TENNESSEE VALLEY AUTHORITY, 10-K filed on 11/17/2020
Annual Report
v3.20.2
DEI Document
shares in Millions, $ in Millions
12 Months Ended
Sep. 30, 2020
USD ($)
shares
Document Information [Line Items]  
Entity Registrant Name TENNESSEE VALLEY AUTHORITY
Entity Central Index Key 0001376986
Current Fiscal Year End Date --09-30
Entity Filer Category Non-accelerated Filer
Document Type 10-K
Document Period End Date Sep. 30, 2020
Document Fiscal Year Focus 2020
Document Fiscal Period Focus FY
Amendment Flag false
Entity Common Stock, Shares Outstanding | shares 0
Entity Small Business false
Entity Emerging Growth Company false
Entity Shell Company false
Entity Well-known Seasoned Issuer No
Entity Voluntary Filers No
Entity Current Reporting Status Yes
Entity Public Float | $ $ 0
Document Transition Report false
Entity File Number 000-52313
Entity Tax Identification Number 62-0474417
Entity Address, State or Province TN
Entity Address, City or Town Knoxville
Entity Address, Address Line One 400 W. Summit Hill Drive
Local Phone Number 632-2101
City Area Code (865)
Entity Address, Postal Zip Code 37902 (Zip Code)
Entity Interactive Data Current Yes
ICFR Auditor Attestation Flag true
v3.20.2
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
$ in Millions
12 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2018
Operating revenues      
Electric revenue $ 10,104 $ 11,159 $ 11,075
Other revenue 145 159 158
Revenue from sales of electricity 10,249 11,318 11,233
Operating expenses      
Fuel 1,584 1,896 2,049
Purchased power 880 1,007 973
Operating and maintenance 2,720 3,090 2,598
Depreciation and amortization 1,826 1,973 2,527
Tax equivalents 528 541 518
Total operating expenses 7,538 8,507 8,665
Operating income 2,711 2,811 2,568
Other income (expense), net 36 62 50
Defined Benefit Plan, Other Cost (Credit) 253 258 256
Interest expense      
Interest expense 1,142 1,198 1,243
Net income (loss) 1,352 1,417 1,119
ALABAMA      
Operating revenues      
Electric revenue 1,439 1,593 1,600
GEORGIA      
Operating revenues      
Electric revenue 249 270 267
KENTUCKY      
Operating revenues      
Electric revenue 624 691 696
MISSISSIPPI      
Operating revenues      
Electric revenue 941 1,063 1,052
NORTH CAROLINA      
Operating revenues      
Electric revenue 65 74 66
TENNESSEE      
Operating revenues      
Electric revenue 6,740 7,419 7,350
VIRGINIA      
Operating revenues      
Electric revenue $ 42 $ 45 $ 48
v3.20.2
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Millions
Sep. 30, 2020
Sep. 30, 2019
Current assets    
Cash and Cash Equivalents, at Carrying Value $ 500 $ 299
Accounts receivable, net 1,529 1,739
Inventories, net 1,003 999
Regulatory assets 130 156
Other current assets 84 85
Total current assets 3,246 3,278
Property, plant, and equipment    
Completed plant 64,970 62,944
Less accumulated depreciation (33,550) (31,384)
Net completed plant 31,420 31,560
Construction in progress 2,139 1,893
Nuclear fuel 1,504 1,534
Capital leases 516 146
Total property, plant, and equipment, net 35,579 35,133
Long-term Investments 3,198 2,968
Regulatory and other long-term assets    
Regulatory assets 10,245 8,763
Operating Lease, Right-of-Use Asset 232 0
Other long-term assets 325 325
Total regulatory and other long-term assets 10,802 9,088
Total assets 52,825 50,467
Current liabilities    
Accounts payable and accrued liabilities 1,844 1,649
Accrued interest 298 296
Asset Retirement Obligation, Current 345 163
Current portion of leaseback obligations 198 40
Regulatory liabilities 141 150
Short-term debt, net of discounts 57 922
Total Current maturities of power bonds issued at par 1,787 1,030
Current maturities of long-term debt of variable interest entities issued at par 41 39
Current maturities of notes payable 0 23
Total current liabilities 4,711 4,312
Other liabilities    
Post-retirement and post-employment benefit obligations 6,617 6,181
Asset retirement obligations 6,440 5,453
Finance Lease, Liability 525 182
Other long-term liabilities 2,548 2,308
Leaseback obligations 25 223
Non-current regulatory liabilities 23 0
Total other liabilities 16,178 14,347
Long-term debt, net    
Long-term power bonds, net 17,956 19,094
Long-term debt of variable interest entities, net 1,048 1,089
Total long-term debt, net 19,004 20,183
Total liabilities 39,893 38,842
Proprietary capital    
Power program appropriation investment 258 258
Power program retained earnings 12,177 10,823
Total power program proprietary capital 12,435 11,081
Nonpower programs appropriation investment, net 548 556
Accumulated other comprehensive income (loss) (51) (12)
Total proprietary capital 12,932 11,625
Total liabilities and proprietary capital $ 52,825 $ 50,467
v3.20.2
CONSOLIDATED STATEMENTS OF CASH FLOWS
$ in Millions
12 Months Ended
Sep. 30, 2020
USD ($)
Sep. 30, 2019
USD ($)
Sep. 30, 2018
USD ($)
Regulatory asset amount expensed $ (23) $ (261) $ (2)
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents 521 322 322
Cash flows from operating activities      
Net income (loss) 1,352 1,417 1,119
Adjustments to reconcile net income (loss) to net cash provided by operating activities      
Depreciation and amortization (including amortization of debt issuance costs and premiums/discounts) 1,848 1,993 2,554
Amortization of nuclear fuel cost 388 379 382
Non-cash retirement benefit expense 324 314 324
Prepayment credits applied to revenue 0 (10) (100)
Changes in current assets and liabilities      
Accounts receivable, net 259 (40) (68)
Inventories and other current assets, net (12) (87) 65
Accounts payable and accrued liabilities (38) (155) 143
Accrued interest 1 (8) (36)
Pension contributions (305) (307) (304)
Settlements of asset retirement obligations (114) (89) (106)
Other, net (44) 52 (37)
Net cash provided by operating activities 3,636 3,720 3,938
Cash flows from investing activities      
Construction expenditures (1,643) (1,700) (1,759)
Nuclear fuel expenditures (342) (474) (457)
Purchases of investments (49) (48) (49)
Loans and other receivables      
Advances (8) (10) (12)
Repayments 7 11 4
Other, net 20 (22) 4
Net cash used in investing activities (2,015) (2,243) (2,269)
Long-term debt      
Issues of power bonds 997 0 998
Redemptions and repurchases of power bonds (1,427) (1,035) (1,731)
Redemptions of notes payable (23) (46) (53)
Payments on debt of variable interest entities (39) (38) (36)
Short-term debt issues (redemptions), net (865) (294) (782)
Payments on leases and leasebacks (55) (43) (42)
Financing costs, net (4) 0 (3)
Other, net (6) (21) (9)
Net cash (used in) provided by financing activities (1,422) (1,477) (1,658)
Net change in cash and cash equivalents 199 0 $ 11
Cash and cash equivalents at beginning of the year 299    
Cash and cash equivalents at end of the year $ 500 $ 299  
v3.20.2
CONSOLIDATED STATEMENTS OF CHANGES IN PROPRIETARY CAPITAL - USD ($)
$ in Millions
3 Months Ended 12 Months Ended
Sep. 30, 2020
Dec. 31, 2019
Sep. 30, 2019
Dec. 31, 2018
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2018
Balance at beginning of year   $ 11,625   $ 10,283 $ 11,625 $ 10,283 $ 9,133
Net income (loss) $ 700 192 $ 588 423 1,352 1,417 1,119
Total other comprehensive income (loss)         (39) (69) 36
Return on power program appropriation investment         (6) (6) (5)
Balance at end of year 12,932   11,625   12,932 11,625 10,283
Power Program Appropriation Investment              
Balance at beginning of year   258   258 258 258 258
Net income (loss)         0 0 0
Total other comprehensive income (loss)         0 0 0
Return on power program appropriation investment         0 0 0
Balance at end of year 258   258   258 258 258
Power Program Retained Earnings              
Balance at beginning of year   10,823   9,404 10,823 9,404 8,282
Net income (loss)         1,360 1,425 1,127
Total other comprehensive income (loss)         0 0 0
Return on power program appropriation investment         (6) (6) (5)
Balance at end of year 12,177   10,823   12,177 10,823 9,404
Nonpower Programs Appropriation Investment, Net              
Balance at beginning of year   556   564 556 564 572
Net income (loss)         (8) (8) (8)
Total other comprehensive income (loss)         0 0 0
Return on power program appropriation investment         0 0 0
Balance at end of year 548   556   548 556 564
Accumulated Other Comprehensive Income (Loss) Net Gains (Losses) on Cash Flow Hedges              
Balance at beginning of year   $ (12)   $ 57 (12) 57 21
Net income (loss)         0 0 0
Total other comprehensive income (loss)         (39) (69) 36
Return on power program appropriation investment         0 0 0
Balance at end of year $ (51)   $ (12)   $ (51) $ (12) $ 57
v3.20.2
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Statement - USD ($)
$ in Millions
12 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2018
Statement of Comprehensive Income [Abstract]      
Net income (loss) $ 1,352 $ 1,417 $ 1,119
Net unrealized gain (loss) on cash flow hedges (1) (114) 10
Reclassification to earnings from cash flow hedges (38) (45) (26)
Total other comprehensive income (loss) (39) (69) 36
Total comprehensive income (loss) $ 1,313 $ 1,348 $ 1,155
v3.20.2
Supplemental Cash Flow Information
12 Months Ended
Sep. 30, 2020
Supplemental Cash Flow Information [Abstract]  
Supplemental Cash Flow Information Supplemental Cash Flow Information
    Interest paid was $1.1 billion for 2020 and $1.2 billion for both 2019 and 2018. These amounts differ from interest expense in certain years due to the timing of payments. There was no interest capitalized in 2020, 2019, or 2018.

    Construction in progress and Nuclear fuel expenditures included in Accounts payable and accrued liabilities at September 30, 2020, 2019, and 2018 were $398 million, $324 million, and $372 million, respectively, and are excluded from the Statements of Consolidated Cash Flows for the years ended September 30, 2020, 2019, and 2018 as non-cash investing activities. 

    Excluded from the Statements of Consolidated Cash Flows for the years ended September 30, 2020 and 2019, as non-cash financing activities were $394 million related to lease obligations incurred primarily in connection with a PPA and $10 million related to lease obligations incurred for leased equipment, respectively. There were no capital leases incurred during 2018. See Note 7 — Leases for further information regarding TVA's finance leases. Also excluded from the Statement of Consolidated Cash Flows for the year ended September 30, 2020, were $80 million and $73 million as non-cash financing and investing activities, respectively, due to derecognition of the Paradise pipeline financing obligation and asset.

    Cash flows from swap contracts that are accounted for as hedges are classified in the same category as the item being hedged or on a basis consistent with the nature of the instrument.
v3.20.2
Supplemental Cash Flow Information - USD ($)
$ in Millions
12 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2018
Supplemental Cash Flow Information      
Interest paid $ 1,100 $ 1,200  
Capital lease obligations incurred 394 10  
Non-cash financing activities 80    
Non-cash investing activities 73    
Interest Paid, Excluding Capitalized Interest, Operating Activities 1,100 1,200  
Accounts payable and accrued liabilities      
Supplemental Cash Flow Information      
Construction in progress and Nuclear fuel expenditures $ 398 $ 324 $ 372
v3.20.2
Summary of Significant Accounting Policies [Text Block]
12 Months Ended
Sep. 30, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies Summary of Significant Accounting Policies
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 in most of Tennessee, northern Alabama, northeastern Mississippi, and southwestern Kentucky and in portions of northern Georgia, western North Carolina, and southwestern Virginia 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.

