What changed in this filing

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Item 1. Business

2022-11-15 compared with 2021-11-15 · 540 added, 528 removed, 658 unchanged (62% of the section changed)

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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 to provide recreational opportunities, adequate water supply, improved water quality, cultural and natural resource protection, and economic development.

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.

TVA performs these management duties in cooperation with other federal and state agencies that have jurisdiction and authority over certain aspects of the river system.

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• Financial Strength — Investing in the future, while keeping energy costs as low as possible.

TVA's Strategic Financial Plan

TVA developed the Strategic Financial Plan in order to help achieve its strategic priorities and mission.

TVA's Strategic Financial Plan, which extends from 2020 through 2030, is flexible in aligning customer preferences and TVA's mission while at the same time establishing a long-term forecast of financial results.

Key focus areas of the Strategic Financial Plan include maintaining flat base rates, stabilizing debt, establishing alignment between the length of LPC contracts and TVA's long-term commitments, driving efficiencies into the business, and advancing the public power model.

As TVA executes the plan, key

assumptions and focus areas may change.

TVA's service area, the area in which it sells power, is defined by the Tennessee Valley Authority Act of 1933, as amended ("TVA Act").

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This provision is referred to as the "fence" because it bounds TVA's sales activities, essentially limiting TVA to power sales within a defined service area.

See Power Supply and Load Management Resources.

In addition to the locations above, TVA owns approximately 1 MW of solar capability among 13 solar installations across the Tennessee Valley region with seven installations in Tennessee, two in Alabama, two in Mississippi, one in Virginia, and one in Kentucky.

See Power Supply and Load Management Resources for a description of all of TVA's power supply resources.

In addition, the Federal Power Act ("FPA") includes a provision that helps protect TVA's ability to sell power within its service area.

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However, there have been some efforts to circumvent the anti-cherrypicking provision, and the protection of the provision could be limited and perhaps eliminated by federal legislation at some time in the future.

See Competition, Item 1A, Risk Factors — Regulatory, Legislative, and Legal Risks — TVA may lose its protected service territory , and Note 23 — Commitments and Contingencies — Legal Proceedings — Challenge to Anti-Cherrypicking Amendment .

See Competition, Item 1A, Risk Factors — Regulatory, Legislative, and Legal Risks — TVA may lose its protected service territory, Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Legislative and Regulatory Matters, and Note 21 — Commitments and Contingencies — Legal Proceedings — Challenge to Anti-Cherrypicking Amendment .

In 2022, the revenues generated from TVA's electricity sales were $12.4 billion and accounted for virtually all of TVA's revenues.

See Note 17 — Revenue for details regarding revenues by state for each of the last three years.

COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of the Coronavirus Disease 2019 ("COVID-19") to be a pandemic, which continues to be a serious challenge throughout the U.S.

TVA implemented a company-wide pandemic plan to address specific aspects of the COVID-19 pandemic, including impacts from variants.

TVA's pandemic plan continually evolves based on medical guidance and federal, regional, and local requirements and guidelines.

TVA has put in place measures to protect its workforce, stakeholders, and critical operations, such as extending the timeframe for workforce reintegration and continuing to implement strong physical and cybersecurity measures.

Generation, transmission, and distribution functions are actively monitored, and TVA's operations and delivery of energy to customers have not been materially impacted by the COVID-19 pandemic at this time.

While TVA experienced a reduction in revenue for the year ended September 30, 2020, 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.

TVA continues to assess potential supplier risk, and through September 30, 2021, TVA has seen an increase in supplier impacts as a result of COVID-19, such as delays and price fluctuations, but has not experienced significant business disruptions at this time.

The COVID-19 pandemic has also created economic uncertainty for TVA's LPCs and the communities they serve.

To support LPCs and strengthen the public power response to the COVID-19 pandemic, TVA created initiatives such as the Public Power Support and Stabilization Program, Back-to-Business Credit Program, Community Care Fund, and Pandemic Credits.

TVA has also provided regulatory flexibility for LPCs to halt disconnection of services.

The COVID-19 pandemic is an evolving situation, and TVA will continue to monitor and adjust its response as necessary to ensure reliable service while protecting the safety and health of its workforce.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives — COVID-19 Pandemic for an expanded discussion of the impact to TVA and related initiatives.

TVA is primarily a wholesaler of power, selling power to LPCs that then resell power to their customers at retail rates.

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In addition, power in excess of the needs of the TVA system may, where consistent with the provisions of the TVA Act, be sold under exchange power arrangements with other specific electric systems.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Financial Results — Operating Revenues and Note 18 — Revenue for details regarding operating revenues for each of the last three years.

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Financial Results — Operating Revenues and Note 17 — Revenue for details regarding operating revenues for each of the last three years.

Local Power Company Customers

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Each of these contracts requires the LPC to purchase from TVA all of the electric power required for service to the LPC's customers;

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.

however, Power Supply 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 their average total hourly energy sales over a certain time period in order to meet their individual customers' needs.

LPCs purchase power under contracts with terms of five or 20 years to terminate.

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Certain LPCs, including MLGW, are evaluating options for future energy choices.

In addition, in January 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.

In August 2021, one of the LPCs notified FERC of its withdrawal from the complaint and petition.

The remaining three LPCs accounted for three percent of TVA's total operating revenues for the year ended September 30, 2021.

See Note 23 — Commitments and Contingencies — Legal Proceedings — Challenge to Anti-Cherrypicking Amendment for updates to this legal proceeding.

TVA and LPCs continue to work together to meet the changing needs of consumers around the Tennessee Valley.

In 2019, the TVA Board approved a Partnership Agreement option that better aligns the length of LPC power contracts with TVA's long-term commitments.

TVA has a Partnership Agreement option that better aligns the length of LPC power contracts with TVA's long-term commitments.

Under the partnership arrangement, the LPC power contracts automatically renew each year and have a 20-year termination notice.

The partnership arrangements can be terminated under certain circumstances, including TVA's failure to limit rate increases as provided for in the agreements going forward.

Participating LPCs receive benefits including a 3.1

percent wholesale bill credit in exchange for their long-term commitment, which enables TVA to recover its long-term financial commitments over a commensurate period.

In June 2020, TVA provided participating LPCs a flexibility option that allows them 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.

As of November 12, 2021, 145 LPCs had signed the 20-year Partnership Agreement with TVA, and 74 LPCs had signed a Flexibility Agreement.

Participating LPCs receive benefits including a 3.1 percent wholesale bill credit in exchange for their long-term commitment, which enables TVA to recover its long-term financial commitments over a commensurate period.

TVA has provided participating LPCs a flexibility option, named Generation Flexibility, that allows them to locally generate or purchase up to approximately five percent of their average total hourly energy sales over a certain time period in order to meet their individual customers' needs.

As of November 14, 2022, 147 LPCs had signed the Partnership Agreement with TVA, and 80 LPCs had signed a Power Supply Flexibility Agreement.

The power contracts between TVA and LPCs provide for the purchase of power by LPCs at the wholesale rates established by the TVA Board.

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Other Revenue

Other revenue consists primarily of wheeling and network transmission charges, sales of excess steam that is a by-product of power production, delivery point charges for interconnection points between TVA and the customer, and certain other minor items.

Other revenue consists primarily of wheeling and network transmission charges, sales of steam that is a by-product of power production, delivery point charges for interconnection points between TVA and the customer, Renewable Energy Certificate ("REC") sales, and certain other minor items.

Other revenue accounted for approximately one percent of TVA's total operating revenues in 2022.

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• Debt service on outstanding indebtedness;

• Payments to the U.S.

• Payments to the United States Department of the Treasury ("U.S.

Treasury") in repayment of and as a return on the government's appropriation investment in TVA's power facilities (the "Power Program Appropriation Investment");

• Such additional margin as the TVA Board may consider desirable for investment in power system assets, retirement of outstanding Bonds in advance of their maturity, additional reduction of the Power Program Appropriation Investment, and other purposes connected with TVA's power business, having 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.

See Note 19 — Proprietary Capital .

See Note 22 — Related Parties .

TVA fulfilled its requirement to repay $1.0 billion of the Power Program Appropriation Investment in 2014;

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In setting the base rates, TVA uses a debt-service coverage ("DSC") methodology to derive annual revenue requirements in a manner similar to that used by other public power entities that also use the DSC rate methodology.

Under the DSC methodology, rates are calculated so that an entity will be able to cover its operating costs and to

satisfy its obligations to pay principal and interest on debt, plus an additional margin.

Under the DSC methodology, rates are calculated so that an entity will be able to cover its operating costs and to satisfy its obligations to pay principal and interest on debt, plus an additional margin.

This ratemaking approach is particularly suitable for use by entities financed primarily, if not entirely, by debt, such as TVA, and helps ensure that TVA produces gross revenues sufficient to fund requirements specified in the TVA Act listed under Rate Authority above.

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Fuel costs are allocated to three groups of customers:

Standard Service (residential and small commercial customers), large manufacturing customers with contract demands greater than 5 megawatts ("MW"), and large general service customers with contract demands greater than 5 MW.

(1) Standard Service (residential and small commercial customers), (2) large general service customers with contract demands greater than 5 megawatts ("MW"), and (3) large manufacturing customers with contract demands greater than 5 MW.

Fuel costs are allocated to these three classes of customers in relation to their hourly loads and TVA's hourly incremental dispatch cost.

Total monthly fuel costs include costs for natural gas, fuel oil, coal, purchased power, emission allowances, nuclear fuel, and other fuel-related commodities as well as realized gains and losses on derivatives purchased to hedge the costs of such commodities.

In prior years, TVA, LPCs, and directly served industries developed changes to TVA's rate structures that focus on TVA's long-term pricing efforts.

These changes improved pricing by better aligning rates with underlying cost drivers and by sending improved pricing signals, while maintaining competitive industrial rates and keeping residential rates affordable.

The rate structures also reduced wholesale energy rates for Standard Service and introduced a GAC at an offsetting rate to better recover fixed costs.

This approach more accurately reflects the wholesale cost of energy and recognizes the value of the grid's reliability and associated fixed costs.

TVA's rate structure includes a focus on TVA's long-term pricing by aligning rates with underlying cost drivers and by sending pricing signals, while maintaining competitive industrial rates and keeping residential rates affordable.

The GAC better recovers fixed costs and the pricing approach more accurately reflects the wholesale cost of energy and recognizes the value of the grid's reliability and associated fixed costs.

TVA's modernized approach to pricing provides bill stability while maintaining reliability and fairness for all TVA's customers.

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TVA is making investments in its generating portfolio to modernize the fleet while also allowing TVA to maintain competitive rates and high reliability and work toward carbon emission reductions.

As TVA continues to evaluate the impact of retiring its coal-fired fleet by 2035, it is also evaluating adding flexible lower carbon-emitting gas plants as a bridging strategy to maintain reliability, such as the ongoing projects at TVA’s Paradise and Colbert sites.

In addition, TVA is committed to investing in the future of nuclear with the evaluation of emerging advanced nuclear technologies, such as small modular reactors ("SMRs"), and has uprated the existing Browns Ferry units to generate more low-cost, reliable, and carbon-free energy.

As TVA continues to evaluate the impact of retiring its coal-fired fleet by 2035, it is also evaluating adding flexible lower carbon-emitting gas plants as a strategy to maintain reliability, such as the ongoing projects at TVA’s Paradise and Colbert sites.

In addition, TVA is committed to investing in the future of nuclear with the evaluation of emerging advanced nuclear technologies, such as small modular reactors ("SMRs").

TVA is also implementing the Hydro Life Extension Program with a focus on improving the availability and flexibility of the hydroelectric fleet.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives — Generation Resources — Extended Power Uprate , Natural Gas-Fired Units , and Small Modular Reactors , in addition to Renewable Energy Resources — Hydro Modernization Program below.

In addition, TVA and other utilities across the southeastern United States are exploring the creation of an automated energy exchange platform across the region to facilitate more short-term power exchanges.

The energy exchange would be an enhancement to the existing market.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives — Automated Energy Exchange Platform .

In August 2022, the Inflation Reduction Act of 2022 ("Inflation Reduction Act") was signed into law, which makes certain tax-exempt entities, including TVA, eligible for a direct-pay option for certain tax credits that encourage investment in clean energy, in some circumstances.

TVA is currently evaluating the Inflation Reduction Act to determine whether it will be able to benefit from any of these tax credits for related eligible investments.

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives — Optimum Energy Portfolio.

In addition, an automated energy exchange platform that facilitates more short-term power exchanges took effect in 2022.

The energy exchange will be an enhancement to the existing market.

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives — Optimum Energy Portfolio — Automated Energy Exchange Platform .

Power generating facilities operated by TVA at September 30, 2022, included three nuclear sites, 17 natural gas and/or oil-fired sites, five coal-fired sites, 29 conventional hydroelectric sites, one pumped-storage hydroelectric site, one diesel generator site, and 13 solar installations.

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TVA also acquires power under PPAs of varying durations, including short-term contracts of less than 24-hours in duration.

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

The following table shows TVA's generation and purchased power by generating source as a percentage of all

electric power generated and purchased (based on kilowatt hours ("kWh")) for the periods indicated:

See Power Purchase and Other Agreements below.

The following table shows TVA's generation and purchased power by generating source as a percentage of all electric power generated and purchased (based on kilowatt hours ("kWh")) for the periods indicated:

Total Power Supply by Generating Source

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Hydroelectric 8% 10% 10%

Purchased power (non-renewable) 8% 8% 9%

Purchased power (renewable) 5% 5% 5%

Purchased power 18% 13% 13%

(1) TVA's non-hydro renewable resources from TVA facilities are less than one percent for all periods shown, and therefore are not represented on the table above.

Purchased power (renewable) contains the majority of non-hydro renewable energy supply.

Purchased power contains the majority of non-hydro renewable energy supply.

TVA sells the RECs resulting from some of its purchased power to certain customers.

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Renewable Power Purchase Agreements.

While TVA continues down the path of reducing power generation from carbon-emitting sources, there will be fluctuations in usage due to electricity demands.

Also, TVA continues to make operational decisions to keep the system reliable and to deliver low-cost energy .

At September 30, 2022, TVA had three nuclear sites consisting of seven units in operation.

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Browns Ferry Unit 1 1,227 92.8 2033

1,227 87.7 2033

Browns Ferry Unit 2 1,208 100.2 2034

1,208 83.3 2034

Browns Ferry Unit 3 1,227 83.5 2036

1,227 99.3 2036

Sequoyah Unit 1 1,152 97.7 2040

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Watts Bar Unit 2 1,121 64.1 2055

(1) Summer net capability for Browns Ferry includes the impact of the extended power uprate project which was finalized in 2021 through issuance of related engineering memos.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Generation Resources — Extended Power Uprate.

Other Nuclear Initiatives .

The NRC issued an Early Site Permit to TVA in December 2019 to license SMRs at TVA's Clinch River Nuclear Site in Oak Ridge, Tennessee.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Generation Resources — Small Modular Reactors .

TVA has an Early Site Permit to potentially construct and operate SMRs at TVA's Clinch River Nuclear Site in Oak Ridge, Tennessee, and in 2022, the TVA Board approved a programmatic approach to exploring advanced nuclear technology (the "New Nuclear Program").

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Small Modular Reactors .

Other Nuclear Matters.

Operating nuclear facilities subjects TVA to waste disposal, decommissioning, and insurance requirements, as well as litigation risks.

