Tennessee Valley Authority

Results of Operations

Sales of Electricity

Sales of electricity were 39,751 million and 39,342 million kilowatt hours ("kWh") for the three months ended June 30, 2025 and 2024, respectively. Sales of electricity were 120,527 million and 117,313 million kWh for the nine months ended June 30, 2025 and 2024, respectively. The total sales of electricity during the nine months ended June 30, 2025 included 94 thousand kWh of pre-commercial generation at Johnsonville Aeroderivative CT Units 21-30, of which 35 thousand kWh was recognized in the three months ended June 30, 2025. The total sales of electricity during the nine months ended June 30, 2024 included 137 thousand kWh of pre-commercial generation at Paradise CT Units 5-7, all of which was recognized in the three months ended December 31, 2023. TVA sells power at wholesale rates to local power company customers ("LPCs") that then resell the power to their customers at retail rates. TVA also sells power to directly served customers, consisting primarily of federal agencies and customers with large or nonstandard loads. In addition, power exceeding TVA's system needs is sold under exchange power arrangements with certain other power systems.

The following charts compare TVA's sales of electricity by customer type for the periods indicated:

The following charts show a breakdown of TVA's energy load:

Note

Information included in the charts above was derived from energy usage of directly served customers and customers served by LPCs during calendar year ("CY") 2024, and these graphs will continue to be updated on a CY basis.

Weather affects both the demand for TVA power and the price for that power. 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.

Sales of electricity increased one percent for the three months ended June 30, 2025, as compared to the same period of the prior year. The increased sales volume was primarily driven by higher sales to residential and small commercial and industrial customers as well as increases within the data processing, hosting, and related services sector. Partially offsetting the increased sales volume was a 12.5 percent decrease in cooling degree days compared to the same period of the prior year.

Sales of electricity increased three percent for the nine months ended June 30, 2025, as compared to the same period of the prior year. The increased sales volume was primarily driven by higher sales to residential and small commercial and industrial customers as well as increases within the data processing, hosting, and related services sector. Partially offsetting the increased sales volume was an 8.2 percent decrease in cooling degree days compared to the same period of the prior year.

Financial Results

The following table compares operating results for the three and nine months ended June 30, 2025 and 2024:

Operating Revenues. Operating revenues for the three months ended June 30, 2025 and 2024, were $3.3 billion and $2.9 billion, respectively. Operating revenues for the nine months ended June 30, 2025 and 2024, were $9.8 billion and $8.8 billion, respectively. The following table compares TVA's operating revenues for the periods indicated:

Note

(1) Represents revenue capitalized during pre-commercial operations at Johnsonville Aeroderivative CT Units 21-30 in the three and nine months ended June 30, 2025 and Paradise CT Units 5-7 in the nine months ended June 30, 2024, all of which was recognized in the three months ended December 31, 2023.

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 both MLGW and NES accounted for eight percent of TVA's total operating revenues for both the nine months ended June 30, 2025 and the nine months ended June 30, 2024.

TVA's rate structure uses pricing signals to indicate seasons and hours of higher cost to serve its customers and to capture a portion of TVA's fixed costs in fixed charges. The structure includes three base revenue components: time of use demand charges, time of use energy charges, and a grid access charge ("GAC"). The demand charges are based upon the customer's peak monthly usage. The energy charges are based on time differentiated kWh used by the customer. Both of these components can be significantly impacted by weather. The GAC captures a portion of fixed costs and is offset by a corresponding reduction to the energy rates. The GAC also reduces the impact of weather variability to the overall rate structure.

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 to no more than 10 percent during any consecutive five-fiscal-year period, as more specifically described in the

agreements. 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 June 30, 2025, 148 LPCs had signed the 20-year Partnership Agreement with TVA.

In addition to base revenues, the rate structure includes a separate fuel rate that includes the costs of natural gas, fuel oil, purchased power, coal, emission allowances, nuclear fuel, and other fuel-related commodities; realized gains and losses on derivatives purchased to hedge the costs of such commodities; and payments to states and counties in lieu of taxes ("tax equivalents") associated with the fuel cost adjustments.

TVA is required to charge rates for power that will produce gross revenues sufficient to cover various costs as discussed in Part I, Item I, Business —Rates of the Annual Report. In August 2024, the TVA Board approved a 5.25 percent wholesale base rate increase (excluding fuel) effective October 1, 2024, primarily due to additional capacity needs and rising costs. This rate adjustment is estimated to produce an additional $495 million of revenue during 2025.

The changes in revenue components are summarized below:

Notes

(1) Includes economic development credits to promote growth in the Tennessee Valley, hydro preference credits for residential customers of LPCs, and demand response credits allowing TVA to reduce industrial customer usage in periods of peak demand to balance system demand. See Note 16 —Revenue.

(2) Represents revenue capitalized during pre-commercial operations at Johnsonville Aeroderivative CT Units 21-30 in the three and nine months ended June 30, 2025 and Paradise CT Units 5-7 in the nine months ended June 30, 2024, all of which was recognized in the three months ended December 31, 2023.