The power program has historically been separate and distinct from the stewardship programs.  It is required to be self-supporting from power revenues and proceeds from power financings, such as proceeds from the issuance of bonds, notes, or other evidences of indebtedness (collectively, "Bonds").  Although TVA does not currently receive congressional appropriations, it is required to make annual payments to the United States Department of the Treasury ("U.S. Treasury") as a return on the government's appropriation investment in TVA's power facilities (the "Power Program Appropriation Investment").  In the 1998 Energy and Water Development Appropriations Act, Congress directed TVA to fund essential stewardship activities related to its management of the Tennessee River system and nonpower or stewardship properties with power revenues in the event that there were insufficient appropriations or other available funds to pay for such activities in any fiscal year.  Congress has not
provided any appropriations to TVA to fund such activities since 1999.  Consequently, during 2000, TVA began paying for essential stewardship activities primarily with power revenues, with the remainder funded with user fees and other forms of revenues derived in connection with those activities.  The activities related to stewardship properties do not meet the criteria of an operating segment under accounting principles generally accepted in the United States of America ("GAAP").  Accordingly, these assets and properties are included as part of the power program, TVA's only operating segment.

Power rates are established by the TVA Board of Directors (the "TVA Board") as authorized by the Tennessee Valley Authority Act of 1933, as amended (the "TVA Act").  The TVA Act requires TVA 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 U.S. Treasury in repayment of and as a return on 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 maturity, additional reduction of the Power Program Appropriation Investment, and other purposes connected with TVA's power business.  TVA fulfilled its requirement to repay $1.0 billion of the Power Program Appropriation Investment with the 2014 payment; therefore, this item is no longer a component of rate setting. In setting TVA's rates, the TVA Board is charged by the TVA Act to have 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.  Rates set by the TVA Board are not subject to review or approval by any state or other federal regulatory body.

Fiscal Year

TVA's fiscal year ends September 30.  Years (2020, 2019, etc.) refer to TVA's fiscal years unless they are preceded by "CY," in which case the references are to calendar years.

Cost-Based Regulation

Since the TVA Board is authorized by the TVA Act to set rates for power sold to its customers, TVA is self-regulated. Additionally, TVA's regulated rates are designed to recover its costs.  Based on current projections, TVA believes that rates, set at levels that will recover TVA's costs, can be charged and collected.  As a result of these factors, TVA records certain assets and liabilities that result from the regulated ratemaking process that would not be recorded under GAAP for non-regulated entities.   Regulatory assets generally represent incurred costs that have been deferred because such costs are probable of future recovery in customer rates.  Regulatory liabilities generally represent obligations to make refunds to customers for previous collections for costs that are not likely to be incurred or deferral of gains that will be credited to customers in future periods.  TVA assesses whether the regulatory assets are probable of future recovery by considering factors such as applicable regulatory changes, potential legislation, and changes in technology.  Based on these assessments, TVA believes the existing regulatory assets are probable of recovery.  This determination reflects the current regulatory and political environment and is subject to change in the future.  If future recovery of regulatory assets ceases to be probable, or any of the other factors described above cease to be applicable, TVA would no longer be considered to be a regulated entity and would be required to write off these costs.  All regulatory asset write offs would be required to be recognized in earnings in the period in which future recovery ceases to be probable.

Basis of Presentation

    The accompanying consolidated financial statements, which have been prepared in accordance with GAAP, include the accounts of TVA, wholly-owned direct subsidiaries, and variable interest entities ("VIE") of which TVA is the primary beneficiary. See Note 10 — Variable Interest Entities. Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements requires TVA to estimate the effects of various matters that are inherently uncertain as of the date of the consolidated financial statements.  Although the consolidated financial statements are prepared in conformity with GAAP, TVA is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the amounts of revenues and expenses, including impacts from the COVID-19 pandemic, reported during the reporting period.  Each of these estimates varies in regard to the level of judgment involved and its potential impact on TVA's financial results.  Estimates are considered critical either when a different estimate could have reasonably been used, or where changes in the estimate are reasonably likely to occur from period to period, and such use or change would materially impact TVA's financial condition, results of operations, or cash flows.

Reclassifications

    Certain historical amounts have been reclassified in the accompanying consolidated financial statements to the current presentation. In the Consolidated Balance Sheet at September 30, 2019, TVA reclassified $163 million from Accounts payable and accrued liabilities to Asset retirement obligations in Current liabilities. In addition, as a result of the adoption of the new lease accounting standard effective for TVA October 1, 2019, TVA reclassified $182 million from Other long-term liabilities to Finance lease liabilities in the Consolidated Balance Sheet at September 30, 2019.
Cash, Cash Equivalents, and Restricted Cash

    Cash includes cash on hand, non-interest bearing cash, and deposit accounts. All highly liquid investments with original maturities of three months or less are considered cash equivalents. Cash and cash equivalents that are restricted, as to withdrawal or use under the terms of certain contractual agreements, are recorded in Other long-term assets on the Consolidated Balance Sheets. Restricted cash and cash equivalents includes cash held in trusts that are currently restricted for TVA economic development loans and for certain TVA environmental programs in accordance with agreements related to compliance with certain environmental regulations. See Note 22 — Commitments and ContingenciesLegal Proceedings Environmental Agreements.

    The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the Consolidated Balance Sheets and Consolidated Statements of Cash Flows:
Cash, Cash Equivalents, and Restricted Cash
At September 30
 20202019
Cash and cash equivalents$500 $299 
Restricted cash and cash equivalents, included in Other long-term assets21 23 
Total Cash, cash equivalents, and restricted cash$521 $322 

    Due to higher volatility in the financial markets associated with the COVID-19 pandemic, TVA increased its target balance of Cash and cash equivalents beginning in March 2020. TVA continued to hold higher target cash balances at September 30, 2020, and may hold higher balances in future periods due to potential market volatility.

Allowance for Uncollectible Accounts

The allowance for uncollectible accounts reflects TVA's estimate of probable losses inherent in its accounts and loans receivable balances excluding the EnergyRight® loans receivable.  TVA determines the allowance based on known accounts, historical experience, and other currently available information including events such as customer bankruptcy and/or a customer failing to fulfill payment arrangements after 90 days.  It also reflects TVA's corporate credit department's assessment of the financial condition of customers and the credit quality of the receivables. TVA continues to monitor the impact of the COVID-19 pandemic on accounts and loans receivable balances to evaluate the allowance for uncollectible accounts.

The allowance for uncollectible accounts was less than $1 million at both September 30, 2020 and 2019, for accounts receivable.  Additionally, loans receivable of $105 million and $131 million at September 30, 2020 and 2019, respectively, are included in Accounts receivable, net and Other long-term assets, for the current and long-term portions, respectively, and are reported net of allowances for uncollectible accounts of less than $1 million at both September 30, 2020 and 2019, respectively.

Revenues

TVA recognizes revenue from contracts with customers to depict the transfer of goods or services to customers in an amount to which the entity expects to be entitled in exchange for those goods or services. For the generation and transmission of electricity, this is generally at the time the power is delivered to a metered customer delivery point for the customer's consumption or distribution. As a result, revenues from power sales are recorded as electricity is delivered to customers. In addition to power sales invoiced and recorded during the month, TVA accrues estimated unbilled revenues for power sales provided to five customers whose billing date occurs prior to the end of the month.  Exchange power sales are presented in the accompanying Consolidated Statements of Operations as a component of sales of electricity. Exchange power sales are sales of excess power after meeting TVA native load and directly served requirements.  Native load refers to the customers on whose behalf a company, by statute, franchise, regulatory requirement, or contract, has undertaken an obligation to serve. TVA engages in other arrangements in addition to power sales. Certain other revenue from activities related to TVA's overall mission are recorded in Other revenue. Revenues that are not related to the overall mission are recorded in Other income (expense), net.

Pre-Commercial Plant Operations

    As part of the process of completing the construction of a generating unit, the electricity produced is used to serve the
demands of the electric system. TVA estimates revenue from such pre-commercial generation based on the guidance provided by Federal Energy Regulatory Commission ("FERC") regulations. The Allen Combined Cycle Plant ("Allen CC") began pre-commercial plant operations in September 2017, and began commercial operations in April 2018. Cogeneration capability at Johnsonville Combustion Turbine Unit 20 commenced pre-commercial plant operations in September 2017, and was placed in service during December 2017. Estimated revenue of $11 million related to Allen CC was capitalized to offset project costs for the year ended September 30, 2018. TVA also capitalized related fuel costs for these construction projects of approximately $19 million during the year ended September 30, 2018. No such amounts were capitalized during 2019 or 2020.
Inventories

Certain Fuel, Materials, and Supplies.  Materials and supplies inventories are valued using an average unit cost method. A new average cost is computed after each inventory purchase transaction, and inventory issuances are priced at the latest moving weighted average unit cost. Coal, fuel oil, and natural gas inventories are valued using an average cost method. A new weighted average cost is computed monthly, and monthly issues are priced accordingly.

Renewable Energy Credits. TVA accounts for Renewable Energy Certificates ("RECs") using the specific identification cost method. RECs that are acquired through power purchases are recorded as inventory and charged to purchased power expense when the RECs are subsequently used or sold. TVA assigns a value to the RECs at the inception of the power purchase arrangement using a relative fair value approach. RECs created through TVA-owned asset generation are recorded at zero cost.

Emission Allowances.  TVA has emission allowances for sulfur dioxide ("SO2") and nitrogen oxide ("NOx") which are accounted for as inventory.  The cost of specific allowances used each month is charged to operating expense based on tons of SO2 and NOx emitted during the respective compliance periods.  Allowances granted to TVA by the Environmental Protection Agency ("EPA") are recorded at zero cost.

Allowance for Inventory Obsolescence.  TVA reviews materials and supplies inventories by category and usage on a periodic basis.  Each category is assigned a probability of becoming obsolete based on the type of material and historical usage data.  In 2018, TVA started moving from a site-specific inventory management policy to a fleet-wide strategy for each generation type. Based on the estimated value of the inventory, TVA adjusts its allowance for inventory obsolescence.

Property, Plant, and Equipment, and Depreciation

    Property, Plant, and Equipment. Additions to plant are recorded at cost, which includes direct and indirect costs.  The cost of current repairs and minor replacements is charged to operating expense.  Nuclear fuel, which is included in Property, plant, and equipment, is valued using the average cost method for raw materials and the specific identification method for nuclear fuel in a reactor.  Amortization of nuclear fuel in a reactor is calculated on a units-of-production basis and is included in fuel expense. When property, plant, and equipment is retired, accumulated depreciation is charged for the original cost of the assets. Gains or losses are only recognized upon the sale of land or an entire operating unit.

    Depreciation. TVA accounts for depreciation of its properties using the composite depreciation convention of accounting.  Under the composite method, assets with similar economic characteristics are grouped and depreciated as one asset. Depreciation is generally computed on a straight-line basis over the estimated service lives of the various classes of assets. The estimation of asset useful lives requires management judgment, supported by external depreciation studies of historical asset retirement experience. Depreciation rates are determined based on the external depreciation studies. These studies will be updated approximately every five years.  Depreciation expense for the years ended September 30, 2020, 2019, and 2018 was $1.6 billion, $1.8 billion, and $1.3 billion, respectively. Depreciation expense expressed as a percentage of the average annual depreciable completed plant was 2.74 percent for 2020, 3.09 percent for 2019, and 2.45 percent for 2018.  Average depreciation rates by asset class are as follows:
Property, Plant, and Equipment Depreciation Rates
At September 30
(percent)
202020192018
Asset Class
Nuclear2.38 2.38 2.64 
Coal-fired(1)
3.62 4.96 2.32 
Hydroelectric1.60 1.61 1.57 
Gas and oil-fired3.04 3.00 2.93 
Transmission1.34 1.34 1.32 
Other7.26 7.16 5.90 
Note
(1) The rates include the acceleration of depreciation related to retiring certain coal-fired units.
    
    Coal-Fired. As a result of TVA's decision to idle or retire certain units since the previous depreciation study, TVA recognized $387 million, $566 million, and $48 million in accelerated depreciation expense related to the units during the years ended September 30, 2020, 2019, and 2018, respectively. Accelerated depreciation is based on the remaining useful life of the asset at the time the decision is made to idle or retire a unit.

