first utility in the nation to successfully obtain approval for an early site permit from the NRC to potentially construct and operate SMRs at its Clinch River Site. TVA has entered into memorandums of understanding and agreements that allow for mutual collaboration to explore advanced reactor designs as a next-generation nuclear technology while leveraging the expertise of federally funded research and development centers, utilities, vendors, and academic institutions. These contractual relationships are important steps in the early stages of evaluation as TVA considers the economic feasibility of advanced nuclear reactors. These contractual relationships are also intended to leverage innovations to improve advanced nuclear designs, streamline licensing pathways, find efficiencies in construction methods, and optimize operating expenses. For example, TVA has entered into a multi-party collaborative arrangement to advance the global development of the GE Hitachi Nuclear Energy BWRX-300 SMR. See Note 21 — Collaborative Arrangement for additional information on the multi-party collaboration arrangement. TVA currently believes that this advanced nuclear reactor technology is most readily available for deployment with the fewest risks; as such, TVA is evaluating this technology in greater detail, while still considering other advanced reactor technologies. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Small Modular Reactors for additional discussion and total costs related to SMR work.

TVA is in the third year of a coalition of utilities and researchers, led by EPRI and the Gas Technology Institute, whose purpose is to engage, inform, and support global low-carbon resources initiatives to develop the pathways for the advancement of carbon reducing technologies for large scale utility deployment. This is a five-year program and includes research to support creating resource options, such as alternative fuels (hydrogen, ammonia, and methanized derivatives), carbon capture, electrification, and utilization of clean DER as part of the overall low-carbon resource mix. TVA has made progress understanding regional geology and carbon capture technologies and is evaluating both with an emphasis on the potential for carbon capture in TVA's future. To support this initiative, in August 2023 TVA entered into an MOU with TC Energy Development Holdings Inc. to study the development, construction, and operation of carbon capture, utilization, transportation, and sequestration infrastructure at or near TVA’s Ackerman and Paradise Combined Cycle Plants. TVA is also exploring the potential for hydrogen to serve as a resource in the decarbonization of the Tennessee Valley, both within the electrical sector and elsewhere. In November 2022, TVA and other major utility companies responded to a funding opportunity from the DOE with the intention of obtaining federal financial support for a Southeast Hydrogen Hub. The Southeast Hydrogen Hub was notified in October 2023 that their application was not among those funded.

At the forefront of the energy storage initiative is deploying grid-scale battery energy storage technology to optimize the existing TVA generation assets and improve the resiliency of the transmission system. In 2020, TVA launched its first TVA-owned, grid scale, lithium-ion demonstration battery project, and in 2023, TVA began construction near Vonore, Tennessee. The system integration lessons learned from this project will guide future application of battery storage as part of the evolving bulk power system in the region. TVA is studying the optimal siting and design for another pumped-storage plant as described in Power Supply and Load Management Resources — Hydroelectric Pumped-Storage. TVA is also evaluating the potential of short duration battery alternatives to lithium-ion and long duration storage alternatives to pumped-storage.

TVA continues to develop potential electrification programs, in addition to the Fast Charge Network, that improve resource use and reduce environmental impacts in the transportation sector. TVA programs are based on previous assessments, which included a multi-stakeholder vision and roadmap effort aimed at identifying the path forward for electric vehicles in Tennessee. The approach provides for broad engagement from industry, government, and utilities that could be applied in other states in the TVA service territory. In addition, TVA is continuing its evaluation of potential electric vehicle adoption strategies through coordination of activities with EPRI and state and industry stakeholders related to operational fleet requirements. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Electric Vehicles.

TVA has established 15 Connected Communities pilot projects with stakeholders and has been engaging in advanced buildings research to support the initiative. Connected Communities projects are aimed at addressing today’s challenges with community-driven information and technology solutions for a modernized energy system. TVA is currently evaluating the next round of pilot projects. TVA has also established six community partnerships to provide consulting services to test a framework for engaging communities to help set goals, scope projects, and apply for funding. Research will continue to identify best practices, better understand challenges in the Tennessee Valley, and scale up learnings from the projects to broader applications throughout the Tennessee Valley.

TVA and LPCs are engaged in several initiatives related to regional grid transformation. Research includes technologies and applications advancement in intelligent distribution systems. Smart meter technology has the potential to shift usage patterns away from peak demand times which could change costs significantly. Additionally, intelligent transmission systems would give TVA the ability to nearly instantaneously diagnose problems, make corrections, and engage transmission and generation resources quickly so that power would keep flowing. This could promote reduced emissions, lower energy costs,

Table of Contents

and add greater flexibility to accommodate the new consumer-generated sources under TVA's renewable energy programs. TVA also worked with LPC partners to execute a survey of LPC technology capabilities and plans, and the results are helping shape a realistic path toward TVA's long-term goals. See Power Supply and Load Management Resources — Distributed Energy Resources and Transmission.

Finally, TVA began a new initiative called Future Grid Performance. This initiative seeks to address grid needs to keep the grid reliable and stable as TVA transitions to an energy system that has a greater share of intermittent and inverter-based resources, such as renewables and battery storage, connected to the transmission system. See Transmission above for more information on this initiative.

Flood Control Activities

The Tennessee River watershed has one of the highest annual rainfall totals of any watershed in the U.S., averaging 51 inches per year. During 2023, approximately 53 inches of rain fell in the Tennessee Valley. TVA manages the Tennessee River system in an integrated manner, which includes managing minimum river flows and minimum depths for navigation, reducing flood damage, generating low-cost hydroelectric power, maintaining flows that support habitat for fish and other aquatic species, maintaining water supply, and providing recreational opportunities for the Tennessee Valley. In addition, having cool water available helps TVA to meet thermal compliance and support normal operation of TVA's nuclear and fossil-fueled plants, while oxygenating water helps fish species remain healthy. TVA spills or releases excess water through its dams in order to reduce flood damage to the Tennessee Valley. TVA typically spills only when all available hydroelectric generating turbines are operating at full capacity and additional water still needs to be moved downstream.

The Tennessee Valley experienced just above normal rainfall at 104 percent of normal and runoff at 89 percent of normal during 2023. Although runoff for 2023 was below normal due to fewer significant rain events, the winter and spring timing of above normal rainfall during the period supported TVA's objective to generate low-cost hydroelectric power while also meeting its river system commitments, including flood mitigation, which is estimated to have prevented damages across the Tennessee Valley of approximately $7 million in 2023 and $9.7 billion over TVA's recorded history.

Environmental Stewardship Activities

TVA's mission includes managing the Tennessee River, its tributaries, and federal lands along the shoreline to provide, among other things, year-round navigation, flood damage reduction, affordable and reliable electricity, recreational opportunities, adequate water supply, improved water quality, and natural resource protection. There are 49 dams that comprise TVA's integrated reservoir system. Each dam may also have ancillary structures used to support or assist the main dam's function. The reservoir system provides approximately 800 miles of commercially navigable waterways and also provides significant flood reduction benefits both within the Tennessee River system and downstream on the lower Ohio and Mississippi Rivers. The reservoir system also provides a water supply for residential and industrial customers, as well as cooling water for TVA's coal-fired plants, combined cycle plants, and nuclear power plants. TVA's Environmental Policy provides objectives for an integrated approach related to providing reliable, affordable, and increasingly clean energy; engaging in proactive stewardship of the Tennessee River system and public lands; and supporting sustainable economic growth. The Environmental Policy also provides additional direction in several environmental stewardship areas related to reducing environmental impacts on the Tennessee Valley's natural resources, including reducing carbon intensity and air emissions; minimizing waste; and protecting water resources and cultural resources. TVA's Biodiversity Policy further builds on the TVA record of environmental stewardship by acknowledging the critical role of natural systems in achieving its mission of improving the quality of life in the region. The policy commits to seeking conservation opportunities within capital projects and improving current operational practices to help minimize impacts, reduce costs, and enhance biodiversity.

TVA serves the people of the TVA region through the integrated management of the Tennessee River system and public lands, which include approximately 11,000 miles of shoreline; 650,000 surface acres of reservoir water; and 293,000 acres of reservoir lands. TVA accomplishes this mission and supports the objectives of the TVA Environmental Policy through implementation of its natural resources stewardship strategy. Within this strategy, TVA confirms a desire to remain agile, balance competing demands, and be a catalyst for collaboration in order to protect and enhance biological, cultural, and water resources as well as create and sustain destinations for recreation and opportunities for learning and research. As part of the strategy, TVA intends to assist water-based community development with the issuance of permits, technical support, and land agreements using planning, clear regulations, meaningful guidelines, and consistent enforcement. Additional guidance for carrying out many of TVA's essential stewardship responsibilities is provided in TVA's Natural Resource Plan. The plan aligns TVA's mission through economic development, energy, and environmental stewardship and guides business planning. It includes ten focus areas, providing a comprehensive view of resource stewardship efforts.

Economic Development Activities

Economic development, along with energy production and environmental stewardship, is one of the primary statutory purposes of TVA. Economic development programs developed by TVA support all communities, including rural and economically distressed communities, across the Tennessee Valley. Through its economic development activities, TVA endeavors to recruit and retain companies in targeted business sectors, foster capital investment and job growth, and assist communities in the

Table of Contents

Tennessee Valley with economic growth opportunities.

TVA seeks to achieve these goals through a combination of initiatives and partnerships with LPCs, regional, state, and local agencies, and communities by providing financial incentives, technical services, industry expertise, and site-selection assistance to new and existing businesses in the Tennessee Valley. TVA's economic development incentive programs offer competitive incentives to new and existing power customers in certain business sectors that make multi-year commitments to invest in the Tennessee Valley. See Note 17 — Revenue — Contract Balances — Economic Development Incentives for total incentives recorded.

In 2023, TVA's economic development efforts, reliability, and competitive rates helped attract or expand 158 companies into the TVA service area. These companies announced the following economic performance measures:


Economic Performance Measure						At September 30, 2023(3)
Projected capital investments						$9.2 billion
Jobs expected to be created (#)(1)						12,276
Jobs expected to be retained (#)(2)						46,135

Notes

(1) "New jobs" in the TVA fiscal year are newly created, paid positions at a facility of a TVA customer. “Positions” are calculated by adding (1) the number of full-time, on-site employees and/or independent contractors at the facility, (2) the total number of full-time work-from-home employees and independent contractors who reside in the TVA service territory and who spend 100% of their work time on facility-related matters, and (3) the total hours worked on facility-related matters by (a) full-time and part-time on-site employees at the facility and (b) full-time and part-time work-from-home employees who reside in the TVA service territory and who spend less than 100% of their work time on facility-related matters, divided by the number of work hours of such employees based on a 40 hour work week. A “TVA customer” means an entity that purchases power from TVA or a distributor of TVA power. New jobs reported by TVA may include positions created during the current TVA fiscal year and certified projections of anticipated positions to be created within a five-year time frame. New job numbers reported by TVA are certified and provided to TVA by TVA customers.