Operating revenues increased $427 million for the three months ended June 30, 2025, as compared to the same period of the prior year, primarily due to a $302 million increase in fuel cost recovery revenue. The $302 million increase in fuel cost recovery revenue was driven by a $296 million increase attributable to higher effective fuel rates and a $6 million increase attributable to higher sales volume. The higher effective fuel rates were due primarily to using higher cost coal and natural gas generation due to less availability of nuclear generation as compared to the same period of the prior year. In addition, there was a $130 million increase in base revenue driven by a $104 million increase attributable to higher effective base rates and a $26 million increase attributable to higher sales volume. The increase in effective base rates was primarily due to the TVA Board action to approve a 5.25 percent wholesale base rate increase effective October 1, 2024. The higher sales volume was driven primarily by higher sales to residential and small commercial and industrial customers as well as increases within the data processing, hosting, and related services sector, partially offset by a decrease in cooling degree days.

Operating revenues increased $960 million for the nine months ended June 30, 2025, as compared to the same

period of the prior year, primarily due to a $492 million increase in base revenue. The $492 million increase in base revenue was driven by a $262 million increase attributable to higher effective base rates and a $230 million increase attributable to higher sales volume. The increase in effective base rates was primarily due to the TVA Board action to approve a 5.25 percent wholesale base rate increase effective October 1, 2024. The higher sales volume was driven primarily by higher sales to residential and small commercial and industrial customers as well as increases within the data processing, hosting, and related services sector, partially offset by a decrease in cooling degree days. In addition, there was a $469 million increase in fuel cost recovery revenue driven by a $401 million increase attributable to higher effective fuel rates and a $68 million increase attributable to higher sales volume. The higher effective fuel rates were due primarily to using higher cost coal and natural gas generation due to less availability of nuclear generation as compared to the same period of the prior year.

See Sales of Electricity above for further discussion of the change in the volume of sales of electricity and Operating Expenses below for further discussion of the change in fuel expense.

Operating Expenses. Operating expense components as a percentage of total operating expenses for the three and nine months ended June 30, 2025 and 2024, consisted of the following:

Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024

Fuel expense increased $165 million for the three months ended June 30, 2025, as compared to the same period of the prior year. This increase was primarily driven by an increase in fuel cost recovery of $127 million due to the collection of significant fuel costs from the previous quarter that were the result of higher than expected coal and natural gas prices due to colder than average temperatures. Additionally, fuel expense increased $53 million primarily due to higher effective fuel rates related to using higher cost coal and natural gas generation due to less availability of nuclear generation as compared to the same period of the prior year. Partially offsetting this increase was a decrease of $15 million due to less availability of nuclear generation and more availability of hydro generation as compared to the same period of the prior year.

Purchased power expense increased $142 million for the three months ended June 30, 2025, as compared to the same period of the prior year. This increase was primarily due to an increase of $82 million from higher purchased power market prices compared to the same period of the prior year. Additionally, purchased power expense increased $52 million due to higher demand for energy with less availability of TVA nuclear generation. Purchased power expense also increased $8 million due to the recovery of purchased power costs from the previous quarter that were the result of higher than expected purchased power prices due to colder than average temperatures.

Operating and maintenance expense increased $7 million for the three months ended June 30, 2025, as compared to the same period of the prior year. This increase was primarily due to a $19 million increase in outage expense primarily due to an increase in nuclear outage days.

Depreciation and amortization expense increased $30 million for the three months ended June 30, 2025, as compared to the same period of the prior year. The increase was primarily driven by a $9 million increase in amortization expense of finance leases and amortization expense of decommissioning costs recovered in rates, as well as an increase due to depreciation of additions to net completed plant.

Tax equivalents expense increased $25 million for the three months ended June 30, 2025, as compared to the same period of the prior year. This change is primarily driven by an increase in TVA's revenue from sales of electricity in 2024, which is used as the basis for calculating tax equivalent expense.

Nine Months Ended June 30, 2025, Compared to Nine Months Ended June 30, 2024

Fuel expense increased $113 million for the nine months ended June 30, 2025, as compared to the same period of the prior year. An increase of $192 million was due primarily to higher effective fuel rates related to using higher cost coal and natural gas generation due to less availability of nuclear generation as compared to the same period of the prior year. Partially offsetting this increase was a decrease of $42 million due to less availability of nuclear generation and more availability of hydro generation as compared to the same period of the prior year. Additionally, fuel expense decreased $37 million related to the deferral of unplanned coal and gas costs due to less availability of nuclear generation.

Purchased power expense increased $377 million for the nine months ended June 30, 2025, as compared to the same period of the prior year. This increase was primarily due to higher demand for energy and less availability of TVA nuclear generation, resulting in an increase of $358 million.

Operating and maintenance expense increased $100 million for the nine months ended June 30, 2025, as compared to the same period of the prior year. This increase was primarily due to $113 million of increased payroll and benefit costs primarily due to severance costs associated with ETP efforts and labor escalation for cost of living increases. In addition, there was a $36 million increase in outage expense primarily due to an increase in nuclear outage days. Partially offsetting these increases was a $27 million decrease in expenditures related to project contract labor primarily due to higher power operations performance activities and other natural gas project work in the prior year.

