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Commission approves report on TVA payments in lieu, estimates modest federal-year increase
Summary
The commission approved a staff report on Tennessee Valley Authority payments in lieu of taxes (PILOT), finding federal fiscal year 2023–24 PILOT totaled about $588 million and estimating roughly $600 million for FY 2024–25; staff recommended continued monitoring and asked TVA to share a distributor list with the Department of Revenue.
The Tennessee Legislative Research Commission on reports approved the commission staff report on Tennessee Valley Authority payments in lieu of taxes, which calculated federal fiscal year 2023–24 PILOT at about $588,000,000 and estimated roughly $600,000,000 for federal fiscal year 2024–25.
The report, presented by senior research associate Jennifer Arzate, said Tennessee received about $394,000,000 of the FY 2023–24 PILOT, including roughly $340,000,000 in direct payments to counties. The staff presentation said the estimated increase for FY 2024–25 was driven mainly by TVA base rate increases, the end of pandemic-era credits and higher sales volume, partially offset by lower fuel costs.
The report noted three factors that could affect future payments: (1) contract provisions that let many TVA distributors buy renewable energy from non‑TVA sources, which under state law can alter PILOT calculations but have produced net credits to distributors so far; (2) a 4.5% wholesale rate increase effective Oct. 1, 2023; and (3) a board‑approved 5.25% wholesale rate increase effective Oct. 1, 2024. Staff told commissioners that, to aid statutory monitoring under Public Chapter 1035 (Acts of 2010), it would be beneficial for TVA to provide the Tennessee Department of Revenue a list of distributors purchasing power from non‑TVA sources.
Chairman Yeager moved approval of the report; Mayor Anderson seconded. The commission approved the staff report by voice vote.
The report breaks out state and local distributions and includes appendices explaining payment calculations, county and city allocations (excluding impact payments), and allocations for counties with TVA construction. Counties newly affected by TVA construction listed in the staff presentation included Benton, Henry, Houston, Humphreys, Roane and Stewart counties.
Commission staff offered no policy recommendations beyond monitoring and the suggested TVA disclosure to the Department of Revenue.
The commission approved the report for filing and directed staff to continue monitoring the matters described in the report.