(2) "Retained jobs" are paid positions at a facility of a TVA customer that were created prior to the current TVA fiscal year and that continue to be filled in the current TVA fiscal year. “Positions” are calculated by adding (1) the number of full-time, on-site employees and/or independent contractors at the facility, (2) the total number of full-time work-from-home employees and independent contractors who reside in the TVA service territory and who spend 100% of their work time on facility-related matters, and (3) the total hours worked on facility-related matters by (a) full-time and part-time on-site employees at the facility and (b) full-time and part-time work-from-home employees who reside in the TVA service territory and who spend less than 100% of their work time on facility-related matters, divided by the number of work hours of such employees based on a 40 hour work week. A “TVA customer” means an entity that purchases power from TVA or a distributor of TVA power. Retained job numbers reported by TVA are certified and provided to TVA by TVA customers.

(3) These amounts are forward-looking and are subject to various uncertainties. Amounts may differ materially based upon a number of factors, including, but not limited to, economic downturns or recessions. See Forward-Looking Information and Item 1A, Risk Factors.

Regulation

TVA is required to comply with comprehensive and complex laws, regulations, and orders. The costs of complying with these laws, regulations, and orders are expected to be substantial, and costs could be significantly more than TVA anticipates.

Congress

TVA exists pursuant to the TVA Act as enacted by Congress and carries on its operations in accordance with this legislation. Congress can enact legislation expanding or reducing TVA's activities, change TVA's structure, and even eliminate TVA. Congress can also enact legislation requiring the sale of some or all of the assets TVA operates or reduce the U.S.'s ownership in TVA. To allow TVA to operate more flexibly than a traditional government agency, Congress exempted TVA from all or parts of certain general federal laws that govern other agencies, such as federal labor relations laws and the laws related to the hiring of federal employees, the procurement of supplies and services, and the acquisition of land. Other federal laws enacted since the creation of TVA that are applicable to other agencies have been made applicable to TVA, including those related to paying employees overtime and protecting the environment, cultural resources, and civil rights.

Securities and Exchange Commission

Section 37 of the Securities Exchange Act of 1934 (the "Exchange Act") requires TVA to file with the Securities and Exchange Commission ("SEC") such periodic, current, and supplementary information, documents, and reports as would be required pursuant to Section 13 of the Exchange Act if TVA were an issuer of a security registered pursuant to Section 12 of the Exchange Act. Section 37 of the Exchange Act exempts TVA from complying with Section 10A(m)(3) of the Exchange Act, which requires each member of a listed issuer's audit committee to be an independent member of the board of directors of the issuer. Since TVA is an agency and instrumentality of the U.S., securities issued or guaranteed by TVA are "exempted securities" under the Securities Act of 1933, as amended (the "Securities Act"), and may be offered and sold without registration under the Securities Act. In addition, securities issued or guaranteed by TVA are "exempted securities" and "government securities" under the Exchange Act. TVA is also exempt from Sections 14(a)-(d) and 14(f)-(h) of the Exchange Act (which address proxy solicitations) insofar as those sections relate to securities issued by TVA, and transactions in TVA securities are exempt from rules governing tender offers under Regulation 14E of the Exchange Act. Also, since TVA securities are exempted securities under the Securities Act, TVA is exempt from the Trust Indenture Act of 1939 insofar as it relates to securities issued by TVA, and no independent trustee is required for these securities.

Table of Contents

Federal Energy Regulatory Commission

Under the FPA, TVA is not a "public utility," a term which primarily refers to investor-owned utilities. Therefore, TVA is not subject to the full jurisdiction that FERC exercises over public utilities under the FPA. TVA is, however, an "electric utility" and a "transmitting utility" as defined in the FPA and, thus, is directly subject to certain aspects of FERC's jurisdiction. Under the FPA, for example, TVA (1) must comply with certain standards designed to maintain transmission system reliability; (2) can be ordered to interconnect its transmission facilities with the electrical facilities of independent generators and of other electric utilities that meet certain requirements; (3) can be ordered to transmit wholesale power provided that the order (a) does not impair the reliability of the TVA or surrounding systems, (b) meets the applicable requirements concerning terms, conditions, and rates for service, and (c) does not implicate the ACPA; (4) could be subject to FERC review of the transmission rates and the terms and conditions of service that TVA provides; and (5) is prohibited from (a) reporting false information on the price of electricity sold at wholesale or the availability of transmission capacity to a federal agency with intent to fraudulently affect the data being compiled by the agency and (b) using manipulative or deceptive devices or contrivances in connection with the purchase or sale of power or transmission services subject to FERC's jurisdiction.

In addition, the FPA provides FERC with authority (1) to order refunds of excessive prices on short-term sales (transactions lasting 31 days or less) by all market participants, including TVA, in price gouging situations if such sales are through an independent system operator or regional transmission organization under a FERC-approved tariff; (2) to issue regulations requiring the reporting, on a timely basis, of information about the availability and prices of wholesale power and transmission service by all market participants, including TVA; (3) to investigate electric industry practices, including TVA's operations that are subject to FERC's jurisdiction; and (4) to impose civil penalties of up to $1 million per day for each violation of the provisions of the FPA discussed in the prior paragraph that are applicable to TVA. Criminal penalties may also result from such violations.

Furthermore, while not required to do so, TVA has elected to implement various FERC orders and regulations pertaining to public utilities on a voluntary basis to the extent that they are consistent with TVA's obligations under the TVA Act.

Finally, on July 28, 2023, FERC issued Order 2023. The order updates the procedures for interconnecting generating facilities and is intended to address interconnection queue backlogs, improve certainty in the interconnection process, and prevent undue discrimination for new technologies. TVA is in the process of evaluating the order and its potential impacts on TVA.

NERC Compliance

TVA is subject to federal reliability standards that are set forth by NERC and approved by FERC. These standards are designed to maintain the reliability of the bulk electric system, including TVA's generation and transmission system, and include areas such as maintenance, training, operations, planning, modeling, critical infrastructure, physical and cyber security, vegetation management, and facility ratings. TVA recognizes that reliability standards and expectations continue to become more complex and stringent for transmission systems.

Nuclear Regulatory Commission

TVA operates its nuclear facilities in a highly regulated environment and is subject to the oversight of the NRC, an independent federal agency that sets the rules that users of radioactive materials must follow. The NRC has broad authority to impose requirements relating to the licensing, operation, and decommissioning of nuclear generating facilities. In addition, if TVA fails to comply with requirements promulgated by the NRC, the NRC has the authority to impose fines, shut down units, or modify, suspend, or revoke TVA's operating licenses. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Operational Challenges.

Environmental Protection Agency

TVA is subject to regulation by the Environmental Protection Agency ("EPA") in a variety of areas, including air quality control, water quality control, management and disposal of solid and hazardous wastes, and greenhouse gas ("GHG") reductions to address climate change. See Environmental Matters below and Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges.

States

The Supremacy Clause of the U.S. Constitution prohibits states, without federal legislative consent, from regulating the manner in which the federal government conducts its activities. As a federal agency, TVA is exempt from regulation, control, and taxation by states except in certain areas where Congress has clearly made TVA subject to state regulation. See Environmental Matters below.

Table of Contents

Other Federal Entities

TVA's activities and records are also subject to review to varying degrees by other federal entities, including the Government Accountability Office and the Office of Management and Budget ("OMB"). There is also an Office of the Inspector General which reviews TVA's activities and records.

Taxation and Tax Equivalents

TVA is not subject to federal income taxation. In addition, neither TVA nor its property, franchises, or income is subject to taxation by states or their subdivisions. The TVA Act, however, does require TVA to make tax equivalent payments to states and counties in which TVA conducts power operations or in which TVA has acquired properties previously subject to state and local taxation. The total amount of these payments is five percent of gross revenues from the sale of power during the preceding year excluding sales or deliveries to other federal agencies and off-system sales with other utilities, with a provision for minimum payments under certain circumstances. Except for certain direct payments TVA is required to make to counties, distribution of tax equivalent payments within a state is determined by individual state legislation.

Environmental Matters

TVA's activities, particularly its power generation activities, are subject to comprehensive regulation under environmental laws and regulations relating to air pollution, water pollution, and management and disposal of solid and hazardous wastes, among other matters. The environmental laws and regulations that have the largest impact on TVA's operations and financial condition are discussed below.

Clean Air Act Programs and Regulations

National Ambient Air Quality Standards. The CAA requires the EPA to set National Ambient Air Quality Standards ("NAAQS") for certain air pollutants. The EPA has set NAAQS for ozone, particulate matter, sulfur dioxide ("SO2"), nitrogen oxides ("NOx"), carbon monoxide, and lead. Over the years, the EPA has made the NAAQS more stringent. Each state must develop a plan to be approved by the EPA for achieving and maintaining NAAQS within its borders. These plans impose limits on emissions from pollution sources, which are applicable to certain TVA generating units, including fossil fuel-fired plants. Areas meeting a NAAQS are designated as attainment areas. Areas not meeting a NAAQS are designated as non-attainment areas, and more stringent requirements apply in those areas, including stricter controls on industrial facilities and more complicated and public permitting processes. TVA fossil fuel-fired plants can be impacted by these requirements. Currently, all TVA generating units are located in areas designated as attainment areas. On January 6, 2023, however, the EPA proposed more stringent NAAQS for particulate matter that, if adopted, may increase the likelihood of certain areas in TVA’s service territory being designated as non-attainment areas. TVA could incur significant costs associated with upgrades to facilities if such facilities are in areas that are redesignated as being in non-attainment.

Revised Cross-State Air Pollution Rule. TVA power plants are subject to the EPA's Cross-State Air Pollution Rule ("CSAPR"). CSAPR addresses air pollution from upwind states in the U.S. that affect air quality in downwind states and is focused on NOx and SO2. To comply with CSAPR, TVA power plants must obtain one NOx allowance for every ton of NOx emitted during the ozone season. Under a revised version of CSAPR (the "CSAPR Update Rule"), the Shawnee Fossil Plant ("Shawnee") facility is subject to reduced ozone-season NOx allowances and has been required to use most of its allowance inventory. In 2023, TVA monitored forecasted needs and utilized purchased allowances for the Shawnee facility. A longer-term compliance strategy for the facility is being developed that may include installing NOx control upgrades, incorporating operational changes, and continuing to purchase allowances. When completed, this strategy will help TVA comply with both the CSAPR Update Rule and the Federal Implementation Plan Addressing Regional Ozone Transport for the 2015 Ozone NAAQS. TVA has obtained approval from the State of Kentucky for construction of seven selective catalytic reduction systems ("SCRs") at the Shawnee facility. TVA plans to construct SCRs at four units by the end of 2025 and expects to spend $240 million. TVA is evaluating plans for the remaining three units.