Reacquired Rights. Property, plant, and equipment includes intangible reacquired rights, net of amortization, of $192 million and $200 million as of September 30, 2020 and 2019, respectively, related to the purchase of residual interests from
lease/leaseback agreements of certain combustion turbine units ("CTs"). Reacquired rights are amortized over the estimated useful life of the underlying CTs. Amortization expense was $8 million for all years 2020, 2019, and 2018.

Software Costs.  TVA capitalizes certain costs incurred in connection with developing or obtaining internal-use software. Capitalized software costs are included in Property, plant, and equipment on the Consolidated Balance Sheets and are generally amortized over seven years.  At September 30, 2020 and 2019, unamortized computer software costs totaled $54 million and $63 million, respectively.  Amortization expense related to capitalized computer software costs was $42 million, $38 million, and $32 million for 2020, 2019, and 2018, respectively.  Software costs that do not meet capitalization criteria are expensed as incurred.

Impairment of Assets.  TVA evaluates long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable.  For long-lived assets, TVA bases its evaluation on impairment indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, regulatory approval and ability to set rates at levels that allow for recoverability of the assets, and other external market conditions or factors that may be present.  If such impairment indicators are present or other factors exist that indicate that the carrying amount of an asset may not be recoverable, TVA determines whether an impairment has occurred based on an estimate of undiscounted cash flows attributable to the asset as compared with the carrying value of the asset.  If an impairment has occurred, the amount of the impairment recognized is measured as the excess of the asset's carrying value over its fair value.  Additionally, TVA regularly evaluates construction projects.  If the project is canceled or deemed to have no future economic benefit, the project is written off as an asset impairment or, upon TVA Board approval, reclassified as a regulatory asset. See Note 6 — Plant Closures.

Leases

    TVA recognizes a lease asset and lease liability for leases with terms of greater than 12 months. Lease assets represent TVA's right to use an underlying asset for the lease term, and lease liabilities represent TVA's obligation to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date.  TVA has certain lease agreements that include variable lease payments that are based on energy production levels. These variable lease payments are not included in the measurement of the lease assets or lease liabilities but are recognized in the period in which the expenses are incurred.
    
    While not specifically structured as leases, certain power purchase agreements ("PPAs") are deemed to contain a lease of the underlying generating units when the terms convey the right to control the use of the assets. Amounts recorded for these leases are generally based on the amount of the scheduled capacity payments due over the remaining terms of the power purchase agreements, the terms of which vary. The total lease obligation included in Accounts payable and accrued liabilities and lease liabilities related to these agreements were $500 million and $174 million for finance and operating leases, respectively, at September 30, 2020.

    TVA has agreements with lease and non-lease components and has elected to account for the components separately. Consideration is allocated to lease and non-lease components generally based on relative standalone selling prices.

    TVA has lease agreements which include options for renewal and early termination. The intent to renew a lease varies depending on the lease type and asset. Renewal options that are reasonably certain to be exercised are included in the lease measurements. The decision to terminate a lease early is dependent on various economic factors. No termination options have been included in TVA's lease measurements.
    
    Leases with an initial term of 12 months or less, which do not include an option to extend the initial term of the lease to greater than 12 months that TVA is reasonably certain to exercise, are not recorded on the Consolidated Balance Sheets at September 30, 2020.
    Operating leases are recognized on a straight-line basis over the term of the lease agreement. Rent expense associated with short-term leases and variable leases is recorded in Operating and maintenance expense, Fuel expense, or Purchased power expense on the Consolidated Statements of Operations. Expenses associated with finance leases result in the separate presentation of interest expense on the lease liability and amortization expense of the related lease asset on the Consolidated Statements of Operations.

Decommissioning Costs

    TVA recognizes legal obligations associated with the future retirement of certain tangible long-lived assets.  These obligations relate to fossil fuel-fired generating plants, nuclear generating plants, hydroelectric generating plants/dams, transmission structures, and other property-related assets.  These other property-related assets include, but are not limited to, easements and coal rights.  Activities involved with retiring these assets could include decontamination and demolition of structures, removal and disposal of wastes, and site restoration.  Revisions to the estimates of asset retirement obligations ("AROs") are made whenever factors indicate that the timing or amounts of estimated cash flows have changed materially.  Any accretion or depreciation expense related to these liabilities and assets is charged to a regulatory asset.  See Note 9 —
Regulatory Assets and Liabilities — Nuclear Decommissioning Costs and Non-Nuclear Decommissioning Costs and Note 12 — Asset Retirement Obligations.

Down-blend Offering for Tritium

TVA, the Department of Energy ("DOE"), and certain nuclear fuel contractors have entered into agreements, referred to as the Down-blend Offering for Tritium, 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 October 2027.  Beginning October 2027, contract activity will consist of storage and flag management.  Flag management ensures that the uranium is of U.S. origin, 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. Since 2019, TVA has received $89 million in reimbursements from the DOE. At September 30, 2020, TVA recorded $6 million in Accounts receivable, net related to this agreement.

Investment Funds

    Investment funds consist primarily of trust funds designated to fund decommissioning requirements (see Note 22 — Commitments and ContingenciesDecommissioning Costs), the Supplemental Executive Retirement Plan ("SERP") (see Note 21 — Benefit Plans Overview of Plans and BenefitsSupplemental Executive Retirement Plan), and the Deferred Compensation Plan ("DCP"). The Nuclear Decommissioning Trust ("NDT") holds funds primarily for the ultimate decommissioning of TVA's nuclear power plants. The Asset Retirement Trust ("ART") holds funds primarily for the costs related to the future closure and retirement of TVA's other long-lived assets. The NDT, ART, SERP, and DCP funds are invested in portfolios of securities generally designed to achieve a return in line with overall equity and debt market performance. The NDT, ART, SERP, and DCP funds are all classified as trading.

Energy Prepayment Obligations

In 2004, TVA and its largest customer, Memphis Light, Gas and Water Division ("MLGW"), entered into an energy prepayment agreement under which MLGW prepaid TVA $1.5 billion for the future costs of electricity to be delivered by TVA to MLGW over a period of 180 months.  TVA accounted for the prepayment as unearned revenue and reported the obligation to deliver power under this arrangement as Energy prepayment obligations.  The arrangement ceased in 2019. Revenue was recognized in each year of the arrangement as electricity was delivered to MLGW based on the ratio of units of kilowatt hours delivered to total units of kilowatt hours under contract.  As of September 30, 2019, $1.5 billion had been recognized as non-cash revenue on a cumulative basis during the life of the agreement, $10 million and $100 million of which was recognized as non-cash revenue during 2019 and 2018, respectively.

Discounts to account for the time value of money, which are recorded as a reduction to electricity sales, amounted to $4 million and $46 million for the years ended September 30, 2019 and 2018, respectively.

Insurance

Although TVA uses private companies to administer its healthcare plans for eligible active and retired employees not covered by Medicare, TVA does not purchase health insurance.  Third-party actuarial specialists assist TVA in determining certain liabilities for self-insured claims.  TVA recovers the costs of claims through power rates and through adjustments to the participants' contributions to their benefit plans.  These liabilities are included in Other liabilities on the Consolidated Balance Sheets.

TVA sponsors an Owner Controlled Insurance Program which provides workers' compensation and liability insurance for a select group of contractors performing maintenance, modifications, outage, and new construction activities at TVA facilities.

The Federal Employees' Compensation Act ("FECA") governs liability to employees for service-connected injuries.  TVA purchases excess workers' compensation insurance above a self-insured retention.

    In addition to excess workers' compensation insurance, TVA purchases the following types of insurance:
Nuclear liability insurance; nuclear property, decommissioning, and decontamination insurance; and nuclear accidental outage insurance. See Note 22 — Commitments and ContingenciesNuclear Insurance.

Excess liability insurance for aviation, auto, marine, and general liability exposures.

Property insurance for certain conventional (non-nuclear) assets.
    The insurance policies are subject to the terms and conditions of the specific policy, including deductibles or self-insured retentions. To the extent insurance would not provide either a partial or total recovery of the costs associated with a loss, TVA would have to recover any such costs through other means, including through power rates.

Research and Development Costs

Research and development costs are expensed when incurred.  TVA's research programs include those related to power delivery technologies, emerging technologies (clean energy, renewables, distributed resources, and energy efficiency), technologies related to generation (fossil fuel, nuclear, and hydroelectric), and environmental technologies.

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 requires TVA to make payments to states and counties in which TVA conducts its power operations and in which TVA has acquired power properties previously subject to state and local taxation.   The total amount of these payments is five percent of gross revenues from sales 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. TVA calculates tax equivalent expense by subtracting the prior year fuel cost-related tax equivalent regulatory asset or liability from the payments made to the states and counties during the current year and adding back the current year fuel cost-related tax equivalent regulatory asset or liability. Fuel cost-related tax equivalent expense is recognized in the same accounting period in which the fuel cost-related revenue is recognized.

Maintenance Costs
TVA records maintenance costs and repairs related to its property, plant, and equipment in the Consolidated Statements of Operations as they are incurred except for the recording of certain regulatory assets for retirement and removal costs.
v3.20.2
Impact of New Accounting Standards and Interpretations
12 Months Ended
Sep. 30, 2020
Accounting Changes and Error Corrections [Abstract]  
Accounting Standards Update and Change in Accounting Principle [Text Block] Impact of New Accounting Standards and Interpretations
    The following are accounting standard updates issued by the Financial Accounting Standards Board ("FASB") that TVA adopted during 2020:
Lease Accounting
DescriptionThis guidance changes the provisions of recognition in both the lessee and lessor accounting models. The standard requires entities that lease assets ("lessees") to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leases with terms of more than 12 months, while also refining the definition of a lease. In addition, lessees are required to disclose key information about the amount, timing, and uncertainty of cash flows arising from leasing arrangements. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily depend on its classification as a finance lease (formerly referred to as capital lease) or operating lease. The standard requires both types of leases to be recognized on the balance sheet. Operating leases will result in straight-line expense, while finance leases will result in recognition of interest on the lease liability separate from amortization expense. The accounting rules for the owner of assets leased by the lessee ("lessor accounting") remain relatively unchanged.

The standard allows for certain practical expedients to be elected related to lease term determination, separation of lease and non-lease elements, reassessment of existing leases, and short-term leases. The standard is to be applied using a modified retrospective transition.
Effective Date for TVAOctober 1, 2019
Effect on the Financial Statements or Other Significant Matters
TVA elected the modified retrospective method of adoption effective October 1, 2019. Under the modified retrospective method of adoption, prior year reported results are not restated.

TVA recorded $205 million and $210 million of lease assets and lease liabilities, respectively, for operating leases in effect at the adoption date. The accounting for finance leases remained substantially unchanged. Adoption of the standard did not materially impact results of operations or cash flows.

