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Item 1A. Risk Factors

2021-11-15 compared with 2020-11-17 · 170 added, 128 removed, 346 unchanged (46% of the section changed)

The risk factors described below, as well as the other information included in this Annual Report, should be carefully considered.

The risk factors described below, as well as the other information included in this Annual Report on Form 10-K for the fiscal year ended September 30, 2021 (the "Annual Report"), should be carefully considered.

Risks and uncertainties described in these risk factors could cause future results to differ materially from historical results as well as from the results anticipated in forward-looking statements.

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See Forward Looking Information above for a description of some matters that could affect the below risks or generate new risks.

The occurrence of any of the following could have a material adverse effect on TVA's cash flows, results of operations, and financial condition.

The occurrence of any of the following could have a material adverse effect on TVA's cash flows, results of operations, or financial condition.

For ease of reference, the risk factors are presented in nine categories:

(1) COVID-19 related risks;

(2) cybersecurity risks;

(3) regulatory, legislative, and legal risks;

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(5) risks related to the environment and catastrophic events;

(5) cybersecurity risks;

(6) financial, economic, and market risks;

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COVID-19 RELATED RISKS

The COVID-19 pandemic has and may continue to adversely affect TVA's business, financial condition, and results of operations.

To date, the COVID-19 pandemic has resulted in and may continue to result in reduced revenues due to customers curtailing operations to reduce the spread of the outbreak, including quarantines, closures, or reduced operations of businesses or other institutions and the deferral of revenues under programs offered by TVA to its local power company customers to offset the impact of customers' inability to pay during the outbreak.

The COVID-19 pandemic has adversely affected, and may continue to adversely affect, TVA's business, financial condition, and results of operations.

To date, the COVID-19 pandemic has resulted in reduced revenues primarily due to economic conditions surrounding COVID-19, including customers curtailing operations to reduce the spread of the outbreak as a result of quarantines, closures, or reduced operations of businesses or other institutions, among other things.

TVA's revenues also decreased due to the deferral of revenues under programs offered by TVA to its LPCs to offset the impact of customers' inability to pay during the outbreak.

TVA estimates base revenues were reduced by approximately $185 million for the year ended September 30, 2020.

TVA expects the COVID-19 pandemic to continue impacting revenue for 2021 and has planned for reduced operating revenues.

It is uncertain at this time the extent to which TVA's revenues may be impacted beyond 2021.

Based on current internal models, TVA estimates that the COVID-19 pandemic had little impact on TVA's sales volume for the year ended September 30, 2021.

At this time, TVA does not anticipate sales volume will be materially impacted due to the COVID-19 pandemic beyond 2021.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Financial Results — Operating Revenues .

TVA could be further adversely affected by the impact of the COVID-19 pandemic on the economy and financial markets, including a prolonged recession and continued volatility in interest rates, commodity prices, investment performance, and foreign currency exchange rates.

TVA has experienced fluctuations related to its pension plan assets and other investment portfolios during the year ended September 30, 2020.

TVA could be further adversely affected by the impact of the COVID-19 pandemic on the economy and financial markets, including differences in the recovery of specific economic sectors or regions of the Tennessee Valley and continued volatility in interest rates, commodity prices, investment performance, and foreign currency exchange rates.

An extended slowdown in the recovery of the United States’ economic growth, changes in the demand for commodities, or material changes in governmental policy could result in lower economic growth and lower demand for electricity in TVA’s key markets.

In addition, contractual counterparties could be impaired in their ability to perform their obligations to TVA, which could result in more costly operation of TVA’s facilities.

TVA has experienced fluctuations related to its pension plan assets and other investment portfolios during the years ended September 30, 2020 and 2021.

The ultimate impact of the COVID-19 pandemic on the pension plan and other investments depends on factors beyond TVA's knowledge or control.

A long-term recession could impact access to capital and have other long-term negative effects on operations.

In addition, TVA's operations could be impacted by, among other things, social distancing to prevent illness from spreading within the workforce;

A long-term recession could impact access to capital and have other long-term negative effects on TVA's business or results of operations.

In addition, TVA's results of operations could be impacted by, among other things, personnel who leave or forego employment to avoid vaccination requirements;

social distancing to prevent illness from spreading within the workforce;

remote work arrangements;

travel restrictions;

the availability of the workforce to perform essential functions;

and the unavailability of fuel or critical parts, supplies, or services due to transportation restrictions and the shutdown, slowdown, or inability to meet contractual requirements of suppliers or other vendors in TVA's supply chain.

and the unavailability of fuel or critical parts, supplies, or services due to transportation restrictions or the shutdown, slowdown, or inability to meet contractual requirements of suppliers or other vendors in TVA's supply chain.

In addition, the continued spread of the COVID-19 pandemic could adversely impact TVA's ability to develop, construct, and operate facilities;

could delay or prevent the completion of projects;

and could lead to impairments of TVA's long-lived assets and accounts and loans receivable.

or could lead to impairments of TVA’s long-lived assets and accounts or loans receivable.

Examples of potential impacts include delivery of force majeure notices from contractual counterparties, closure or reduced operation of global ports, or limitations on shipping key equipment as anticipated or at budgeted costs.

These impacts could cause delays in construction projects or the performance of necessary maintenance to TVA’s generation or transmission facilities, which could impact the availability of TVA’s facilities for their intended operations.

To address specific aspects of the COVID-19 pandemic, TVA has implemented a company-wide pandemic plan, including limiting non-essential travel and mandatory telework for those who do not have to be physically present at a TVA facility or office building;

implementing strong physical and cyber-security measures;

keeping certain developed recreation areas closed;

actively monitoring generation, transmission, and distribution functions;

and maintaining an increased cash reserve.

however, it is possible that these measures will not be successful in mitigating the impact of the outbreak.

At this time, operations and delivery of energy to customers have not been materially impacted.

The extent to which the COVID-19 pandemic will impact TVA's business, financial condition, and results of operations is uncertain and will depend on numerous evolving factors beyond TVA's knowledge or control including, among other things, the duration and severity of the outbreak, actions taken to contain its spread and mitigate its effects, and the broader impact of the COVID-19 pandemic on the country and region's economy.