See Fuel Supply — Nuclear Fuel below for a discussion of spent nuclear fuel and low-level radioactive waste, Note 23 — Commitments and Contingencies — Contingencies for a discussion of TVA's nuclear decommissioning liabilities and the related trust and nuclear insurance, and Note 23 — Commitments and Contingencies — Legal Proceedings and Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Apparent Violations of NRC Regulations for a discussion of legal and administrative proceedings related to TVA's nuclear program, which discussions are incorporated herein by reference.

See Fuel Supply — Nuclear Fuel below for a discussion of spent nuclear fuel and low-level radioactive waste, Note 21 — Commitments and Contingencies — Contingencies for a discussion of TVA's nuclear decommissioning liabilities and the related trust and nuclear insurance, and Note 21 — Commitments and Contingencies — Legal Proceedings for a discussion of legal proceedings related to TVA's nuclear program, which discussions are incorporated herein by reference.

Natural Gas and/or Oil-Fired

At September 30, 2021, TVA's natural gas and oil-fired fleet consisted of 101 combustion turbine power blocks (86 simple-cycle units, one cogeneration unit, and 14 combined-cycle power units), accounting for 12,183 MW of summer net capability.

At September 30, 2022, TVA's natural gas and oil-fired fleet consisted of 101 combustion turbine power blocks (81 simple-cycle units, one cogeneration unit, and 14 combined-cycle power units, accounting for 11,777 MW of summer net capability, and five idled units at Allen Combustion Turbine Facility:

Units 2, 3, 11, 17, and 18).

Sixty-six of the simple-cycle units are currently capable of quick-start response allowing full generation capability in approximately 10 minutes.

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TVA uses simple-cycle units to meet peaking or backup power needs.

TVA's 2019 IRP projects significant solar expansion over the next decade.

TVA's 2019 Integrated Resource Plan ("IRP") projects significant solar expansion over the next decade.

The natural gas-fired fleet supports that expansion by providing reliability across all hours, as well as the flexibility to help manage ramping and intermittency.

As TVA evaluates its coal-fired fleet, it will also evaluate adding flexible lower carbon-emitting gas plants as a bridging strategy.

See Item 2, Properties — Generating Properties, Note 8 — Leases , Note 11 — Variable Interest Entities , and Note 14 — Debt and Other Obligations for a discussion of lease arrangements into which TVA has entered in connection with certain combustion turbine units.

In addition, as TVA evaluates its coal-fired fleet, it will also evaluate adding flexible lower carbon-emitting gas plants as a strategy to maintain reliability.

Because of TVA's strategy of portfolio diversification and reduction of air emissions, TVA may decide to make further strategic investments in natural gas-fired facilities in the future by purchase, construction, or lease.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Generation Resources — Natural Gas-Fired Units for a discussion of ongoing projects at certain natural gas-fired facilities .

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Natural Gas-Fired Units for a discussion of ongoing projects at certain natural gas-fired facilities .

At September 30, 2022, TVA had five coal-fired plants consisting of 25 active units, accounting for 6,580 MW of summer net capability.

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All other coal-fired units are considered retired.

In 2018, the TVA Board approved a plan to perform assessments of Bull Run Fossil Plant ("Bull Run") and Paradise Fossil Plant ("Paradise").

Results of these assessments were presented to the TVA Board at its February 2019 meeting, and the Board approved the retirement of Paradise Unit 3 by December 2020 and Bull Run by December 2023.

Paradise Unit 3 was taken offline on February 1, 2020, effectively retiring the plant.

In 2019, the TVA Board approved the retirement of Bull Run Fossil Plant ("Bull Run") by December 2023.

Coal-fired plants have been subject to increasingly stringent regulatory requirements over the last few decades, including those under the Clean Air Act ("CAA"), the Clean Water Act ("CWA"), and the Resource Conservation and Recovery Act ("RCRA").

TVA has committed to a programmatic approach for the evaluation of its sites where coal combustion residuals ("CCR") are stored to meet all applicable state and federal regulations.

Increasing regulatory costs and carbon reduction efforts have caused TVA to consider whether to make the required capital investments to continue operating its coal-fired facilities.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Generation Resources — Coal Combustion Residuals Facilities.

See Part II, Item 7, Management's Discussion and

Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Coal Combustion Residuals — Coal Combustion Residuals Facilities.

TVA is moving toward a more balanced generation plan with greater reliance on lower-cost and cleaner energy generation technologies.

Since September 30, 2010, TVA has reduced its summer net capability of coal-fired units by 7,653 MW.

Following the publication of the 2019 IRP, TVA began conducting end-of-life evaluations of the remaining coal fleet to inform long-term planning.

TVA’s recent evaluation confirms that the aging coal fleet is among the oldest in the nation and is experiencing deterioration of material condition and performance challenges.

Following the publication of the 2019 IRP, TVA conducted end-of-life evaluations of the remaining coal fleet to inform long-term planning.

These evaluations confirmed that the aging coal fleet is among the oldest in the nation and is experiencing deterioration of material condition and performance challenges.

The performance challenges are projected to increase due to the coal fleet’s advancing age and the difficulty of adapting the coal fleet’s generation within the changing generation profile.

Additionally, the coal fleet is contributing to environmental, economic, and reliability risks.

TVA is evaluating the impact of retiring the balance of the coal-fired fleet by 2035, and that evaluation includes environmental review, public input, and TVA Board approval.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Generation Resources — Optimum Energy Portfolio.

Environmental reviews evaluating the potential retirement of the Cumberland Fossil Plant ("Cumberland") and Kingston Fossil Plant ("Kingston") and replacement with other generation are now underway, in addition to the public input process.

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio .

Diesel Generators

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Then, during periods of high or peak demand, the water is released and the pumps reverse to work as power generating turbines.

New hydroelectric pumped storage is one of several technologies that TVA is exploring as part of its decarbonization efforts to ensure the reliability and resiliency of the grid.

Renewable Energy Resources

As more consumers and businesses are demanding cleaner energy, the utility industry is evolving to meet those needs.

As TVA also evolves, it will see impacts to the way it does business through the pricing of products, transmission of energy, and

development of new products and services for its customers in support of changing customer preferences.

As more consumers and businesses are seeking cleaner energy, the utility industry is evolving to meet those needs.

As TVA also evolves, it will see impacts to the way it does business through the pricing of products, transmission of energy, and development of new products and services for its customers in support of changing customer preferences.

Many companies are focusing on sustainability and requiring more energy efficiency and renewable energy options.

In addition, TVA also seeks to obtain greater amounts of its power supply from clean resources to work towards carbon emission reductions.

As a result, TVA is increasing its renewable energy portfolio, by investing in existing assets and securing power purchase agreements for out-of-Valley wind and in-Valley solar.

As a result, TVA is increasing its renewable energy portfolio, by investing in existing hydroelectric assets through the Hydro Life Extension Program and securing renewable power purchase agreements.

New utility-scale solar is increasing, in part driven by customers’ demand through TVA’s Green Invest Program.

TVA also encourages renewable power and offers renewable solutions through various current programs and offerings.

Finally, TVA is investing in its hydroelectric fleet through the Hydro Life Extension Program.

See Distributed Energy Resources below for information on renewable energy solutions and Power Purchase and Other Agreements below for information on TVA’s power purchase agreements, including renewable agreements.

TVA also encourages renewable power and offers renewable resources through various current programs and offerings.

See below for information on renewable energy resources and Power Purchase and Other Agreements for information on TVA’s power purchase agreements, including renewable agreements.

Conventional Hydroelectric Dams.

TVA maintains 29 conventional hydroelectric dams with 109 generating units throughout the Tennessee River system for the production of electricity.

As of September 30, 2021, these units accounted for 3,750 MW of summer net capability.

At September 30, 2022, TVA's hydroelectric fleet consisted of 29 conventional hydroelectric dams throughout the Tennessee River system with 106 active generating units that accounted for 3,754 MW of summer net capability and three units at Wilbur Hydroelectric Facility:

Units 1-3, that were in long-term outage and unavailable for service at September 30, 2022.

The amount of electricity that TVA is able to generate from its hydroelectric plants depends on a number of factors, including the amount of precipitation and runoff, initial water levels, generating unit availability, and the need for water for competing water management objectives.

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In addition, a portion of energy generated by nine U.S.

Army Corps of Engineers ("USACE") dams on the Cumberland River system contributes to the TVA power system.

See Weather and Seasonality below and Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Dam Safety and Remediation Initiatives.

Army Corps of Engineers ("USACE") dams on the Cumberland River system contributes to the TVA power system, and electric generation from the USACE dams is dependent on the same factors that affect generation from the TVA-owned dams .

See Weather and Seasonality below and Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Dam Safety Assurance Initiatives.

Hiwassee Hydro Unit 2 has a unique reversible turbine/generator that acts as a pump and a turbine enhancing TVA's ability to balance baseload generation.

At September 30, 2022, Hiwassee Hydro Unit 2 accounted for 86 MW of the conventional hydroelectric summer net capability.

Hydro Modernization Program.

TVA's Hydro Modernization Program began in 1992 and focused on units with potential to increase peaking capacity and improve reliability.

With the completion of Pickwick Landing Dam ("Pickwick") Unit 2 in 2020, the initial Hydro Modernization Program has concluded with modernization completed on 62 conventional hydroelectric units under the program.

The modernization projects resulted in 453 MW of increased capacity from the conventional hydroelectric units, with an average efficiency gain of approximately five percent.

Hydroelectric generation will continue to be an important part of TVA's energy mix since it plays a vital role in carbon reduction initiatives, the ability to integrate other renewables into the power portfolio, and, ultimately, TVA's ability to meet changing customer preferences for cleaner energy sources.

As such, TVA is implementing the Hydro Life Extension Program with a focus on improving the availability and flexibility of the hydroelectric fleet to help meet these changing customer preferences.

Hydro Life Extension Program.

TVA's Hydro Life Extension Program began in 2021 with a focus on recovering and preserving TVA's extensive hydroelectric fleet, improving efficiency and flexibility, and ensuring long-term reliability of this vital clean energy asset.

Hydroelectric generation will continue to be an important part of TVA's energy mix in the future.

It plays a vital role in carbon reduction initiatives, the ability to integrate other renewables into the power portfolio, and TVA's ability to meet changing customer preferences for cleaner energy sources.

Dam Safety Assurance Program.

TVA has an established dam safety program, which includes procedures based on the Federal Guidelines for Dam Safety, with the objective of reducing the risk of a dam safety event.

The program analyzes, evaluates, and manages risks through a systematic and thorough process that facilitates decision-making for the safety of a structure, identifying necessary actions to reduce risk, including remediation projects, and prioritization of actions for TVA's river dams.

Prioritization is driven by reducing risk to the public and asset preservation.

TVA also continues to provide routine care of the dams as part of the dam safety program through inspections, monitoring, and maintenance, among other activities.

Self-Directed Solar.

During 2019, the TVA Board approved the opportunity for TVA to explore being directly involved in the development of a utility-scale solar project, contingent on the successful completion of environmental reviews under National Environmental Policy Act ("NEPA") and other applicable laws.

A project structure has been developed that will allow TVA to work with financial partners for solar development, and in September 2021, TVA purchased land for this planned 200 MW development.

As of September 30, 2021, TVA had spent approximately $24 million on the project and expects to spend an additional $293 million through 2024.

During 2019, the TVA Board approved the opportunity for TVA to explore being directly involved in the development of a utility-scale solar project, contingent on the successful completion of environmental reviews under the National Environmental Policy Act ("NEPA") and other applicable laws.

Mounting solar supply chain constraints are being seen in TVA’s Self-Directed Solar project, which have resulted in a delay in the estimated completion date.

Project cost increases are also anticipated due to cost escalations from the state of global supply chains.

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Self-Directed Solar .

Other Renewable Energy Resources.

TVA's other renewable energy resources include TVA-owned solar and renewable energy purchases, a majority associated with TVA renewable programs.

In addition to the hydroelectric units above, TVA owns 13 solar installations that account for approximately 1 MW of summer net capability.

See Distributed Energy Resources below for a description of TVA's current renewable energy offerings and Power Purchase and Other Agreements for information on renewable energy purchases.

TVA tracks its renewable energy commitments and claims through the management of Renewable Energy Certificates ("RECs").

In addition to the hydroelectric units above, TVA owns 13 solar installations that account for approximately one MW of summer net capability.

Other renewable energy resources also include renewable energy purchases, a majority associated with TVA renewable programs.

See Power Purchase and Other Agreements for information on renewable PPAs.

TVA's current renewable programs and offerings include:

Small-scale Solutions .

The Green Connect Program connects residential customers who are interested in on-site solar photovoltaic ("PV") and/or battery storage systems with qualified solar and battery storage installers who agree to install to Green

Connect Program Standards.

These qualified installers, who are members of TVA's Quality Contractor Network, are insured and

licensed and have also completed special training on TVA guidelines.

Participants have access to objective information and

assurance that their solar PV system has met Green Connect Program Standards through installation verifications.

Utility-scale Solutions .

The Green Invest Program matches customer demand with renewable supply through a Green Invest Agreement.

The goal of the Green Invest Program is to meet the long-term sustainability needs of customers at scale.

TVA procures the needed renewable supply through a diversified approach, which could include a competitive procurement process, strategic partnerships, or construction of renewable facilities to meet these needs.

As of September 30, 2022, more than 2,000 MW of renewable PPAs have been matched to customers through the Green Invest Program.

In addition, Generation Flexibility is a solution available to long-term LPC partners and supports the deployment of up to 2,000 MW of distributed solar to provide clean, local generation.

See Note 17 — Revenue .

Other Renewable Solutions.

The Green Switch Program allows customers to support wind, solar, and biomass renewable resources through purchasing renewable energy generated in the Tennessee Valley, sold in 200 kWh blocks.

Other DER Initiatives .

TVA also offers various energy efficiency programs.

In addition, TVA and LPCs conduct workshops to educate homeowners about low and no-cost energy efficiency upgrades that improve their quality of life.

Through the School Uplift Program pilot, TVA is partnering with LPCs as well as state and local governments to assist schools with adopting strategic energy management practices.

The engagement with each school includes monthly virtual workshops and fosters performance through competitions for energy efficiency grants and grants for solar pavilions.

Finally, through the Community Centered Growth Program, TVA is partnering with LPCs to assist small businesses located within underserved communities with energy evaluations and no-cost energy improvement investments.

In 2017, the TVA Board authorized up to $300 million to be spent over the next 10 years, subject to annual budget availability and necessary environmental reviews, to build an enhanced fiber optic network that will better connect TVA's operational assets.

Fiber is a vital part of TVA's modern communication infrastructure.

The new fiber optic lines will improve the reliability and resiliency of the generation and transmission system while enabling the system to better accommodate DER as they enter the market.

Fiber is a vital part of TVA's modern communication infrastructure and is needed to help manage DER as they enter the market.

The new fiber optic lines will also improve the reliability and resiliency of the generation and transmission system.

New energy management systems and energy storage technologies present opportunities for more sophisticated and integrated operation of the entire grid.

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Implementation of these technologies in conjunction with two-way communication to the site creates the potential for more efficient usage of other DER on the grid.

TVA continues to focus on utilizing more EVs and installing charging stations inside the Tennessee Valley.

TVA's electric vehicle ("EV") strategy is a staged approach that will evolve as the local EV market matures.

TVA partnered with over 30 organizations across the State of Tennessee (known as the "Drive Electric Tennessee" collaborative) to create a roadmap to outline local market needs for widespread adoption.

This foundational information is crucial as more affordable, longer range EVs come to the market.

TVA is partnering with LPCs and others to support the electrification of transportation in the Valley in a multi-year EV initiative.

TVA is partnering with LPCs and others to support the electrification of transportation in the Tennessee Valley in a multi-year EV initiative.