TVA has elected to apply the following practical expedients:
Practical ExpedientDescription
Package of transition practical expedients (for leases commenced prior to adoption date; expedients must be adopted as a package)Do not need to (1) reassess whether any expired or existing contracts are leases or contain leases, (2) reassess the lease classification for any expired or existing leases, or (3) reassess initial direct costs for any existing leases.
Short-term lease expedient (elect by class of underlying asset)Elect as an accounting policy to not apply the recognition requirements to short-term leases by asset class.
Existing and expired land easements not previously accounted for as leasesElect to not evaluate existing or expired easements under the new guidance and carry forward current accounting treatment.
Comparative reporting requirements for initial adoptionElect to (1) apply transition requirements at adoption date, (2) recognize cumulative effect adjustment to retained earnings in period of adoption, and (3) not apply the new requirements to comparative periods, including disclosures.
Derivatives and Hedging - Improvements to Accounting for Hedging Activities
DescriptionThis guidance better aligns an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. To meet that objective, the amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements.
Effective Date for TVAOctober 1, 2019
Effect on the Financial Statements or Other Significant MattersTVA has adopted the standard on a prospective basis. The adoption of this standard did not have a material impact on TVA's financial condition, results of operations, or cash flows. TVA only uses hedge accounting under its foreign currency swap arrangements, and the adoption of this standard had no impact on those arrangements.
Customer's Accounting for Implementation Costs in a Cloud Arrangement That Is a Service Contract
DescriptionThis guidance relates to the accounting for a customer's implementation costs in a hosting arrangement that is a service contract. The amendments align the requirements for capitalizing those implementation costs with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. The amendments also provide requirements for the classification of the capitalized costs and related expense and cash flows in the financial statements, the application of impairment guidance to the capitalized costs, and the application of abandonment guidance to the capitalized costs. Entities are required to apply the amendments either retrospectively or prospectively to all implementation costs incurred after the adoption date.
Effective Date for TVAOctober 1, 2019
Effect on the Financial Statements or Other Significant MattersTVA has adopted the standard on a prospective basis. Adoption of this standard did not have a material impact on TVA's financial condition, results of operations, or cash flows. TVA records qualified implementation costs in a cloud arrangement that is a service contract as a prepaid asset and amortizes the prepaid asset to Operating and maintenance expense based on the term of the contract.
    The following accounting standards have been issued but as of September 30, 2020, were not effective and had not been adopted by TVA:

Financial Instruments - Credit Losses
DescriptionThis guidance eliminates the probable initial recognition threshold in current GAAP and, instead, requires an allowance to be recorded for all expected credit losses for certain financial assets that are not measured at fair value. The allowance for credit losses is based on historical information, current conditions, and reasonable and supportable forecasts. The new standard also makes revisions to the other than temporary impairment model for available-for-sale debt securities. Disclosures of credit quality indicators in relation to the amortized cost of financing receivables are further disaggregated by year of origination.
Effective Date for TVAThe new standard is effective for TVA's interim and annual reporting periods beginning October 1, 2020.
Effect on the Financial Statements or Other Significant MattersTVA adopted this standard using the modified retrospective method through a cumulative-effect adjustment to retained earnings on October 1, 2020. TVA will recognize an allowance that reflects the current estimate of credit losses expected to be incurred over the life of the financial assets based on historical experience, current conditions, and reasonable and supportable forecasts. This standard will primarily impact TVA's long-term loans receivable. Adoption of this standard is not expected to have a material impact on TVA's financial condition, results of operations, or cash flows.
Fair Value Measurement Disclosure
DescriptionThe guidance changes certain disclosure requirements for fair value measurements. It removes certain disclosure requirements, such as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of the transfers between levels; and the valuation processes for Level 3 fair value measurements.  Some disclosure requirements are added, such as the change in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.
Effective Date for TVAThe new standard is effective for TVA's interim and annual reporting periods beginning October 1, 2020.
Effect on the Financial Statements or Other Significant MattersTVA does not expect the adoption of this standard to have a material impact on TVA's financial condition, results of operations, or cash flows.
Reference Rate Reform
DescriptionThe guidance provides temporary optional expedients and exceptions to the guidance in GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rates.
Effective Date for TVAThe new standard is effective for adoption at any time between March 12, 2020, and December 31, 2022. TVA currently plans to adopt the standard by December 31, 2022.
Effect on the Financial Statements or Other Significant MattersTVA continues to review this standard and evaluate the impact of using an alternative reference rate instead of LIBOR in its interest rate swap contracts. TVA expects the adoption of the standard will simplify the accounting for any modifications to its interest rate swap contracts.
v3.20.2
Accounts Receivable, Net
12 Months Ended
Sep. 30, 2020
Accounts Receivable, after Allowance for Credit Loss [Abstract]  
Accounts Receivable, Net
3.  Accounts Receivable, Net

Accounts receivable primarily consist of amounts due from customers for power sales.  The table below summarizes the types and amounts of TVA's accounts receivable:
Accounts Receivable, Net
At September 30
 20202019
Power receivables$1,401 $1,624 
Other receivables128 115 
Accounts receivable, net(1)
$1,529 $1,739 
Note
(1) Allowance for uncollectible accounts was less than $1 million at September 30, 2020 and 2019, and therefore is not represented in the table above.
In response to the COVID-19 pandemic, the TVA Board approved the Public Power Support and Stabilization program in March 2020, which includes alternative wholesale payment arrangements for LPCs. Through this program, TVA is offering up to $1.0 billion of credit support to LPCs that demonstrate the need for temporary financial relief, through the deferral of a portion of LPCs' wholesale power payments owed to TVA. The program requires LPCs to apply for the deferral, which is subject to approval by TVA. If approved, TVA will establish and approve a repayment schedule with the LPC by December 31, 2020, with a repayment term not to exceed two years. The program is available through CY 2020, and as of November 16, 2020, $1 million of credit support has been approved under the program.
v3.20.2
Inventories, Net
12 Months Ended
Sep. 30, 2020
Inventory, Net [Abstract]  
Inventories, Net
4.  Inventories, Net

The table below summarizes the types and amounts of TVA's inventories:
Inventories, Net 
At September 30
 20202019
Materials and supplies inventory$770 $742 
Fuel inventory253 294 
RECs inventory, net15 16 
Allowance for inventory obsolescence(35)(53)
Inventories, net$1,003 $999 
v3.20.2
Net Completed Plant
12 Months Ended
Sep. 30, 2020
Property, Plant and Equipment, Net, by Type [Abstract]  
Property, Plant, and Equipment and Intangible Assets Net Completed Plant
Net completed plant consisted of the following:
Net Completed Plant
At September 30
 20202019
 CostAccumulated Depreciation 
Net
CostAccumulated DepreciationNet
Coal-fired(1)(2)
$18,613 $13,944 $4,669 $17,400 $12,538 $4,862 
Gas and oil-fired6,010 1,696 4,314 6,054 1,562 4,492 
Nuclear25,741 12,141 13,600 25,543 11,656 13,887 
Transmission8,283 3,140 5,143 7,932 3,083 4,849 
Hydroelectric3,410 1,090 2,320 3,163 1,051 2,112 
Other electrical plant1,981 1,146 835 1,920 1,110 810 
Intangible software
Multipurpose dams900 381 519 900 373 527 
Other stewardship29 10 19 29 10 19 
Total$64,970 $33,550 $31,420 $62,944 $31,384 $31,560 
Notes
(1) TVA recognized accelerated depreciation as a result of the decision to idle or retire certain units. See Note 6 — Plant Closures.
(2) In 2020, TVA recorded approximately $1.1 billion in upward revisions to asset retirement costs for coal-fired assets. See Note 12 Asset Retirement Obligations.
v3.20.2
Other Long-Term Assets [Text Block]
12 Months Ended
Sep. 30, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Other Long-Term Assets
8.  Other Long-Term Assets

The table below summarizes the types and amounts of TVA's other long-term assets:
Other Long-Term Assets 
At September 30
 2020
2019(1)
Loans and other long-term receivables, net$100 $125 
EnergyRight® receivables
69 81 
Prepaid long-term service agreements42 22 
Commodity contract derivative assets23 — 
Restricted cash and cash equivalents21 23 
Prepaid capacity payments11 19 
Other59 55 
Total other long-term assets$325 $325 
Note
(1) At September 30, 2019, $22 million previously classified as Other (a component of Other long-term assets) has been reclassified to Prepaid long-term service agreements (a component of Other long-term assets) to conform with current year presentation.

    EnergyRight® Receivables. In association with the EnergyRight® program, TVA's local power company customers ("LPCs") offer financing to end-use customers for the purchase of energy-efficient equipment. Depending on the nature of the energy-efficiency project, loans may have a maximum term of five years or 10 years. TVA purchases the resulting loans receivable from its LPCs. The loans receivable are then transferred to a third-party bank with which TVA has agreed to repay in
full any loans receivable that have been in default for 180 days or more or that TVA has determined are uncollectible. Given this continuing involvement, TVA accounts for the transfer of the loans receivable as secured borrowings. The current and long-term portions of the loans receivable are reported in Accounts receivable, net and Other long-term assets, respectively, on TVA's Consolidated Balance Sheets. At September 30, 2020 and 2019, the carrying amount of the loans receivable, net of discount, reported in Accounts receivable, net was approximately $18 million and $20 million, respectively. See Note 11 — Other Long-Term Liabilities for information regarding the associated financing obligation.

In response to the COVID-19 pandemic, customers experiencing financial hardship can request a deferral of EnergyRight® loan payments for a period of up to six months. This deferral option began April 20, 2020, and is available through October 31, 2020. Deferred loans will not accrue interest during the deferral months. These deferred loans have resulted in a less than $1 million impact to TVA.

Prepaid Long-Term Service Agreements. TVA has entered into various long-term service agreements for major
maintenance activities at certain of its combined cycle plants. TVA uses the direct expense method of accounting for these
arrangements. TVA accrues for parts when it takes ownership and for contractor services when they are rendered. Under
certain of these agreements, payments made exceed the value of parts received and services rendered. The current and long-term portions of the resulting prepayments are reported in Other current assets and Other long-term assets, respectively, on
TVA's Consolidated Balance Sheets. At September 30, 2020 and 2019, prepayments of $3 million and $5 million,
respectively, were recorded in Other current assets.
v3.20.2
Regulatory Assets and Liabilities [Text Block]
12 Months Ended
Sep. 30, 2020
Regulatory Assets and Liabilities Disclosure [Abstract]  
Regulatory Assets and Liabilities Regulatory Assets and Liabilities
Regulatory assets generally represent incurred costs that have been deferred because such costs are probable of future recovery in customer rates.  Regulatory liabilities generally represent obligations to make refunds to customers for previous collections for costs that are not likely to be incurred or deferral of gains that will be credited to customers in future periods.  Components of regulatory assets and regulatory liabilities are summarized in the table below. 
Regulatory Assets and Liabilities 
At September 30
 2020
2019(1)
Current regulatory assets  
Unrealized losses on interest rate derivatives$114 $89 
Unrealized losses on commodity derivatives39 
Fuel cost adjustment receivable12 28 
Total current regulatory assets130 156 
Non-current regulatory assets  
Deferred pension costs and other post-retirement benefits costs5,193 4,756 
Non-nuclear decommissioning costs2,512 1,741 
Unrealized losses on interest rate derivatives1,506 1,241 
Nuclear decommissioning costs896 868 
Unrealized losses on commodity derivatives— 15 
Other non-current regulatory assets138 142 
Total non-current regulatory assets10,245 8,763 
Total regulatory assets$10,375 $8,919 
Current regulatory liabilities  
Fuel cost adjustment tax equivalents$115 $138 
Unrealized gains on commodity derivatives26 12 
Total current regulatory liabilities141 150 
Non-current regulatory liabilities  
Unrealized gains on commodity derivatives23 — 
Total non-current regulatory liabilities23 — 
Total regulatory liabilities$164 $150 
Note
(1) At September 30, 2019, $12 million previously classified as Environmental agreements (a component of Regulatory assets) has been reclassified to Other non-current regulatory assets (a component of Regulatory assets) to conform with current year presentation.

    In 2017, the TVA Board authorized management to accelerate amortization of certain regulatory assets to the extent actual net income in 2018 exceeded the budgeted amount, up to the aggregate amount of those certain regulatory assets. Assets included in this TVA Board action include: deferred nuclear generating units, environmental cleanup costs related to the Kingston ash spill, and nuclear training costs related to the refurbishing and restarting of Browns Ferry Nuclear Plant ("Browns Ferry") Unit 1 and the construction of Watts Bar Nuclear Plant ("Watts Bar") Unit 2. TVA recorded $857 million of accelerated amortization of the Deferred nuclear generating units and Nuclear training costs regulatory assets in 2018. The TVA Board authorized TVA to use the amount included in the 2019 rate action for these two regulatory assets, to the extent needed, to accelerate amortization of the Environmental cleanup costs - Kingston ash spill regulatory asset in 2019. TVA recorded $266 million of accelerated recovery for the Kingston ash spill regulatory asset in 2019. No accelerated amortization was recorded in 2020.

    Deferred Pension Costs and Other Post-retirement Benefit Costs.  TVA measures the funded status of its pension and post-retirement ("OPEB") benefit plans at each year-end balance sheet date. The funded status is measured as the difference between the fair value of plan assets and the benefit obligations at the measurement date for each plan. The changes in funded status are actuarial gains and losses that are recognized on TVA's Consolidated Balance Sheets by adjusting the recognized pension and OPEB liabilities, with the offset deferred as a regulatory asset or a regulatory liability. In an unregulated
environment, these deferred costs would be recognized as an increase or decrease to accumulated other comprehensive income (loss) ("AOCI").