However, TVA reasonably anticipates that a prolonged outbreak could have a material adverse impact on its business, financial condition, and results of operations, and could require TVA to change how it conducts certain operations, takes power under certain agreements, or dispatches its own facilities.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Coronavirus Pandemic for an expanded discussion of the impact to TVA and related initiatives.

However, it is possible that these measures will not be successful in mitigating the impacts of the pandemic.

At this time, operations and delivery of energy to customers have not been materially impacted, but there is no guarantee that there will not be a material impact in the future.

The extent to which the COVID-19 pandemic will impact TVA's business, financial condition, cash flows, and results of operations is uncertain and will depend on numerous evolving factors beyond TVA's control including, among other things, the duration and severity of the pandemic, actions taken to contain its spread and mitigate its effects, including vaccination programs, and the broader impact of the COVID-19 pandemic on the country, the region's economy, and global trade.

However, TVA reasonably anticipates that any of a prolonged outbreak, impacts of variants of COVID-19, and resulting commercial or social restrictions could have a material adverse impact on its business, financial condition, and results of operations, and could require TVA to change how it conducts certain operations, takes power under certain agreements, or dispatches its own facilities.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives

and Challenges — COVID-19 Pandemic for an expanded discussion of the impact to TVA and related initiatives.

CYBERSECURITY RISKS

TVA’s facilities and information infrastructure may not operate as planned due to cyber threats to TVA’s assets

and operations.

TVA’s operations are heavily computerized and include assets such as information technology and networking systems.

As with all industries, the reliance on computerization and networking makes TVA a target for cyber attacks, and the risk

of such attacks may increase as individual devices and equipment become accessible via the internet.

targeted by cyber attacks in the past and anticipates that it will be targeted in the future.

These attacks may have been

carried out, or in the future could be carried out, by individuals, groups, or nation states.

Although TVA has extensive

cyber safeguards and works with industry specialists and relevant governmental authorities to deter, stop, or mitigate

cyber attacks, it is possible that these measures might not prevent all attacks.

Furthermore, there may be more attacks

in the future as technology becomes more prevalent in energy infrastructure.

Cyber attacks could include viruses,

malicious or destructive code, phishing attacks, denial of service attacks, ransomware and other ransom-based attacks,

improper access by third parties, attacks on email systems, and ransom demands to not expose sensitive data,

gain operational control, or expose security vulnerabilities specific to TVA’s facilities, among various other security

In such a case, a cyber attack could compromise sensitive data;

significantly disrupt operations;

additional expenditures for cybersecurity;

negatively affect TVA’s cash flows, results of operations, financial condition,

and reputation;

and pose health and safety risks.

Additionally, the theft, damage, or improper disclosure of sensitive

data may subject TVA to penalties and claims from third parties.

Cyber attacks on third parties could interfere with or harm TVA.

TVA relies on third parties for various services, including transferring funds to non-TVA entities and delivering

TVA’s products in the ordinary course of business.

As with TVA, these third parties are heavily computerized and use

assets such as information technology and networking systems.

If these third parties undergo cyber attacks, which

have occurred and may continue to occur, the services they provide TVA could be disrupted.

This disruption could

interfere with TVA’s ability to perform its obligations to others, transfer funds, obtain fuel or critical parts, supplies, or

services, or make payments, which in turn could negatively affect TVA’s financial condition and reputation.

Additionally,

the theft, damage, or improper disclosure of sensitive data held by these third parties may subject TVA to further harm.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Safeguarding Assets — Cybersecurity for a discussion of recent cyber attacks on third parties.

REGULATORY, LEGISLATIVE, AND LEGAL RISKS

Existing laws, regulations, and orders may negatively affect TVA's cash flows, results of operations, and financial condition, as well as the way TVA conducts its business.

TVA is required to comply with comprehensive and complex laws, regulations, and orders.

The costs of complying with these laws, regulations, and orders are substantial, and costs could be significantly more than TVA anticipates, especially with respect to environmental and nuclear compliance.

In addition, TVA is required to obtain numerous permits and approvals from governmental agencies that regulate its business, and TVA may be unable to obtain or maintain all desired regulatory approvals.

If there is a delay in obtaining desired regulatory approvals or if TVA fails to obtain or maintain any approvals or to comply with any law, regulation, or order, TVA may have to change how it operates certain assets, may be unable to operate certain assets, or may have to pay fines or penalties if it continues to operate the assets.

New laws, regulations, or administrative or executive orders, or congressional actions or inactions, may negatively affect TVA's cash flows, results of operations, and financial condition, as well as the way TVA conducts its business.

Because TVA is a corporate agency and instrumentality established by federal law, it may be affected by a variety of laws, regulations, and administrative or executive orders that do not affect other electric utilities.

For example, federal legislation may expand or reduce TVA's activities, change its governance structure, require TVA to sell some or all of the assets that it operates, require TVA to take certain other operational or regulatory actions, reduce or eliminate the U.S.'s ownership of TVA, or even liquidate TVA.

For example, federal

legislation may expand or reduce TVA's activities, change its governance structure, require TVA to sell some or all of the assets that it operates, require TVA to take certain other operational or regulatory actions, reduce or eliminate the U.S.'s ownership of TVA, or even liquidate TVA.

Additionally, Congress could act, or fail to take action, on various issues that may result in impacts to TVA, including but not limited to action or inaction related to the national debt ceiling or automatic spending cuts in government programs.

Furthermore, administrative or executive orders could cause TVA to change the way it conducts its business.

See Item 1, Business — Environmental Matters — Climate Change — Executive Actions for a discussion of recent executive orders regarding climate change.

Although it is difficult to predict exactly how new laws, regulations, or administrative or executive orders or congressional action or inaction may impact TVA, some of the possible effects are described below.

TVA may lose its protected service territory.

TVA’s service area is defined primarily by provisions of law and long-term contracts.

The fence limits the region in which TVA or LPCs which distribute TVA power may provide power.