The initiative focuses on reducing or eliminating EV market barriers by setting EV policies, improving charging infrastructure availability, expanding EV availability and offerings, and spreading EV consumer awareness.

In November 2020, the TVA Board approved new policies and an optional wholesale EV rate aimed at encouraging the development of charging infrastructure in the Valley.

The updated policies enable LPC investment in public charging infrastructure and allow for the conditional resale of electricity, for transportation purposes only, by any charging developer on a kWh basis.

The optional wholesale rate was developed with high power EV charging in mind and provides a stable option for those developing charging infrastructure.

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Electric Vehicles.

Onsite energy management technologies and the proliferation of companies interested in providing services to support and aggregate the impacts of such systems provide another DER opportunity.

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TVA acquires power from a variety of power producers generally through long-term and short-term PPAs as well as through spot market purchases.

During 2021, TVA acquired approximately 94 percent of the power that it purchased through the long-term PPAs described below, including agreements for long-term renewable generation resources, approximately one percent through short-term PPAs, and approximately five percent on the spot market.

In order to meet customer preferences and requirements for cleaner and greener energy, TVA has entered into certain PPAs with renewable resource providers.

As of September 30, 2021, TVA had operating or contracted capacity totaling 4,313 MW of summer net capability under renewable PPAs.

These agreements are part of progressive partnerships that align the core values of TVA and the public power model with the desire of TVA's customers for renewable energy.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Changing Customer Preferences — Renewable Power Purchase Agreements.

During 2022, TVA acquired approximately 94 percent of the power that it purchased through the long-term PPAs described below, including agreements for long-term renewable generation resources, approximately three percent through short-term PPAs, and approximately three percent on the spot market.

During 2021, TVA acquired approximately 94 percent of the power that it purchased through long-term PPAs, approximately one percent through short-term PPAs, and approximately five percent on the spot market.

TVA's capability provided by PPAs is primarily provided under contracts that expire between 2022 and 2045 and are described in the table below.

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At September 30, 2022

Type of Facility Location Number of Contracts Summer Net Capability

(MW) Contract Termination Date

Type of Facility Location Number of Contracts Summer Net Capability (MW) Contract Termination Date

Renewable PPAs

Solar Tennessee 2 58 2032 - 2039

Alabama 2 302 2037 - 2041

Tennessee 3 208 2032 - 2042

Solar Alabama 2 302 2037 - 2041

Total Operating Solar 5 510

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Contract Renewable Resources (3)

Total Operating 2,335

Tennessee 11 1,186 2038 - 2045

Kentucky 2 242 2038 - 2043

Mississippi 3 550 2043

Total Contracted 16 1,978

Total Renewable PPAs 30 4,313

Total Renewable Operating PPAs 2,481

Contracted (not yet online)

Total Renewable Contracted PPAs 15 1,828

Nonrenewable PPAs

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Total Operating Diesel 7 115

Natural Gas Alabama 4 2,573 2022 - 2033

Natural Gas (5)

Alabama 3 2,068 2022 - 2033

Natural Gas (5)

Georgia 1 500 2022

Natural Gas (2)

Illinois 1 495 2024

Total Operating Natural Gas 5 3,063

Lignite Mississippi 1 440 2032

Total Operating 12 3,128

Battery Storage (5)

Tennessee 1 66 2045

Battery Storage (4)

Kentucky 1 30 2043

Total Nonrenewable Operating PPAs 13 3,618

Contracted (not yet online)

Battery Storage (4)

Mississippi 3 150 2043

Total Contracted 5 246

Total Nonrenewable PPAs 17 3,374

(1) 227 MW of power delivery commenced in 2021.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives — Changing Customer Preferences — Renewable Power Purchase Agreements .

Total Nonrenewable Contracted PPAs 5 246

(1) TVA sells the RECs resulting from some of its purchased power to certain customers.

See Part II, Item 7, Management's Discussion and Analysis of Financial

Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Renewable Power Purchase Agreements.

(2) 150 MW of power delivery in Solar and 495 MW of power delivery in Natural Gas commenced in 2022.

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives — Optimum Energy Portfolio — Renewable Power Purchase Agreements .

(3) Contract Renewable Resources is capability from various historical renewable energy programs that consist of PPAs primarily with individuals and small businesses.

(4) Power delivery is expected to commence between 2023 - 2025.

(4) Power delivery is expected to commence in 2023.

(5) Power delivery is expected to commence in 2025.

See challenges associated with contracted PPAs not yet online in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives — Optimum Energy Portfolio — Renewable Power Purchase Agreements .

(5) Included in the table above are 500 MW of power delivery in Alabama and 500 MW in Georgia that expired on September 30, 2022.

The Alabama and Georgia contracts were replaced with 500 MW and 250 MW of Natural Gas, respectively, and both commenced on October 1, 2022.

The two new contracts are not reported in the table above.

Under federal law, TVA is required to purchase energy from qualifying facilities (cogenerators and small power producers) at TVA's avoided cost of either generating this energy itself or purchasing this energy from another source.

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TVA's consumption of various types of fuel depends largely on the demand for electricity by TVA's customers, the availability of various generating units, and the availability and cost of fuel.

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

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

Current Fuel Supply .

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Production of the low-enriched uranium began in 2019 and is contracted to continue through September 2025.

Beginning October 2025, contract activity will consist of storage and flag management.

Contract activity after that date will consist of storage and flag management.

Flag management ensures that the uranium is free from foreign obligations, and unencumbered by policy restrictions, so that it can be used in connection with the production of tritium.

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TVA has provided irradiation services using Watts Bar Unit 1 since 2003.

Although the interagency agreement provides for irradiation services to be performed at Watts Bar and Sequoyah, TVA expects the Watts Bar site to provide sufficient capacity to fulfill this agreement in the near term.

Although the interagency agreement provides for irradiation services to be performed at Watts Bar and Sequoyah, TVA expects the Watts Bar site to provide sufficient capacity

to fulfill this agreement in the near term.

The DOE notified TVA of future increased needs for tritium requiring the use of a second reactor.

In 2019, TVA received approval from the NRC for a license amendment to authorize the irradiation of TPBARs in Watts Bar Unit 2.

TVA began tritium production in Watts Bar Unit 2 in November 2020.

In 2019, TVA received approval from the Nuclear Regulatory Commission ("NRC") for a license amendment to authorize the irradiation of TPBARs in Watts Bar Unit 2.

TVA began tritium production in Watts Bar Unit 2 in 2021.

The DOE's decision also allows for irradiation of TPBARs at Sequoyah in the future;

however, TVA does not have plans to employ Sequoyah units for tritium production in the near term.

TVA does intend to increase its production in Watts Bar Unit 1 beginning in November 2024, to align with a DOE request for increased tritium.

TVA does intend to increase its production within currently licensed limits beginning in November 2024 for Watts Bar Unit 1 and April 2025 for Watts Bar Unit 2, to align with a DOE request for increased tritium.

TVA is currently working to submit a license amendment request with the NRC to fulfill this request.

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The net book value of TVA's natural gas inventory was $54 million and $22 million at September 30, 2022 and 2021, respectively.

Natural gas inventory increased primarily due to higher gas prices, as well as an increase in the amount of stored gas to mitigate fuel price volatility.

The net book value of TVA's fuel oil inventory was $84 million and $69 million at September 30, 2022 and 2021, respectively.

At September 30, 2021, 80 of the combustion turbines that TVA operates were dual-fuel capable, and TVA has fuel oil stored on each of these sites as a backup to natural gas.

At September 30, 2022, 80 of the combustion turbine assets were dual-fuel capable, and TVA has fuel oil stored on each of these sites as a backup to natural gas.

TVA purchases natural gas from multiple suppliers on a daily, monthly, seasonal, and term basis.

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TVA plans to continue using contracts of various lengths and terms to meet the projected natural gas needs of its natural gas fleet.

During 2021, TVA arranged for the transportation of natural gas on nine separate pipelines, with approximately 66 percent being transported on two pipelines.

During 2021, TVA maintained a total of approximately 1,517,000 million British thermal unit(s) ("mmBtu") per day of firm transportation capacity on seven major pipelines, with approximately 59 percent of total firm transportation capacity being maintained on two pipelines.

TVA utilizes natural gas storage services at seven facilities with a total capacity of 7.25 billion per cubic feet ("Bcf") of firm service and 5.00 Bcf of interruptible service to manage the daily balancing requirements of the nine pipelines used by TVA, with approximately 59 percent of the total storage capacity being maintained at two facilities.

During 2022, TVA arranged for the transportation of natural gas on eight separate pipelines, with approximately 68 percent being transported on two pipelines.

During 2022, TVA maintained a total of approximately 1,501,000 million British thermal unit(s) ("mmBtu") per day of firm transportation capacity on eight major pipelines, with approximately 66 percent of total firm transportation capacity being maintained on two pipelines.

TVA utilizes natural gas storage services at seven facilities with a total capacity of 7.25 billion per cubic feet ("Bcf") of firm service and 5.00 Bcf of interruptible service to manage the daily balancing requirements of the eight pipelines used by TVA, with approximately 59 percent of the total storage capacity being maintained at two facilities.

During 2022, storage levels were generally maintained at between 40 and 80 percent of the maximum contracted capacity at each facility.

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In 2023, TVA expects to increase its storage portfolio by approximately 10 percent.

Coal consumption at TVA's coal-fired generating facilities during 2021 and 2020 was approximately 12 million tons and 11 million tons, respectively.

Coal consumption at TVA's coal-fired generating facilities during both 2022 and 2021 was approximately 12 million tons.

At September 30, 2022 and 2021, TVA had 25 days and 21 days of system-wide coal supply at full burn rate, respectively, with net book values of $165 million and $107 million, respectively.

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The following charts present the proportion of each delivery method TVA utilizes for its coal supply for the periods indicated:

Total system coal inventories were lower than anticipated throughout 2021 primarily as a result of higher than forecasted coal generation, coal supply limitations, and transportation challenges.

Higher coal generation was primarily the result of higher demand than anticipated in 2021 after the lower energy sales in 2020 associated with the COVID-19 pandemic and an increase in natural gas prices making coal a more favorable economic fuel choice.

Supply limitations and transportation challenges were due to reduced mine production and/or mine closures, an increase in coal exports, and a reallocation of transportation capacity to support export sales.

TVA anticipates that these challenges will continue into 2022.

See also Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Generation Resources — Coal Supply .

Coal inventory increased at September 30, 2022 as compared to September 30, 2021.

This increase was primarily due to higher costs of fuel, including transportation costs, coal conservation efforts, and an increase in inventory levels in preparation for winter inventory needs.

The increased inventory levels will help mitigate expected constraints on fuel supply and continued natural gas price volatility which may cause coal to be a more favorable economic fuel choice during that period.

However, total system coal inventories were lower than planned throughout 2022 primarily due to higher than forecasted coal generation and continued constraints on fuel supply.

Higher coal generation was driven by an increase in sales of electricity, primarily due to economic growth in the Tennessee Valley region and weather patterns, and an increase in natural gas prices making coal a more favorable economic fuel choice.

Fuel supply constraints were due to limited mine production, labor shortages, an increase in coal exports, and a reallocation of transportation capacity to support export sales and other commodities.

TVA will continue to monitor these constraints and coal inventory levels, as TVA anticipates that these challenges will continue into 2023.

See also Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Operational Challenges — Coal Supply .

The TVA transmission system is one of the largest high-voltage transmission systems in North America.

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TVA has also adopted and operates in accordance with its published Transmission Standards of Conduct and separates its transmission function from its power marketing function.

TVA also is subject to federal reliability standards that are set forth by the North American Electric Reliability Corporation ("NERC") and approved by FERC.

As a Balancing Authority, Distribution Provider, Generator Owner, Generator Operator, Planning Coordinator, Reliability Coordinator, Resource Planner, Transmission Owner, Transmission Operator, Transmission Planner, and Transmission Service Provider, as those terms are defined for purposes of North American Electric Reliability Corporation ("NERC") regulations, TVA is also subject to federal reliability standards that are set forth by the NERC and approved by FERC.

See Regulation .

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Upgrades may include enhancements to existing lines and substations or new installations as necessary to provide adequate power transmission capacity, maintain voltage support, and ensure generating plant and transmission system stability.

In addition to upgrades to maintain reliability, TVA’s Grid of Tomorrow initiative aims to increase grid flexibility to enable greater use of renewable resources such as solar, wind, and other forms of distributed generation and includes making data and communications upgrades as demonstrated by the below initiatives.

This initiative supports TVA’s decarbonization efforts while ensuring TVA continues to deliver reliable power at the lowest feasible rate.

Investments in a modernized grid will enable enhanced monitoring and control of TVA’s transmission and generation portfolio.

In 2017, the TVA Board authorized a strategic fiber optic initiative of up to $300 million to be spent over the next 10 years, subject to annual budget availability and necessary environmental reviews, that will expand TVA's fiber capacity and improve the reliability and resiliency of the generation and transmission system.

The network expansion is designed to help meet the power system's growing need for bandwidth as well as accommodate the integration of new DER.

As of September 30, 2021 , TVA had spent $151 million on installation of the fiber optic lines and expects to spend an additional $149 million.

A new system operations center has been approved for $289 million.

The new secured facility is being built to accommodate a new energy management system and adapt to new regulatory requirements, and will have improved physical security from the previous center.

The facility is expected to be constructed by the third quarter of 2023 and fully operational in 2025.

As of September 30, 2021 , TVA had spent approximately $92 million on the project and expects to spend an additional $197 million.

The new energy management system has been approved for $90 million.

As the current energy management

system is nearing the end of its life cycle, this project will replace the existing analog system with a digital system .

The new digital system will have higher capacity and speed, for communications with the TVA grid and for inputs from monitoring equipment, which will network the new control center with existing locations and enable better remote visibility and control.

The system is expected to be complete in 2026.

As of September 30, 2021, TVA had spent approximately $37 million on the project and expects to spend an additional $53 million.

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio.

In addition, TVA is working on various projects with universities, EPRI, and others to help enable a dynamic and multi-directional grid.

TVA is also working in partnership with LPCs to modernize their distribution systems by developing a shared vision and roadmap for transforming the Valley’s transmission and distribution systems into an integrated regional grid.

TVA is also working in partnership with LPCs to modernize their distribution systems by developing a shared vision and roadmap for transforming the Tennessee Valley’s transmission and distribution systems into an integrated regional grid.

These initiatives support TVA’s decarbonization efforts while helping ensure TVA continues to achieve its mission to deliver reliable power at the lowest feasible rate.

Investments in a modernized grid will help enable enhanced monitoring and control of TVA’s transmission and generation portfolio.

Weather and Seasonality

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Degree days measure the extent to which the TVA system 23-station average temperatures vary from 65 degrees Fahrenheit.

See Environmental Matters — Climate Change — Physical Impacts of Climate Change below and Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Sales of Electricity.

See Item 1, Business — Flood Control Activities, Item 1, Business — Environmental Matters — Climate Change — Physical Impacts of Climate Change, and

Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Sales of Electricity.

TVA provides electricity in a service area that is largely free of competition from other electric power providers.

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All TVA wholesale power contracts 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.

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There have also been some efforts to erode the ACPA, and the protection of the provision could be limited and perhaps eliminated by federal legislation at some time in the future.

See Note 23 — Commitments and Contingencies — Legal Proceedings — Challenge to Anti-Cherrypicking Amendment for updates to this legal proceeding.

See Note 21 — Commitments and Contingencies — Legal Proceedings — Challenge to Anti-Cherrypicking Amendment for updates to a legal proceeding challenging the ACPA.

TVA also faces competition in the form of emerging technologies.