Federal Implementation Plan Addressing Regional Ozone Transport for the 2015 Ozone NAAQS. On March 15, 2023, the EPA issued final regulations known as the "Good Neighbor Plan" to reduce NOx emissions from power plants and certain industrial facilities. With the Good Neighbor Plan, the EPA issued its Federal Implementation Plan ("FIP") that covers 23 states, including Alabama, Kentucky, and Mississippi, to reduce the interstate transport of NOx. Under the rule, beginning with the 2023 ozone season, power plants in 22 states, including Alabama, Kentucky, and Mississippi, are required to participate in a NOx trading program. Over time, the emission budgets will decline based on the level of reductions achievable through phased installation of emissions controls at power plants starting in 2024. The rule also establishes daily emission rates for coal steam electric generating units greater than or equal to 100 MW in the covered states beginning with the 2024 ozone season. To help comply with these regulations, TVA is developing a longer-term compliance strategy for its Shawnee facility that may include installing NOx control upgrades, incorporating operational changes, and continuing to purchase allowances. See Revised Cross-State Air Pollution Rule above. During 2023, the EPA issued interim rules to stay the effectiveness of the 2023 FIP requirements for emission sources in several states, including Kentucky, Mississippi, and Alabama. The Good Neighbor Plan itself has been challenged in the District of Columbia Circuit ("D.C. Circuit"), and applications have been filed with the U.S. Supreme Court to stay the plan while its merits are being litigated.

Table of Contents

Mercury and Air Toxics Standards for Electric Utility Units. In January 2022, the EPA proposed reaffirming that it is appropriate and necessary to regulate hazardous air pollutants ("HAP"), including mercury emitted from steam electric utilities. In addition, in April 2023 the EPA proposed to strengthen and update the Mercury and Air Toxics Standards (“MATS”) for electric utility units to reflect recent developments in control technologies and the performance of these plants. If adopted in its current form, the EPA's proposed MATS could require TVA to install new equipment at some of its coal-fired units, and the cost of such equipment could be substantial.

Environmental Agreements. In 2011, TVA entered into two substantively similar agreements, one with the EPA and the other with Alabama, Kentucky, North Carolina, Tennessee, and three environmental advocacy groups (collectively, the "Environmental Agreements"). To resolve alleged New Source Review claims, TVA committed under the Environmental Agreements to, among other things, take now-completed actions regarding coal units and invest $290 million in certain TVA environmental projects. See Note 22 — Commitments and Contingencies — Legal Proceedings — Environmental Agreements, which discussion is incorporated herein by reference.

Acid Rain Program. The EPA's Acid Rain Program is intended to help reduce emissions of SO2 and NOx, which are the primary pollutants implicated in the formation of acid rain. The program includes a cap-and-trade emission reduction program for SO2 emissions from power plants. TVA continues to reduce SO2 and NOx emissions from its coal-fired plants, and the SO2 allowances allocated to TVA under the Acid Rain Program are sufficient to cover the operation of its coal-fired plants. In the TVA service area, the limitations imposed on SO2 and NOx emissions by the CSAPR program are more stringent than the Acid Rain Program. Therefore, TVA does not anticipate that the Acid Rain Program will impose any additional material requirements on TVA.

Regional Haze Program. The EPA issued the Clean Air Visibility Rule, which required certain older sources to install best available retrofit technology. No additional controls or lower operating limits are required for any TVA units to meet best available retrofit technology requirements. In 2017, the EPA published the final rule that changed some of the requirements for Regional Haze State Implementation Plans ("SIPs"). Specific impacts on TVA cannot be determined until future Regional Haze SIPs are developed for the next decennial review under the visibility haze provisions of the CAA. States were required to submit their Regional Haze SIPs to the EPA by July 31, 2021. In response to requests from state air pollution control agencies in Tennessee and Kentucky, TVA submitted regional haze analyses for its Cumberland and Shawnee facilities, respectively, to those state agencies. The reports evaluate SO2 emission reduction options for these facilities and will be considered by these state agencies in preparing their Regional Haze SIPs. On August 25, 2022, the EPA issued a final action stating that 15 states, including Kentucky, failed to submit a complete SIP, which triggered a two-year deadline for the EPA to promulgate a FIP for the state unless Kentucky submits, and the EPA approves, a SIP satisfying the visibility protection requirements of the CAA. TVA negotiated with Kentucky and agreed to accept a federal limit for SO2 emissions starting January 1, 2028. In August 2023, TVA submitted a Title V permit application to the Kentucky Division of Air Quality that incorporates this limit. TVA anticipates that it could meet this limit by installing control technologies for the seven uncontrolled Shawnee units. See Revised Cross-State Air Pollution Rule above for additional information regarding TVA’s plans to control the Shawnee units.

Start Up, Shutdown, and Malfunctions. Opacity, or visible emissions, measures the denseness or color of power plant plumes and has traditionally been used by states as a means of monitoring good maintenance and operation of particulate control equipment. Under some conditions, retrofitting a unit with additional equipment to better control SO2 and NOx emissions can adversely affect opacity emissions, and TVA and other utilities have addressed this issue. The evaluation of utilities' compliance with opacity requirements is coming under increased scrutiny, especially during periods of startup, shutdown, and malfunction. Historically, SIPs developed under the CAA typically excluded periods of startup, shutdowns, and malfunctions, but in June 2015, the EPA finalized a rule to eliminate such exclusions ("2015 Rule"). Environmental petitioners and several states filed petitions for judicial review of the 2015 Rule before the U.S. Court of Appeals for the D.C. Circuit, and oral arguments were heard on March 25, 2022. Separately, on September 8, 2021, environmental petitioners filed a lawsuit to enforce the SIP calls under the 2015 Rule, and on June 27, 2022, the EPA entered into a consent decree that would require the agency to take final action on SIP revisions submitted in response to the 2015 SIP call by dates ranging from 180 to 480 days from the date of the consent decree. On January 12, 2022, the EPA determined that Alabama and Shelby County (Tennessee) failed to submit a revised SIP as required by the 2015 Rule, and on February 15, 2023, the EPA proposed to issue a new finding of substantial inadequacy and SIP calls to Shelby County, Tennessee. On June 23, 2023, the EPA approved a portion of the SIP revisions submitted by the State of Tennessee. TVA cannot predict the outcome of future SIP evaluations.

New York Petition to Address Impacts from Upwind High Emitting Sources. In 2018, the State of New York filed a petition with the EPA under Section 126(b) of the CAA to address ozone impacts on New York from the NOx emissions from sources emitting at least 400 tons of NOx in CY 2017 from nine states including Kentucky. The New York petition requests that the EPA require daily NOx limits for utility units with selective catalytic reduction systems ("SCRs") such as Shawnee Units 1 and 4 and emission reductions from utility units without SCRs such as Shawnee Units 2, 3, and 5 - 9. Kentucky utility unit NOx emissions are already limited under CSAPR and are declining, and current EPA modeling projects that no additional requirements to reduce Kentucky NOx emissions are necessary. In 2019, the EPA finalized its denial of New York's petition. The State of New York filed a petition in the D.C. Circuit for judicial review of the EPA's denial of the petition, and in July 2020, the D.C. Circuit vacated the EPA's denial of the petition and remanded the petition to the EPA for reconsideration. Specific impacts to TVA cannot be determined until the EPA takes further action on the petition.

Table of Contents

GHG Emissions from Existing Sources. In 2019, the EPA finalized the Affordable Clean Energy ("ACE") rule addressing GHG emissions from existing fossil fuel-fired units. The ACE rule established guidelines, under Section 111(d) of the CAA, for GHG emissions from existing coal-fired units based on efficiency improvements that can be achieved at those units at reasonable cost. On January 19, 2021, the D.C. Circuit vacated and remanded the ACE rule. On October 29, 2021, the U.S. Supreme Court accepted the request filed by a coalition of states and other parties to review the D.C. Circuit's decision to vacate the ACE rule. On June 30, 2022, the U.S. Supreme Court issued its decision in West Virginia v. EPA, in which it restricted the EPA's authority to regulate GHG from existing power plants under Section 111(d). The U.S. Supreme Court concluded that Congress did not grant the EPA authority under the CAA to demand generation-shifting to achieve reduction of GHG emissions, but the court did not hold that the EPA is limited in future rulemakings to just the heat-rate improvements that made up the ACE rule. The judgment of the D.C. Circuit was thus reversed, and the case remanded for further proceedings consistent with the U.S. Supreme Court's opinion. On May 23, 2023, the EPA published in the Federal Register a proposal that would repeal the ACE rule and establish new GHG emission guidelines for both existing fossil fuel-fired steam generating units and existing large, frequently operated stationary combustion turbine units. These proposed GHG emission guidelines, if finalized in their current form, could result in substantial costs to TVA.

GHG Emissions from New Sources. On May 23, 2023, the EPA published in the Federal Register proposed revised new source performance standards ("NSPS") for GHG emissions from new fossil fuel-fired stationary combustion turbine units as well as proposed revised NSPS for GHG emissions from existing fossil fuel-fired steam generating units that undertake large modifications. These proposed NSPS, if finalized in their current form, could result in substantial costs to TVA. In the meantime, the 2015 GHG emission standards for new, modified, and reconstructed electric utility generating units remain in effect.

Climate Change

Emissions. Though many of TVA's facilities continue to emit air pollutants, emissions from all TVA-owned and operated units (including small CTs of less than 25 MW) have been reduced from historic peaks. Emissions of NOx and SO2 began being regulated in 1995 and 1977, respectively. Emissions of NOx and SO2 have been reduced by 97 percent and 99 percent, respectively, since their initial year of regulation.



Emissions and Intensity Rates (1)	CY 2022	CY 2021



Nitrogen Oxide (NOx)(2)
Total NOx Emissions (MT)	15,270	15,210
Total NOx Emissions Intensity (MT/Net MWh)	0.000113	0.000109
Sulfur Dioxide (SO2)(2)
Total SO2 Emissions (MT)	22,331	25,226
Total SO2 Emissions Intensity (MT/Net MWh)	0.000165	0.000181
Mercury (Hg)
Total Hg Emissions (kg)	39.2	22.3
Total Hg Emissions Intensity (kg/Net MWh)	0.0000003	0.0000002

Notes

(1) Intensity rates are calculated based on generation from TVA's most recent fiscal year for years indicated and emissions data from the most recent CYs.