The anti-cherrypicking provision precludes FERC from ordering TVA to transmit power for others if that power would be consumed within the TVA service area.

State service territory laws limit unregulated third parties’ ability to sell electricity to consumers.

All current wholesale power contracts between TVA and LPCs are all requirements contracts;

however, Flexibility Agreements available to LPCs that have executed long-term contracts with TVA allow LPCs to locally generate or purchase up to approximately five percent of average total hourly energy sales over 2015 - 2019 in order to meet their individual customers’ needs.

In addition, other utilities may use their own transmission lines to serve customers within TVA’s service area, and third parties are able to avoid the restrictions on serving end-use customers by selling or leasing generating assets to a customer rather than selling electricity.

From time to time, there have been efforts to circumvent the protection of the anti-cherrypicking provision.

For example, on January 11, 2021, four LPCs filed a complaint and petition with FERC asking FERC to order TVA to provide transmission and interconnection service to the LPCs or other suppliers that want to serve them, although one of the four LPCs subsequently withdrew from the complaint and petition.

See Note 23 — Commitments and Contingencies — Legal Proceedings — Challenge to Anti-Cherrypicking Amendment .

In addition, the protections afforded by the anti-cherrypicking provision could be affected by federal legislation at some time in the future.

If FERC limited the application of the anti-cherrypicking provision or if federal legislation eliminated or limited the application of the anti-cherrypicking provision without corresponding legislative modifications to the territorial limitations imposed by the fence, TVA's ability to compete fairly for customers would be adversely affected.

Because TVA’s ability to expand its customer base is constrained by the fence, reductions in demand have to be offset by such actions as reducing TVA’s internal costs or increasing rates.

Any failure of such measures to fully offset the reduced demand for power may negatively affect TVA’s cash flows, results of operations, and financial condition.

TVA is involved in various legal and administrative proceedings whose outcomes may affect TVA's finances and operations.

TVA is involved in various legal and administrative proceedings and is likely to become involved in additional proceedings in the future in the ordinary course of business or as a result of, among other things, catastrophic events or environmental conditions at TVA property or areas where TVA has disposed of materials or property.

The additional proceedings could involve, among other things, challenges to TVA’s CCR facilities, nuisance suits involving TVA’s coal-fired plants, challenges to the anti-cherrypicking provision, and challenges to TVA’s authority to set rates and enter into contracts.

Although TVA cannot predict the outcome of the individual matters in which TVA is involved or will become involved, the resolution of these matters could require TVA to make expenditures in excess of established reserves and in amounts that could have a material adverse effect on TVA’s cash flows, results of operations, and financial condition.

Similarly, resolution of any such proceedings may require TVA to change its business practices or procedures, change how it operates its fossil-fueled units, reduce emissions to a greater extent than TVA had planned, close existing CCR facilities sooner than planned, build new CCR facilities sooner than planned, build new CCR facilities that were not planned, cease operation of some coal-fired units, adjust its rates, or terminate or modify contracts.

These events could also have a material adverse effect on TVA’s cash flows, results of operations, and financial condition.

For a discussion of certain current material legal proceedings, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges and Note 23 — Commitments and Contingencies — Legal Proceedings .

TVA may become subject to additional environmental regulation.

New environmental laws, regulations, or orders may become applicable to TVA or the facilities it operates, and existing environmental laws or regulations may be revised or reinterpreted in a way that adversely affects TVA, including substantially increasing TVA's cost of operations or requiring significant capital expenditures.

Possible areas of future laws or regulations include, but are not limited to, GHGs, CCR, ELGs, water quality, renewable energy portfolio standards, and natural gas production and transmission.

See Item 1, Business – Environmental Matters – Water Quality Control Developments for a discussion of the EPA's new effluent limitation guidelines and Item 1, Business – Environmental Matters – Cleanup of Solid and Hazardous Wastes – Coal Combustion Residuals for a discussion of recent revisions to the EPA's CCR rule.

See Item 1, Business — Environmental Matters — Water Quality Control Developments for a discussion of the EPA's new effluent limitation guidelines, Item 1, Business — Environmental Matters — Cleanup of Solid and Hazardous Wastes — Coal Combustion Residuals for a discussion of recent revisions to the EPA's CCR rule, and Item 1, Business — Environmental Matters — Climate Change — Executive Actions for a discussion of recent executive orders regarding

climate change.

Litigation may affect the timing and requirements of new regulatory proposals, and may indirectly affect TVA, even if TVA is not involved.

TVA could be divested by the federal government or be required to sell some or all of its assets.

From time to time, U.S.

administrations have suggested that the federal government should either divest TVA or require TVA to sell some or all of its assets, including its transmission system.

Either event could trigger change of control provisions in certain material contracts or covenants in TVA’s bond documents that concern the sale or disposal of a substantial portion of TVA’s power properties.

TVA may, among other things, be required to pay off debt more quickly than anticipated and be unable to access credit facilities.

Additionally, the loss of the transmission system could interfere with TVA’s operations and require TVA to contract for the transmission of electricity to customers.

These factors could negatively affect TVA’s operations, change the way it conducts such operations, and increase costs.

TVA's ability to control or allocate funds could be restricted.

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Treasury account.

Additionally, the OMB might, in the event that automatic spending cuts go into effect, attempt to require TVA to reduce its budget by a specified percentage (although the legal applicability of such a situation to TVA would depend upon the wording of the legislation making the automatic spending cuts).

Additionally, the OMB might, in the event that automatic spending cuts go into effect, attempt to require TVA to reduce its budget by a specified percentage (although the legal applicability of such a situation to TVA would depend upon the specific legislation making the automatic spending cuts).

Such attempts to restrict TVA's ability to control or allocate funds in those specific types of situations could adversely affect its cash flows, results of operations, and financial condition, its relationships with creditors, vendors, and counterparties, the way it conducts its business, and its reputation.

TVA may lose its protected service territory.

TVA's service area is defined primarily by provisions of law and long-term contracts.

The fence limits the region in which TVA or LPCs which distribute TVA power may provide power.