    "Incurred cost" is a cost arising from cash paid out or an obligation to pay for an acquired asset or service, and a loss from any cause that has been sustained and for which payment has been or must be made. In the cases of pension and OPEB costs, the unfunded obligation represents a projected liability to the employee for services rendered, and thus it meets the definition of an incurred cost. Therefore, amounts that otherwise would be charged to AOCI for these costs are recorded as a regulatory asset or liability since TVA has historically recovered pension and OPEB expense in rates. Through historical and current year expense included in ratemaking, the TVA Board has demonstrated the ability and intent to include pension and OPEB costs in allowable costs and in rates for ratemaking purposes. As a result, it is probable that future revenue will result from inclusion of the pension and OPEB regulatory assets or regulatory liability in allowable costs for ratemaking purposes.

    The regulatory asset and liability are classified as long-term, which is consistent with the pension and OPEB liabilities, and are not amortized to the consolidated statements of operations over a specified recovery period. They are adjusted either upward or downward each year in conjunction with the adjustments to the unfunded pension liability and OPEB liability, as calculated by the actuaries. Ultimately the regulatory asset and liability will be recognized in the consolidated statements of operations in the form of pension and OPEB expense as the actuarial liabilities are eliminated in future periods. See Note 21 — Benefit PlansObligations and Funded Status.

    Additionally on October 1, 2014, TVA began recognizing pension costs as a regulatory asset to the extent that the amount calculated under GAAP as pension expense differs from the amount TVA contributes to the pension plan. As a result of recent plan design changes, future contributions are expected to exceed the expense calculated under U.S. GAAP. Accordingly, TVA will discontinue this regulatory accounting practice once all such deferred costs have been recovered, at which time it will recognize pension costs in accordance with U.S. GAAP.

Non-Nuclear Decommissioning Costs.  Non-nuclear decommissioning costs include: (1) certain deferred charges related to the future closure and decommissioning of TVA's non-nuclear long-lived assets, (2) recognition of changes in the liability, (3) recognition of changes in the value of TVA's ART, and (4) certain other deferred charges under the accounting rules for AROs.  TVA has established the ART to more effectively segregate, manage, and invest funds to help meet future non-nuclear AROs.  The funds from the ART may be used, among other things, to pay the costs related to the future closure and retirement of non-nuclear long-lived assets under various legal requirements.  These future costs can be funded through a combination of investment funds already set aside in the ART, future earnings on those investment funds, and future cash contributions to the ART and future earnings thereon.  For 2020, TVA recovered in rates a portion of its estimated current year non-nuclear decommissioning costs and contributions to the ART. Deferred charges will be recovered in rates based on an analysis of the expected expenditures, contributions, and investment earnings required to recover the decommissioning costs. There is not a specified recovery period; therefore, the regulatory asset is classified as long-term consistent with the ART investments and ARO liability.

Unrealized Losses on Interest Rate Derivatives.  TVA uses regulatory accounting treatment to defer the unrealized gains and losses on certain interest rate derivative contracts. When amounts in these contracts are realized, the resulting gains or losses are included in the ratemaking formula.  The unrealized losses on these interest rate derivatives are recorded on TVA's Consolidated Balance Sheets as current and non-current regulatory assets, and the related realized gains or losses, if any, are recorded on TVA's Consolidated Statements of Operations when the contracts settle. A portion of certain unrealized gains and losses will be amortized into earnings over the remaining lives of the contracts. Gains and losses on interest rate derivatives that are expected to be realized within the next year are included as a current regulatory asset or liability on TVA's Consolidated Balance Sheet.

Due to changing interest rates in the financial markets associated with the COVID-19 pandemic, TVA has experienced unrealized losses related to its derivative instruments for the year ended September 30, 2020. TVA does not recognize unrealized gains and losses from the investment portfolios and derivative instruments within earnings but rather defers all such gains and losses within a regulatory liability or asset in accordance with its accounting policy. See Note 15 — Risk Management Activities and Derivative Transactions and Note 16 — Fair Value Measurements.

Nuclear Decommissioning Costs.  Nuclear decommissioning costs include: (1) certain deferred charges related to the future closure and decommissioning of TVA's nuclear generating units under the Nuclear Regulatory Commission ("NRC") requirements, (2) recognition of changes in the liability, (3) recognition of changes in the value of TVA's NDT, and (4) certain other deferred charges under the accounting rules for AROs.  These future costs can be funded through a combination of investment funds set aside in the NDT and ART, future earnings on the investment funds, and future earnings thereon. Deferred charges will be recovered in rates based on the analysis of expected expenditures, contributions, and investment earnings required to recover the decommissioning costs.  See Note 1 — Summary of Significant Accounting Policies Investment Funds.  There is not a specified recovery period; therefore, the regulatory asset is classified as long-term consistent with the NDT investments and ARO liability.

Unrealized Gains (Losses) on Commodity Derivatives.  Unrealized gains (losses) on natural gas purchase contracts, included as part of unrealized gains (losses) on commodity derivatives, relate to the mark-to-market ("MtM") valuation of natural
gas purchase contracts.  During the fourth quarter of 2020, TVA discontinued derivative accounting for forward coal contracts because these contracts no longer meet the criteria of net settlement. As a result, the associated net regulatory assets have been derecognized. The natural gas purchase contracts qualify as derivative contracts but do not qualify for cash flow hedge accounting treatment.  As a result, TVA recognizes the changes in the market value of these derivative contracts as a regulatory liability or asset.  This treatment reflects TVA's ability and intent to recover the cost of these commodity contracts on a settlement basis for ratemaking purposes through the fuel cost adjustment. TVA recognizes the actual cost of fuel received under these contracts in fuel expense at the time the fuel is used to generate electricity.  These contracts expire at various times through 2024.  Unrealized gains and losses on contracts with a maturity of less than one year are included as a current regulatory asset or liability on TVA's Consolidated Balance Sheets.  See Note 15 — Risk Management Activities and Derivative Transactions.

Fuel Cost Adjustment Receivable.  The fuel cost adjustment provides a mechanism to alter rates monthly to reflect changing fuel and purchased power costs. There is typically a lag between the occurrence of a change in fuel and purchased power costs and the reflection of the change in fuel rates.  Balances in the fuel cost adjustment regulatory accounts represent over-collected or under-collected revenues that offset fuel and purchased power costs, and the fuel rate is designed to recover or refund the balance in less than one year.

Other Non-Current Regulatory Assets. Other non-current regulatory assets consist of the following:

    Deferred Capital Leases and Other Financing Obligations. For certain leases that were determined prior to TVA's adoption of the new lease accounting standard effective October 1, 2019, TVA recognized the initial capital lease liability and asset at inception. However, the annual expense recognized in rates is equal to the annual lease payments, which differs from GAAP treatment. This practice results in TVA's asset balances being higher than they otherwise would have been under GAAP, with the difference representing a regulatory asset related to each capital lease. These costs will be amortized over the respective lease as lease payments are made. As the costs associated with this regulatory asset are not currently being considered in rates and the asset is expected to increase over the next year, the regulatory asset has been classified as long-term.

Debt Reacquisition Costs.  Reacquisition expenses, call premiums, and other related costs, such as unamortized debt issue costs associated with redeemed Bond issues, are deferred and amortized (accreted) on a straight-line basis over the weighted average life of TVA's debt portfolio. Because timing of additional reacquisition expenses and changes to the weighted average life of the debt are uncertain, the regulatory asset is classified as long-term.

Retirement Removal Costs.  Retirement removal costs, net of salvage, that are not legally required are recognized as a regulatory asset. Net removal costs are amortized over a one-year period subsequent to completion of the removal activities. TVA treats this regulatory asset as long-term in its entirety primarily because it relates to assets that are long-term in nature.
Fuel Cost Adjustment Tax Equivalents.  The fuel cost adjustment includes a provision related to the current funding of the future payments TVA will make.  As TVA records the fuel cost adjustment, five percent of the calculation that relates to a future asset or liability for tax equivalent payments is recorded as a current regulatory liability and paid or refunded in the following year.
v3.20.2
Asset Acquisitions and Business Combinations (Notes)
12 Months Ended
Sep. 30, 2020
Business Combinations and Settlement of Preexisting Relationships [Abstract]  
Asset Acquisitions and Business Combinations Disclosure Asset Acquisitions
    On September 20, 2017, TVA acquired 100 percent of the equity interests in two special purpose entities ("SPEs") designed to administer rent payments TVA makes under certain of its lease/leaseback arrangements.  Each entity holds residual interests in four of TVA's peaking combustion turbine units ("CTs").  TVA acquired these entities in order to reacquire the residual interests in eight CTs it had previously granted in the lease/leaseback arrangements.

                TVA acquired the entities for total cash consideration of $36 million.  The fair value of the assets acquired consisted of $110 million of reacquired rights, and the fair value of liabilities assumed consisted of $74 million in notes payable.  Reacquired rights are an intangible asset included in TVA's Completed plant balance and are amortized over the estimated useful life of the underlying CTs.  Notes payable assumed in the transaction were paid in full during 2020. TVA recognized less than $1 million of amortization expense, related to reacquired rights, within TVA's consolidated statements of operations.  Transaction costs were not material.

                TVA determined that its lease/leaseback obligations were preexisting relationships that were effectively settled in the asset acquisitions.  TVA settled the preexisting relationships separately from the asset acquisitions, resulting in a loss on extinguishment of the obligations of $3 million.  The carrying value of lease/leaseback obligations effectively settled was $71 million, including accrued interest, and the reacquisition price was $74 million, paid in cash, at the acquisition date.
v3.20.2
Variable Interest Entities
12 Months Ended
Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Variable Interest Entities
10.  Variable Interest Entities

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

John Sevier VIEs

In 2012, TVA entered into a $1.0 billion construction management agreement and lease financing arrangement with John Sevier Combined Cycle Generation LLC ("JSCCG") for the completion and lease by TVA of the John Sevier Combined Cycle Facility ("John Sevier CCF"). JSCCG is a special single-purpose limited liability company formed in January 2012 to finance the John Sevier CCF through a $900 million secured note issuance (the "JSCCG notes") and the issuance of $100 million of membership interests subject to mandatory redemption.  The membership interests were purchased by John Sevier Holdco LLC ("Holdco").  Holdco is a special single-purpose entity, also formed in January 2012, established to acquire and hold the membership interests in JSCCG.  A non-controlling interest in Holdco is held by a third-party through nominal membership interests, to which none of the income, expenses, and cash flows are allocated. 
 
The membership interests held by Holdco in JSCCG were purchased with proceeds from the issuance of $100 million of secured notes (the "Holdco notes") and are subject to mandatory redemption pursuant to a schedule of amortizing, semi-annual payments due each January 15 and July 15, with a final payment due in January 2042. The payment dates for the mandatorily redeemable membership interests are the same as those of the Holdco notes. The sale of the JSCCG notes, the membership interests in JSCCG, and the Holdco notes closed in January 2012. The JSCCG notes are secured by TVA's lease payments, and the Holdco notes are secured by Holdco's investment in, and amounts receivable from, JSCCG. TVA's lease payments to JSCCG are equal to and payable on the same dates as JSCCG's and Holdco's semi-annual debt service payments. In addition to the lease payments, TVA pays administrative and miscellaneous expenses incurred by JSCCG and Holdco. Certain agreements related to this transaction contain default and acceleration provisions.

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

Southaven VIE

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

The membership interests held by SHLLC were purchased with proceeds from the issuance of $40 million of secured notes (the "SHLLC notes") and are subject to mandatory redemption pursuant to a schedule of amortizing, semi-annual payments due each February 15 and August 15, with a final payment due on August 15, 2033. The payment dates for the mandatorily redeemable membership interests are the same as those of the SHLLC notes, and the payment amounts are sufficient to provide returns on, as well as returns of, capital until the investment has been repaid to SHLLC in full. The rate of return on investment to SHLLC is 7.0 percent, which is reflected as interest expense in the consolidated statements of operations. SHLLC is required to pay a pre-determined portion of the return on investment to Seven States Southaven, LLC ("SSSL") on each lease payment date as agreed in SHLLC's formation documents (the "Seven States Return"). The current and long-term portions of the Membership interests of VIE subject to mandatory redemption are included in Accounts payable and accrued liabilities and Other long-term liabilities, respectively.