(2) Emissions data is consistent with Edison Electric Institute Environmental, Social, Governance, and Sustainability Report standards, which are based on metric tons ("MTs"), whereas overall CO2 emission rates and baseline reductions from historical levels are based on short tons.

For CY 2022, TVA's emissions of carbon dioxide ("CO2") from its owned and operated units, including purchased power and REC retirement adjustments which reduce the reportable CO2 emissions, were 54 million tons, resulting in a TVA system average, as delivered, CO2 emission rate of 658 lbs/MWh. This represents a 54 percent and 50 percent reduction in mass carbon emissions and TVA's carbon emission rate, respectively, from 2005 levels.

While TVA continues down the path of lowering emissions, including GHG emissions, there will be fluctuations in TVA's emission numbers. Between CY 2021 and CY 2022, TVA's GHG emissions reflect higher electricity usage in the Tennessee Valley as the region experienced economic growth. Changes in the power supply mix between CY 2021 and CY 2022 also impacted the emissions fluctuation, as TVA continues to make operational decisions to keep the system reliable and deliver low-cost energy.

Report on Climate-Related Risks. On January 30, 2023, the Government Accountability Office ("GAO") publicly released a report entitled Tennessee Valley Authority: Additional Steps Are Needed to Better Manage Climate-Related Risks. This report examines climate-related risks to TVA's operations and steps TVA has taken to manage climate-related risks as well as additional steps needed. In the report, the GAO made three recommendations:

• TVA's CEO should direct TVA staff to conduct an inventory of assets and operations vulnerable to climate change that includes analyzing the likelihood and degree of damage or disruption from climate change and the likely consequences if specific climate effects were to occur.

Table of Contents

• Once TVA staff identifies vulnerable assets and operations, TVA's CEO should direct TVA staff to develop a resilience plan that identifies and prioritizes measures to address climate change vulnerabilities and that includes a portfolio of resilience measures and an action plan that specifies which risks to address and how and when to do so.

• TVA's CEO should direct TVA staff to establish a plan to routinely reassess the TVA resilience plan and incorporate updated information about implemented resilience actions, as well as updated information about climate change, resilience technologies and planning tools, and connected infrastructure vulnerabilities.

TVA provided a response to the GAO in June 2023 outlining completed and planned TVA actions to address the recommendations. To strengthen TVA’s climate resiliency, TVA has established new priority actions in TVA’s Climate Action Adaptation and Resiliency Plan. These actions include continuing to implement and maintain seasonal readiness programs that incorporate climate threats, continuing to evaluate climate threats in enterprise risk management, researching methods for improving climate resilience and adaptation planning, incorporating relevant climate change information in each IRP, evaluating systems and components for potential resiliency hardening, integrating climate resiliency in the transmission grid resiliency program, and completing asset analysis and incorporating climate resiliency into business processes.

Executive Actions. President Biden has taken several executive actions relating to climate change.

•On January 20, 2021, President Biden issued EO 13990, "Protecting Public Health and the Environment and Restoring Science To Tackle the Climate Crisis." EO 13990 directs federal agencies to review and revise regulations consistent with broad policy goals to improve public health and the environment, reduce GHG emissions, and prioritize environmental justice.

•On January 27, 2021, President Biden issued EO 14008, "Executive Order on Tackling the Climate Crisis at Home and Abroad." EO 14008 seeks to promote safe global temperatures, increase climate resilience, and support low greenhouse gas emissions and climate-resilient development by, among other things, (1) using federal procurement authorities to achieve or facilitate (a) a carbon pollution-free electricity sector no later than 2035 and (b) clean and zero-emission vehicles for federal, state, local, and tribal government fleets, (2) putting the U.S. on a path to achieve net-zero emissions, economy-wide, by no later than 2050, and (3) establishing the Justice40 Initiative, instructing federal agencies to direct 40 percent of the benefit from eligible projects toward disadvantaged communities.

•On May 20, 2021, President Biden issued EO 14030, “Climate-Related Financial Risk,” which calls for a governmental-wide strategy on the disclosure of climate-related financial risk that includes, among other things, the measurement, assessment, mitigation, and disclosure of climate-related financial risk to federal government programs, assets, and liabilities in order to increase the long-term stability of federal operations.

•On December 8, 2021, President Biden issued EO 14057, "Executive Order on Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability," which details the administration’s policy to take a whole-of-government approach to lead by example to achieve a carbon pollution-free electricity sector by 2035 and net-zero emissions economy-wide by no later than 2050. Implementing Instructions for EO 14057 issued in August 2022 provided instructions to federal agencies regarding agency planning, reporting requirements, and accountability. Agencies must issue or revise existing agency policies, directives, and guidance, as appropriate, including employee training, to ensure alignment with the goals and requirements of EO 14057.

•On September 12, 2022, President Biden issued EO 14082, “Implementation of the Energy and Infrastructure Provisions of the Inflation Reduction Act of 2022.” EO 14082 provides that in implementing the Inflation Reduction Act, federal agencies shall, as appropriate and to the extent consistent with law, prioritize, among other things, (1) driving progress to achieve the climate goals of the U.S. to reduce greenhouse gas emissions 50 to 52 percent below 2005 levels in 2030, achieve a carbon pollution-free electricity sector by 2035, and achieve net-zero emissions by no later than 2050, (2) advancing environmental and climate justice through an all-of-government approach, including through the Justice40 Initiative set forth in EO 14008, and (3) promoting construction of clean energy generation, storage, transmission, and enabling technologies through efficient, effective mechanisms that incorporate community engagement.

•On April 21, 2023, President Biden issued EO 14096, “Revitalizing Our Nation's Commitment to Environmental Justice for All.” EO 14096, among other things, details the administration’s policy to take a whole-of-government approach to environmental justice and to advance environmental justice by implementing and enforcing the nation’s environmental and civil rights laws, preventing pollution, addressing climate change and its effects, and working to clean up legacy pollution that is harming human health and the environment. In addition, EO 14096 directs each federal agency to make achieving environmental justice part of its mission and to submit an environmental justice strategic plan to the Chair of the Council on Environmental Quality within 18 months of the date of the order and every four years thereafter.

•On September 21, 2023, President Biden announced that he approved recommendations from the Interagency Working Group on the expanded use of the social costs of GHG for budgeting, procurement, and other agency decisions, including reaffirming its use for environmental reviews where appropriate.

Table of Contents

TVA is voluntarily pursuing multiple policies and programs in the Tennessee Valley that support the goals and policies of these executive actions. See Actions Taken by TVA to Reduce GHG Emissions below. TVA must consider executive actions within the context of statutory requirements imposed by Congress when carrying out its mission such as the TVA Act and the Energy Policy Act of 1992 that require power be sold at rates as low as feasible and the use of least-cost resource planning, respectively. TVA performs long-term least-cost resource planning through its Integrated Resource Plan process.

Paris Agreement. The U.S. is currently part of the Paris Agreement. The Paris Agreement tracks emissions targets through nationally determined contributions ("NDCs"). Each nation that is a party to the Paris Agreement is asked to prepare five-year, successive NDCs that it plans to achieve. On April 22, 2021, the Biden Administration announced its GHG NDCs for 2030 under the Paris Agreement, and these NDCs establish a new target for the U.S. to achieve a 50 to 52 percent reduction from 2005 levels in economy-wide net GHG pollution in 2030. TVA's own operations have achieved GHG reductions from 2005 levels that are in excess of 50 to 52 percent.

Litigation. Climate change issues have been the subject of a number of lawsuits, including lawsuits against TVA, and TVA may be subject to additional lawsuits in the future. See Note 22 — Commitments and Contingencies — Legal Proceedings for additional information.

Indirect Consequences of Regulation or Business Trends. Legal, technological, political, and scientific developments regarding climate change may create new opportunities and risks. The potential indirect consequences could include an increase or decrease in electricity demand, increased demand for clean generation from alternative energy sources, and subsequent impacts to business reputation and public opinion. See Power Supply and Load Management Resources.

Physical Impacts of Climate Change. Physical impacts of climate change may include, but not be limited to, changing weather patterns, extreme weather conditions, and other events such as flooding, droughts, wildfires, heat waves, and snow or ice storms, and these events can impact TVA's system in terms of system operability, customer demand, and the health of regional economies. TVA has a 2021 Climate Change Action Plan which it updated in 2022. The goal of the action planning process is to ensure TVA continues to achieve its mission and program goals and to operate in a secure, effective, and efficient manner in a changing climate by integrating climate change adaptation efforts in coordination with state and local partners, tribal governments, and private stakeholders. TVA manages the risks proposed by climate change on its mission, programs, and operations within its environmental management processes, though such risks cannot be completely eliminated.

Actions Taken by TVA to Reduce GHG Emissions. TVA has reduced GHG emissions from both its generation facilities and its other operations. TVA Board actions have focused on further reducing GHG emissions from its generation fleet by evaluating the potential retirement of its coal-fired fleet, increasing its nuclear capacity, modernizing its hydroelectric generation system, increasing natural gas-fired generation to enable greater integration of renewables on the grid, increasing its purchases of renewable energy, building solar facilities, and investing in energy efficiency initiatives to reduce energy use in the Tennessee Valley. Additionally, TVA continues to invest in energy efficiency in its operations and offers renewable energy programs. See Power Supply and Load Management Resources — Renewable Energy Resources. These changes support the broad electrification and carbon emission reduction efforts in other sectors of the economy. There are inherent challenges each year in both operations and asset changes. TVA will not sacrifice reliability at any time, which means that TVA must make certain operational decisions at times to keep the system reliable, possibly impacting annual performance on carbon emissions. Therefore, while TVA continues to strive to lower GHG emissions, there will be fluctuations in TVA’s emission numbers resulting from changes in the power supply mix, weather impacts, economic conditions, and generating unit performance. As TVA evolves its generation portfolio, and after appropriate environmental review under NEPA, the TVA Board could make decisions about the timing, retirement, and replacement of aging fossil units or other expiring capacity, which may further TVA’s CO2 and other emissions reductions. The Environmental Policy also provides additional direction in several environmental stewardship areas related to reducing environmental impacts on the Tennessee Valley's natural resources, including reducing carbon intensity and air emissions. In addition, TVA's decarbonization initiative is aimed at understanding and applying clean resources to support the reduction of carbon emissions from its power supply, and TVA is exploring several technologies as part of these efforts. See Research and Development above.