The anti-cherrypicking provision precludes FERC from ordering TVA to transmit power for others if that power would be consumed within the TVA service area.

State service territory laws limit unregulated third parties' ability to sell electricity to consumers.

All current wholesale power contracts between TVA and LPCs are all requirements contracts;

however, Flexibility Agreements available to LPCs that have executed long-term contracts with TVA allow LPCs to locally generate up to approximately five percent of average total hourly energy sales over the prior five years to meet their individual customers' needs.

In addition, other utilities may use their own transmission lines to serve customers within TVA's service area, and third parties are able to avoid the restrictions on serving end-use customers by selling or leasing generating assets to a customer rather than selling electricity.

From time to time, there have been efforts to circumvent the protection of the anti-cherrypicking provision.

In addition, the protections afforded by the anti-cherrypicking provision could be limited or perhaps eliminated by federal legislation at some time in the future.

If FERC were to limit the application of the anti-cherrypicking provision or if federal legislation were to eliminate or limit the application of the anti-cherrypicking provision, TVA could more easily lose customers that it could not replace within its specified service area due to the fence.

The loss of these customers could adversely affect TVA's cash flows, results of operations, and financial condition.

The TVA Board may lose its sole authority to set rates for electricity.

Under the TVA Act, the TVA Board has the sole authority to set the rates that TVA charges for electricity, and these rates are not subject to further review.

Under the TVA Act, the TVA Board has the sole authority to set the rates that TVA charges for electricity, and these rates are not subject to further regulation.

If the TVA Board loses this authority or if the rates or the ratemaking process become subject to external review, there could be material adverse effects on TVA including, but not limited to, being unable to set rates at a level sufficient to generate adequate revenues to service TVA's financial obligations, properly operate and maintain its assets, and provide for reinvestment in its power program and becoming subject to additional regulatory oversight that could impede its ability to adapt its business to changing circumstances.

TVA may lose responsibility for managing the Tennessee River system.

TVA's management of the Tennessee River system is important to effectively operate its power system.

TVA's management of the Tennessee River system helps TVA effectively operate its power system.

TVA's ability to integrate management of the Tennessee River system with power system operations increases power system reliability and reduces costs.

Restrictions on how TVA manages the Tennessee River system could negatively affect its operations, change the way it conducts such operations, or increase costs.

Restrictions on how TVA manages the Tennessee River system could negatively affect its operations or increase costs.

TVA may lose responsibility for managing real property currently under its control.

TVA's management of real property containing power generation and transmission structures as well as certain reservoir shorelines is important for navigation, flood control, and the effective operation of the power system.

Restrictions on or the loss of the authority to manage these properties could negatively affect TVA's operations, change the way it conducts such operations, or increase costs.

Existing laws, regulations, and orders may negatively affect TVA's cash flows, results of operations, and financial condition, as well as the way TVA conducts its business.

TVA is required to comply with comprehensive and complex laws, regulations, and orders.

The costs of complying with these laws, regulations, and orders are expected to be substantial, and costs could be significantly more than TVA anticipates, especially in the environmental and nuclear areas.

In addition, TVA is required to obtain numerous permits and approvals from governmental agencies that regulate its business, and TVA may be unable to obtain or maintain all required regulatory approvals.

If there is a delay in obtaining required regulatory approvals or if TVA fails to obtain or maintain any approvals or to comply with any law, regulation, or order, TVA may have to change how it operates certain assets, may be unable to operate certain assets, or may have to pay fines or penalties if it continues to operate the assets.

TVA is involved in various legal and administrative proceedings whose outcomes may affect TVA's finances and operations.

The additional proceedings could involve, among other things, challenges to TVA's CCR facilities, nuisance suits involving TVA's coal-fired plants, and challenges to TVA's authority to set rates and enter into contracts.

Although TVA cannot predict the outcome of the individual matters in which TVA is involved or will become involved, the resolution of these matters could require TVA to make expenditures in excess of established reserves and in amounts that could have a material adverse effect on TVA's cash flows, results of operations, and financial condition.

Similarly, resolution of any such proceedings may require TVA to change its business practices or procedures, change how it operates its coal-fired units, reduce emissions to a greater extent than TVA had planned, close existing CCR facilities sooner than planned, build new CCR facilities sooner than planned, build new CCR facilities that were not planned, cease operation of some coal-fired units, adjust its rates, or terminate or modify contracts.

These events could also have a material adverse effect on TVA's cash flows, results of operations, and financial condition.

For a discussion of certain current material legal proceedings, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges and Note 22 — Contingencies and Legal Proceedings — Legal Proceedings .

TVA is largely restricted to a defined service area.

TVA's ability to expand its customer base is constrained by its inability to pursue new customers outside its service area.

Accordingly, reductions in demand have to be offset by such actions as reducing TVA's internal costs or increasing rates.

Any failure of such measures to fully offset the reduced demand for power may negatively affect TVA's cash flows, results of operations, and financial condition.

Restrictions on or the loss of the authority to manage these properties could negatively affect TVA's operations or increase costs.

TVA may become subject to additional NERC requirements.

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TVA recognizes that reliability standards and expectations continue to become more complex and stringent for transmission systems.

Currently there are approximately 90 mandatory standards subject to enforcement containing approximately 1,300 requirements and sub-requirements that must be met.

Complying with these or additional requirements set forth by NERC may require significant capital expenditures and may negatively affect TVA's cash flows, results of operations, and financial condition.

TVA could be divested by the federal government or be required to sell some or all of its assets.

From time to time, presidential administrations have suggested that the federal government should either divest TVA or require TVA to sell some or all of its assets, including its transmission system.

Either event could trigger change of control provisions in certain material contracts or covenants in TVA's bond documents that concern the sale or disposal of a substantial portion of TVA's power properties.

TVA may, among other things, be required to pay off debt more quickly than anticipated and be unable to access credit facilities.

Additionally, the loss of the transmission system could interfere with TVA's operations and require TVA to contract for the transmission of electricity to TVA customers.

These factors could negatively affect TVA's operations, change the way it conducts such operations, and increase costs.