The payment dates for the mandatorily redeemable membership interests are the same as those of the SHLLC notes. The SCCG notes are secured by TVA's lease payments, and the SHLLC notes are secured by SHLLC's investment in, and amounts receivable from, SCCG. TVA's lease payments to SCCG are payable on the same dates as SCCG's and SHLLC's semi-annual debt service payments and are equal to the sum of (i) the amount of SCCG's semi-annual debt service payments, (ii) the amount of SHLLC's semi-annual debt service payments, and (iii) the amount of the Seven States Return. In addition to the lease payments, TVA pays administrative and miscellaneous expenses incurred by SCCG and SHLLC. Certain agreements related to this transaction contain default and acceleration provisions.

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

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

    The financial statement items attributable to carrying amounts and classifications of JSCCG, Holdco, and SCCG as of September 30, 2020 and 2019, as reflected on the Consolidated Balance Sheets, are as follows:
Summary of Impact of VIEs on Consolidated Balance Sheets
At September 30
 20202019
Current liabilities 
Accrued interest$10 $11 
Accounts payable and accrued liabilities
Current maturities of long-term debt of variable interest entities41 39 
Total current liabilities
54 53 
Other liabilities
Other long-term liabilities23 25 
Long-term debt, net
Long-term debt of variable interest entities, net1,048 1,089 
Total liabilities$1,125 $1,167 

Interest expense of $54 million, $56 million, and $58 million related to debt of VIEs and membership interests of variable interest entity subject to mandatory redemption is included in the Consolidated Statements of Operations for the years ended September 30, 2020, 2019, and 2018, respectively.

Creditors of the VIEs do not have any recourse to the general credit of TVA. TVA does not have any obligations to provide financial support to the VIEs other than as prescribed in the terms of the agreements related to these transactions.
v3.20.2
Other Long-Term Liabilities
12 Months Ended
Sep. 30, 2020
Other Liabilities, Noncurrent [Abstract]  
Other Long-Term Liabilities Other Long-Term Liabilities
Other long-term liabilities consist primarily of liabilities related to certain derivative agreements as well as for environmental remediation liabilities and liabilities under agreements related to compliance with certain environmental regulations. See Note 12 — Asset Retirement Obligations, Note 15 — Risk Management Activities and Derivative TransactionsDerivatives Not Receiving Hedge Accounting Treatment — Interest Rate Derivatives, and Note 22 — Commitments and Contingencies — Legal Proceedings — Environmental Agreements. The table below summarizes the types and amounts of Other long-term liabilities:
Other Long-Term Liabilities(1)
At September 30
 20202019
Interest rate swap liabilities$1,927 $1,676 
Operating lease liabilities171 — 
Currency swap liabilities123 193 
EnergyRight® financing obligation78 90 
Paradise pipeline financing obligation— 80 
Accrued long-term service agreements56 66 
Other193 203 
Total other long-term liabilities$2,548 $2,308 
Note
(1) Due to the implementation of the new lease accounting standard effective October 1, 2019, TVA reclassified $182 million of finance leases from Other long-term liabilities to Finance lease liabilities in the Consolidated Balance Sheet for the year ending September 30, 2019.
Interest Rate Swap Liabilities. TVA uses interest rate swaps to fix variable short-term debt to a fixed rate. The values of these derivatives are included in Accounts payable and accrued liabilities, Accrued interest, and Other long-term liabilities on the Consolidated Balance Sheets. As of September 30, 2020 and 2019, the carrying amount of the interest rate swap liabilities reported in Accounts payable and accrued liabilities and Accrued interest was approximately $114 million and $88 million, respectively. See Note 15 — Risk Management Activities and Derivative TransactionsDerivatives Not Receiving Hedge Accounting TreatmentInterest Rate Derivatives for information regarding the interest rate swap liabilities. As of September 30, 2020, Interest rate swap liabilities increased $277 million as compared to September 30, 2019, primarily due to a decrease in interest rates resulting in higher mark-to-market values on future expected net cash flows.
    EnergyRight® Financing Obligation. TVA purchases certain loans receivable from its LPCs in association with the EnergyRight® program. The current and long-term portions of the resulting financing obligation are reported in Accounts payable and accrued liabilities and Other long-term liabilities, respectively, on TVA's Consolidated Balance Sheets. As of September 30, 2020 and 2019, the carrying amount of the financing obligation reported in Accounts payable and accrued liabilities was approximately $19 million and $23 million, respectively. See Note 8 — Other Long-Term Assets for information regarding the associated loans receivable.

In response to the COVID-19 pandemic, customers experiencing financial hardship can request a deferral of EnergyRight® loan payments for a period of up to six months. This deferral option began April 20, 2020, and is available through October 31, 2020. Deferred loans will not accrue interest during the deferral months. These deferred loans have resulted in a less than $1 million impact to TVA.

    Paradise Pipeline Financing Obligation. TVA reserves firm pipeline capacity on an approximately 19-mile pipeline
owned by Texas Gas, which serves TVA's Paradise Combined Cycle Facility. TVA had been accounting for the contract covering this arrangement as a financing transaction due to failed sale-leaseback treatment. The contract was revised during the fourth quarter of 2020 and is no longer deemed to contain a lease component. Accordingly, amounts related to the pipeline asset and financing obligation recorded in connection with this transaction were derecognized as of September 30, 2020. The current and long-term portions of less than $1 million and $80 million, respectively, of the financing obligation are reported in Accounts payable and accrued liabilities and Other long-term liabilities, respectively, on TVA's Consolidated Balance Sheet at September 30, 2019.

    Accrued Long-Term Service Agreement. TVA has entered into various long-term service agreements for major
maintenance activities at certain of its combined cycle plants. TVA uses the direct expense method of accounting for these
arrangements. TVA accrues for parts when it takes ownership and for contractor services when they are rendered. Under
certain of these agreements, parts received and services rendered exceed payments made. The current and long-term portions
of the resulting obligation are reported in Accounts payable and accrued liabilities and Other long-term liabilities, respectively, on
TVA's Consolidated Balance Sheets. As of September 30, 2020 and 2019, related liabilities of $15 million and $12 million, respectively, were recorded in Accounts payable and accrued liabilities.
v3.20.2
Asset Retirement Obligations
12 Months Ended
Sep. 30, 2020
Asset Retirement Obligation Disclosure [Abstract]  
Asset Retirement Obligations Asset Retirement Obligations
    During the year ended September 30, 2020, TVA's total ARO liability increased $1.2 billion.

    To estimate its decommissioning obligation related to its nuclear generating stations, TVA uses a probability-weighted, discounted cash flow model which, on a unit-by-unit basis, considers multiple outcome scenarios that include significant estimations and assumptions. Those assumptions include (1) estimates of the cost of decommissioning; (2) the method of decommissioning and the timing of the related cash flows; (3) the license period of the nuclear plant, considering the probability of license extensions; (4) cost escalation factors; and (5) the credit adjusted risk free rate to measure the obligation at the present value of the future estimated costs. TVA has ascribed probabilities to two different decommissioning methods related to its nuclear decommissioning obligation estimate: the DECON method and the SAFSTOR method. The DECON method requires radioactive contamination to be removed from a site and safely disposed of or decontaminated to a level that permits the site to be released for unrestricted use shortly after it ceases operation. The SAFSTOR method allows nuclear facilities to be placed and maintained in a condition that allows the facilities to be safely stored and subsequently decontaminated to levels that permit release for unrestricted use.

    TVA bases its nuclear decommissioning estimates on site-specific cost studies. The most recent study was approved and implemented in September 2017. An increase of $250 million was recorded to the nuclear AROs as a result of the updates. Site-specific cost studies are updated for each of TVA's nuclear units at least every five years.

    TVA also has decommissioning obligations related to its non-nuclear generating sites, ash impoundments, transmission substation and distribution assets, and certain general facilities. To estimate its decommissioning obligation related to these assets, TVA uses estimations and assumptions for the amounts and timing of future expenditures and makes judgments concerning whether or not such costs are considered a legal obligation. Those assumptions include (1) estimates of the costs of decommissioning, (2) the method of decommissioning and the timing of the related cash flows, (3) the expected retirement date of each asset, (4) cost escalation factors, and (5) the credit adjusted risk free rate to measure the obligation at the present value of the future estimated costs. TVA bases its decommissioning estimates for each asset on its identified preferred closure method.

During 2020, the revisions in non-nuclear estimates increased $1.1 billion for the year ended September 30, 2020. In November 2019, the Tennessee Department of Environment and Conservation ("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. This regulatory revision resulted in an increase of $129 million, of which $38 million was related to operating CCR facilities and $91 million was related to inactive or closed CCR facilities. In June 2020, based on recent project cost data and estimates, TVA revised its AROs for closure-by-removal of certain CCR facilities at Allen Fossil Plant, resulting in an increase to AROs of $273 million. In September 2020, TVA completed an engineering review of its cost estimates to close the ash pond complex at Gallatin Fossil Plant, resulting in an increase of $173 million due to expected cost increases for excavation, disposal, and other activities required in a closure-by-removal project. Also in September 2020, TVA completed a study of its plant decommissioning obligations and CCR post-closure care and monitoring obligations. TVA increased its plant decommissioning obligations by $19 million, primarily due to asbestos and hazardous material abatement costs. TVA increased its CCR post-closure care and monitoring AROs primarily as a result of expected cost increases to monitor groundwater and maintain CCR areas after closure as well as increases in expected acreage to maintain after closure, totaling $460 million.

    During 2019, the revisions in non-nuclear estimates increased $50 million for the year ended September 30, 2019. As a result of recent experience in completing settlements at certain facilities, costs for asbestos abatement activities across TVA's fossil fleet increased $114 million. TVA changed the preferred closure method for Allen West Impoundment from closure-in-place to closure-by-removal, which resulted in a cost increase of $33 million. Partially offsetting these increases was a $57 million decrease in costs for Paradise closure projects, and a $44 million decrease in costs for the Allen East Impoundment closure project. Additionally, as a result of the decision in TVA's favor by the Sixth Circuit in the lawsuit brought by TSRA and TCWN, as well as the June 2019 consent order filed in the case brought by TDEC, Gallatin discounted cash flows related to CCR closure and post-closure costs of $672 million have been recorded as Asset retirement obligations. The obligation is based upon the assumptions outlined in the consent order, including a new lined facility will be permitted and constructed on the Gallatin site and existing CCR materials in the existing wet ash disposal impoundments at Gallatin will be moved to this new facility over a 20-year period.
    
    Additionally, during the years ended September 30, 2020 and 2019, both the nuclear and non-nuclear liabilities were increased by periodic accretion, partially offset by settlement projects that were conducted during these periods. The nuclear and non-nuclear accretion amounts were deferred as regulatory assets. During 2020, 2019, and 2018, $169 million, $144 million, and $144 million, respectively, of the related regulatory assets were amortized into expense as these amounts were collected in rates. See Note 9 — Regulatory Assets and Liabilities. TVA maintains investment trusts to help fund its decommissioning obligations. See Note 16 — Fair Value Measurements Investment Funds and Note 22 — Commitments and ContingenciesDecommissioning Costs for a discussion of the trusts' objectives and the current balances of the trusts.
Asset Retirement Obligation Activity
 NuclearNon-NuclearTotal
Balance at September 30, 2018$2,989 $1,790 $4,779 
Settlements(7)(82)(89)
Revisions in estimate— 50 50 
Additional obligations18 — 18 
Gallatin CCR— 672 672 
Accretion (recorded as regulatory asset)136 50 186 
Balance at September 30, 20193,136 2,480 5,616 
(1)
Settlements(1)(113)(114)
Revisions in estimate— 1,077 1,077 
Accretion (recorded as regulatory asset)143 63 206 
Balance at September 30, 2020$3,278 $3,507 $6,785 
(1)
Note
(1) Includes $345 million and $163 million at September 30, 2020 and 2019, respectively, in Current liabilities.
v3.20.2
Debt and Other Obligations
12 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
Debt and Other Obligations Debt and Other Obligations
General

The TVA Act authorizes TVA to issue Bonds in an amount not to exceed $30.0 billion at any time.  At September 30, 2020, TVA had only two types of Bonds outstanding: power bonds and discount notes.  Power bonds have maturities between one and 50 years, and discount notes have maturities of less than one year.  Power bonds and discount notes are both issued pursuant to Section 15d of the TVA Act and pursuant to the Basic Tennessee Valley Authority Power Bond Resolution adopted by the TVA Board on October 6, 1960, as amended on September 28, 1976, October 17, 1989, and March 25, 1992 (the "Basic Resolution").  Bonds are not obligations of the U.S., and the U.S. does not guarantee the payments of principal or interest on Bonds.
Power bonds and discount notes rank on parity and have first priority of payment from net power proceeds, which are defined as the remainder of TVA's gross power revenues after deducting the costs of operating, maintaining, and administering its power properties and tax equivalent payments, but before deducting depreciation accruals or other charges representing the amortization of capital expenditures, plus the net proceeds from the sale or other disposition of any power facility or interest therein.