Renewable/Clean Energy Standards

Thirty-six states and the District of Columbia have established enforceable or mandatory requirements for electric

utilities to generate a certain amount of electricity from renewable sources or have established a renewable goal. In 12 of those

states and the District of Columbia, the requirement is for a 100% clean electricity standard or goal by 2050 or earlier. One state within the TVA service area, North Carolina, has a mandatory renewable and clean energy goal that, while not applying directly to TVA, does apply to TVA's LPCs serving retail customers in that state. TVA's policy is to provide compliance assistance to any distributor of TVA power, and TVA is providing assistance to the covered LPCs that sell TVA power in North Carolina. In 2020, Virginia signed into law the Clean Economy Act. This act establishes a mandatory requirement for utilities to generate a certain amount of electricity from renewable sources. At this time, TVA is not impacted by the legislation due to the relatively small amount of electricity that TVA provides in Virginia compared to other utilities. Likewise, the Mississippi Public Service Commission adopted an energy efficiency rule applying to electric and natural gas providers in the state, and TVA is supplying information on participation in TVA's energy efficiency programs to support the covered Mississippi LPCs.

Table of Contents

Water Quality Control Developments

Waters of the United States. On May 25, 2023, the Supreme Court in Sackett v. EPA narrowed the interpretation of the scope of “waters of the United States” under the Clean Water Act (“CWA”). Specifically, the Court ruled that CWA jurisdiction extends only to wetlands that have continuous surface connection with relatively permanent bodies of water connected to traditional interstate navigable waters. In reaching its decision, the Court rejected the “significant nexus” standard for determining the jurisdiction of the CWA that was articulated by Justice Kennedy in the Court’s Rapanos decision. The result of this decision is that fewer waters will be subject to CWA permitting or other restrictions. In response to the Sackett v. EPA decision, the EPA and the Army Corps of Engineers (“ACE”) published a final rule in the Federal Register on September 8, 2023, that reestablishes, for the third time, the definition of Waters of the United States. The new definition encompasses fewer water bodies than the previous definition. As such, ACE permits will no longer be required for some streams and wetlands that would have been included based on the previous “significant nexus” standard.

Cooling Water Intake Structures. In 2014, the EPA released a final rule under Section 316(b) of the CWA relating to cooling water intake structures ("CWIS") for existing power generating facilities. The rule requires changes in CWIS used to cool the vast majority of coal, gas, and nuclear steam-electric generating plants and a wide range of manufacturing and industrial facilities in the U.S. The final rule requires CWIS to reflect the best technology available ("BTA") for minimizing adverse environmental impacts, primarily by reducing the amount of fish and shellfish that are impinged or entrained at a CWIS. These new requirements will potentially affect a number of TVA's fossil- and nuclear-fueled facilities and will likely require capital upgrades to ensure compliance. Most TVA facilities are projected to require retrofit of CWIS with "fish-friendly" screens and fish return systems to achieve compliance with the new rule. The rule is being implemented through permits issued under the National Pollutant Discharge Elimination System ("NPDES") in Section 402 of the CWA. State agencies administer the NPDES permit program in most states including those in which TVA's facilities are located. In addition, the responsible state agencies must provide all permit applications to the U.S. Fish and Wildlife Service for a 60-day review prior to public notice and an opportunity to comment during the public notice. As a result, the permit may include requirements for additional studies of threatened and endangered species arising from U.S. Fish and Wildlife Service comments and may require additional measures be taken to protect threatened and endangered species and critical habitats directly or indirectly related to the plant cooling water intake. TVA's review of the final rule indicates that the rule offers adequate flexibility for cost-effective compliance. The required compliance timeframe is linked to plant-specific NPDES permit renewal cycles (i.e., technology retrofits), and compliance activities have begun and are expected to continue through the 2028 - 2030 timeframe.

The EPA has never previously applied the requirements under Section 316(b) to hydroelectric facilities. However, on September 30, 2021, EPA Region 10, which covers an area outside TVA’s service area, issued NPDES permits to four hydroelectric plants that include Section 316(b) requirements. In determining the BTA to minimize adverse impacts on the environment using best professional judgment, Region 10 analyzed the existing controls that the hydroelectric facilities were already implementing and concluded that those controls constitute BTA. It is not clear whether this approach will be adopted nationwide or how the BTA standard would be applied to TVA's hydroelectric facilities; accordingly, the specific impacts to TVA from the Region 10 permits cannot be determined at this time.

Hydrothermal Discharges. The EPA and many states continue to focus regulatory attention on potential effects of hydrothermal discharges. Many TVA plants have variances from thermal standards under Section 316(a) of the CWA that are subject to review as NPDES permits are renewed. Specific data requirements in the future will be determined based on negotiations between TVA and state regulators. If plant thermal limits are made more stringent, TVA may have to install cooling towers at some of its plants and operate installed cooling towers more often. This could result in a substantial cost to TVA.

Steam-Electric Effluent Guidelines. In 2015, the EPA revised existing steam-electric effluent limitation guidelines ("ELGs"), which regulate water discharge pollutants and require the application of certain pollutant control technologies. The 2015 ELGs established more stringent performance standards for existing and new sources and required major upgrades to wastewater treatment options at all coal-fired plants. Compliance with new requirements was originally required in the CYs 2018 - 2023 timeframe, but the EPA delayed the compliance dates for flue gas desulfurization ("FGD") wastewater and bottom ash transport water until CYs 2020 - 2023 to allow the EPA time to review and potentially revise the ELGs with regard to these waste streams.

In October 2020, the EPA issued final revised ELGs for bottom ash transport water and FGD wastewater. The primary impact for TVA is on the operation of existing coal-fired generation facilities. The revised ELGs could impact long-term investment decisions being made relative to the long-term compliance and operability of these plants. The revisions may require TVA to install additional wastewater treatment systems for FGD wastewater and bottom ash transport water, and TVA could incur substantial costs to comply with the new rule. In addition, the revised ELGs could cause TVA to further reduce utilization of its coal-fired generation facilities or even to decommission such facilities. The revision also includes a subcategory for which Cumberland would qualify that provides TVA greater flexibility in meeting the ELGs. The revision includes two additional subcategories for low utilization units and units that cease coal combustion by the end of CY 2028. TVA is evaluating the applicability of those subcategories to its plants as appropriate. In October 2021, TVA filed Notices of Planned Participation preserving the option for TVA's Bull Run, Cumberland, and Kingston plants to participate in the subcategory for units that cease coal combustion by the end of CY 2028.

Table of Contents

Petitions for judicial review of the October 2020 ELG rule were filed in the D.C. Circuit and the U.S. Court of Appeals for the Fourth Circuit (the "Fourth Circuit") and have been consolidated in the Fourth Circuit in the case Appalachian Voices, et al. v. EPA. On August 3, 2021, the EPA announced a supplemental rulemaking to revise the Steam Electric Power Generating Effluent Limitations Guidelines and Standards. As part of the rulemaking process, the EPA will determine whether more stringent limitations and standards are appropriate and consistent with the technology-forcing statutory scheme and the goals of the CWA. Because this rulemaking could result in more stringent ELGs, the EPA has requested that the Appalachian Voices, et al. v. EPA litigation in the Fourth Circuit be stayed pending the outcome of the supplemental rulemaking process.

Consistent with the 2020 rule, on January 8, 2021, TVA submitted requests to state regulatory authorities to modify NPDES permits for Kingston, Cumberland, Bull Run, Shawnee, and Gallatin Fossil Plant ("Gallatin") to incorporate into the permits limitations in the 2020 rule. The Kentucky Department for Environmental Protection issued a final revised permit for Shawnee in the fourth quarter of 2021 and an additional revision in the second quarter of 2022. The Tennessee Department of Environment and Conservation ("TDEC") issued a final revised permit for Kingston in the first quarter of 2022 and for Gallatin in May 2022. TDEC issued a draft permit for Bull Run in August 2022 and a draft permit for Cumberland in October 2023.

On March 7, 2023, the EPA proposed new ELGs for steam electric power generators. The proposed rule would impose more stringent effluent limits on discharges of flue gas desulfurization wastewater, bottom ash transport water, and combustion residual leachate from coal-fired power plants as well as establish new definitions for various legacy wastewaters, which affects when more stringent requirements will apply to such wastewaters. The EPA's proposed rule also includes flexible paths for certain types of power plants to come into compliance with the proposed ELGs. Since this is a proposed rule, it is premature to evaluate the potential impacts of this rule on TVA operations; however, the EPA's adoption of such a rule could result in material compliance costs to TVA.

Other Clean Water Act Requirements. As is the case in other industrial sectors, TVA and other utilities are also facing more stringent requirements related to the protection of wetlands, reductions in storm water impacts from construction activities, new water quality criteria for nutrients and other pollutants, new wastewater analytical methods, and changes in regulation of pesticide application.

Cleanup of Solid and Hazardous Wastes

TVA Sites. TVA historical operations at certain facilities have resulted in releases of contaminants that TVA is addressing, including at TVA's Environmental Research Center at Muscle Shoals, Alabama. TVA has completed several removal, remedial, and characterization actions at the site, as required by a RCRA permit issued by the Alabama Department of Environmental Management ("ADEM"). At September 30, 2023, TVA's estimated liability for required cleanup and similar environmental work for those sites for which sufficient information was available to develop a cost estimate was approximately $16 million and was included in Accounts payable and accrued liabilities and Other long-term liabilities on the Consolidated Balance Sheets. ADEM issued a renewed permit to TVA on July 7, 2023, with a 10-year term. The new permit will not have any adverse impacts on TVA. In addition, the Environmental Research Center has an active groundwater monitoring program as part of a permitted corrective action plan.

Non-TVA Sites. TVA is aware of alleged hazardous-substance releases at certain non-TVA areas for which it may have some liability. See Note 22 — Commitments and Contingencies — Contingencies — Environmental Matters.

Coal Combustion Residuals. The EPA published its final rule governing CCR in 2015. The rule regulates CCR as nonhazardous waste under Subtitle D of RCRA and establishes standards for landfill and surface impoundment placement, design, operation, and closure; groundwater monitoring; corrective action; and post-closure care. While states may adopt the rule's requirements into their regulatory programs, the rule does not require states to adopt the requirements. The initial version of the rule provided for self-implementation by utilities and allowed enforcement through citizen suits in federal court. The Water Infrastructure Improvements for the Nation Act subsequently allowed state or federal-based permitting to implement the EPA's CCR rule ("CCR Rule") instead of self-implementation and citizen suits. In 2020, the EPA issued the final Part A revision to its CCR Rule. Among other things, the final Part A rule requires unlined CCR surface impoundments to stop receiving CCR and non-CCR wastestreams and to initiate closure or retrofit by no later than April 11, 2021. TVA ceased sending CCR and non-CCR wastestreams to, and initiated closure of, unlined CCR surface impoundments by the specified deadline. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Coal Combustion Residuals — Coal Combustion Residuals Facilities for a discussion of the impact on TVA's operations, including the cost and timing estimates of related projects.