TVA's governmental status may interfere in its ability to quickly respond to the needs of its current or potential customers or to act solely in the interest of its ratepayers.

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The delay in responding to requests could damage relationships with current customers, deter potential customers from moving into TVA's service territory, or damage TVA's reputation.

In addition, TVA's nature as a quasi-governmental entity imposes additional pressures that most companies do not face, such as the requirement to support economic development, manage a river system, and promote recreational opportunities.

In addition, TVA's nature as a quasi-governmental entity imposes additional pressures that most companies do not face, such as the requirement to support economic development;

simultaneously manage a river system for commerce, recreation, and power generation;

and promote recreational opportunities.

TVA must balance these obligations with the requirement to provide power at the lowest feasible rates.

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Among other projects, TVA is improving the reliability and resiliency of its transmission system, undertaking repairs at certain hydroelectric facilities and dams, and closing some coal-fired plants and their supporting infrastructure.

These activities involve risks of overruns in the cost of labor and materials as well as risks of schedule delays, which may result from, among other things, changes in laws or regulations, lack of productivity, human error, and the failure to schedule activities properly.

In addition, if TVA does not or cannot obtain the necessary regulatory approvals or licenses, is otherwise unable to complete the development or construction of a facility, decides to cancel construction of a facility, incurs delays or cost overruns in connection with constructing a facility, or is required to change how it will conduct construction, repair, or closure activities, TVA's cash flows, financial condition, and results of operations could be negatively affected.

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TVA may not be able to operate one or more of its nuclear power units.

Should issues develop with TVA's nuclear power units that TVA is unable to correct, TVA might voluntarily shut down one or more units or be ordered to do so by the NRC.

Should issues develop with TVA's nuclear power units that are unable to be corrected, TVA might voluntarily shut down one or more units or be ordered to do so by the NRC.

Returning the unit(s) to operation could be a lengthy and expensive process, or might not be possible depending on circumstances.

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Nuclear Risks .

A nuclear incident at one of TVA's facilities could have significant consequences including loss of life, damage to the environment, damage to or loss of the facility, and damage to non-TVA property.

Hazards exist with the use of radioactive material in energy production, including management, handling, storage, and disposal.

Further, a nuclear incident at one of TVA's facilities could have significant consequences including loss of life, damage to the environment, damage to or loss of the facility, and damage to non-TVA property.

Although TVA carries certain types of nuclear insurance, the amount that TVA is required to pay in connection with a nuclear incident could significantly exceed the amount of coverage provided by insurance.

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The NDT is invested in securities generally designed to achieve a return in line with overall equity and debt market performance.

See Note 16 — Fair Value Measurements — Investment Funds for NDT balance at September 30, 2020 .

See Note 17 — Fair Value Measurements — Investment Funds for the NDT balance at September 30, 2021 .

TVA might have to make unplanned contributions to the NDT if, among other things:

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If TVA is unable to secure either the original components, intellectual property, or replacements approved for use by the NRC, TVA might have to change how it conducts its operations.

Further, limitations on global trade resulting from COVID-19 or limitations on global shipping could materially impact the availability or cost of desired equipment.

TVA's management and operation of CCR facilities exposes it to additional costs and risks.

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TVA has closed some of these facilities in compliance with state and federal laws and is in the process of closing others.

Many of these facilities were constructed prior to the requirement that such facilities be built with liners and thus do not contain such liners.

Many of these facilities were constructed prior to the requirement that such facilities be built with liners and thus do not contain liners.

TVA has been ordered by TDEC to undertake investigations at all CCR facilities in Tennessee.

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TVA could be subject to similar litigation or orders in the future and could be required to restrict or stop the use of some or all CCR facilities or relocate CCR material to lined facilities.

Further, TVA has decided to move all CCR material at Allen Combined Cycle Plant ("Allen CC") rather than closing the CCR facilities in place as originally planned, which subjects TVA to additional costs and risks.

TVA may change its closure plans at other facilities depending on the particular facts of each situation and the completion of any required environmental investigations or studies.

Further, TVA has decided to move all CCR material at Allen Fossil Plant rather than closing the CCR facilities in place as originally planned, and moving the CCR material subjects TVA to additional costs and risks.

TVA may change its closure plans at other facilities depending on the particular facts of each situation and the completion of any required environmental investigations or studies and/or approval by appropriate state regulators.

TVA's facilities and operations may be damaged or interfered with by physical attacks, threats, or other interference.

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Because of TVA's status as a governmental corporation and TVA's role as predominantly the sole power provider for its service territory, TVA may be targeted by individuals, groups, or nation states for physical attacks or threats of such attacks.

Although TVA's operations are protected by automated monitoring systems, TVA Police and Emergency Management, TVA employees, local law enforcement, or a combination thereof, it may not be possible to effectively deter or prevent attacks.

Although TVA's operations are protected by automated monitoring systems, TVA Police and Emergency Management, TVA employees,

local law enforcement, or a combination thereof, it may not be possible to effectively deter or prevent attacks.

Such attacks could pose health and safety risks, significantly disable or destroy TVA assets, interfere with TVA's operations, result in additional regulatory or security requirements, and negatively affect TVA's cash flows, results of operations, and financial condition.

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TVA purchases coal, uranium, natural gas, fuel oil, and electricity from a number of suppliers.

Additionally, TVA contracts for conversion of uranium into nuclear fuel and purchases other items, such as anhydrous ammonia, liquid oxygen, or replacement parts that are critical to the operation of certain generation assets.

Additionally, TVA contracts for conversion of uranium into nuclear fuel and purchases other items, such as anhydrous ammonia, liquid

oxygen, or replacement parts that are critical to the operation of certain generation assets.

TVA also purchases power from other power producers when the purchase of such power is appropriate due to economic opportunities or operational concerns.

Disruption or price volatility in the acquisition or delivery of fuel, purchased power, contracted services, or other critical supplies may result from a variety of physical and commercial events, political developments, international trade restrictions or tariffs, legal actions, or environmental regulations affecting TVA's suppliers as well as from transportation or transmission constraints.