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The growing interest by customers in generating their own power through DER has the potential to lead to a reduction in the load served by TVA as well as cause TVA to re-evaluate how it operates the overall grid system to continue to provide highly reliable power at affordable rates.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Distributed Energy Resources.

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Fiber Optic Network.

Finally, TVA and other utility companies are facing an evolving marketplace of increased competition driven by customer choice and behavior.

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Research and Development

Investments in TVA's research portfolio are supported through partnership and collaboration with LPCs, EPRI, the DOE, federal agencies, national labs, peer utilities, universities, and industry vendors and through participation in professional societies and other research consortiums.

Investments in TVA's research portfolio are supported through partnership and collaboration with LPCs, EPRI, the DOE, federal agencies, peer utilities, universities, and industry vendors and through participation in professional societies and other research consortiums.

Annual investments made in science and technological innovation help meet future business and operational

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TVA also provides research and development services on behalf of LPCs by helping optimize their distribution systems and helping minimize technology gaps in energy utilization and consumer technologies.

In 2020, TVA placed a high priority on providing research which aligns to and supports its five transformative initiatives:

energy storage, electric vehicles, advanced nuclear, connected communities, and regional grid transformation.

TVA has also placed a special emphasis on research leading to the understanding and application of clean resources to support the reduction of carbon emissions from its power supply.

This research supports both TVA and national strategic interests to reduce carbon

emissions and will serve to both catalyze and support TVA’s sixth transformative initiative, decarbonization, which commenced in 2022.

Beginning in 2020, TVA placed a high priority on providing research which aligns to and supports its six transformative initiatives:

decarbonization, energy storage, electric vehicles, advanced nuclear, connected communities, and regional grid transformation.

TVA has placed a special emphasis on research leading to the understanding and application of clean resources to support the reduction of carbon emissions from its power supply.

This research supports both TVA and national strategic interests to reduce carbon emissions and will serve to both catalyze and support TVA’s decarbonization initiative.

TVA is in the second year of a coalition of utilities and researchers, led by EPRI and Gas Technology Institute, whose purpose is to engage, inform, and support global low-carbon resources initiatives to develop the pathways for the advancement

of carbon reducing technologies for large scale utility deployment.

This is a five-year program and includes research to support creating resource options, such as alternative fuels (hydrogen, ammonia, and methanized derivatives), carbon capture, electrification, and utilization of clean DER as part of the overall low-carbon resource mix.

TVA has made progress understanding regional geology and carbon capture technologies and is evaluating both with an emphasis on the potential for carbon capture in TVA's future.

TVA is also exploring the potential for hydrogen to serve as a tool in the decarbonization of the Tennessee Valley, both within the electrical sector and elsewhere.

TVA and other major utility companies are working together to respond to the recently announced funding opportunity from the DOE with the intention of obtaining federal financial support for a Southeast Hydrogen Hub.

At the forefront of the energy storage initiative is deploying grid-scale battery energy storage technology to optimize the existing TVA generation assets and improve the resiliency of the transmission system.

In 2020, TVA launched its first TVA-owned, grid scale, lithium-ion demonstration battery project and in 2021, TVA awarded the contract for the battery project which will be located near Vonore, Tennessee.

In 2020, TVA launched its first TVA-owned, grid scale, lithium-ion demonstration battery project and in 2022, TVA broke ground for the battery project, which will be located near Vonore, Tennessee.

The system integration learnings from this project will guide future application of battery storage as part of the evolving bulk power system in the region.

TVA continues to assess potential electrification programs that improve resource use and reduce environmental impacts (especially in the transportation sector).

Assessments include a multi-stakeholder vision and roadmap effort aimed at identifying the path forward for electric vehicles in Tennessee.

TVA continues to develop potential electrification programs, in addition to the Fast Charge Network, that improve resource use and reduce environmental impacts (especially in the transportation sector).

TVA programs are based on previous assessments, which included a multi-stakeholder vision and roadmap effort aimed at identifying the path forward for electric vehicles in Tennessee.

The approach provides for broad engagement from industry, government, and utilities that could be applied in other states in the TVA service territory.

In addition, TVA is continuing its evaluation of potential electric vehicle adoption strategies through coordination of activities with EPRI and state and industry stakeholders related to operational fleet requirements.

Additional areas of focus include LPC engagement on plug-in electric vehicle grid integration and readiness for various transportation electrification technologies.

In addition, research continues in electrification applications surrounding vehicle charging stations, impacts from charging stations to the power grid, refinement of power-system control processes, and development of smart charging strategies to maximize the potential of electricity to replace petroleum as the transportation fuel of choice.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Distributed Energy Resources — Electric Vehicles.

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Electric Vehicles.

TVA is committed to investing in the future of nuclear and continues to evaluate the licensing and design of emerging nuclear technologies, such as advanced light water SMRs and advanced non-light water reactors, as part of technology innovation efforts aimed at developing the energy system of the future.

In December 2019, TVA became the first utility in the nation to successfully obtain approval for an early site permit from the NRC to potentially construct and operate SMRs at its Clinch River Site.

Additionally, TVA is partnering with like-minded organizations to evaluate the economic feasibility of advanced nuclear reactors.

Additionally, TVA is partnering with technology progressive organizations to evaluate the economic feasibility of advanced nuclear reactors.

TVA has entered into memorandums of understanding and agreements that allow for mutual collaboration to explore advanced reactor designs as a next-generation nuclear technology while leveraging the expertise of federally funded research and development centers, utilities, vendors, and academic institutions.

These partnerships are important steps in the early stages of evaluation as TVA considers the prospect of new nuclear.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Distributed Energy Resources — Small Modular Reactors.

TVA is working to establish connected communities pilot projects with stakeholders and has been engaging in advanced buildings research to support the initiative.

These partnerships are also leveraged to develop innovations to improve advanced nuclear designs, streamline licensing pathways, find efficiencies in construction methods, and optimize operating expenses.

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Small Modular Reactors for additional discussion and total costs related to SMR work.

TVA established 13 connected communities pilot projects with stakeholders and has been engaging in advanced buildings research to support the initiative.

Connected communities projects are aimed at addressing today’s challenges with community-driven information and technology solutions to improve the quality of life in the Tennessee Valley.

Research will continue to identify best practices, better understand challenges in the Valley, and build a roadmap for the future.

TVA and LPCs are engaged in several initiatives related to grid modernization.

Research will continue to identify best practices, better understand challenges in the Tennessee Valley, and scale up the learnings from the pilots to broader application throughout the Tennessee Valley.

Finally, TVA and LPCs are engaged in several initiatives related to grid modernization.

Research includes technologies and applications advancement in intelligent transmission and distribution systems.

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This could promote reduced emissions, lower energy costs, and add greater flexibility to accommodate the new consumer-generated sources under TVA's renewable energy programs.

See Power Supply and Load Management Resources — Distributed Energy Resources .

Finally, TVA is in the second year of a coalition of utilities and researchers, led by EPRI and Gas Technology Institute, whose purpose is to engage, inform, and support global low-carbon resources initiatives to develop the pathways for the advancement of carbon reducing technologies for large scale utility deployment.

TVA also worked with LPC partners to execute a survey of LPC technology capabilities and plans, and the results are helping shape a realistic path toward TVA's long-term goals.

See Power Supply and Load Management Resources — Distributed Energy Resources and Transmission .

Flood Control Activities

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During 2022, approximately 55 inches of rain fell in the Tennessee Valley.

TVA manages the Tennessee River system in an integrated manner, balancing hydroelectric generation with navigation, flood damage reduction, water quality and supply, and recreation.

TVA manages the Tennessee River system in an integrated manner, which includes managing minimum river flows and minimum depths for navigation, reducing flood damage, generating low-cost hydroelectric power, maintaining flows that support habitat for fish and other aquatic species, maintaining water supply, and providing recreational opportunities for the Tennessee Valley.

In addition, having cool water available helps TVA to meet thermal compliance and support normal operation of TVA's nuclear and fossil-fueled plants, while oxygenating water helps fish species remain healthy.

TVA spills or releases excess water through its dams in order to reduce flood damage to the Tennessee Valley.

TVA typically spills only when all available hydroelectric generating turbines are operating at full capacity and additional water still needs to be moved downstream.

The Tennessee Valley experienced above normal rainfall during 2021 which included the second wettest August on record with nearly 10 inches of rainfall.

Despite significant rainfall, runoff, and flooding during the period, TVA continued to generate low-cost hydroelectric power while meeting its river system commitments, including flood mitigation, which is estimated to have prevented approximately $170 million in damages across the Tennessee Valley.

The Tennessee Valley experienced above normal rainfall during 2022 with rainfall and runoff at 108 percent and 106 percent of normal, respectively.

The above normal rainfall and runoff during the period supported TVA's objective to generate low-cost hydroelectric power while also meeting its river system commitments, including flood mitigation, which is estimated to have prevented damages across the Tennessee Valley of approximately $3 million in 2022 and $9.7 billion over TVA's recorded history.

Environmental Stewardship Activities

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The reservoir system also provides a water supply for residential and industrial customers, as well as cooling water for TVA's coal-fired plants, combined cycle plants, and nuclear power plants.

In 2020, the TVA Board approved a new Environmental Policy.

TVA's updated policy provides objectives for an integrated approach related to providing reliable, affordable, and increasingly clean energy;

TVA's Environmental Policy provides objectives for an integrated approach related to providing reliable, affordable, and increasingly clean energy;

engaging in proactive stewardship of the Tennessee River system and public lands;

and supporting sustainable economic growth.

The Environmental Policy also provides additional direction in several environmental stewardship areas related to reducing environmental impacts on the Valley's natural resources, including reducing carbon intensity and air emissions;

The Environmental Policy also provides additional direction in several environmental stewardship areas related to reducing environmental impacts on the Tennessee Valley's natural resources, including reducing carbon intensity and air emissions;

minimizing waste;

and protecting water resources, biodiversity, and cultural resources.

and protecting water resources and cultural resources.

TVA's Biodiversity Policy further builds on the TVA record of environmental stewardship by acknowledging the critical role of natural systems in achieving its mission of improving the quality of life in the region.

The policy commits to seeking conservation opportunities within capital projects and improving current operational practices to help minimize impacts, reduce costs, and enhance biodiversity.

TVA serves the people of the TVA region through the integrated management of the Tennessee River system and public lands, which include approximately 11,000 miles of shoreline;

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Within this strategy, TVA confirms a desire to remain agile, balance competing demands, and be a catalyst for collaboration in order to protect and enhance biological, cultural, and water resources as well as create and sustain destinations for recreation and opportunities for learning and research.

As part of the strategy, TVA intends to assist water-based community development with issuing permits, technical support, and land agreements using planning, clear regulations, meaningful guidelines, and consistent enforcement.

Additional guidance for carrying out many of TVA's essential stewardship responsibilities is provided in TVA's Natural Resource Plan ("NRP") .

In 2020, changes were made to TVA's NRP to support a more strategic, flexible, and comprehensive management approach to TVA's natural resource stewardship work.

The updated plan enhances alignment with TVA's mission through economic development, energy, and environmental stewardship and guides business planning.

In the newly published NRP, TVA expanded from six resource areas to ten focus areas, ensuring the NRP provides a more comprehensive view of resource stewardship efforts.

As part of the strategy, TVA intends to assist water-based community development with the issuance of permits, technical support, and land agreements using planning, clear regulations, meaningful guidelines, and consistent enforcement.

Additional guidance for carrying out many of TVA's essential stewardship responsibilities is provided in TVA's Natural Resource Plan .

The plan aligns TVA's mission through economic development, energy, and environmental stewardship and guides business planning.

It includes ten focus areas, providing a comprehensive view of resource stewardship efforts.

Economic Development Activities

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TVA's economic development incentive programs offer competitive incentives to new and existing power customers in certain business sectors that make multi-year commitments to invest in the Tennessee Valley.

See Note 17 — Revenue — Contract Balances — Economic Development Incentives for total incentives recorded.

In addition to providing financial support to businesses, TVA offers communities and economic developers site selection services, technical and project development assistance, and leadership training services.

In 2021, TVA's economic development efforts helped recruit or expand 269 companies into the TVA service area.

These companies announced capital investments of over $8.8 billion and expect to create and/or retain approximately 80,900 jobs.

In 2022, TVA's economic development efforts, reliability, and competitive rates helped attract or expand 245 companies into the TVA service area.

These companies announced projected capital investments of over $10.2 billion and are expected to create or retain approximately 66,500 jobs.

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

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Nuclear Regulatory Commission

TVA operates its nuclear facilities in a highly regulated environment and is subject to the oversight of the NRC, an independent federal agency that sets the rules that users of radioactive materials must follow.

TVA operates its nuclear facilities in a highly regulated environment and is subject to the oversight of the NRC, an

independent federal agency that sets the rules that users of radioactive materials must follow.

The NRC has broad authority to impose requirements relating to the licensing, operation, and decommissioning of nuclear generating facilities.

In addition, if TVA fails to comply with requirements promulgated by the NRC, the NRC has the authority to impose fines, shut down units, or modify, suspend, or revoke TVA's operating licenses.

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

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Operational Challenges.

Environmental Protection Agency

TVA is subject to regulation by the EPA in a variety of areas, including air quality control, water quality control, and management and disposal of solid and hazardous wastes.

See Environmental Matters below and Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges.

TVA is subject to regulation by the Environmental Protection Agency ("EPA") in a variety of areas, including air quality control, water quality control, and management and disposal of solid and hazardous wastes.

See Environmental Matters below and Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges.

The Supremacy Clause of the U.S.

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TVA's activities, particularly its power generation activities, are subject to comprehensive regulation under environmental laws and regulations relating to air pollution, water pollution, and management and disposal of solid and hazardous wastes, among other matters.

Emissions from all TVA-owned and operated units (including small combustion turbine units of less than 25 MW) have been reduced from historic peaks.

Emissions of nitrogen oxide ("NO x ") have been reduced by 97 percent below peak 1995 levels and emissions of sulfur dioxide ("SO 2 ") have been reduced by 99 percent below 1977 levels through CY 2020.

For CY 2020, TVA's emissions of carbon dioxide ("CO 2 ") from its owned and operated units, including purchased power and REC retirement adjustments which reduce the CO 2 emissions, were 43 million tons, resulting in a TVA system average, as delivered, CO 2 emission rate of 562 lbs/MWh.

This represents a 63 percent reduction in mass carbon emissions from 2005 levels.

To remain consistent and to align with the EPA's reporting requirements, TVA intends to continue reporting CO 2 emissions on a calendar year basis.

Additional quantitative emissions data is as follows:

Emissions and Intensity Rates (1)

Nitrogen Oxide (NO x ) (2)

Total NO x Emissions (MT)

12,577 19,430

Total NO x Emissions Intensity (MT/Net MWh)

0.000094 0.000140

Sulfur Dioxide (SO 2 ) (2)

Total SO 2 Emissions (MT)

17,082 26,972

Total SO 2 Emissions Intensity (MT/Net MWh)

0.000127 0.000194

Total Hg Emissions (kg) 17.5 50.1

Total Hg Emissions Intensity (kg/Net MWh) 0.0000001 0.0000004

(1) Intensity rates are calculated based on generation from TVA's most recent fiscal year for years indicated and emissions data from the most recent calendar years.

(2) Emissions data is consistent with Edison Electric Institute Environmental, Social, Governance and Sustainability Report standards, which are based on metric tons ("MTs") whereas overall CO 2 emission rates and baseline reductions from historical levels are based on short tons.

Clean Air Act

The CAA establishes a comprehensive program to protect and improve the nation's air quality and control sources of air pollution.