On May 18, 2023, the EPA issued a proposed rule expanding the federal CCR Rule to include legacy CCR units. The proposed rule would establish two new classes of units not currently regulated under the federal CCR Rule: (1) legacy CCR surface impoundments, which are surface impoundments that (a) contained both CCR and liquids on or after October 19, 2015, and (b) are located at a power plant that ceased generating power prior to October 19, 2015, and (2) CCR management units, which are any area of land (a) on which any non-containerized accumulations of CCR are received, placed, or otherwise managed, and (b) which is not a CCR unit. The EPA proposes to subject both classes of legacy units to the requirements applicable to currently regulated units with a few exceptions and also proposes to mandate the requirement to initiate closure within 12 months of the effective date of the rule. If finalized in its current form, this proposed rule may significantly increase the

Table of Contents

number of federally regulated units in TVA’s fleet that will be subject to substantial costs for closure, post-closure, and potential remediation, and could have a material adverse effect on TVA's results of operations and financial condition. In addition, the EPA has recently interpreted its CCR Rule in a way that could create significant additional costs with implementing closure.

In addition to the requirements of the EPA's CCR Rule, CCR landfills and surface impoundments will continue to be regulated by the states. In August 2015, TDEC issued an order that (1) established a process for TDEC to oversee TVA's implementation of the EPA's CCR Rule to ensure coordination and compliance with Tennessee laws and regulations that govern the management and disposal of CCR and (2) required TVA to investigate and assess CCR contamination risks at seven of TVA's eight coal-fired plants in Tennessee and to remediate any unacceptable risks. The TDEC order does not allege that TVA is violating any CCR regulatory requirements nor does it assess TVA penalties. The TDEC order sets out an iterative process through which TVA and TDEC will identify and evaluate any CCR contamination risks and, if necessary, respond to such risks. TVA has submitted to TDEC environmental assessment reports (“EARs”) for Allen, Cumberland, John Sevier, Bull Run, Kingston, Watts Bar Fossil, and Johnsonville. At TDEC's request, to address a potential data gap, TVA is conducting additional investigation work at Allen around the West Ash Disposal Area and will submit a revised EAR upon completion of that work. Upon TVA's submittal of each EAR, TDEC will review the document and provide comments, and TVA will make revisions until TDEC approves a final EAR for each site. After the EARs are approved, TVA will submit Corrective Action/Risk Assessment ("CARA") Plans that will identify the unacceptable risks and TVA's proposed remediation. TDEC approved the EARs for John Sevier and Cumberland in the first quarter of 2024, and the CARA Plans for those sites will be submitted to TDEC as required by the order. It is too early to accurately predict the scope of any remedial activities that may arise under the order, and as such cost estimates for any required remedies are not possible to predict at this time. See also Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Initiatives and Challenges – Coal Combustion Residuals – Coal Combustion Residual Facilities for a discussion of an EAR for Gallatin that was recently approved by TDEC pursuant to a consent order and agreement.

In October 2019, TDEC released amendments to its regulations which govern solid waste disposal facilities, including TVA's active CCR facilities covered by a solid waste disposal permit and those which closed pursuant to a TDEC-approved closure plan. Such facilities are generally subject to a 30-year post-closure care period during which the owner or operator must undertake certain activities, including monitoring and maintaining the facility. The amendments, among other things, add an additional 50-year period after the end of the post-closure care period, require TVA to submit recommendations as to what activities must be performed during this 50-year period to protect human health and the environment, and require TVA to submit revised closure plans every 10 years.

Groundwater Contamination. The EPA, environmental groups, and state regulatory agencies are increasing their attention on alleged groundwater contamination associated with CCR management activities. As a result, TVA may have to change how it manages CCR at some of its plants, potentially resulting in higher costs. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Coal Combustion Residuals — Coal Combustion Residuals Facilities and — Allen Groundwater Investigation and Note 13 — Asset Retirement Obligations.

Environmental Investments

From 1970 to 2023, TVA spent approximately $6.8 billion on controls to reduce emissions from its coal-fired power plants. In addition, TVA has reduced emissions by idling or retiring coal-fired units and relying more on cleaner energy resources including natural gas and nuclear generation and renewable sources.

TVA currently anticipates spending significant amounts on environmental projects in the future, including investments in new clean energy generation including renewables to reduce TVA's overall environmental footprint. TVA environmental project expenditures could also result from coal-fired plant decommissioning and from effective ash management modernization. Based on TVA's decisions regarding certain coal-fired units, the amount and timing of expenditures could change. See Power Supply and Load Management Resources — Coal-Fired above and Estimated Required Environmental Expenditures below.

SO2 Emissions and NOx Emissions. To reduce SO2 emissions, TVA operates scrubbers on 17 of its coal-fired units and switched to lower-sulfur coal at certain coal-fired units. To reduce NOx emissions, TVA operates SCRs on 17 coal-fired units, operates low-NOx burners or low-NOx combustion systems on 20 units, optimized combustion on all 24 units, and operates NOx control equipment year round when units are operating (except during start-up, shutdown, and maintenance periods). TVA has also retired 35 of 59 coal-fired units. Except for seven units at Shawnee, the remaining coal-fired units in the TVA fleet have scrubbers and SCRs. TVA plans to construct SCRs at four of the Shawnee units by the end of 2025 and is evaluating plans for the remaining three units. See Power Supply and Load Management Resources — Coal-Fired above.

Particulate Emissions. To reduce particulate emissions of air pollutants, TVA has equipped all of its coal-fired units with scrubbers, mechanical collectors, electrostatic precipitators, and/or bag houses.

Greenhouse Gas Emissions. Various federal agencies, including the EPA and the Department of Commerce, may issue regulations establishing more stringent air and waste requirements, as well as GHG accounting requirements, and these requirements could result in significant changes in the structure of the U.S. power industry, especially in the eastern half of the country. There could be additional material costs if further reductions of GHGs, including CO2, are mandated by legislative,

Table of Contents

executive, regulatory, or judicial actions and if more stringent emission reduction requirements for conventional pollutants are established. These costs cannot reasonably be predicted at this time because of the uncertainty of these actions.

Estimated Required Environmental Expenditures

The following table contains information about TVA's current estimates on projects related to environmental laws and regulations.


Estimated Potential Environmental Expenditures(1)(2) As of September 30, 2023 (in millions)
	2024		2025		2026 - 2028(3)(4)		Total
Coal Combustion Residual Program(5)	$	323	$	349	$	936	$	1,608
Clean Air Act control projects(6)	109		85		58		252
Clean Water Act requirements(7)	52		59		79		190

Notes

(1) These estimates are subject to change as additional information becomes available and as regulations change.

(2) These estimates include $200 million, $171 million, and $122 million for 2024, 2025, and 2026 - 2028, respectively, in capital environmental expenditures. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Cash Requirements.

(3) See Note 22 — Commitments and Contingencies.

(4) These estimates do not include expenditures expected to be incurred after 2028.

(5) Includes costs associated with the closure of facilities and landfill activities. TVA is continuing to evaluate the rules and their impact on its operations, including the cost and timing estimates of related projects. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Coal Combustion Residuals — Coal Combustion Residuals Facilities and Note 13 — Asset Retirement Obligations.

(6) Includes air quality projects that TVA is currently performing to comply with existing air quality regulations, but does not include any projects that may be required to comply with potential GHG regulations or transmission upgrades.

(7) Includes projects that TVA is currently planning to comply with revised rules under the Clean Water Act regarding CWIS and ELGs for steam electric power plants.

Human Capital Management

People Strategy and TVA's Values

As the TVA region continued to grow throughout 2023, increasing not only its demand for electricity but also its demand for talent across the Tennessee Valley, the employees of TVA continue to advance the unique TVA mission and create a culture that lives up to its values - Safety, Integrity, Inclusion, and Service. TVA employees collectively align to address business needs together and enable strong performance while serving approximately 10 million people of the Tennessee Valley.

As part of its People Advantage strategic priority, TVA strives to create a work environment that supports and responds to the changing needs of the workforce. People Advantage is one of TVA's five strategic priorities and a multi-year commitment to evolve TVA's culture. TVA continues to strive to effectively demonstrate the value of its human capital and putting its people first by sustaining and evolving these programs.

The focus on People Advantage, along with the other four strategic priorities of Operational Excellence, Financial Strength, Powerful Partnerships, and Igniting Innovation, allows TVA to fulfill its daily mission of service to the people of the Tennessee Valley.

TVA's People Advantage priority is anchored on three specific pillars: (1) Inclusion with Diversity ("IwD"), (2) Talent, and (3) Engagement. To help shape an inclusive work environment that values all voices, TVA has intensified its efforts over the past few years to integrate IwD into its culture and make its efforts and progress sustainable and a part of TVA's daily operations. Similarly, TVA has promoted a people-focused organization that amplifies and harnesses the energy, power, and creativity of an experienced and talented workforce - one that continues to bring about the best from its people - manifesting itself as a "destination for difference makers" for highly-skilled candidates. TVA is working to cultivate a positive employee experience to heighten workforce engagement. This work is focused on equipping leaders to champion engagement across the enterprise through the understanding and leveraging of employee surveys, workplace flexibility opportunities, and health, safety, and well-being programs.

Management illustrates its commitment to human capital by including a safety metric in its incentive compensation metrics that tracks the serious injury incident rate and applies to all eligible participants in TVA’s annual program. Compensation derived from this program is based on TVA performance and individual achievements. As a result, success in measures like safety and similar principles grounded in human capital matters helps TVA maintain top quartile ranking in workforce engagement.

Ethics

Ethics and integrity are highly valued at TVA. Since its establishment in 1933, a commitment to ethics has been a part of TVA's DNA. TVA's Ethics & Compliance ("E&C") office aims to help employees make the right decisions when the right

Table of Contents

decisions may not be clear. The office is focused on educating and creating awareness while also assisting employees with ethical decision-making inside and outside of the TVA workplace. Further, TVA requires all employees and certain contractors to take its annual ethics training and attest to its Code of Conduct, which sets forth standards for adhering to TVA's core values and conducting its affairs with openness, honesty, and integrity every day.

TVA contracted with Ethisphere® to take a deep dive review of TVA's corporate ethics and compliance program. After this review, TVA became the first federal agency to receive the Compliance Leader VerificationTM certification, applicable for 2022-2023.