Disruption or price volatility in the acquisition or delivery of fuel, purchased power, contracted services, or other critical supplies, such as the natural gas price spikes that occurred in 2021, may result from a variety of physical and commercial events, political developments, international trade restrictions or tariffs, legal actions, cyber attacks, mine closures or reduced mine production, increases in fuel exports, or environmental regulations affecting TVA's suppliers as well as from transportation or transmission constraints.

If one of TVA's suppliers fails to perform under the terms of its contract with TVA, TVA might have to purchase replacement fuel, power, or other critical supplies, perhaps at a significantly higher price than TVA is entitled to pay under the contract.

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If any of these assumptions materially change or are impacted by subsequent events, TVA's generation mix may not address its operational needs in the most efficient manner.

Resolving such a situation may require capital expenditures or additional power purchases, and TVA's cash flows, results of operations, financial condition, and reputation may be negatively affected.

For example, efforts to electrify the transportation and building sectors to reduce GHG emissions may result in higher electric demand and lower natural gas demand over time.

In addition, achieving TVA's carbon reduction goals may require TVA to make significant capital investments, including investments in new technologies, and may require TVA to retire coal-fired and natural-gas fired generation facilities sooner than planned.

Resolving situations where results vary from assumptions may require significant capital expenditures or additional power purchases, and TVA's cash flows, results of operations, financial condition, and reputation may be negatively affected.

RISKS RELATED TO THE ENVIRONMENT AND CATASTROPHIC EVENTS

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Additionally, periods of either high or low levels of rainfall may impede river traffic, impacting barge deliveries of critical items such as coal and equipment for power facilities.

Furthermore, high river water temperatures in the summer may limit TVA's ability to

use water from the Tennessee or Cumberland River systems for cooling at certain of TVA's generating facilities, thereby limiting its ability to operate these generating facilities.

Furthermore, high river water temperatures in the summer may limit TVA's ability to use water from the Tennessee or Cumberland River systems for cooling at certain of TVA's generating facilities, thereby limiting its ability to operate these generating facilities.

This situation would be aggravated during periods of reduced rainfall or drought.

If changes in the climate make such shifts in weather more common or extreme, TVA may be required to, among other things, change its generation mix or change how it conducts its operations, which could have a material adverse effect on TVA's cash flows, results of operations, and financial condition.

If changes in the climate make such shifts in weather more common or extreme or cause catastrophic events, such as droughts, floods, wildfires, and snow or ice storms, to occur more frequently in the Tennessee Valley region, TVA may be required to, among other things, change its generation mix or change how it conducts its operations, which could have a material adverse effect on TVA's cash flows, results of operations, and financial condition.

Moreover, TVA's efforts to address the potential impacts of climate change may not be effective, as there are uncertainties with any new technology and operational development and deployment, and there are also potential financial, operational, and environmental impacts, including impacts to rates and reliability as well as siting and permitting challenges.

Events that affect the supply or quality of water in the Tennessee River system and Cumberland River system or elsewhere may interfere with TVA's ability to generate power.

An inadequate supply of water in the Tennessee River system and Cumberland River system could negatively impact TVA's cash flows, results of operations, and financial condition by reducing generation not only at TVA's hydroelectric plants but also at its coal-fired and nuclear plants, which depend on water from the river systems near which they are located for cooling and for use in boilers where water is converted into steam to drive turbines.

Certain of TVA's gas-fired facilities not located near a river require alternative sources of water, such as from wells or local utility companies.

Some of TVA's gas-fired facilities not located near a river require alternative sources of water, such as from wells or local utility companies.

Further, the water must be of a particular quality for use in TVA's equipment.

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An inadequate supply of quality water could result, among other things, from periods of low rainfall or drought, the withdrawal of water from the river systems by governmental entities or others, incidents affecting bodies of water not managed by TVA, supply issues which affect water providers, or intrusive aquatic plants and animals such as eel grass, algae, and mussels that block cooling water intake pipes or otherwise interfere with the operation of TVA's generation facilities.

While TVA manages the Tennessee River and a large portion of its tributary system to provide much of the water necessary for the operation of its power plants, the USACE operates and manages other bodies of water upon which some of TVA's facilities rely.

Events at these bodies of water or their associated hydroelectric facilities may interfere with the flow of water and may result in TVA's having insufficient water quality to meet the needs of its plants.

While TVA manages

the Tennessee River and a large portion of its tributary system to provide much of the water necessary for the operation of its power plants, the USACE operates and manages other bodies of water upon which some of TVA's facilities rely.

If TVA has insufficient water supply of the quality necessary to meet the needs of its plants, TVA may be required to treat the water, reduce generation at its affected facilities to levels compatible with the available supply of water, or take additional steps that change how TVA conducts its operations or cause TVA to incur additional expense.

Catastrophic events may negatively affect TVA's cash flows, results of operations, and financial condition.

TVA's cash flows, results of operations, and financial condition may be adversely affected, either directly or indirectly, by catastrophic events such as fires, earthquakes, explosions, solar events, electromagnetic pulses ("EMPs"), geomagnetic disturbances, droughts, floods, hurricanes, tornadoes, or other casualty events, wars, national emergencies, terrorist activities, pandemics, or other similar destructive or disruptive events.

TVA's cash flows, results of operations, and financial condition may be adversely affected, either directly or indirectly, by catastrophic events such as fires, earthquakes, explosions, solar events, electromagnetic pulses ("EMPs"), geomagnetic disturbances, droughts, floods, hurricanes, tornadoes, polar vortexes, icing events, or other casualty events, wars, national emergencies, terrorist activities, pandemics, or other similar destructive or disruptive events.

These events, the frequency and severity of which are unpredictable, may, among other things, lead to legislative or regulatory changes that affect the construction, operation, and decommissioning of nuclear units and the storage of spent fuel;

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Additionally, some studies have predicted that climate change may cause catastrophic events, such as droughts and floods, to occur more frequently in the Tennessee Valley region, which could adversely impact TVA.

CYBERSECURITY RISKS

TVA's facilities and information infrastructure may not operate as planned due to cyber threats to TVA's assets and operations.