The major CAA programs that affect TVA's power generation activities are described below.

The environmental laws and regulations that have the largest impact on TVA's operations and financial condition are discussed below.

Clean Air Act Programs and Regulations

National Ambient Air Quality Standards.

The CAA requires the EPA to set National Ambient Air Quality Standards ("NAAQS") for certain air pollutants.

The EPA has done this for ozone, particulate matter ("PM"), SO 2 , nitrogen dioxide, carbon monoxide, and lead.

The EPA has set NAAQS for ozone, particulate matter, sulfur dioxide ("SO 2 "), nitrogen oxides ("NO x "), carbon monoxide, and lead.

Over the years, the EPA has made the NAAQS more stringent.

Each state must develop a plan to be approved by the EPA for achieving and maintaining NAAQS within its borders.

These plans impose limits on emissions from pollution sources, including TVA fossil fuel-fired plants.

These plans impose limits on emissions from pollution sources, which are applicable to certain TVA generating units, including fossil fuel-fired plants.

Areas meeting a NAAQS are designated as attainment areas.

Areas not meeting a NAAQS are designated as non-attainment areas, and more stringent requirements apply in those areas, including stricter controls on industrial facilities and more complicated permitting processes.

TVA fossil fuel-fired plants can be impacted by these requirements.

All TVA generating units are located in areas designated as in attainment with NAAQS.

Cross-State Air Pollution Rule.

The EPA issued the Cross-State Air Pollution Rule ("CSAPR") in 2011 requiring several states in the eastern U.S.

to improve air quality by reducing power plant emissions that contribute to pollution in other states.

In 2016, the EPA issued an update to CSAPR to address cross-state air pollution (the "CSAPR Update Rule").

The EPA subsequently issued an additional rule to resolve any remaining cross-state air pollutant issues ("CSAPR Close-Out Rule").

Court of Appeals for the District of Columbia Circuit ("D.C.

Circuit") remanded a portion of the CSAPR Update Rule back to the EPA to address its failure to require upwind states to eliminate substantial contributions to downwind non-attainment areas by the statutory deadline.

Circuit also vacated the CSAPR Close-Out Rule.

On March 15, 2021, the EPA Administrator signed the final revisions to the CSAPR Update Rule.

The revisions address the defects identified by the D.C.

Circuit and took effect on June 29, 2021.

In this final action, the EPA reduced ozone-season NO x allowances for a group of 12 states, including Kentucky, and required sources in those states to surrender most of their banked allowances.

TVA's Shawnee Fossil Plant ("Shawnee") facility is affected by these revisions, and TVA is in the process of analyzing compliance strategies to determine how any shortage in allowances will be overcome for the ozone season in 2022 and beyond.

Currently, all TVA generating units are located in areas designated as attainment areas.

Revised Cross-State Air Pollution Rule.

TVA power plants are subject to the EPA's Cross-State Air Pollution Rule ("CSAPR").

CSAPR addresses air pollution from upwind states in the United States that affect air quality in downwind states and is focused on NO x and SO 2 .

To comply with CSAPR, TVA power plants must obtain one NO x allowance for every ton of NO x emitted during the ozone season.

Under a revised version of CSAPR, the Shawnee Fossil Plant ("Shawnee") facility is subject to reduced ozone-season NO x allowances and has been required to surrender most of its allowance inventory.

TVA is monitoring forecasted needs and has purchased allowances for the Shawnee facility with plans to continue doing so as needed to comply with the rule in 2023.

A longer-term compliance strategy for the facility is being developed that could include a combination of NO x control upgrades, operational changes, and allowance purchases.

Proposed Federal Implementation Plan Addressing Regional Ozone Transport for the 2015 Ozone NAAQS.

On April 6, 2022, the EPA issued a proposed Federal Implementation Plan (“FIP”) to address cross-state air pollution with respect to the 2015 ozone NAAQS, and the comment period was subsequently extended on May 12, 2022.

The proposed FIP establishes ozone-season NO x allowance budgets that will apply to TVA electric generating units in Alabama, Kentucky, Mississippi, and Tennessee, beginning with the 2023 ozone season.

It also establishes daily NO x emissions limits applicable to TVA's individual coal-fired units.

TVA is currently evaluating potential impacts from this proposal.

A compliance strategy for affected facilities in Kentucky and Tennessee could include a combination of NO x control upgrades, operational changes, and allowance purchases.

Mercury and Air Toxics Standards for Electric Utility Units .

In April 2020, the EPA issued a final rule which revokes the agency's earlier finding that regulation of hazardous air pollutants ("HAP") emitted from steam electric utilities is appropriate and necessary.

The rule does not remove electric generating units from the source categories listed under Section 112 of the CAA nor does it rescind the Mercury and Air Toxics Standards ("MATS") requirements.

Additionally, the EPA determined that further restrictions on HAP emissions are not warranted based on a residual risk and technology review ("RTR") for this source category.

TVA does not anticipate that the final rule will change TVA's MATS compliance requirements or strategy.

Certain states and environmental groups filed petitions in the D.C.

Circuit challenging the "appropriate and necessary" finding and the RTR finding.

On February 16, 2021, the EPA filed a motion requesting the D.C.

Circuit to hold the cases in abeyance pending the agency's review of the final rule under Executive Order ("EO") 13990, which, among other things, requires the EPA to reconsider the final rule by August 2021.

The EPA did not meet the August 2021 deadline, but is expected to issue a proposed rule that reverses the findings of the April 2020 final rule.

TVA will evaluate the proposal when it is issued.

On January 31, 2022, the EPA proposed reaffirming that it is appropriate and necessary to regulate hazardous air pollutants ("HAP"), including mercury emitted from steam electric utilities.

If adopted in its current form, the EPA's proposed rule addressing HAP would not change TVA’s compliance requirements.

Environmental Agreements.

See Note 23 — Commitments and Contingencies — Legal Proceedings — Environmental Agreements for a discussion of two substantively similar agreements into which TVA entered in April 2011:

one with the EPA and the other with Alabama, Kentucky, North Carolina, Tennessee, and three environmental advocacy groups:

the Sierra Club, the National Parks Conservation Association, and Our Children's Earth Foundation (collectively, the "Environmental Agreements"), which discussion is incorporated herein by reference.

In 2011, TVA entered into two substantively similar agreements, one with the EPA and the other with Alabama, Kentucky, North Carolina, Tennessee, and three environmental advocacy groups (collectively, the "Environmental Agreements").

To resolve alleged New Source Review claims, TVA committed under the Environmental Agreements to, among other things, take now-completed actions regarding coal units and invest $290 million in certain TVA environmental projects.

See Note 21 — Commitments and Contingencies — Legal Proceedings — Environmental Agreements , which discussion is incorporated herein by reference.

Acid Rain Program.

The Acid Rain Program is intended to help reduce emissions of SO 2 and NO x , which are the primary pollutants implicated in the formation of acid rain.

The EPA's Acid Rain Program is intended to help reduce emissions of SO 2 and NO x , which are the primary pollutants implicated in the formation of acid rain.

The program includes a cap-and-trade emission reduction program for SO 2 emissions from power plants.

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In 2017, the EPA published the final rule that changed some of the requirements for Regional Haze State Implementation Plans ("SIPs").

Specific impacts cannot be determined until future Regional Haze SIPs are developed for the next decennial review under the visibility haze provisions of the CAA.

Specific impacts on TVA cannot be determined until future Regional Haze SIPs are developed for the next decennial review under the visibility haze provisions of the CAA.

States were required to submit their Regional Haze SIPs to the EPA by July 31, 2021.

In response to requests from state air pollution control agencies in Tennessee and Kentucky, TVA submitted regional haze analyses for Cumberland Fossil Plant ("Cumberland") and Shawnee.

The reports evaluate SO 2 emission reduction options for these facilities and will be used by these state agencies in preparing their Regional Haze SIPs.

In response to requests from state air pollution control agencies in Tennessee and Kentucky, TVA submitted regional haze analyses for its Cumberland and Shawnee facilities, respectively, to those state agencies.

The reports evaluate SO 2 emission reduction options for these facilities and will be considered by these state agencies in preparing their Regional Haze SIPs.

On August 25, 2022, the EPA issued a final action stating that 15 states, including Kentucky, failed to submit a complete SIP, which triggers a two-year deadline for the EPA to promulgate a FIP for the state unless Kentucky submits, and the EPA approves, a SIP satisfying the visibility protection requirements of the CAA.

TVA cannot predict the outcome of the EPA's evaluation of the SIP submitted by Tennessee or the FIP to be developed by the EPA for Kentucky.

Start Up, Shutdown, and Malfunctions.

Opacity, or visible emissions, measures the denseness or color of power plant plumes and has traditionally been used by states as a means of monitoring good maintenance and operation of particulate control equipment.

Under some conditions, retrofitting a unit with additional equipment to better control SO 2 and NO x emissions can adversely affect opacity performance, and TVA and other utilities have addressed this issue.

Under some conditions, retrofitting a unit with additional equipment to better control SO 2 and NO x emissions can adversely affect opacity emissions, and TVA and other utilities have addressed this issue.

The evaluation of utilities' compliance with opacity requirements is coming under increased scrutiny, especially during periods of startup, shutdown, and malfunction.

Historically, SIPs developed under the CAA typically excluded periods of startup, shutdowns, and malfunctions, but in June 2015, the EPA finalized a rule to eliminate such exclusions ("2015 Rule").

The 2015 Rule required states to modify their implementation plans

by November 2016.

Kentucky, Tennessee, and Mississippi submitted implementation plans, but Alabama has not.

Environmental petitioners and several states filed petitions for judicial review of the 2015 Rule before the D.C.

In April 2017, the D.C.

Circuit, at the request of the EPA Administrator, ordered this litigation to be suspended pending the EPA's review to determine whether to reconsider all or part of the 2015 Rule.

On October 9, 2020, the EPA issued a guidance memorandum ("2020 Memorandum") that superseded and replaced policy statements outlined in the 2015 Rule.

On September 30, 2021, the EPA withdrew the 2020 Memorandum, reinstating the agency's prior policy as set out in the 2015 Rule.

The EPA's evaluation of state SIPs will be undertaken in light of the considerations outlined in the September 30, 2021 memorandum.

Environmental petitioners and several states filed petitions for judicial review of the 2015 Rule before the U.S.

Court of Appeals for the District of Columbia Circuit ("D.C.

Circuit"), and oral arguments were heard on March 25, 2022.

Separately, on September 8, 2021, environmental petitioners filed a lawsuit to enforce the SIP calls under the 2015 Rule.

On January 12, 2022, the EPA determined that Alabama and Tennessee (Shelby County) failed to submit a revised SIP as required by the 2015 Rule.

On June 27, 2022, the EPA entered into a consent decree that would require the agency to take final action on SIP revisions submitted in response to the 2015 SIP call by dates ranging from 180 to 480 days from the date of the consent decree.

TVA cannot predict the outcome of future SIP evaluations.

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The New York petition requests that the EPA require daily NO x limits for utility units with selective catalytic reduction systems ("SCRs") such as Shawnee Units 1 and 4 and emission reductions from utility units without SCRs such as Shawnee Units 2, 3, and 5 - 9.

Kentucky utility unit NO x emissions are already limited by the CSAPR Update Rule and are declining, and current EPA modeling projects no additional requirements to reduce Kentucky NO x emissions are necessary.

In 2019, the EPA finalized its denial of New York's petition because the state did not demonstrate, and the EPA could not independently establish, that sources in the states listed in the petition contribute to exceedances of the 2008 and 2015 ozone NAAQS in New York.

Kentucky utility unit NO x emissions are already limited under CSAPR and are declining, and current EPA modeling projects that no additional requirements to reduce Kentucky NO x emissions are necessary.

In 2019, the EPA finalized its denial of New York's petition.

The State of New York filed a petition in the D.C.

Circuit for judicial review of the EPA's denial of the petition.

In July 2020, the D.C.

Circuit for judicial review of the EPA's denial of the petition, and in July 2020, the D.C.

Circuit vacated the EPA's denial of the petition and remanded the petition to the EPA for reconsideration.

In its recently published Unified Regulatory Agenda, the EPA indicated that it will respond to the D.C.

Circuit's decision by providing a revised response to New York's Section 126(b) petition.

Specific impacts to TVA cannot be determined until the EPA takes further action on the petition.

Affordable Clean Energy Rule .

In 2019, the EPA finalized the Affordable Clean Energy ("ACE") rule and repealed the EPA's previous regulation addressing greenhouse gas ("GHG") emissions from existing fossil fuel-fired units.

The ACE rule established guidelines for GHG emissions from existing coal-fired units based on efficiency improvements that can be achieved at those units at reasonable cost.

In 2019, the EPA finalized the Affordable Clean Energy ("ACE") rule addressing greenhouse gas ("GHG") emissions from existing fossil fuel-fired units.

The ACE rule established guidelines, under Section 111(d) of the CAA, for GHG emissions from existing coal-fired units based on efficiency improvements that can be achieved at those units at reasonable cost.

States were then required to adapt these guidelines into individual SIPs to be submitted to the EPA for its approval.

Several industry, environmental, and state and local petitioners filed for judicial review of the ACE rule.

On January 19, 2021, the D.C.

Circuit vacated and remanded the ACE rule, and specified that the court's mandate will not issue with regard to the portion of the ACE rule that repeals the Clean Power Plan until after the EPA develops a replacement for the ACE rule.

In Congressional hearings in February 2021, the EPA Administrator stated that the EPA will propose a new rule to regulate CO 2 emissions from electric generating units.

On April 29, 2021, a coalition of states asked the Supreme Court to reverse the D.C.

Circuit's decision to vacate and remand the ACE rule.

TVA is unable to predict the future course of this litigation on appeal, nor the direction that the EPA may take in the future to regulate GHG emissions from fossil fuel-fired units.

Circuit vacated and remanded the ACE rule.

On October 29, 2021, the U.S.

Supreme Court accepted the request filed by a coalition of states and other parties to review the D.C.

Circuit's decision to vacate the ACE rule.

On June 30, 2022, the U.S.

Supreme Court issued its decision in West Virginia v.

EPA , in which it restricted the EPA's authority to regulate GHG from existing power plants under Section 111(d).

Supreme Court concluded that Congress did not grant the EPA authority under the CAA to demand generation-shifting to achieve reduction of GHG emissions, but the court did not hold that the EPA is limited in future rulemakings to just the heat-rate improvements that made up the ACE rule.

The judgment of the D.C.

Circuit was thus reversed and the case remanded for further proceedings consistent with the U.S.

Supreme Court's opinion.

TVA is unable to predict the future course of the litigation on remand, nor the direction that the EPA may take in the future to regulate GHG emissions from existing fossil fuel-fired units.

As such, it is not possible at this time to predict the impacts the EPA’s effort to develop a rule to replace the ACE rule will have on the level of GHG emissions control to be required at applicable TVA plants.

On September 8, 2022, the EPA announced the opening of a non-rulemaking docket for public comments on the EPA's efforts to reduce GHG emissions from existing fossil-fuel fired electric generating units.

Comments may be submitted to the EPA until March 27, 2023.

New Source Performance Standards .

In 2018, the EPA proposed revisions to the 2015 GHG emission standards for new, modified, and reconstructed electric utility generating units required under Section 111(b) of the CAA.

For coal-fired units, the EPA proposes to revise the current new source standards such that carbon capture and sequestration technology is no longer necessary to meet the standards of performance that reflect the best system of emission reduction.

The resulting limits are less stringent than limits under the current rule and can be met by modern coal-fired units (e.g., supercritical steam generators) in combination with best operating practices, but without carbon capture and sequestration.