TVA Board Governance and Oversight

The TVA Board’s People and Governance Committee ("Committee") assists the TVA Board in fulfilling its responsibilities under the TVA Act by overseeing policies and strategies that affect a wide array of people-related programs inclusive of leadership development, culture, engagement, labor relations, safety, communications, compensation, performance incentives, benefits, and well-being. Specifically, the Committee advises the TVA Board in areas of overall Board governance, CEO goals, performance, compensation, and succession planning. Emergent people issues are discussed by this Committee, or in TVA Board briefings, as appropriate. The TVA Board's Audit, Finance, Risk, and Cybersecurity Committee oversees TVA's compliance and ethics programs.

Inclusion with Diversity

In 2020, TVA added Inclusion as one of its core values and adopted IwD as an enterprise-wide transformational strategic element. Since then, IwD has become increasingly integrated into TVA’s daily operations. To accelerate the impact of IwD within TVA and the communities it serves, TVA is working to shape an inclusive work environment that values all voices, recognizes and sustains diversity as an imperative, leverages the public power model to advance IwD in all TVA communities, and establishes foundational principles and objectives to further understanding of workplace equity.

Inclusion is a journey, not a destination, and TVA made strides in 2023 to continue the progress, including the following initiatives and accomplishments:

•Increased the visibility of the IwD Council internally and externally;

•Published TVA’s second Diversity, Equity, Inclusion, and Accessibility ("DEIA") Report that details the progress made over the past year and its uncompromising commitment to build a more inclusive and equitable future;

•Established representation goals aimed at increasing the number of women and people of color in leadership;

•Signed an agreement with the Trades and Labor Council for Annual Employees to strengthen the diversity of the hiring pool;

•Increased supplier diversity through Ready Now, a mentorship program designed to prepare diverse small business owners to work with TVA;

•Incorporated performance goals focused on IwD for every leader to build an accountability framework for progress;

•Cultivated support for nine Employee Resource Groups ("ERGs") to encourage employee development and foster community;

•Continued focus and work with business units to incorporate recommendations from the independent diversity, equity, and inclusion assessment to improve people policies, processes, programs, and behaviors to further drive inclusion and equity across TVA;

•Improved TVA’s inclusion score, which measures sense of belonging, to above median at 75;

•Trained and supported leaders to deliver IwD content through forums that cover a range of DEIA topics specific to their business units, demonstrating the importance of an inclusive workplace;

•Held IwD Leadership Forum for TVA's union partners to provide information, tools, and strategies to help achieve TVA's 10-year enterprise diversity goals, celebrate progress made thus far, and discuss TVA's journey moving forward; and

•Maintained CEO accountability for reinforcement of IwD as an enterprise priority through assessment of the

CEO’s individual performance in 2023.

Table of Contents

TVA continues to advance IwD in the communities it serves and is enhancing its economic development program support for women-, minority-, and veteran-owned businesses. TVA has established a Supplier Diversity Stakeholder Advisory Council. One of the priorities of the council is the Supplier Diversity Mentoring Program, which is designed to support and position diverse suppliers seeking to do business with TVA. Specific skills enhancements include inventory management, technology integration, accounting practices, program implementation, and continuous improvement. In addition, TVA has strengthened and focused IwD in the communities TVA serves, as part of advancing the public power model at TVA. This was accomplished through support of TVA’s regional model, community engagement, and focused partnerships with deliberate outreach to LPCs and community-based organizations.

Employee Resource Groups. TVA is powered by its people and strengthened by its diversity. TVA supports nine ERGs to help strengthen an inclusive culture and make life better for the people it serves:

•ABLED Events — allows TVA employees to bring unique perspectives and gifts together as a united team to celebrate commonalities and differences through "Awareness Benefiting Leaders & Employees about disAbilities" in the workplace.

•ACTion — celebrates and honors the many Asian cultures represented within TVA, from Japan to India, and to the Philippines and beyond. It regularly highlights social events and supports career-enriching workshops.

•African American Voices — provides an avenue for African Americans and others interested in fellowship and smart career connections within TVA. It promotes mentoring and development opportunities, as well as group workshop events on such topics as personal branding, personal finance, and networking and negotiation skills.

•Council for Native Americans (new for 2023) — provides educational opportunities for the TVA workforce to learn and interact more with a focus on the cultural diversity of Native Americans, to help facilitate the growth of the Native American employee population in numbers, and to provide an avenue for Native Americans to share their cultural diversity. Its goal is to be a growing part of TVA's commitment to a sustainable, diverse, and inclusive workforce by highlighting the Native American history, various ethnicities, and community endeavors.

•New Employee Network — makes life easier for new employees entering a large company. It provides organizational information and cross-functional connections not only on the front-end to new employees but throughout an employee’s tenure at the company.

•Spectrum — highlights the open, accepting, and safe work environment TVA provides for all employees and focuses increasing visibility on educational and social opportunities on LGBTQ+ issues by offering employees a variety of community and professional networking opportunities within the Tennessee Valley.

•TVA & Amigos — provides an avenue for TVA's Hispanic employees and those interested in Latin culture to be involved in professional, educational, and service-oriented events.

•TVA Veterans Association — allows employees unique camaraderie opportunities as they support a wide array of local and national ceremonies and events and is one of the oldest and most active ERGs at TVA, with all branches of the military represented.

•Women Empowered — supports women at all stages of their careers and advocates for the equal rights of all female employees across TVA. This extends externally as TVA supports inclusion, networking, and developmental opportunities for girls and young women in local communities.

Together, TVA and its employees collectively champion personal and professional growth through a network of professional, social, and volunteer opportunities made available by each ERG and TVA’s diverse mix of employees.

Talent

The strength of TVA lies in the collective power from the diverse knowledge, experiences, and perspectives that its employees bring. To inspire the best from its people, TVA utilizes a talent management framework to deliver enterprise workforce needs supporting talent attraction, selection, development, engagement, and performance.

Attracting and Retaining Talent. TVA is enriched by the diversity of a talented, highly skilled workforce made up of people from all backgrounds. As an employer of choice across the seven-state service region, TVA endeavors to ensure that all qualified candidates receive fair consideration for open jobs at TVA. TVA actively engages with key community and university partners to recruit talent of all races, colors, sexual orientations, ethnicities, gender identities, abilities, religions, and ages. TVA continues to improve employment opportunities for underrepresented populations within TVA’s workforce through early career apprenticeships and internships.

Table of Contents

While TVA’s voluntary attrition rate reflected a slight year-over-year rise in 2022, voluntary attrition has returned to TVA’s historical rates prior to 2022. In addition, the TVA voluntary attrition rate continues to fall well below the national, utility, and government benchmarks. The majority of TVA's attrition is healthy attrition (e.g., retirements), and this is important because retention in early years of employment is key for maintaining healthy, inclusive pipelines at all levels in the organization. The stability that results from retaining talent is an area of strength that is critical to TVA’s success. TVA believes this is largely attributable to its People Advantage focus, which includes competitive compensation and comprehensive benefits programs, inclusion and well-being programs, flexible workplace practices, and an environment that promotes the retention of its complex and valuable workforce.

Competitive Total Rewards. TVA’s total rewards package is a significant factor in attracting and retaining top talent. TVA’s competitive benefits portfolio supports the values and needs of its employees. TVA provides market-based and competitive compensation which includes an annual incentive plan designed to reward accomplishments against established annual business and individual goals. All eligible employees participate in TVA's annual incentive plan, including TVA's represented employee population.

Additionally, in support of its cultural commitment to IwD, TVA periodically reviews compensation practices to promote fairness and equity. TVA has engaged third party vendors to conduct independent pay equity analyses and continues to monitor its pay practices and to provide its leaders with tools to assist in making equitable pay decisions.

To support and care for the well-being of employees and their families, TVA currently offers comprehensive and competitive benefits, including the following:


•medical, vision, dental, life, accident, and disability insurance	•flexible spending accounts •tuition reimbursement	•well-being incentives •employee assistance programs
•behavioral and medical telemedicine	•401(k) retirement	•family caregiving benefits
•leave donation	•dependent scholarship program	•family building benefits
•maternity leave	•paid parental leave	•flexible work schedules
•paid time-off	•health savings account

Development and Training. As TVA continues to adapt to the evolving demands of the industry, it is imperative that it cultivate a work environment that motivates people to do their best work by aligning employee development, skills, and capabilities with what TVA needs to succeed now and in the future. TVA provides multiple training and development opportunities at all employee levels. Those opportunities include:


•individual learning-ability	•team learning	•mentoring
•career pathing, including rotational development	•professional, technical, and leadership career pathways	•33 craft apprenticeship programs
•over 15,300 on-line learning courses

TVA also invests in the development of its employees through tuition reimbursement for academic programs aligned with TVA’s business and workforce development needs. In addition, employees engaged in over 715,000 hours of training in 2023.

Leadership Development and Succession Planning. TVA encourages personal and professional development and has strategic leadership development programs designed to prepare employees to step into leadership positions and to accept the additional responsibilities, expectations, and challenges faced by each level of leadership. TVA also has advanced leadership programs designed to further prepare leaders for executive level positions, which require an extensive interview and assessment process for selection. Through TVA’s talent review and succession planning program, 98 percent of director and executive level roles have at least one succession candidate identified, with 93 percent having at least one ready-now succession candidate.

Continuous focus on and support of leadership development is maintained through means such as talent discussions at least annually at every level of the organization, which include attention to developing a diverse leadership pipeline. TVA has established goals for female and people of color representation in leadership and plans to update these goals to continuously improve this representation.

Engagement

Strong engagement levels impact all TVA strategic priorities. TVA's work in this key area is focused on ensuring TVA is providing the tools and education to support employee's well-being, leveraging flexibility to support and engage the workforce,

Table of Contents

and strengthening relationships with TVA's union partners to ensure employees feel heard.

Employee Engagement Survey. TVA’s Employee Engagement Survey is a key tool for understanding and leveraging the employee voice. The survey is administered a minimum of annually to all employees and measures overall engagement and drivers of engagement. The survey results provide real-time insights and analytics and are compared to a normative database comprised of other relative external benchmarks to help identify strengths and opportunities for improvement. Results from the surveys are shared with employees and used by TVA leadership and business units to improve and monitor progress against People Advantage objectives. Two scores are used as key People Advantage metrics: Engagement, which measures the sense of commitment and involvement, and Inclusion, which measures the sense of belonging at work. See Key Metrics below for Engagement and Inclusion scores.

Workplace Flexibility. As part of its People Advantage strategic priority, TVA strives to create a work environment that is welcoming, supportive, and responsive to the changing needs of the workforce. As the world around TVA has considerably shifted over the past few years, TVA's employees continue to show a remarkable ability to adapt and persevere as they make a difference in communities across the Tennessee Valley. While recognizing hybrid environments means fewer individuals in office locations, TVA is exploring how to best enable its employees to work everywhere across the Tennessee Valley. TVA is evaluating its facilities and workspace options with the objective to transform its facilities into a resource that enables the future of work, while enhancing TVA's engagement and presence within the communities TVA serves. As always, TVA is committed to being a valued, trusted partner in the communities where TVA employees live and serve.