TVA's operations are heavily computerized and include assets such as information technology and networking systems.

As with all industries, the reliance on computerization and networking makes TVA a target for cyber attacks, and the risk of such attacks may increase as individual devices and equipment become accessible via the internet.

TVA has been targeted by cyber attacks in the past and anticipates that it will be targeted in the future.

These attacks may have been carried out, or in the future could be carried out, by individuals, groups, or nation states.

Although TVA has extensive cyber safeguards and works with industry specialists and relevant governmental authorities to deter, stop, or mitigate cyber attacks, it is possible that these measures might not prevent all attacks.

In such a case, a cyber attack could compromise sensitive data;

significantly disrupt operations;

require additional expenditures for cybersecurity;

negatively affect TVA's cash flows, results of operations, financial condition, and reputation;

and pose health and safety risks.

Additionally, the theft, damage, or improper disclosure of sensitive data may subject TVA to penalties and claims from third parties.

Cyber attacks on third parties could interfere with or harm TVA.

TVA relies on third parties for various services, including transferring funds to non-TVA entities in the ordinary course of business.

As with TVA, these third parties are heavily computerized and use assets such as information technology and networking systems.

If these third parties undergo cyber attacks, the services they provide TVA could be disrupted.

This disruption could interfere with TVA's ability to perform its obligations to others, transfer funds, or make payments, which in turn could negatively affect TVA's financial condition and reputation.

Additionally, the theft, damage, or improper disclosure of sensitive data held by these third parties may subject TVA to further harm.

FINANCIAL, ECONOMIC, AND MARKET RISKS

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Although the plan is frozen to new participants, any of these factors or any number of these factors could keep at high levels, or even increase, the costs of providing benefits and require TVA to make contributions to the plan in amounts that significantly exceed TVA's planned contributions.

Unfavorable financial market conditions may result in lower expected rates of return on plan assets, loss in value of the investments, and lower discount rates used in determining future benefit obligations.

Unfavorable financial market conditions, including conditions that may result from the COVID-19 pandemic, may result in lower expected rates of return on plan assets, loss in value of the investments, and lower discount rates used in determining future benefit obligations.

These changes would negatively impact the funded status of the plan.

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The importance of having access to the debt markets is underscored by the fact that TVA, unlike most utilities, relies almost entirely on debt capital since, as a governmental instrumentality, TVA cannot issue equity securities.

TVA, together with owners of TVA securities, may be impacted by downgrades of TVA's credit ratings.

Downgrades of TVA’s credit ratings may have material adverse effects on TVA’s cash flows, results of operations, and financial condition as well as on investors in TVA securities.

Among other things, a downgrade could increase TVA’s interest expense by increasing the interest rates that TVA pays on new securities that it issues.

Such an increase may reduce the amount of cash available for other purposes, which may result in the need to increase borrowings, to reduce other expenses or capital investments, or to increase power rates.

A downgrade may also result in TVA’s having to post collateral under certain physical and financial contracts that contain ratings triggers.

A downgrade below a contractual threshold may prevent TVA from borrowing under four credit facilities totaling $2.7 billion or posting letters of credit as collateral under these facilities.

At September 30, 2021, there were $1.2 billion of letters of credit outstanding under these facilities.

If TVA were no longer able to post letters of credit as collateral, TVA would likely have to post cash as collateral, which would negatively affect TVA’s liquidity.

Further, a downgrade may lower the price of TVA securities in the secondary market, thereby negatively impacting investors who sell TVA securities after the downgrade and diminishing the attractiveness and marketability of TVA securities.

The criteria used by credit rating agencies to assign ratings could also be changed at any time, which could result in changes to TVA's ratings.

TVA's credit ratings may be impacted by congressional actions or by a downgrade of the U.S.'s sovereign credit ratings.

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Additionally, the criteria used by the credit rating agencies to assign ratings could be changed at any time, which could result in changes to TVA's ratings.

TVA, together with owners of TVA securities, may be impacted by downgrades of TVA's credit ratings.

Downgrades of TVA's credit ratings may have material adverse effects on TVA's cash flows, results of operations, and financial condition as well as on investors in TVA securities.

Among other things, a downgrade could increase TVA's interest expense by increasing the interest rates that TVA pays on new securities that it issues.

A downgrade may also result in TVA's having to post collateral under certain physical and financial contracts that contain ratings triggers.

A downgrade below a contractual threshold may prevent TVA from borrowing under four credit facilities totaling $2.7 billion or posting letters of credit as collateral under these facilities.

At September 30, 2020, there were $1.5 billion of letters of credit outstanding under these facilities.

If TVA were no longer able to post letters of credit as collateral, TVA would likely have to post cash as collateral, which would negatively affect TVA's liquidity.

The criteria used by credit rating agencies to assign ratings could also be changed at any time, which could result in changes to TVA's ratings.

TVA's assumptions about the future may be inaccurate.

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TVA could lose customers, particularly LPCs, if customers choose another utility to meet some or all of their power needs where available, pursue self-generation to meet some or all of their power needs, or move their operations outside of TVA's service territory.

At September 30, 2020, TVA had wholesale power contracts with 153 LPCs, and 64 LPCs had entered into Flexibility Agreements with TVA that allow the LPCs to locally generate up to approximately five percent of average total hourly energy sales over the prior five years in order to meet their individual customers' needs.

As of November 12, 2021, TVA had wholesale power contracts with 153 LPCs, and 74 LPCs had entered into Flexibility Agreements with TVA that allow the LPCs to locally generate or purchase up to approximately five percent of average total hourly energy sales over 2015 - 2019

in order to meet their individual customers' needs.

A significant portion of TVA's total operating revenues are concentrated in a small number of these LPCs.

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As the amount of DER grows on the TVA system, the need for TVA's traditional generation resources may be reduced, and the ability of the system to reliably and economically operate in conjunction with these DER may become more challenging.

If TVA is unable to compensate for the resulting

decrease in demand for TVA electricity, TVA's cash flows, results of operations, and financial condition could be negatively impacted, resulting in higher rates and changes to TVA's operations.