Depreciation and amortization expense increased $98 million for the nine months ended June 30, 2025, as compared to the same period of the prior year. The increase was primarily driven by an increase of $33 million related to amortization expense of finance leases and amortization expense of decommissioning costs recovered in rates and an increase in depreciation expense of $18 million related to the decision in April 2024 to retire Kingston. Additionally, there was an increase due to depreciation of additions to net completed plant.

Tax equivalents expense increased $55 million for the nine months ended June 30, 2025, as compared to the same period of the prior year. This change is primarily driven by an increase in TVA's revenue from sales of electricity in 2024, which is used as the basis for calculating tax equivalent expense.

Generating Sources. The following tables show TVA's generation and purchased power by generating source as a percentage of all electrical power generated and purchased (based on kWh) for the periods indicated.

Notes

(1) The generation for the three months ended June 30, 2025 includes 35 thousand kWh of pre-commercial generation at Johnsonville Aeroderivative CT Units 21-30. The generation for the three months ended June 30, 2024 includes no kWh of pre-commercial generation at Paradise CT Units 5-7.

(2) Generation from TVA-owned renewable resources (non-hydroelectric) is less than one percent for all periods shown and therefore is not represented in the table above.

(3) Raccoon Mountain Pumped-Storage Plant net generation is allocated against each TVA-operated generation facility and purchased power type for both the three months ended June 30, 2025, and 2024. See Part I, Item 1, Business —Power Supply and Load Management Resources —Hydroelectric Pumped-Storage in the Annual Report for a discussion of Raccoon Mountain Pumped-Storage Plant.

(4) Purchased power (natural gas and/or oil-fired) includes generation from Caledonia Combined Cycle Plant ("Caledonia CC"), which is currently a leased facility operated by TVA. Generation from Caledonia CC was 1,484 million kWh and 1,364 million kWh for the three months ended June 30, 2025, and 2024, respectively.

(5) Purchased power (other renewables) includes purchased power from the following renewable sources: solar, wind, biomass, and renewable cogeneration. TVA acquires Renewable Energy Certificates ("RECs") in connection with certain purchased power transactions and sells some of these RECs to customers.

Notes

(1) The generation for the nine months ended June 30, 2025 includes 94 thousand kWh of pre-commercial generation at Johnsonville Aeroderivative CT Units 21-30. The generation for the nine months ended June 30, 2024 includes 137 thousand kWh of pre-commercial generation at Paradise CT Units 5-7, all of which was recognized in the three months ended December 31, 2023.

(2) Generation from TVA-owned renewable resources (non-hydroelectric) is less than one percent for all periods shown and therefore is not represented in the table above.

(3) Raccoon Mountain Pumped-Storage Plant net generation is allocated against each TVA-operated generation facility and purchased power type for both the nine months ended June 30, 2025, and 2024. See Part I, Item 1, Business —Power Supply and Load Management Resources —Hydroelectric Pumped-Storage in the Annual Report for a discussion of Raccoon Mountain Pumped-Storage Plant.

(4) Purchased power (natural gas and/or oil-fired) includes generation from Caledonia Combined Cycle Plant ("Caledonia CC"), which is currently a leased facility operated by TVA. Generation from Caledonia CC was 3,958 million kWh and 3,240 million kWh for the nine months ended June 30, 2025, and 2024, respectively.

(5) Purchased power (other renewables) includes purchased power from the following renewable sources: solar, wind, biomass, and renewable cogeneration. TVA acquires RECs in connection with certain purchased power transactions and sells some of these RECs to customers.

In addition to power supply sources included here, TVA offers energy efficiency programs that effectively reduce energy needs. In 2025, TVA expects to invest $99 million on its energy efficiency programs and anticipates approximately 289 gigawatt hours of net incremental energy efficiency savings.

Interest Expense. Interest expense and interest rates for the three and nine months ended June 30, 2025, and the three and nine months ended June 30, 2024, were as follows:

Notes

(1) Includes amortization of debt discounts, issuance, and reacquisition costs, net.

(2) Includes average balances of long-term power bonds, debt of variable interest entities ("VIEs"), and discount notes.

(3) Includes interest on long-term power bonds, debt of VIE, and discount notes.

Total interest expense increased $40 million for the three months ended June 30, 2025, as compared to the same period of the prior year. This increase was primarily driven by a $32 million increase from higher average balances and rates on long-term debt, and a $17 million increase in interest on other financing leases, primarily the new lease financing arrangement with Johnsonville Aeroderivative Combustion Turbine Generation LLC ("JACTG"). This increase was partially offset by a $9 million decrease in interest on short-term debt primarily due to lower average balances and rates.

Total interest expense increased $85 million for the nine months ended June 30, 2025, as compared to the same period of the prior year. This increase was primarily driven by a $54 million increase from higher average balances and rates on long-term debt, and a $41 million increase in interest on other financing leases, primarily the new lease financing arrangement with JACTG. This increase was partially offset by a $10 million decrease in interest on short-term debt primarily due to lower average balances and rates.