Safety, Employee Health, and Well-being. Safety is one of TVA’s core values. TVA's safety program is based on the fundamentals of a safety management system, which includes management commitment, employee engagement, hazard recognition and control, worksite analysis, contractor safety management, training, review, and continuous improvement. TVA’s safety training aims to educate employees on the elements of the safety program and foster a culture of awareness. Employee engagement is critical to the success of the program. TVA's vital safety behaviors are employee-driven and developed with the collaboration of represented employees, union leadership, and management. As a federal agency, TVA is also required to complete regulatory compliance inspections of its facilities on an annual basis.

In 2023, TVA Safety continued to expand efforts around contractor safety oversight and to improve field engagement. TVA also focused on engaging with industry leaders and developing internal safety talent through participation in the Middle Tennessee Occupational Safety and Health Administration Council, the American Society of Occupational Safety Professional Executive Forum Alliance, the Construction Safety Research board of advisors, and Edison Electric Institute, and sitting on the Department of Labor’s Federal Advisory Council on Occupational Safety and Health.

TVA has provided support for its employees to ensure the retention of valuable talent and to enhance well-being. This support includes emergency back-up care support for child and adult dependents, establishing a mental health advocacy program, providing unlimited Employee Assistance Program sessions, enhancing paid leave, and providing tutoring resources. TVA’s safety and well-being accomplishments in 2023 include an increased effort and focus on developing proactive and preventative leading indicators of the safety program, improving employee engagement, strengthening procedural and regulatory/compliance framework, and obtaining top decile serious injury performance based on the most recent data available.

Partnerships with Unions. TVA has a long-standing policy of acknowledging and working with recognized representatives of its employees, and that policy is reflected in long-term agreements to recognize the unions (or their successors) that represent TVA employees. TVA’s labor construct is complex and unique and is primarily governed by the TVA Act. Neither the federal labor relations laws covering most private sector employers, nor those covering most federal agencies, apply to TVA.

TVA’s labor strategy is critical to the achievement of its strategic priorities as it prepares the workforce for the future. Its employees are represented by six collective bargaining agreements and nine labor unions. This reflects 58% of TVA's workforce, or approximately 6,000 employees. With the addition of collective bargaining agreements and labor unions for TVA's contractors, there are a total of nine collective bargaining agreements and 17 labor unions. TVA’s partnerships with these unions go back more than 80 years and form the backbone of TVA and its ability to serve the people of the Tennessee Valley.

Recent accomplishments to strengthen the relationship between TVA and its labor unions include integrating union partners in TVA’s comprehensive workforce optimization strategy, in alignment with operational and asset transition strategies that position TVA to meet strategic imperatives over the next decade; negotiating a three-year wage agreement between TVA and the Office and Professional Employees International Union through September 2026; and collaborating with IwD to hold the first ever IwD Forum with union leaders to align on how TVA and the union work together to reach goals for a skilled workforce representative of the Tennessee Valley.

Table of Contents

Awards

Awards and other recognition help TVA understand its strengths, identify opportunities for improvement, bolster employee pride, and better attract and retain diverse talent. 2023 TVA recognition included:


•2022-2023 – Ethisphere® Compliance Leader VerificationTM – first federal agency to receive certification			•2023 Military Friendly® Brand – Rank "Designated"
•2023 National Organization on Disability – Leading Disability Employer			•2023 Military Friendly® Employers – Ranked No. 4
•2023 Fair360 – Top Companies for Utilities Award – Ranked No. 3; Top Regional Companies - No. 12			•2023 Military Friendly® Military Spouse Friendly Employers - Ranked No. 7
•2023 VETS Indexes Employer Awards – VETS Indexes 5-Star Employer			•2023 Military Friendly® Supplier Diversity Program Award – Ranked No. 1; Top 10, four years in a row
•2023 Forbes America's Best Employers By State - Ranked No. 8 in Tennessee			•One of the largest U.S. Contributors to Helmets to Hardhats Program

Key Metrics

TVA actively monitors internal metrics to remain aware of human capital trends and to strive to ensure that it is making measurable progress on its People Advantage objectives. Through monitoring sources such as data and performance dashboards, one-on-one engagements between leaders and employees, and engagement surveys, TVA obtains information that helps it understand its performance and make adjustments, as needed.

Key measures of success in TVA’s People Advantage strategic priority are set forth below:


	Goal		Actual
Performance Measure	2024		2023		2022
People of color representation in leadership (%) (1)	12.0	%	10.9	%	10.4	%
Female representation in leadership (%) (1)	21.0	%	19.7	%	19.2	%
Diverse external hires (%) (2)	40.0	%	41.4	%	41.4	%

Voluntary attrition (%) (3)	2.4	%	1.4	%	2.4	%
Engagement (100-point scale) (4)	Top Quartile (≥79)		81		81
Inclusion (100-point scale) (5)	Median (≥72)		75		72
Recordable injuries (#) (6)	28		32		54
Serious injury incident rate (7)	0.00		0.02		0.02
Serious injury incidents (7)	0		3		2
Ethics violations(8)	0		23		28

Notes

(1) Defined as first line supervisors and above.

(2) Defined as external hires who are female, persons of color, or persons with disabilities.

(3) Voluntary attrition measures and accounts for all employees who leave the business voluntarily during a fiscal year. 2023 voluntary attrition rates have realigned to former pre-pandemic rates for TVA, significantly below those of the greater external market.

(4) Based on score from Employee Engagement Survey defined as degree to which employees invest their cognitive, emotional, and behavioral energies toward positive organizational outcomes. Benchmark data is provided by the third-party administrator of the survey, based on data collected from over 750 organizations. Benchmarks are updated at least annually using data from the previous 12-month period.

(5) Based on score from Employee Engagement Survey defined as the degree to which employees sense they belong at work. Benchmark data is provided by the third-party administrator of the survey, based on data collected from over 750 organizations. Benchmarks are updated at least annually using data from the previous 12-month period.

(6) Retroactive cases can affect annual recordable injury counts reported.

(7) Based on the Edison Electric Institute criteria developed by industry peers.

(8) Ethics violations are determined by performing a comprehensive assessment across TVA of substantiated ethics violations involving violation of ethical laws or TVA's Code of Conduct; refusal or failure to cooperate with investigations; violation of equal opportunity policies or remedial actions; mishandling of classified information, privacy information, or security incidents; misuse of government property or official time; theft or unauthorized possession of property; falsification of safety-related documents; falsification or failure to correct TVA documents; and associated disciplinary and/or corrective actions taken.

Table of Contents

Workforce Demographics


Employee Demographics	2023	2022
Number of employees on September 30	10,901	10,390
Employees represented by collective bargaining unit	58% of employees represented, or approximately 6,000 employees	58% of employees represented, or approximately 6,000 employees
Trades and labor employees	3,293	3,198
Average tenure (years)	12	13
Average age	45.4	45.7


	All Employees		Leadership		New Hires
	2023	2022	2023	2022	2023	2022
Female	2,289	2,159	309	288	267	276

People of Color	1,363	1,227	171	156	206	186
Military, Veteran	1,883	1,822	336	315	148	122
Disabled	844	773	134	114	44	38

Note

All data is based upon self-reported information provided to TVA.

In addition to the employees above, TVA also had approximately 15,600 and 16,200 contractors on September 30, 2023 and 2022, respectively, providing intermittent or full-time services. The majority of these contractors are managed by TVA suppliers that are providing services to TVA.

Table of Contents

ITEM 1A. RISK FACTORS

The risk factors described below, as well as the other information included in this Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (the "Annual Report"), should be carefully considered. Risks and uncertainties described in these risk factors could cause future results of TVA operations to differ materially from historical results as well as from the results anticipated in forward-looking statements. Although the risk factors described below are the ones that TVA considers material, additional risk factors that are not presently known to TVA or that TVA presently does not consider material may also impact TVA's business operations. See Forward Looking Information above for a description of some matters that could affect the below risks or generate new risks. The occurrence of any of the following could have a material adverse effect on TVA's cash flows, results of operations, or financial condition.

For ease of reference, the risk factors are presented in eight categories: (1) regulatory, legislative, and legal risks; (2) cybersecurity and information technology risks; (3) operational risks; (4) financial, economic, and market risks; (5) human capital and management risks; (6) risks related to the environment and catastrophic events; (7) accounting and financial reporting risks; and (8) general risk factors.

REGULATORY, LEGISLATIVE, AND LEGAL RISKS

Existing laws, regulations, and orders may negatively affect TVA's cash flows, results of operations, and financial condition, as well as the way TVA conducts its business.

TVA is required to comply with comprehensive and complex laws, regulations, and orders. The costs of

Tennessee Valley Authority [TVE] Filings
Tennessee Valley Authority [TVC] Filings
10-K	[2023-11-14]
10-Q	[2023-08-01]
10-Q	[2023-05-02]
10-Q	[2023-01-31]
10-K	[2022-11-15]
10-Q	[2022-08-02]
10-Q	[2022-05-12]
10-Q	[2022-02-01]
10-K	[2021-11-15]
10-Q	[2021-08-03]
10-Q	[2021-05-04]
10-Q	[2021-02-12]
10-K	[2020-11-17]
10-Q	[2020-08-04]
10-Q	[2020-05-05]
10-Q	[2020-02-05]
10-K	[2019-11-15]
10-Q	[2019-08-02]
10-Q	[2019-05-02]
10-Q	[2019-01-31]
10-K	[2018-11-15]
10-Q	[2018-08-03]
10-Q	[2018-05-04]
10-Q	[2018-02-02]
10-K	[2017-11-15]
10-Q	[2017-08-01]
10-Q	[2017-05-02]
10-Q	[2017-01-31]
10-K	[2016-11-15]
10-Q	[2016-08-02]
10-Q	[2016-05-03]
10-Q	[2016-02-03]
10-K	[2015-11-20]
10-Q	[2015-08-04]
10-Q	[2015-05-01]
10-Q	[2015-02-04]
10-K	[2014-11-17]
10-Q	[2014-08-05]
10-Q	[2014-05-06]
10-Q	[2014-02-04]
10-K	[2013-11-18]
10-Q	[2013-08-05]
10-Q	[2013-05-03]
10-Q	[2013-02-05]
10-K	[2012-11-16]
10-Q	[2012-08-03]
10-Q	[2012-05-04]
10-Q	[2012-02-03]

Tennessee Valley Authority [TVE] Filings

Tennessee Valley Authority [TVC] Filings