TVA considers its scheduled rent payments under its leaseback transactions, as well as its scheduled payments under its lease financing arrangements involving John Sevier CCF and Southaven CCF, as costs of operating, maintaining, and administering its power properties. Costs of operating, maintaining, and administering TVA's power properties have priority over TVA's payments on the Bonds.  Once net power proceeds have been applied to payments on power bonds and discount notes as well as any other Bonds that TVA may issue in the future that rank on parity with or subordinate to power bonds and discount notes, Section 2.3 of the Basic Resolution provides that the remaining net power proceeds shall be used only for (1) minimum payments into the U.S. Treasury required by the TVA Act as repayment of, and as a return on, the Power Program Appropriation Investment; (2) investment in power system assets; (3) additional reductions of TVA's capital obligations; and (4) other lawful purposes related to TVA's power business.

The TVA Act and the Basic Resolution each contain two bond tests: the rate test and the bondholder protection test.  Under the rate test, TVA must charge rates for power which will produce gross revenues sufficient to provide funds for, among other things, debt service on outstanding Bonds.  As of September 30, 2020, TVA was in compliance with the rate test. See Note 1 — Summary of Significant Accounting Policies General.  Under the bondholder protection test, TVA must, in successive five-year periods, use an amount of net power proceeds at least equal to the sum of (1) the depreciation accruals and other charges representing the amortization of capital expenditures and (2) the net proceeds from any disposition of power facilities for either the reduction of its capital obligations (including Bonds and the Power Program Appropriation Investment) or investment in power assets. TVA met the bondholder protection test for the five-year period ended September 30, 2020, and must next meet the bondholder protection test for the five-year period ending September 30, 2025.

Secured Debt of VIEs

On August 9, 2013, SCCG issued secured notes totaling $360 million that bear interest at a rate of 3.846 percent. The SCCG notes require amortizing semi-annual payments on each February 15 and August 15, and mature on August 15, 2033. Also on August 9, 2013, SCCG issued $40 million of membership interests subject to mandatory redemption. The proceeds from the secured notes issuance and the issuance of the membership interests were paid to TVA in accordance with the terms of the Southaven head lease. See Note 10 — Variable Interest EntitiesSouthaven VIE. TVA used the proceeds from the transaction primarily to fund the acquisition of the Southaven CCF from SSSL.

On January 17, 2012, JSCCG issued secured notes totaling $900 million in aggregate principal amount that bear interest at a rate of 4.626 percent. Also on January 17, 2012, Holdco issued secured notes totaling $100 million that bear interest at a rate of 7.1 percent. The JSCCG notes and the Holdco notes require amortizing semi-annual payments on each January 15 and July 15, and mature on January 15, 2042. The Holdco notes require a $10 million balloon payment upon maturity. See Note 10 — Variable Interest EntitiesJohn Sevier VIEs. TVA used the proceeds from the transaction to meet its requirements under the TVA Act.

Secured debt of VIEs, including current maturities, outstanding at both September 30, 2020 and 2019 totaled $1.1 billion.

Secured Notes

    On July 20, 2016, TVA acquired two entities, in a business combination, designed to administer rent payments TVA makes under certain of its lease/leaseback arrangements. On September 27, 2000, the entities issued secured notes totaling $255 million that had an interest rate of 7.299 percent and required amortizing semi-annual payments on each March 15 and September 15 with a maturity date of March 15, 2019. In 2016, TVA assumed these secured notes in the acquisition at a fair value of $78 million. The secured notes of the entities were paid in full in 2019.

    On September 20, 2017, TVA acquired two entities, in an asset acquisition, designed to administer rent payments TVA makes under certain of its lease/leaseback arrangements. On November 14, 2001, the entities issued secured notes totaling $272 million that had an interest rate of 5.572 percent and required amortizing semi-annual payments on each May 1 and November 1 with a maturity date of May 1, 2020. In 2017, TVA assumed these secured notes in the acquisition at a fair value of $74 million. The secured notes of the entities, including current maturities, outstanding at September 30, 2019, totaled approximately $23 million, and are included in Notes payable on TVA's Consolidated Balance Sheet. The secured notes of the entities were paid in full in 2020.
Short-Term Debt

    The following table provides information regarding TVA's short-term borrowings:
Short-term Borrowings
At September 30
 202020192018
Gross amount outstanding - discount notes$57 $922 $1,217 
Weighted average interest rate - discount notes0.06 %2.15 %2.05 %

Put and Call Options

At September 30, 2019, bond issues of $357 million held by the public were redeemable in whole or in part, at TVA's option, on call dates through 2020 and at call prices of 100 percent of the principal amount. Nine of these bond issues totaling $217 million, with maturity dates ranging from 2025 to 2043, included a "survivor's option," which allowed for right of redemption upon the death of a beneficial owner in certain specified circumstances. These bonds were classified as long-term at September 30, 2019. TVA subsequently announced in October 2019 that $217 million of callable bonds were redeemed at par on November 15, 2019.

Additionally, TVA has two issues of Putable Automatic Rate Reset Securities ("PARRS") outstanding.  After a fixed-rate period of five years, the coupon rate on the PARRS may automatically be reset downward under certain market conditions on an annual basis.  The coupon rate reset on the PARRS is based on a calculation.  For both series of PARRS, the coupon rate will reset downward on the reset date if the rate calculated is below the then-current coupon rate on the Bond.  The calculation dates, potential reset dates, and terms of the calculation are different for each series.  The coupon rate on the 1998 Series D PARRS may be reset on June 1 (annually) if the sum of the five-day average of the 30-Year Constant Maturity Treasury ("CMT") rate for the week ending the last Friday in April, plus 94 basis points, is below the then-current coupon rate.  The coupon rate on the 1999 Series A PARRS may be reset on May 1 (annually) if the sum of the five-day average of the 30-Year CMT rate for the week ending the last Friday in March, plus 84 basis points, is below the then-current coupon rate.  The coupon rates may only be reset downward, but investors may request to redeem their Bonds at par value in conjunction with a coupon rate reset for a limited period of time prior to the reset dates under certain circumstances.

The coupon rate for the 1998 Series D PARRS, which mature in June 2028, has been reset eight times, from an initial rate of 6.750 percent to the current rate of 2.134 percent.  In connection with these resets, $318 million of the Bonds have been redeemed; therefore, $256 million of the Bonds were outstanding at September 30, 2020.  The coupon rate for the 1999 Series A PARRS, which mature in May 2029, has been reset seven times, from an initial rate of 6.50 percent to the current rate of 2.216 percent.  In connection with these resets, $316 million of the Bonds have been redeemed; therefore, $208 million of the Bonds were outstanding at September 30, 2020.

Due to the contingent nature of the put option on the PARRS, TVA determines whether the PARRS should be classified as long-term debt or current maturities of long-term debt by calculating the expected reset rate for the Bonds on the calculation dates, described above.  If the determination date for reset is before the balance sheet date of the reporting period and the expected reset rate is less than the then-current coupon rate on the PARRS, the PARRS are included in current maturities. Otherwise, the PARRS are included in long-term debt.  
Debt Securities Activity

The table below summarizes the long-term debt securities activity for the years ended September 30, 2020 and 2019.
Debt Securities Activity
For the years ended September 30
 20202019
Issues
2020 Series A(1)
$1,000 $— 
Discount on debt issues(3)— 
Total$997 $— 
Redemptions/Maturities(2)
  
electronotes®
$219 $
2013 Series A1,000 
2009 Series B28 30 
2018 Series A1,000 — 
1999 Series A PARRS (TVE)23 — 
1998 Series D PARRS (TVC)17 — 
1995 Series B140 — 
Total redemptions/maturities of power bonds1,427 1,035 
Notes payable23 46 
Variable interest entities39 38 
Total$1,489 $1,119 
Notes
(1) The 2020 Series A Bonds were issued at 99.7 percent of par.
(2) All redemptions were at 100 percent of par.

Debt Outstanding

    Total debt outstanding at September 30, 2020 and 2019, consisted of the following: 
Short-Term Debt
At September 30
 
CUSIP or Other Identifier
 
Maturity
 Call/(Put) Date 
Coupon Rate
20202019
Short-term debt, net of discounts$57 $922 
Current maturities of long-term debt of VIEs issued at par41 39 
Current maturities of notes payable— 23 
Current maturities of power bonds issued at par
880591EF5
12/15/20193.770%— 
880591EF56/15/20203.770%— 27 
880591EF512/15/20203.770%— 
880591EF56/15/20213.770%28 — 
88059TEL111/15/20192.650%— 
88059TEL15/15/20202.650%— 
880591EV03/15/20202.250%— 1,000 
880591EL22/15/20213.875%1,500 — 
880591DC36/7/20215.805%258 
(1)
— 
Total current maturities of power bonds issued at par   1,787 1,030 
Total current debt outstanding, net   $1,885 $2,014 
Note
(1) Includes net exchange gain from currency transactions of $73 million at September 30, 2020.
Long-Term Debt
At September 30
 
CUSIP or Other Identifier
 
Maturity
Coupon
Rate
Effective Call Date2020 Par2019 ParStock Exchange Listings
electronotes®(2)
5/15/2020 - 2/15/20432.375% - 3.625%
2/15/2015 - 2/15/2018 (5)
$— $217 None
880591EL22/15/20213.875%— 1,500 New York
880591DC36/7/20215.805%
(3)
— 

246 
(1)
New York, Luxembourg
880591EN88/15/20221.875%1,000 1,000 New York
880591ER99/15/20242.875%1,000 1,000 New York
880591EW85/15/20250.750%1,000 — New York
880591CJ911/1/20256.750%1,350 1,350 New York, Hong Kong, Luxembourg, Singapore
880591EU22/1/20272.875%1,000 1,000 New York
880591300(4)
6/1/20282.134%256 273 New York
880591409(4)
5/1/20292.216%208 232 New York
880591DM15/1/20307.125%1,000 1,000 New York, Luxembourg
880591DP46/7/20326.587%
(3)
323 
(1)
307 
(1)
New York, Luxembourg
880591DV17/15/20334.700%472 472 New York, Luxembourg
880591EF56/15/20343.770%218 246 None
880591DX76/15/20354.650%436 436 New York
880591CK64/1/20365.980%121 121 New York
880591CS94/1/20365.880%1,500 1,500 New York
880591CP51/15/20386.150%1,000 1,000 New York
880591ED06/15/20385.500%500 500 New York
880591EH19/15/20395.250%2,000 2,000 New York
880591EP312/15/20423.500%1,000 1,000 New York
880591DU36/7/20434.962%
(3)
194 
(1)
185 
(1)
New York, Luxembourg
880591CF77/15/20456.235%7/15/2020— 140 New York
880591EB41/15/20484.875%500 500 New York, Luxembourg
880591DZ24/1/20565.375%1,000 1,000 New York
880591EJ79/15/20604.625%1,000 1,000 New York
880591ES79/15/20654.250%1,000 1,000 New York
Subtotal 18,078 19,225  
Unamortized discounts, premiums, issue costs, and other  (122)(131) 
Total long-term outstanding power bonds, net  17,956 19,094  
Long-term debt of VIEs, net1,048 1,089 
Total long-term debt, net$19,004 $20,183 
Notes
(1)  Includes net exchange gain from currency transactions of $80 million and $191 million at September 30, 2020 and 2019, respectively.
(2)  Includes one electronotes® issue with partial maturities of principal for each required annual payment.
(3)  The coupon rate represents TVA's effective interest rate.
(4)  TVA PARRS, CUSIP numbers 880591300 and 880591409, may be redeemed under certain conditions.  See Put and Call Options above.
(5)  The bonds were callable on or after the dates shown.
 
