Tennessee Valley Authority

Results of Operations

Sales of Electricity

Sales of electricity were 39,577 million and 38,031 million kilowatt hours ("kWh") for the three months ended December 31, 2025 and 2024, respectively. The total sales of electricity during the three months ended December 31, 2024 included 8 thousand kWh of pre-commercial generation at Johnsonville Aeroderivative Combustion Turbine ("CT") Facility. 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 chart compares 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 four percent for the three months ended December 31, 2025, as compared to the same period of the prior year. For the three months ended December 31, 2025, weather impacts were closer to normal as compared to the same period of the prior year, which resulted in a 17 percent increase in heating degree days. In addition, sales volume increased due to higher sales within the data processing, hosting, and related services sector.

Financial Results

The following table compares operating results for the three months ended December 31, 2025 and 2024:

Operating Revenues. Operating revenues for the three months ended December 31, 2025 and 2024, were $3.0 billion and $2.9 billion, respectively. The following table compares TVA's operating revenues for the periods indicated:

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 three months ended December 31, 2025 and the three months ended December 31, 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 December 31, 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.

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.

Operating revenues increased $129 million for the three months ended December 31, 2025, as compared to the same period of the prior year, primarily due to a $152 million increase in base revenue driven by a $124 million increase attributable to higher sales volume and a $28 million increase attributable to higher effective base rates. Higher sales volume was driven by closer to normal weather impacts as compared to the same period of the prior year, which resulted in a 17 percent increase in heating degree days, and higher sales within the data processing, hosting, and related services sector. In addition, there was a $28 million decrease in fuel cost recovery revenue. The $28 million decrease in fuel cost recovery revenue was driven by a $61 million decrease attributable to lower fuel cost recovery rates, partially offset by a $33 million increase attributable to higher sales volume. The lower fuel cost recovery rates were due primarily to more 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 months ended December 31, 2025 and 2024, consisted of the following:

Fuel expense increased $9 million for the three months ended December 31, 2025, as compared to the same period of the prior year. This increase was primarily due to an increase of $30 million in fuel expense due to higher demand for energy. Additionally, there was an increase of $18 million due to higher effective fuel rates primarily as a result of higher natural gas prices. Partially offsetting these increases was a decrease of $39 million related to the deferral of unplanned energy demand.

Purchased power expense increased $16 million for the three months ended December 31, 2025, as compared to the same period of the prior year. This increase was primarily due to higher purchased power market prices compared to the same period of the prior year resulting in an increase of $74 million. Partially offsetting this increase was a decrease of $34 million related to the deferral of unplanned purchased power expenses. Additionally, there was a decrease of $24 million related to higher availability of TVA nuclear generation assets.

Operating and maintenance expense decreased $56 million for the three months ended December 31, 2025, as compared to the same period of the prior year. This decrease was primarily due to IRA tax credits recorded in the three months ended December 31, 2025, which contributed $62 million to the overall decrease. These credits were recognized as a reduction in Operating and maintenance expense based on what the credits were intended to reimburse. See Note 1 —Summary of Significant Accounting Policies —Government Grants.

Depreciation and amortization expense increased $14 million for the three months ended December 31, 2025, as compared to the same period of the prior year. This increase was primarily driven by an increase in depreciation expense due to additions of net completed plant. Partially offsetting this increase was a $15 million decrease in depreciation expense due to the December 2025 Browns Ferry SLR, which extended the useful life of the three nuclear units for an additional 20 years.

Tax equivalents expense increased $7 million for the three months ended December 31, 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 2025, 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 December 31, 2024 included 8 thousand kWh of pre-commercial generation at Johnsonville Aeroderivative CT.

(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 December 31, 2025, and the three months ended December 31, 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 1,020 million kWh and 1,238 million kWh for the three months ended December 31, 2025, and 2024, respectively.

(5) Purchased power (other renewables) includes purchased power from the following renewable sources: solar, 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.

(6) At December 31, 2024, 1,024 megawatts ("MWs") previously classified as Purchased power (other renewables) has been reclassified to Purchased power (wind) to conform to current year presentation.

In addition to power supply sources included here, TVA offers energy efficiency programs that effectively reduce energy needs. In 2026, TVA expects to invest $133 million on its energy efficiency programs and anticipates approximately 400 gigawatt hours of net incremental energy efficiency savings. During the three months ended December 31, 2025, TVA invested $27 million on energy efficiency programs.

Interest Expense. Interest expense and interest rates for the three months ended December 31, 2025, and the three months ended December 31, 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 VIEs, and discount notes.

Total interest expense increased $29 million for the three months ended December 31, 2025, as compared to the same period of the prior year. This increase was primarily driven by a $33 million increase from higher average balances and rates on long-term debt. This increase was partially offset by a $3 million decrease in interest on short-term debt primarily due to lower average balances and rates as well as a $1 million decrease from lower other interest expense.