TACIR approves report on TVA payments-in-lieu-of-taxes; staff flagged contract and rate drivers

The Tennessee Advisory Commission on Intergovernmental Relations approved its annual monitoring report on the Tennessee Valley Authority'payments-in-lieu-of-taxes pilot, a statutorily required review of how TVA wholesale changes and distributor choices affect payments to states and local governments.

Jennifer Arzate, presenting the report (tab 3 in the commission docket), told commissioners the pilot distribution for the federal fiscal period the staff reviewed totaled in the hundreds of millions of dollars and that Tennessee received the largest share. "For federal fiscal year 2023, TVA's actual pilot totaled $611,000,000, of which $410,000,000 were paid to Tennessee governments, including $3,400,000 in direct payments to counties," Arzate said. She said staff estimated decreases in total federal'fiscal'year payments for the next year (staff cited a projected federal'year decline of about $23,000,000) tied primarily to milder weather and lower industrial sales but noted a separate state'fiscal effect because of timing differences between fiscal years.

Arzate also discussed two factors that could affect future pilot distributions: TVA's October 1, 2023 wholesale rate increase and contract provisions that allow many TVA distributors to purchase renewable energy from non'TVA sources, which can reduce TVA revenue and therefore payments tied to the pilot. Under Public Chapter 1035 (Acts of 2010), purchases from non'TVA entities may still be subject to equivalent payments but credits for other local taxes can reduce or eliminate payments.

After the presentation, chair moved to approve the report. A second was made and the commission approved the report by voice vote; no roll call was requested.