Maturities Due in the Year Ending September 30
 20212022202320242025ThereafterTotal
Long-term power bonds, long-term debt of VIEs, and notes payable including current maturities(1)
$1,901 $1,071 $69 $1,058 $1,059 $15,957 $21,115 
Short-term debt, net of discounts57 — — — — — 57 
Note
(1) Long-term power bonds does not include non-cash items of foreign currency exchange gain of $153 million, unamortized debt issue costs of $45 million, and net discount on sale of Bonds of $77 million. Long-term debt of VIE does not include non-cash item of unamortized debt issue costs of $8 million.

Credit Facility Agreements

TVA has funding available under four long-term revolving credit facilities totaling $2.7 billion: a $150 million credit facility that matures on December 11, 2021, a $1.0 billion credit facility that matures on June 13, 2023, a $1.0 billion credit facility that matures on September 28, 2023, and a $500 million credit facility that matures on February 1, 2025. The interest rate on any borrowing under these facilities varies based on market factors and the rating of TVA's senior unsecured, long-term, non-credit-enhanced debt. TVA is required to pay an unused facility fee on the portion of the total $2.7 billion that TVA has not borrowed or committed under letters of credit. This fee, along with letter of credit fees, may fluctuate depending on the rating of TVA's senior unsecured, long-term, non-credit-enhanced debt. At September 30, 2020 and 2019, there were $1.5 billion and $1.3 billion, respectively, of letters of credit outstanding under these facilities, and there were no borrowings outstanding. See Note 15 — Risk Management Activities and Derivative TransactionsOther Derivative InstrumentsCollateral.

The following table provides additional information regarding TVA's funding available under the four long-term revolving credit facilities:
Summary of Long-Term Credit Facilities
At September 30, 2020
Maturity DateFacility LimitLetters of Credit OutstandingCash BorrowingsAvailability
December 2021$150 $38 $— $112 
June 20231,000 432 — 568 
September 20231,000 487 — 513 
February 2025500 500 — — 
     Total$2,650 $1,457 $— $1,193 

TVA and the U.S. Treasury, pursuant to the TVA Act, have entered into a memorandum of understanding under which the U.S. Treasury provides TVA with a $150 million credit facility. This credit facility was renewed for 2021 with a maturity date of September 30, 2021. Access to this credit facility or other similar financing arrangements with the U.S. Treasury has been available to TVA since the 1960s. TVA can borrow under the U.S. Treasury credit facility only if it cannot issue Bonds in the market on reasonable terms, and TVA considers the U.S. Treasury credit facility a secondary source of liquidity. The interest rate on any borrowing under this facility is based on the average rate on outstanding marketable obligations of the U.S. with maturities from date of issue of one year or less. There were no outstanding borrowings under the facility at September 30, 2020. The availability of this credit facility may be impacted by how the U.S. government addresses the possibility of approaching its debt limit.

Lease/Leasebacks

    TVA previously entered into leasing transactions to obtain third-party financing for 24 peaking CTs as well as certain qualified technological equipment and software ("QTE"). Due to TVA's continuing involvement with the combustion turbine facilities and the QTE during the leaseback term, TVA accounted for the lease proceeds as financing obligations. On September 30, 2020 and 2019, the outstanding leaseback obligations related to the remaining CTs and QTE were $223 million and $263 million, respectively. In March 2019, TVA made final rent payments under lease/leaseback transactions involving eight CTs, and TVA had previously acquired the equity interests related to these transactions. These transactions were terminated in July 2019. In May 2020, TVA made final rent payments under lease/leaseback transactions involving eight additional CTs, and TVA had previously acquired the equity interest related to these transactions. Rent payments under the remaining CT lease/leaseback transactions are scheduled to be made through January 2022. TVA does have the option to acquire the equity interests related to transactions involving the remaining eight CTs for additional amounts. In addition, on October 30, 2019, TVA provided notice of its intent to purchase the ownership interest in certain QTE. Repurchase payments are expected to be paid through a series of installments in 2021 and 2022, after which the associated leases will be terminated.
v3.20.2
Accumulated Other Comprehensive Income (Loss)
12 Months Ended
Sep. 30, 2020
Equity [Abstract]  
Accumulated Other Comprehensive Income (Loss) Accumulated Other Comprehensive Income (Loss)
    AOCI represents market valuation adjustments related to TVA's currency swaps. The currency swaps are cash flow hedges and are the only derivatives in TVA's portfolio that have been designated and qualify for hedge accounting treatment. TVA records exchange rate gains and losses on its foreign currency-denominated debt and any related accrued interest in net income and marks its currency swap assets and liabilities to market through other comprehensive income (loss) ("OCI"). TVA then reclassifies an amount out of AOCI into net income, offsetting the exchange gain/loss recorded on the debt. For the years ended September 30, 2020 and 2019, TVA reclassified $38 million of gains and $45 million of losses, respectively, related to its cash flow hedges from AOCI to Interest expense. See Note 15 — Risk Management Activities and Derivative Transactions.

    TVA records certain assets and liabilities that result from the regulated ratemaking process that would not be recorded under GAAP for non-regulated entities. As such, certain items that would generally be reported in AOCI or that would impact the statements of operations are recorded as regulatory assets or regulatory liabilities. See Note 9 — Regulatory Assets and Liabilities for a schedule of regulatory assets and liabilities.  See Note 15 — Risk Management Activities and Derivative Transactions for a discussion of the recognition in AOCI of gains and losses associated with certain derivative contracts. See Note 16 — Fair Value Measurements for a discussion of the recognition of certain investment fund gains and losses as regulatory assets and liabilities.  See Note 21 — Benefit Plans for a discussion of the regulatory accounting related to components of TVA's benefit plans.
v3.20.2
Risk Management Activities and Derivative Transactions
12 Months Ended
Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Risk Management Activities and Derivative Transactions Risk Management Activities and Derivative Transactions
TVA is exposed to various risks related to commodity prices, investment prices, interest rates, currency exchange rates, and inflation as well as counterparty credit and performance risks.  To help manage certain of these risks, TVA has historically entered into various derivative transactions, principally commodity option contracts, forward contracts, swaps, swaptions, futures, and options on futures.  Other than certain derivative instruments in its trust investment funds, it is TVA's policy to enter into these derivative transactions solely for hedging purposes and not for speculative purposes. During the fourth quarter of 2020, TVA discontinued derivative accounting for forward coal contracts because these contracts no longer meet the criteria of net settlement. As a result, the associated $10 million net derivative liabilities have been derecognized. TVA suspended its FTP in 2014 and no longer uses financial instruments to hedge risks related to commodity prices; however, TVA plans to continue to manage fuel price volatility through other methods and is currently reevaluating its suspended FTP program for future use of financial instruments.

Overview of Accounting Treatment

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

The following tables summarize the accounting treatment that certain of TVA's financial derivative transactions receive:
Summary of Derivative Instruments That Receive Hedge Accounting Treatment (part 1) 
Amount of Mark-to-Market Gain (Loss) Recognized in Accumulated Other Comprehensive Income (Loss)
For the years ended September 30
Derivatives in Cash Flow Hedging RelationshipObjective of Hedge TransactionAccounting for Derivative
Hedging Instrument
20202019
Currency swapsTo protect against changes in cash flows caused by changes in foreign currency exchange rates (exchange rate risk)Unrealized gains and losses are recorded in AOCI and reclassified to Interest expense to the extent they are offset by gains and losses on the hedged transaction$(1)$(114)
Summary of Derivative Instruments That Receive Hedge Accounting Treatment (part 2)(1)
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income to Interest Expense
For the years ended September 30
Derivatives in Cash Flow Hedging Relationship20202019
Currency swaps$38 $(45)
Note
(1) There were no amounts excluded from effectiveness testing for any of the periods presented. Based on forecasted foreign currency exchange rates, TVA expects to reclassify approximately $27 million of gains from AOCI to Interest expense within the next 12 months to offset amounts anticipated to be recorded in Interest expense related to exchange gain on the debt.
Summary of Derivative Instruments That Do Not Receive Hedge Accounting Treatment
Amount of Gain (Loss) Recognized in Income on Derivatives(1)
For the years ended September 30
 
Derivative Type
Objective of Derivative(2)
Accounting for Derivative Instrument20202019
Interest rate swapsTo fix short-term debt variable rate to a fixed rate (interest rate risk)Mark-to-market gains and losses are recorded as regulatory assets or liabilities

Realized gains and losses are recognized in Interest expense when incurred during the settlement period and are presented in operating cash flow
$(97)$(79)
Commodity contract derivativesTo protect against fluctuations in market prices of purchased coal or natural gas (price risk)Mark-to-market gains and losses are recorded as regulatory assets or liabilities

Realized gains and losses due to contract settlements are recognized in Fuel expense as incurred
(1)— 
Notes
(1) All of TVA's derivative instruments that do not receive hedge accounting treatment have unrealized gains (losses) that would otherwise be recognized in income but instead are deferred as regulatory assets and liabilities. As such, there were no related gains (losses) recognized in income for these unrealized gains (losses) for the years ended September 30, 2020 and 2019.
(2) During the fourth quarter of 2020, TVA discontinued derivative accounting for forward coal contracts.
Fair Values of TVA Derivatives
At September 30
 20202019
Derivatives That Receive Hedge Accounting Treatment:
 BalanceBalance Sheet PresentationBalanceBalance Sheet Presentation
Currency swaps    
£200 million Sterling
$(78)Accounts payable and accrued liabilities $(78)$(90)Accounts payable and accrued liabilities $(6); Other long-term liabilities $(84)
£250 million Sterling
(63)Accounts payable and accrued liabilities $(5); Other long-term liabilities $(58)(61)Accounts payable and accrued liabilities $(5); Other long-term liabilities $(56)
£150 million Sterling
(68)Accounts payable and accrued liabilities $(3); Other long-term liabilities $(65)(57)Accounts payable and accrued liabilities $(4); Other long-term liabilities $(53)
Derivatives That Do Not Receive Hedge Accounting Treatment:
 BalanceBalance Sheet PresentationBalanceBalance Sheet Presentation
Interest rate swaps    
$1.0 billion notional
$(1,449)Accounts payable and accrued liabilities $(43); Accrued interest $(37); Other long-term liabilities $(1,369)$(1,261)Accounts payable and
accrued liabilities $(29); Accrued interest $(33);
Other long-term liabilities
$(1,199)
$476 million notional
(588)Accounts payable and accrued liabilities $(22); Accrued interest $(10); Other long-term liabilities $(556)(498)Accounts payable and
accrued liabilities $(15); Accrued interest $(9);
Other long-term liabilities
$(474)
$42 million notional(4)Accounts payable and accrued liabilities $(2); Other long-term liabilities $(2)(5)Accounts payable and
accrued liabilities $(1); Accrued interest $(1); Other long-term liabilities $(3)
Commodity contract derivatives46 Other current assets $26; Other long-term assets $23; Accounts payable and accrued liabilities $(3)(41)Other current assets $12; Other long-term liabilities $(16); Accounts payable and accrued liabilities $(37)
Cash Flow Hedging Strategy for Currency Swaps

To protect against exchange rate risk related to three British pound sterling denominated Bond transactions, TVA entered into foreign currency hedges at the time the Bond transactions occurred.  TVA had the following currency swaps outstanding at September 30, 2020:
Currency Swaps Outstanding
September 30, 2020
Effective Date of Currency Swap ContractAssociated TVA Bond Issues Currency ExposureExpiration Date of SwapOverall Effective
Cost to TVA
1999£200 million20215.81%
2001£250 million20326.59%
2003£150 million20434.96%

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