The EPA is not proposing to revise the new source performance standard for GHG emission from gas-fired units.

In January 2021, the EPA published criteria in the Federal Register for making a significant contribution finding for GHGs from a source category for the purpose of regulating those emissions under Section 111(b) of the CAA, and the EPA did not take final action on the 2018 proposed revisions in this rulemaking.

On March 17, 2021, the EPA asked the D.C.

Circuit to vacate and remand the "significant contribution" finding since the rule was promulgated without public notice or opportunity to comment.

On April 5, 2021, the D.C.

Circuit vacated and remanded the January 2021 final rule.

If finalized as proposed, the revisions are not expected to significantly impact TVA since TVA does not currently plan to construct, modify, or reconstruct any coal-fired units.

For coal-fired units, the EPA proposed to revise the current new source standards such that carbon capture and sequestration technology would no longer be necessary to meet the standards of performance that reflect the best system of emission reduction.

The resulting limits are less stringent than limits under the 2015 rule and can be met by modern coal-fired units (e.g., supercritical steam generators) in combination with best operating practices, without carbon capture or sequestration.

The EPA is not proposing to revise the new source performance standard in the 2015 rule for GHG emissions from gas-fired units.

In January 2021, the EPA finalized a significant contribution finding for purposes of regulating source categories for GHGs under Section 111(b) of the Clean Air Act for electric generating units which was subsequently vacated and remanded.

The 2015 GHG emission standards are currently in effect, and on September 8, 2022, the EPA announced the opening of a non-rulemaking docket for public comments on the EPA’s efforts to reduce GHG emissions from new fossil-fuel fired electric generating units.

Comments may be submitted to the EPA until March 27, 2023.

Any formal rulemaking will have separate opportunities for public comment.

In its spring 2022 Unified Regulatory Agenda, the EPA indicated that it is undertaking a comprehensive review of the new source performance standards for GHG emissions from electric utility steam generating units, including a review of all aspects of the 2018 proposed amendments and the requirements in the 2015 rule that the agency did not propose to amend in the 2018 proposal.

TVA is unable to predict the direction that the EPA may take in the future to regulate GHG emissions from new, modified, or reconstructed fossil fuel-fired units.

Climate Change

Though many of TVA's facilities continue to emit air pollutants, emissions from all TVA-owned and operated units (including small CTs of less than 25 MW) have been reduced from historic peaks.

Emissions of NO x and SO 2 began being regulated in 1995 and 1977, respectively.

Emissions of NO x and SO 2 have been reduced by 97 percent and 99 percent, respectively, since their initial year of regulation.

Emissions and Intensity Rates (1)

CY 2021 CY 2020

Nitrogen Oxide (NO x ) (2)

Total NO x Emissions (MT)

15,210 12,577

Total NO x Emissions Intensity (MT/Net MWh)

0.000109 0.000094

Sulfur Dioxide (SO 2 ) (2)

Total SO 2 Emissions (MT)

25,226 17,082

Total SO 2 Emissions Intensity (MT/Net MWh)

0.000181 0.000127

Total Hg Emissions (kg) 22.3 17.5

Total Hg Emissions Intensity (kg/Net MWh) 0.0000002 0.0000001

(1) Intensity rates are calculated based on generation from TVA's most recent fiscal year for years indicated and emissions data from the most recent CYs.

(2) Emissions data is consistent with Edison Electric Institute Environmental, Social, Governance and Sustainability Report standards, which are based on metric tons ("MTs"), whereas overall CO 2 emission rates and baseline reductions from historical levels are based on short tons.

For CY 2021, TVA's emissions of carbon dioxide ("CO 2 ") from its owned and operated units, including purchased power and REC retirement adjustments which reduce the reportable CO 2 emissions, were 50 million tons, resulting in a TVA system average, as delivered, CO 2 emission rate of 638 lbs/MWh.

This represents a 57 percent reduction in mass carbon emissions

from 2005 levels.

While TVA continues down the path of lowering emissions, including GHG emissions, there will be fluctuations in TVA's emission numbers.

Between CY 2020 and CY 2021, TVA's GHG emissions reflect higher electricity usage in the Tennessee Valley as the region recovered from the effects of the Coronavirus Disease 2019 (" COVID-19") pandemic and experienced economic growth.

Changes in the power supply mix between CY 2020 and CY 2021 also impacted the emissions fluctuation, as TVA continues to make operational decisions to keep the system reliable and deliver low-cost energy.

Executive Actions.

President Biden has issued several executive orders relating to climate change.

On January 20, 2021, President Biden issued EO 13990, "Protecting Public Health and the Environment and Restoring Science To Tackle the Climate Crisis." EO 13990 directs federal agencies to review and revise regulations consistent with broad policy goals to improve public health and the environment, reduce GHG emissions, and prioritize environmental justice.

On March 8, 2021, a coalition of 12 states filed a lawsuit in the U.S.

District Court for the Eastern District of Missouri challenging President Biden's authority to establish interim values for the social cost of GHGs under EO 13990.

On August 31, 2021, the court dismissed the matter, but the plaintiffs have appealed the decision to the U.S.

Court of Appeals for the Eighth Circuit.

A similar lawsuit is pending in the U.S.

District Court for the Western District of Louisiana.

EO 13990 also requires the EPA to review several environmental regulations to determine their consistency with the goals and policies prescribed in the EO.

Specific impacts to TVA of EO 13990 cannot be determined at this time.

In addition, on January 27, 2021, President Biden issued EO 14008, "Executive Order on Tackling the Climate Crisis at Home and Abroad." Among other things, EO 14008 expresses the following policies of the federal government:

(1) to organize and deploy the full capacity of its agencies to combat the climate crisis to implement a government-wide approach that reduces climate pollution in every sector of the economy, (2) to align the management of federal procurement and real property, public lands and waters, and financial programs to support robust climate action, (3) to use all available procurement authorities to achieve or facilitate (a) a carbon pollution-free electricity sector no later than 2035 and (b) clean and zero-emission vehicles for

federal, state, local, and tribal government fleets, (4) to put the U.S.

on a path to achieve net-zero emissions, economy-wide, by no later than 2050, (5) to accelerate the deployment of clean energy and transmission projects in an environmentally stable manner, (6) to ensure that, to the extent consistent with applicable law, federal funding is not directly subsidizing fossil fuels, (7) to promote the flow of capital toward climate-aligned investments and away from high-carbon investments, (8) improve air and water quality, and (9) secure an equitable economic future by making environmental justice part of an agency's mission.

TVA is closely monitoring these developments, including the Justice40 Initiative, the Department of Treasury effort to establish a carbon market, establishment and development of the Civilian Climate Corps, and establishment of several White House comprehensive plans.

In addition, EO 14008 created the Special Presidential Envoy for Climate and called for an early Leaders' Climate Summit aimed at raising climate ambition and making a positive contribution to the 26th United Nations Climate Change Conference of the Parties and beyond.

EO 14008 also stated the U.S.

would reconvene the Major Economies Forum on Energy and Climate, beginning with the Leader's Climate Summit.

Federal agencies were directed to update their Climate Change Action Plans, and TVA submitted its draft plan in May 2021 and submitted its final plan in August 2021.

Aside from the directive to update TVA’s Climate Change Action Plan, specific impacts of EO 14008 on TVA cannot be determined at this time.

On May 20, 2021, President Biden also issued EO 14030, “Climate-Related Financial Risk,” which calls for a governmental-wide strategy on the disclosure of climate-related financial risk.

EO 14030 requires the development of government-wide strategy regarding the following:

(1) the measurement, assessment, mitigation, and disclosure of climate-related financial risk to federal government programs, assets, and liabilities in order to increase the long-term stability of federal operations;

(2) financing needs associated with achieving net-zero greenhouse gas emissions for the U.S.

economy by no later than 2050, limiting global average temperature rise to 1.5 degrees Celsius, and adapting to the acute and chronic impacts of climate change;

and (3) areas in which private and public investments can play complementary roles in meeting these financing needs while advancing economic opportunity, worker empowerment, and environmental mitigation, especially in disadvantaged communities and communities of color.

While TVA is subject to this EO, the specific impacts of EO 14030 cannot be determined at this time.

International Accords .

In September 2016, the U.S.

formally accepted the Paris Agreement.

The agreement met the threshold of at least 55 countries that account for at least 55 percent of global GHG emissions and formally entered into force in November 2016.

On November 4, 2019, the U.S.

formally notified the United Nations that it would withdraw from the agreement.

Under the terms of the agreement, the effective date for the withdrawal was November 4, 2020.

On January 20, 2021, President Biden formally rejoined the Paris Agreement on behalf of the U.S.

The means for tracking emissions targets under the Paris Agreement are nationally determined contributions ("NDCs").

On January 27, 2021, President Biden issued EO 14008, "Executive Order on Tackling the Climate Crisis at Home and Abroad." EO 14008 seeks to promote safe global temperatures, increase climate resilience, and support low greenhouse gas emissions and climate-resilient development by, among other things, (1) using federal procurement authorities to achieve or facilitate (a) a carbon pollution-free electricity sector no later than 2035 and (b) clean and zero-emission vehicles for federal, state, local, and tribal government fleets, (2) putting the U.S.

on a path to achieve net-zero emissions, economy-wide, by no later than 2050, and (3) establishing the Justice40 Initiative, instructing federal agencies to direct 40 percent of the benefit from eligible projects toward disadvantaged communities.

On May 20, 2021, President Biden issued EO 14030, “Climate-Related Financial Risk,” which calls for a governmental-wide strategy on the disclosure of climate-related financial risk that includes, among other things, the measurement, assessment, mitigation, and disclosure of climate-related financial risk to federal government programs, assets, and liabilities in order to increase the long-term stability of federal operations.

On December 8, 2021, President Biden issued EO 14057, "Executive Order on Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability," which details the administration’s policy to take a whole of government approach to lead by example to achieve a carbon pollution-free electricity sector by 2035 and net-zero emissions economy-wide by no later than 2050.

Implementing Instructions for EO 14057 issued in August 2022 provided instructions to federal agencies regarding agency planning, reporting requirements, and accountability.

Agencies must issue or revise existing agency policies, directives, and guidance, as appropriate, including employee training, to ensure alignment with the goals and requirements of EO 14057.

On September 12, 2022, President Biden issued EO 14082, “Implementation of the Energy and Infrastructure Provisions of the Inflation Reduction Act of 2022.” EO 14082 provides that in implementing the Inflation Reduction Act of 2022, federal agencies shall, as appropriate and to the extent consistent with law, prioritize, among other things, (1) driving progress to achieve the climate goals of the United States to reduce greenhouse gas emissions 50 to 52 percent below 2005 levels in 2030, achieve a carbon pollution-free electricity sector by 2035, and achieve net-zero emissions by no later than 2050, (2) advancing environmental and climate justice through an all-of-government approach, including through the Justice40 Initiative set forth in EO 14008, and (3) promoting construction of clean energy generation, storage, transmission, and enabling technologies through efficient, effective mechanisms that incorporate community engagement.

TVA is voluntarily pursuing multiple policies and programs in the Tennessee Valley that support the goals and policies of these executive orders.

See Actions Taken by TVA to Reduce GHG Emissions below.

TVA must consider executive orders within the context of statutory requirements imposed by Congress when carrying out its mission such as the TVA Act and the Energy Policy Act of 1992 that require power be sold at rates as low as feasible and the use of least-cost resource planning, respectively.

TVA performs long-term least-cost resource planning through its Integrated Resource Plan process.

Paris Agreement .

The United States is currently part of the Paris Agreement.

The Paris Agreement tracks emissions targets through nationally determined contributions ("NDCs").

Each nation that is a party to the Paris Agreement is asked to prepare five-year, successive NDCs that it plans to achieve.

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Specific impacts to TVA cannot be determined at this time.

In addition to legislative activity, climate change issues have been the subject of a number of lawsuits, including lawsuits against TVA, and TVA may be subject to additional lawsuits in the future.

Climate change issues have been the subject of a number of lawsuits, including lawsuits against TVA, and TVA may be subject to additional lawsuits in the future.

See Note 21 — Commitments and Contingencies — Legal Proceedings for additional information.

Indirect Consequences of Regulation or Business Trends .

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Physical impacts of climate change may include, but not be limited to, changing weather patterns, extreme weather conditions, and other events such as flooding, droughts, wildfires, and snow or ice storms, and these events can impact TVA's system in terms of system operability, customer demand, and the health of regional economies.

TVA has a Climate Change Action Plan which it updated in 2021 in accordance with EO 14008.

TVA submitted its draft Climate Change Action Plan in May 2021 and its final plan in August 2021.

TVA has a Climate Change Action Plan which it updated in 2021 in support of EO 14008.

TVA submitted its draft Climate Change Action Adaptation and Resiliency Plan to the White House in May 2021 and its final plan in August 2021.

The goal of the action planning process is to ensure TVA continues to achieve its mission and program goals and to operate in a secure, effective, and efficient manner in a changing climate by integrating climate change adaptation efforts in coordination with state and local partners, tribal governments, and private stakeholders.

TVA manages the potential effects of climate change on its mission, programs, and operations within its environmental management processes.

TVA manages the risks proposed by climate change on its mission, programs, and operations within its environmental management processes, though such risks cannot be completely eliminated.

Actions Taken by TVA to Reduce GHG Emissions .

TVA has reduced GHG emissions from both its generation facilities and its operations.

TVA Board actions have focused on TVA's plan to balance its coal-fired generation by increasing its nuclear capacity, modernizing its hydroelectric generation system, increasing natural gas-fired generation, installing emission control equipment on certain of its coal-fired units, increasing its purchases of renewable energy, building solar facilities, and investing in energy efficiency initiatives to reduce energy use in the Tennessee Valley.

Additionally, TVA has invested to increase energy efficiency in its operations.

The combination of more stringent environmental regulations, lower natural gas prices, and lower demand for energy across the Tennessee Valley has reduced the utilization of coal-fired generation.

These factors have resulted in lower CO 2 emissions from the TVA system, as previously discussed in this section.

TVA has reduced GHG emissions from both its generation facilities and its other operations.

TVA Board actions have focused on further reducing GHG emissions from its generation fleet by evaluating the potential retirement of its coal-fired fleet, increasing its nuclear capacity, modernizing its hydroelectric generation system, increasing natural gas-fired generation, installing emission control equipment on certain of its coal-fired units, increasing its purchases of renewable energy, building solar facilities, and investing in energy efficiency initiatives to reduce energy use in the Tennessee Valley.

Additionally, TVA has invested to increase energy efficiency in its operations and offers renewable energy programs.

See Power Supply and Load Management Resources — Renewable Energy Resources .

These changes support the broad electrification and carbon emission reduction efforts in other sectors of the economy.

There are inherent challenges each year in both operations and asset changes.

TVA will not sacrifice reliability at any time, which means that TVA must make certain operational decisions at times to keep the system reliable, possibly impacting annual performance on carbon emissions.

Therefore, while TVA continues to strive to lower GHG emissions, there will be fluctuations in TVA’s emission numbers resulting from changes in the power supply mix, weather impacts, economic conditions, and generating unit performance.

As TVA evolves its generation portfolio, and after appropriate environmental review under NEPA, the TVA Board could make decisions about the timing, retirement, and replacement of aging fossil units or other expiring capacity, which may further TVA’s CO 2 and other emissions reductions.

Renewable/Clean Energy Standards

Thirty states and the District of Columbia have established enforceable or mandatory requirements for electric utilities to generate a certain amount of electricity from renewable sources.