If TVA is unable to compensate for the resulting decrease in demand for TVA electricity, TVA's cash flows, results of operations, and financial condition could be negatively impacted, resulting in higher rates and changes to TVA's operations.

Increased Energy Efficiency and Conservation .

Increasingly efficient use of energy as well as conservation efforts have reduced the demand for power.

Increasingly efficient use of energy as well as conservation efforts and DER have reduced the demand for power supplied by TVA.

Further reductions, if TVA is unable to compensate for them, could negatively affect TVA's cash flows, results of operations, and financial condition and could result in higher rates and changes to TVA's operations, especially if the reductions occur during an economic downturn or a period of slow economic growth.

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A portion of this amount may be spent on contracts that are denominated in one or more foreign currencies.

Additionally, TVA's three issues of Bonds denominated in British pounds sterling are hedged by currency swap agreements.

Additionally, TVA's two issues of Bonds denominated in British pounds sterling are hedged by currency swap agreements.

The value of the U.S.

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dollar to British pound sterling exchange rate primarily driven by the "BREXIT" vote for the United Kingdom to leave the European Union.

If not effectively managed, foreign currency

exposure could negatively impact TVA's counterparty risk, cash flows, results of operations, and financial condition.

If not effectively managed, foreign currency exposure could negatively impact TVA's counterparty risk, cash flows, results of operations, and financial condition.

Changes in an interest rate benchmark may impact certain TVA swaps and other financial arrangements.

TVA has four "fixed for floating" interest rate swaps related to outstanding Bonds and receives periodic payments under these swaps based on the floating London Interbank Offered Rate ("LIBOR") benchmark rate.

TVA may also have additional contracts that could be impacted.

LIBOR is expected to be discontinued after 2021.

TVA has limited other contracts that could be impacted.

Various parts of the LIBOR market are expected to be substantially discontinued in the coming years.

LIBOR rates will be phased out between the end of calendar year 2021 and June 2023.

Various alternatives for LIBOR are being evaluated by market participants, with the Secured Overnight Financing Rate being the most widely-adopted alternative thus far.

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Failure to attract and retain an appropriately qualified workforce may negatively affect TVA's results of operations.

TVA's business depends on its ability to recruit and retain key executive officers as well as skilled professional and

technical employees.

TVA's business depends on its ability to recruit and retain key executive officers as well as skilled professional and technical employees.

The inability to attract and retain an appropriately qualified, diverse, and inclusive workforce could adversely affect TVA's ability to, among other things, operate and maintain generation and transmission facilities, complete large construction projects, and successfully implement its continuous improvement initiatives.

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Such an inability to defer costs would likely have a substantial impact on TVA's financial condition and results of operations and could impact the timing and amounts of TVA's rate recovery.

For a discussion of regulatory accounting, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates .

For a discussion of regulatory accounting, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates .

TVA's financial control system cannot guarantee that all control issues and instances of fraud or errors will be detected.

No financial control system, no matter how well designed and operated, can provide absolute assurance that the objectives of the control system are met, and no evaluation of financial controls can provide absolute assurance that all control issues and instances of fraud or errors can be detected.

The design of any system of financial controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

The design of any system of financial controls is based

in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

GENERAL BUSINESS RISKS

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This strategy is subject to business, economic, and competitive uncertainties and contingencies, many of which are beyond TVA’s control.

Such uncertainties include customer energy-efficiency programs that are designed to reduce energy demand;

energy-efficiency efforts by customers not related to TVA’s energy-efficiency programs;

increased customer use of DER, such as solar panels and other technologies, which have become more cost competitive, with decreasing costs expected in the future, as well as the use of energy storage technologies;

and macroeconomic factors impacting economic growth or contraction within TVA’s service territory, which could affect energy demand.

If TVA is unable to successfully implement its business strategy, TVA’s financial condition and results of operations could be negatively affected.

See Item 1, Business — Environmental Matters and Human Capital Management , Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges , and Item 11, Executive Compensation — C ompensation Discussion and Analysis for additional information regarding TVA's strategic objectives.

TVA's cost management efforts may not be successful.

TVA is continuing to improve operating efficiencies to offset any potential future reductions in power demand and maintain its rates, reputation, cash flows, results of operations, and financial condition.

The failure to achieve or

maintain cost reductions could adversely affect TVA's rates, reputation, cash flows, results of operations, and financial condition.

The failure to achieve or maintain cost reductions could adversely affect TVA's rates, reputation, cash flows, results of operations, and financial condition.

TVA's organizational structure may not adequately support TVA's anticipated business needs or enable it to meet the needs of its current or potential customers.

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As with any company, TVA's reputation is a vital element of its ability to effectively conduct its business.

TVA's reputation could be harmed by a variety of factors, including the failure of a generating asset or supporting infrastructure, failure to effectively manage land and other natural resources entrusted to TVA, real or perceived violations of environmental regulations, real or perceived issues with TVA's safety culture or work environment, significant delays in construction projects, acts or omissions of TVA management, acts or omissions of a contractor or other third-party working with or for TVA, the perception of such acts or omissions, measures taken to offset reductions in demand, or a significant dispute with one of TVA's customers.

TVA's reputation could be harmed by a variety of factors, including the failure of a generating asset or supporting infrastructure, failure to effectively manage land and other natural resources entrusted to TVA, failure to meet its carbon reduction goals or other environmental, social, or governance goals, real or perceived violations of environmental regulations, including those related to climate change, real or perceived issues with TVA's safety culture or work environment, inability to meet its human capital management goals, significant delays in construction projects, cyber attacks or security vulnerabilities, acts or omissions of TVA management, acts or omissions of a contractor or other third-party working with or for TVA, the perception of such acts or omissions, measures taken to offset reductions in demand, or a significant dispute with one of TVA's customers.

Any deterioration in TVA's reputation may harm TVA's relationships with its customers and stakeholders, may increase its cost of doing business, may interfere with its ability to attract and retain a skilled workforce, and may potentially lead to the enactment of new laws and regulations, or the modification of existing laws and regulations, that negatively affect the way TVA conducts its business.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors