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1.
Summary of significant
accounting policies
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General
TVA is a wholly owned corporate agency and instrumentality of the United
States. It was established by the TVA Act with the objective of developing
the resources of the Tennessee Valley region in order to strengthen
the regional and national economy and the national defense by providing:
(1) an ample supply of power within the region, (2) navigable channels
and flood control for the Tennessee River System, and (3) agricultural
and industrial development and improved forestry in the region. TVA
carries out these regional and national responsibilities in a service
area that centers on Tennessee and parts of Alabama, Georgia, Kentucky,
Mississippi, North Carolina and Virginia.
TVA’s operations
have historically been divided into two types of activities—the
power program and the nonpower programs. Substantially all TVA revenues
and assets are attributable to the power program. The power program
has historically been separate and distinct from the nonpower programs
and is required to be self-supporting from power revenues and proceeds
from the issuance of debt. The power program receives no congressional
appropriations and is required to make annual payments to the U.S. Treasury
in repayment of, and as a return on, the government’s appropriation
investment in TVA power facilities. Until 2000 most of the funding for
TVA’s nonpower programs was provided by congressional appropriations.
Certain nonpower activities are also funded by various revenues and
user fees. See note 10 for a discussion related
to current and future funding of TVA’s nonpower programs.
Power rates are
established by the TVA Board of Directors as authorized by the TVA Act.
The Act requires TVA to charge rates for power that, among other things,
will produce gross revenues sufficient to provide funds for operation,
maintenance and administration of its power system; payments to states
in lieu of taxes; and debt service on outstanding indebtedness.
Fiscal
year
Unless otherwise indicated, years (2000, 1999, etc.) refer to TVA’s
fiscal years ended September 30.
Revenue
Revenues from power sales are recorded as power is delivered to customers.
TVA accrues estimated unbilled revenues for power sales provided to
customers for the period of time from the end of the billing cycle to
month-end.
Off-system sales
are presented in the accompanying Statements of Income-Power Program
as a component of Sales
of electricity—Federal agencies and other.
Property,
plant and equipment, and depreciation
Additions to plant are recorded at cost, which includes direct and indirect
costs and an allowance for funds used during construction. The cost
of current repairs and minor replacements is charged to operating expense.
Nuclear fuel is valued at the lower of cost or market using the average
cost method for raw materials and the specific identification method
for nuclear fuel in reactor. Amortization of nuclear fuel is calculated
on a units-of-production basis and is included in fuel expense. The
TVA Act requires TVA’s Board of Directors to allocate the cost
of completed multipurpose projects between the power and nonpower programs,
subject to the approval of the President of the United States. The original
cost of property retired, together with removal costs less salvage value,
is charged to accumulated depreciation. Depreciation is generally computed
on a straight-line basis over the estimated service lives of the various
classes of assets. Depreciation expense expressed as a percentage of
the average annual depreciable completed plant was 3.27 percent for
2000, 3.28 percent for 1999 and 3.23 percent for 1998.
Decommissioning
costs
TVA recognizes as incurred all obligations related to closure and removal
of its nuclear units. Earnings from decommissioning investments, amortization
of the decommissioning regulatory asset and interest expense on the
decommissioning liability are deferred (see
note 9—Decommissioning costs).
In 2000 TVA performed
calculations in accordance with Nuclear Regulatory Commission (NRC)
revised guidelines. The studies resulted in a $209 million decrease
in TVA’s required decommissioning obligation which was recorded
along with a corresponding reduction in the regulatory asset.
Allowance
for funds used during construction
TVA capitalizes an allowance for funds used during construction. The
allowance is applicable to construction in progress, excluding deferred
nuclear generating units.
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