Two states within the TVA service area, North Carolina and Virginia, have mandatory renewable standards that, while not applying directly to TVA, do apply to TVA's LPCs serving retail customers in those states.

Thirty-eight states and the District of Columbia have established enforceable or mandatory requirements for electric utilities to generate a certain amount of electricity from renewable sources or have established a renewable goal.

In 12 of those states and the District of Columbia, the requirement is for a 100% clean electricity standard or goal by 2050 or earlier.

Two states within the TVA service area, North Carolina and Virginia, have mandatory renewable and clean energy goals that, while not applying directly to TVA, do apply to TVA's LPCs serving retail customers in those states.

TVA's policy is to provide compliance assistance to any distributor of TVA power, and TVA is providing assistance to the covered LPCs that sell TVA power in North Carolina.

In 2020, Virginia signed into law the Clean Economy Act.

The Act establishes a mandatory requirement for utilities to generate a certain amount of electricity from renewable sources.

This act establishes a mandatory requirement for utilities to generate a certain amount of electricity from renewable sources.

At this time, TVA is not impacted by the legislation due to the relatively small amount of electricity that TVA provides in Virginia compared to other utilities.

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In April 2020, the USACE and the EPA issued the Navigable Waters Protection Rule ("NWPR"), which established a new regulatory definition of WOTUS and replaced the definition set forth in the 2015 WOTUS Rule.

The NWPR established four categories of waters considered jurisdictional under the CWA:

(1) territorial seas and traditional navigable waters, (2) perennial and intermittent tributaries to those waters, (3) certain lakes and ponds, and impoundments of jurisdictional waters, and (4) wetlands adjacent to jurisdictional waters.

The rule excluded twelve categories of waters, including ephemerals, groundwater, many ditches, and waste treatment systems.

The NWPR reduced the jurisdictional reach of the CWA and could potentially reduce permitting and mitigation requirements for TVA projects that impact waters that were previously considered jurisdictional under the 2015 WOTUS Rule.

The NWPR was challenged in multiple courts, and on August 30, 2021, it was vacated by the United States District Court for the District of Arizona.

The United States District Court for the District of New Mexico also vacated it on September 27, 2021.

Two other courts declined to vacate the rule, but remanded it to the EPA and the Army Corps of Engineers.

Previously, on June 9, 2021, the EPA and the Department of the Army announced their intention to initiate a new rulemaking process to restore the definition of WOTUS that was in place prior to the 2015 WOTUS Rule and to develop a new rule to establish a new definition of WOTUS.

The impact of the rulemaking process cannot be ascertained fully at this time.

Pending the completion of the rulemaking process, the EPA and the USACE are interpreting WOTUS consistent with the pre-2015 definition.

The NWPR was challenged in multiple courts.

Two courts vacated the rule;

two others declined to vacate it, instead remanding it to the EPA and the USACE.

On June 9, 2021, the EPA and the USACE announced their intention to initiate a new rulemaking process to restore the definition of WOTUS that was in place prior to the 2015 WOTUS Rule and to develop a second new rule to establish a new definition of WOTUS.

The rule to restore the pre-2015 WOTUS Rule definition was proposed in December 2021, and the EPA has not yet proposed a rule for a new definition of WOTUS.

The impact of the rulemaking process cannot be ascertained at this time.

Cooling Water Intake Structures.

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The rule requires changes in CWIS used to cool the vast majority of coal, gas, and nuclear steam-electric generating plants and a wide range of manufacturing and industrial facilities in the U.S.

The final rule requires CWIS to reflect the best technology available for minimizing adverse environmental impacts, primarily by reducing the amount of fish and shellfish that are impinged or entrained at a CWIS.

The final rule requires CWIS to reflect the best technology available ("BTA") for minimizing adverse environmental impacts, primarily by reducing the amount of fish and shellfish that are impinged or entrained at a CWIS.

These new requirements will potentially affect a number of TVA's fossil- and nuclear-fueled facilities and will likely require capital upgrades to ensure compliance.

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The rule is being implemented through permits issued under the National Pollutant Discharge Elimination System ("NPDES") in Section 402 of the CWA.

State agencies administer the NPDES permit program in most states including those in which TVA's facilities are located.

State agencies administer the NPDES

permit program in most states including those in which TVA's facilities are located.

In addition, the responsible state agencies must provide all permit applications to the U.S.

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TVA's review of the final rule indicates that the rule offers adequate flexibility for cost-effective compliance.

The required compliance timeframe is linked to plant-specific NPDES permit renewal cycles (i.e., technology retrofits), and compliance is expected to be required beginning in the CY 2022 - 2024 timeframe.

The required compliance timeframe is linked to plant-specific NPDES permit renewal cycles (i.e., technology retrofits), and compliance activities have begun and are expected to continue through the 2028 - 2030 timeframe.

The EPA has never previously applied the requirements under Section 316(b) to hydroelectric facilities.

However, on September 30, 2021, EPA Region 10, which covers an area outside TVA’s service area, issued NPDES permits to four hydroelectric plants that include Section 316(b) requirements.

In determining the best technology available (“BTA”) to minimize adverse impacts on the environment using best professional judgment, Region 10 analyzed the existing controls that the hydroelectric facilities were already implementing and concluded that those controls constitute BTA.

In determining the BTA to minimize adverse impacts on the environment using best professional judgment, Region 10 analyzed the existing controls that the hydroelectric facilities were already implementing and concluded that those controls constitute BTA.

It is not clear whether this approach will be adopted nationwide or how the BTA standard would be applied to TVA's hydroelectric facilities;

accordingly, the specific impacts to TVA from the new Region 10 permits cannot be determined at this time.

accordingly, the specific impacts to TVA from the Region 10 permits cannot be determined at this time.

Hydrothermal Discharges.

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In 2015, the EPA revised existing steam-electric effluent limitation guidelines ("ELGs"), which regulate water discharge pollutants and require the application of certain pollutant control technologies.

2015 ELGs established more stringent performance standards for existing and new sources and required major upgrades to wastewater treatment options at all coal-fired plants.

The 2015 ELGs established more stringent performance standards for existing and new sources and required major upgrades to wastewater treatment options at all coal-fired plants.

Compliance with new requirements was originally required in the CYs 2018 - 2023 timeframe, but the EPA delayed the compliance dates for flue gas desulfurization ("FGD") wastewater and bottom ash transport water until CYs 2020 - 2023 to allow the EPA time to review and potentially revise the ELGs with regard to these waste streams.

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The revisions may require TVA to install additional wastewater treatment systems for FGD wastewater and bottom ash transport water, and TVA could incur substantial costs to comply with the new rule.

In addition, the revised ELGs could cause TVA to reduce utilization of its coal-fired generation facilities or even close such facilities.

In addition, the revised ELGs could cause TVA to further reduce utilization of its coal-fired generation facilities or even to decommission such facilities.

The revision also includes a subcategory for which Cumberland would qualify that provides TVA greater flexibility in meeting the ELGs.

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On August 3, 2021, the EPA announced a supplemental rulemaking to revise the Steam Electric Power Generating Effluent Limitations Guidelines and Standards.

As part of the rulemaking process, the EPA will determine whether more stringent limitations and standards are appropriate and consistent with the technology-forcing statutory scheme and the goals of the Clean Water Act.

The impact of the proposed rulemaking cannot be fully determined at this time.

Because this rulemaking could result in more stringent ELGs, the EPA has requested that the Appalachian Voices, et al.

EPA litigation in the Fourth Circuit be held in abeyance.

Consistent with the 2020 rule, on January 8, 2021, TVA submitted requests to state regulatory authorities to modify NPDES permits for Kingston Fossil Plant ("Kingston"), Cumberland, Bull Run, Shawnee, and Gallatin Fossil Plant ("Gallatin") to incorporate into the permits limitations in the 2020 rule.

The Kentucky Department for Environmental Protection released a final revised permit for Shawnee in the fourth quarter of 2021, and TVA anticipates the Tennessee Department of Environment and Conservation ("TDEC") will issue draft permits for Kingston, Cumberland, Bull Run, and Gallatin by December 2021.

Nationwide Permits for Dredge and Fill.

On January 12, 2021, the USACE published notice of a final rule that reissued and modified Nationwide Permits (“NWPs”) that authorize discharges of dredge and fill material into waters of the U.S.

The final rule limits applicability of NWP 12, which previously authorized discharges from all utility line activities, to oil and natural gas pipelines, creates new NWPs for certain utility line activities, including NWP 57 for electric utility line and telecommunication activities, and modifies certain pre-construction notification requirements.

The new NWP 12 is being challenged in court on the same grounds that were litigated in Northern Plains Resource Council v.

Army Corps of Engineers , where the U.S.

District Court for the District of Montana found the permit unlawful and vacated it.

Although the new lawsuit does not challenge NWP 57, the NWP upon which TVA is most likely to rely for its utility line activities, the lawsuit raises claims that apply with equal force to NWP 57.

However, the impact on TVA from this litigation cannot be evaluated fully until the legal challenge is resolved.

EPA litigation in the Fourth Circuit be stayed pending the outcome of the supplemental rulemaking process.

Consistent with the 2020 rule, on January 8, 2021, TVA submitted requests to state regulatory authorities to modify NPDES permits for Kingston, Cumberland, Bull Run, Shawnee, and Gallatin Fossil Plant ("Gallatin") to incorporate into the permits limitations in the 2020 rule.

The Kentucky Department for Environmental Protection issued a final revised permit for Shawnee in the fourth quarter of 2021 and an additional revision in the second quarter of 2022, and the Tennessee Department of Environment and Conservation ("TDEC") issued a final revised permit for Kingston in the first quarter of 2022.

TDEC issued a final revised permit for Gallatin in May 2022, and TDEC issued a draft permit for Bull Run in August 2022.

TVA anticipates TDEC will issue a draft permit for Cumberland later in 2022.

The Sierra Club and the Center for Biological Diversity administratively appealed the NPDES permit issued for Kingston.

See Note 21 — Commitments and Contingencies — Legal Proceedings — Administrative Proceeding Regarding National Pollutant Discharge Elimination System Permit for Kingston .

Other Clean Water Act Requirements .

As is the case in other industrial sectors, TVA and other utilities are also facing more stringent requirements related to the protection of wetlands, reductions in storm water impacts from construction activities, new water quality criteria for nutrients and other pollutants, new wastewater analytical methods, and changes in regulation of pesticide application.

Recent Supreme Court Decision

On April 23, 2020, in County of Maui v.

Hawaii Wildlife Fund , the Supreme Court held that the CWA requires a permit when there is a direct discharge of pollutants from a point source to waters of the U.S.

and when there is "the functional equivalent" of a direct discharge to such waters.

The Court suggested seven factors for determining when such a discharge is the functional equivalent of a direct discharge and acknowledged that the new test would be somewhat difficult to apply, potentially requiring evaluation of multiple factors.

The Court noted that "time and distance" of pollutant migration often will be the most important factor but that other relevant factors may include, for example, the nature of the material through which the pollutant travels and the extent to which the pollutant is diluted or chemically changed as it travels.

After evaluating the potential impact of the decision, TVA determined that this decision will not require TVA to change its operations.

new water quality criteria for nutrients and other pollutants, new wastewater analytical methods, and changes in regulation of pesticide application.

Cleanup of Solid and Hazardous Wastes

Liability for releases and cleanup of hazardous substances is imposed under the federal Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), the RCRA, and other federal and parallel state statutes.

In a manner similar to many other industries and power systems, TVA has generated or used hazardous substances over the years.

TVA historical operations at certain facilities have resulted in releases of contaminants that TVA is addressing, including at TVA's Environmental Research Center at Muscle Shoals, Alabama.

TVA has completed several removal, remedial, and characterization actions at the site, as required by a permit issued by the Alabama Department of Environmental Management.

At September 30, 2021, TVA's estimated liability for required cleanup and similar environmental

work for those sites for which sufficient information was available to develop a cost estimate was approximately $18 million and was included in Accounts payable and accrued liabilities and Other long-term liabilities on the Consolidated Balance Sheet.

TVA must submit an application for renewal of the RCRA permit by September 27, 2022, and the renewal process may include additional mandates for further remedial activities.

TVA has completed several removal, remedial, and characterization actions at the site, as required by a RCRA permit issued by the Alabama Department of Environmental Management ("ADEM").

At September 30, 2022, TVA's estimated liability for required cleanup and similar environmental work for those sites for which sufficient information was available to develop a cost estimate was approximately $17 million and was included in Accounts payable and accrued liabilities and Other long-term liabilities on the Consolidated Balance Sheet.

TVA has submitted an application for renewal of the RCRA permit.

Although the current permit expired on September 27, 2022, ADEM has determined that TVA's permit application is complete, and the current permit will remain in effect until ADEM issues a new permit.

Both the renewal process and the resulting renewed permit may include additional mandates for further remedial activities under RCRA's corrective action authorities.

TVA has evaluated the potential impact that a permit renewal could have on its operations and does not believe that the renewal will have any adverse impacts at this time.

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The EPA published its final rule governing CCR in 2015.

The rule regulates CCR as nonhazardous waste under Subtitle D of the RCRA.

The rule regulates CCR as nonhazardous waste under Subtitle D of RCRA and establishes standards for landfill and surface impoundment placement, design, operation, and closure;

groundwater monitoring;

corrective action;

and post-closure care.

While states may adopt the rule's requirements into their regulatory programs, the rule does not require states to adopt the requirements.

The initial version of the rule provided for self-implementation by utilities and allows enforcement through citizen suits in federal court.

The Water Infrastructure Improvements for the Nation Act ("WIIN Act") subsequently allowed state or federal-based permitting to implement the CCR Rule as an alternative to self-implementation and citizen suits.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Generation Resources — Coal Combustion Residuals Facilities for a discussion of the impact on TVA's operations, including the cost and timing estimates of related projects.

In July 2018, the EPA issued a final CCR rule which provided additional flexibility and an extension of certain deadlines.

In March 2019, the D.C.

Circuit granted the EPA's request to remand the final rule to allow the EPA to reconsider the amendments.

The remand also allowed the EPA time to complete a new rulemaking to establish revised timelines for unlined impoundments to initiate closure and to reexamine the October 2020 deadline for closing some unlined impoundments.

In August 2019, the EPA issued a proposed rule to amend portions of the CCR Rule regarding beneficial use, temporary piles, and public access to information.

On November 4, 2019, the EPA announced a proposed rule that will revise portions of the CCR Rule requiring closure of unlined surface impoundments.

The final Part A rule was published in the Federal Register on August 28, 2020, and became effective September 28, 2020.

Among other things, the final Part A rule required all unlined CCR surface impoundments to stop receiving CCR and non-CCR wastestreams and to initiate closure or retrofit by no later than April 11, 2021, and TVA ceased doing so, and initiated closure, by the specified deadline.

Additionally, the final rule provides a process for a utility to seek site-specific approval from the EPA to continue to use the unlined CCR surface impoundment until October 15, 2023, and possibly longer under certain circumstances.

The final rule also includes requirements that enhance the public's access to groundwater monitoring and corrective action reports.

TVA does not currently anticipate the final rule will have a significant impact because TVA initiated closure of its unlined CCR surface impoundments by the regulatory deadline and already makes groundwater monitoring and corrective action reports publicly available.

A separate final Part B rule was published in the Federal Register on November 12, 2020.

This rule provides an alternative liner demonstration procedure for utilities with clay lined units which are being forced to close under the Part A rule.

However, TVA does not have any units which qualify for this demonstration.

The initial version of the rule provided for self-implementation by utilities and allowed enforcement through citizen suits in federal court.

The Water Infrastructure Improvements for the Nation Act subsequently allowed state or federal-based permitting to implement the EPA's CCR rule instead of self-implementation and citizen suits.

In 2020, the EPA issued the final Part A revision to its CCR rule.

Among other things, the final Part A rule requires unlined CCR surface impoundments to stop receiving CCR and non-CCR wastestreams and to initiate closure or retrofit by no later than April 11, 2021.

TVA ceased sending CCR and non-CCR wastestreams to, and initiated closure of, unlined CCR surface impoundments by the specified deadline.

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Coal Combustion Residuals — Coal Combustion Residuals Facilities for a discussion of the impact on TVA's operations, including the cost and timing estimates of related projects.

In addition to the requirements of the EPA's CCR rule, CCR landfills and surface impoundments will continue to be regulated by the states.

In August 2015, TDEC issued an order that (1) established a process for TDEC to oversee TVA's implementation of the EPA's CCR rule and to ensure coordination and compliance with Tennessee laws and regulations that govern the management of CCR and (2) required TVA to investigate and assess CCR contamination risks at seven of TVA's eight coal-fired plants in Tennessee and to remediate any unacceptable risks.

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The TDEC order sets out an iterative process through which TVA and TDEC will identify and evaluate any CCR contamination risks and, if necessary, respond to such risks.

TVA submitted to TDEC an environmental assessment report (“EAR”) for Allen in the fourth quarter of 2021.

TVA is currently conducting environmental investigations for the remaining six sites in accordance with the TDEC-approved Environmental Investigation Plans and will submit EARs to TDEC upon completion of the related investigations.

TVA submitted to TDEC an environmental assessment report (“EAR”) for Allen in the fourth quarter of 2021 and an EAR for Cumberland in the third quarter of 2022.

At TDEC's request, to address a potential data gap, TVA is conducting additional investigation work at Allen around the West Ash Disposal Area and will submit a revised EAR upon completion of that work.

TVA is currently conducting environmental investigations for the remaining five sites in accordance with TDEC-approved Environmental Investigation Plans and will submit EARs to TDEC upon completion of the related investigations.

Upon TVA's submittal of each EAR, TDEC will review the document and provide comments, and TVA will make revisions until TDEC approves a final EAR for each site.

After the EARs are approved, TVA will submit Corrective Action/Risk Assessment Plans that will identify the unacceptable risks and TVA's proposed remediation.

It is too early to accurately predict the scope of any remedial activities that may arise as a result of these pending investigations, and as such cost estimates for any required remedies are not possible to predict at this time.

In October 2019, 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.

Groundwater Contamination .

Environmental groups and state regulatory agencies are increasing their attention on alleged groundwater contamination associated with CCR management activities.

The EPA, environmental groups, and state regulatory agencies are increasing their attention on alleged groundwater contamination associated with CCR management activities.

As a result, TVA may have to change how it manages CCR at some of its plants, potentially resulting in higher costs.

See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Generation Resources — Coal Combustion Residuals Facilities and — Allen Groundwater Investigation and Note 13 — Asset Retirement Obligations.

See Part II, Item 7, Management's

Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Coal Combustion Residuals — Coal Combustion Residuals Facilities and — Allen Groundwater Investigation and Note 13 — Asset Retirement Obligations.

Environmental Investments

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TVA currently anticipates spending significant amounts on environmental projects in the future, including investments in new clean energy generation including renewables to reduce TVA's overall environmental footprint.

TVA environmental project expenditures also result from coal-fired plant decommissioning and from effective ash management modernization.

TVA environmental project expenditures could also result from coal-fired plant decommissioning and from effective ash management modernization.

Based on TVA's decisions regarding certain coal-fired units, the amount and timing of expenditures could change.

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Greenhouse Gas Emissions .

The EPA may issue regulations establishing more stringent air, water, and waste requirements, and these requirements could result in significant changes in the structure of the U.S.

Various federal agencies, including the EPA and the Department of Commerce, may issue regulations establishing more stringent air and waste requirements, as well as GHG accounting requirements, and these requirements could result in significant changes in the structure of the U.S.

power industry, especially in the eastern half of the country.

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Estimated Potential Environmental Expenditures (1)(2)

For the years ended September 30, 2021

As of September 30, 2022

(in millions)

2022 2023 Thereafter (3)(4)

2023 2024 2025 - 2027 (3)(4)

Coal Combustion Residual Program (5)

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(1) These estimates are subject to change as additional information becomes available and as regulations change.

(2) These estimates include $134 million, $75 million, and $52 million for 2022, 2023, and thereafter, respectively, in capital expenditures.

(2) These estimates include $132 million, $75 million, and $41 million for 2023, 2024, and 2025 - 2027, respectively, in capital environmental expenditures.

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Cash Requirements .

(3) See Note 21 — Commitments and Contingencies .

(4) These estimates include expenditures expected to be incurred during 2024, 2025, and 2026.

(4) These estimates do not include expenditures expected to be incurred after 2027.

(5) Includes costs associated with the closure of facilities and landfill activities.

TVA is continuing to evaluate the rules and their impact on its operations, including the cost and timing estimates of related projects.

See Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Generation Resources — Coal Combustion Residuals Facilities and Note 13 — Asset Retirement Obligations.

(6) Includes air quality projects that TVA is currently performing to comply with existing air quality regulations, but does not include any projects that may be required to comply with potential GHG regulations or transmission upgrades.

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People Strategy and TVA's Values

As 2021 remained a challenge due to the continuation of the COVID-19 pandemic, the employees of TVA kept its mission in focus and continued to create a culture that lives up to its values - Safety, Integrity, Inclusion, and Service.

In 2022, TVA employees kept TVA's mission in focus and continued to create a culture that lives up to TVA's values - Safety, Integrity, Inclusion, and Service - all as pandemic headwinds persisted and as a competition for talent ensued.

TVA employees collectively came together to address business needs and enable strong performance while serving the 10 million people of the Tennessee Valley.

As part of its People Advantage strategic priority, TVA strives to create a work environment that supports and responds to the changing needs of the workforce.

As part of its People Advantage strategic priority, TVA strives to create a work environment that supports and responds

to the changing needs of the workforce.

People Advantage is one of TVA's five strategic priorities and a multi-year commitment to evolve TVA's culture.

The recent and on-going effects of the pandemic have brought the importance of employee health, well-being and retention into sharp focus.

This importance centers around TVA's valuable human capital and putting its people first.

The recent pandemic provided TVA the opportunity to demonstrate the importance of employee health, well-being, and retention by establishing action plans to address vaccine mandates and executive orders.

TVA continues to strive to effectively demonstrate the value of its human capital and putting its people first by sustaining and evolving these programs.

The focus on People Advantage, along with the other four strategic priorities of Operational Excellence, Financial Strength, Powerful Partnerships, and Igniting Innovation, allows TVA to fulfill its daily mission of service to the people of the Tennessee Valley.

The three initiatives in People Advantage that influence the desired TVA culture impact to the communities that TVA serves are (1) Inclusion with Diversity ("IwD"), (2) Talent, and (3) Engagement.

TVA's People Advantage priority is anchored on three specific pillars:

(1) Inclusion with Diversity ("IwD"), (2) Talent, and (3) Engagement.

To help shape an inclusive work environment that values all voices, TVA has intensified its efforts over the past few years to integrate diversity and inclusion into its culture and make its efforts and progress sustainable and a part of TVA's daily operations.

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TVA is working to cultivate a positive employee experience to heighten workforce engagement.

focused on equipping leaders to champion engagement across the enterprise through the understanding and leveraging of employee surveys, workplace flexibility opportunities, and health, safety, and well-being programs.

This work is focused on equipping leaders to champion engagement across the enterprise through the understanding and leveraging of employee surveys, workplace flexibility opportunities, and health, safety, and well-being programs.

Management illustrates its commitment to human capital by including a safety metric in its incentive compensation metrics that tracks serious injury incident rate and applies to all eligible participants in TVA’s annual program.

Compensation derived from this program is based on TVA performance and individual achievements.

As a result, success in measures like safety and similar principles grounded in human capital matters helps TVA meet and exceed its goals in workforce engagement.

TVA’s transparency in this area was further illustrated by the inaugural release of its Diversity, Equity, Inclusion and Accessibility ("DEIA") report and appointment of its first-ever Chief Diversity and Inclusion Officer to help elevate the importance and visibility of inclusion and diversity both internally and externally.

The DEIA report plays a critical role in TVA's ability to achieve its strategic priorities and to meet the objectives laid out by its People Advantage priorities discussed above, which are anchored in the pillars of IwD, Talent, and Engagement.

The DEIA report builds upon TVA's transparency efforts by providing valuable insights into DEIA promotion in the workplace and DEIA promotion across the region and communities served.

DEIA promotion in the workplace includes the establishment of TVA's first Chief Diversity and Inclusion Officer, IwD Council, Inclusion as a core value, and a dashboard for People Advantage metrics and for the facilitation of Employee Resource Groups ("ERGs") and union partnerships.

DEIA promotion across the TVA region and communities served includes Home Uplift, School Uplift, the Community Care Fund, TVA's Supplier Diversity, and Diversity Alliance programs, among others.

Ethics and integrity are highly valued at TVA.

Since its establishment in 1933, a commitment to ethics has been a part of TVA's DNA.

In 2021, TVA partnered with a third-party administrator to execute a survey that measured employees' perceptions of TVA's ethical culture.

TVA is committed to leveraging the results from the survey to further strengthen TVA's strong ethical culture.

TVA's Ethics & Compliance office aims to help employees make the right decisions for the right reasons and offers guidance when the right decisions may not be clear.

The office is focused on educating and creating awareness while also assisting employees with ethical decision-making inside and outside of the TVA workplace.

Further, TVA requires all employees and contractors to take its annual ethics training and attest to its Code of Conduct, which sets forth standards for adhering to TVA's core values and conducting its affairs with openness, honesty, and integrity every day.

Further, TVA requires all employees and certain contractors to take its annual ethics training and attest to its Code of Conduct, which sets forth standards for adhering to TVA's core values and conducting its affairs with openness, honesty, and integrity every day.

In 2022, TVA contracted with Ethisphere ® to take a deep dive review of TVA's corporate ethics and compliance program.

After this review, TVA became the first federal agency to receive the Compliance Leader Verification TM certification.

TVA Board Governance and Oversight

The TVA Board’s People and Governance Committee assists the TVA Board in fulfilling its responsibilities under the TVA Act by overseeing policies and strategies that affect a wide array of people-related programs inclusive of leadership development, culture, engagement, labor relations, safety, communications, compensation, performance incentives, benefits, and well-being.

The TVA Board’s People and Governance Committee ("Committee") assists the TVA Board in fulfilling its responsibilities under the TVA Act by overseeing policies and strategies that affect a wide array of people-related programs inclusive of leadership development, culture, engagement, labor relations, safety, communications, compensation, performance incentives, benefits, and well-being.

Specifically, the Committee advises the TVA Board in areas of overall Board governance, CEO goals, performance, compensation, and succession planning.

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Inclusion with Diversity

In 2020, the company added Inclusion as one of its core values and adopted IwD as an enterprise-wide transformational strategic element.

In 2020, TVA added Inclusion as one of its core values and adopted IwD as an enterprise-wide transformational strategic element.

Since then, IwD has become increasingly integrated into TVA’s daily operations.

To accelerate the impact of IwD within TVA and the communities it serves, TVA is working to recognize and sustain diversity as an imperative, leveraging the public power model to advance inclusion with diversity in TVA communities.

To accelerate the impact of IwD within TVA and the communities it serves, TVA is working to shape an inclusive work environment that values all voices, recognizes and sustains diversity as an imperative, and leverages the public power model to advance IwD in all TVA communities.

In 2022, TVA's initiatives and accomplishments in promoting diversity and inclusion included the following:

• Established an IwD Council, comprised of senior leadership from all six strategic business units with accountability directly to TVA’s CEO and his direct reports;

the council advises, champions, and oversees all IwD strategies and actions across the enterprise;

• Established a Supplier Diversity Stakeholder Advisory Council and Supplier Mentoring Program;

• Established the reinforcement of IwD by the TVA Board as an enterprise priority and goal for TVA’s CEO, which is reflected in his individual performance assessment under the annual incentive compensation program;

see Item 11, Executive Compensation — C ompensation Discussion and Analysis — 2021 Performance Goals and Performance Achievement — Executive Annual Incentive Plan — Individual Performance Multiplier Reinforces Pay for Performance for additional information;

• Refreshed courses to ensure that existing learning and development programs have the right level of content and emphasis on inclusion with diversity and expanded accessibility to courses through partnership with an online platform;

• Maintained an inclusion score, which measures sense of belonging, above market median at 74%;

• Created new virtual programs for safe and open conversations about diversity and inclusion.

TVA is also advancing IwD in the communities it serves.

For example, TVA is enhancing its economic development program support for women-, minority- and veteran-owned businesses .

• Appointed TVA’s first Chief Diversity and Inclusion Officer;

• Published TVA’s inaugural DEIA Report;

• Affirmed a shift in performance goals for management and specialist employees for a second year from an "awareness" of inclusion to an action-oriented "demonstration of behaviors" of inclusion;

• Established Inclusion Councils, tasked with developing IwD strategies and plans within each of TVA’s six

strategic business units that align with IwD enterprise strategies and plans;

• Provided the business case for IwD to leaders, highlighting the proven business value of IwD;

• Released a “People Dashboard” to increase transparency into TVA’s progress and performance;

• Initiated an independent assessment to identify people policies, processes, programs, and behaviors that

could be improved to further drive inclusion and equity across TVA;

• Sustained TVA’s inclusion score, which measures sense of belonging, at median of 72;

• Created leadership forums for safe and open conversations about diversity and inclusion, including the

importance of leader commitment and ownership;

• Maintained CEO accountability for reinforcement of IwD as an enterprise priority through assessment of the

CEO’s individual performance in 2022.

TVA continues to advance IwD in the communities it serves and is enhancing its economic development program support for women-, minority- and veteran-owned businesses .

TVA has established a Supplier Diversity Stakeholder Advisory Council.

One of the priorities of the council is the Supplier Diversity Mentoring Program, which is designed to support and position diverse suppliers seeking to do business with TVA.

Specific skills enhancements include:

inventory management, technology integration, accounting practices, program implementation, and continuous improvement.

In addition, TVA has strengthened and focused IwD in the communities TVA serves, as part of advancing the public power model at TVA.

This was accomplished through support of TVA’s regional model, community engagement, and focused partnerships with deliberate outreach to LPCs and community-based organizations.

Employee Resource Groups.

TVA is powered by its people and strengthened by its diversity.

TVA supports nine Employee Resource Groups ("ERGs") to help strengthen an inclusive culture and make life better for the people it serves:

TVA supports eight ERGs to help strengthen an inclusive culture and make life better for the people it serves:

• ABLED Events — allows TVA employees to bring unique perspectives and gifts together as a united team to celebrate commonalities and differences through "Awareness Benefitting Leaders & Employees about disAbilities" in the workplace.

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It promotes mentoring and development opportunities, as well as group workshop events on such topics as personal branding, personal finance, and networking and negotiation skills.

• IGNITE — provides TVA’s workforce with an opportunity to engage with others on various topics of interest about products, services, processes, and solutions provided by TVA;

and in doing so, provides a more diverse and creative knowledge base for TVA and its employees.

• New Employee Network — makes life easier for new employees entering a large company.

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• TVA Veterans Association — allows employees unique camaraderie opportunities as they support a wide array of local and national ceremonies and events and is one of the oldest and most active resource groups at TVA, with all branches of the military represented.

• Women Empowered (WE) — supports women at all stages of their careers and advocates for the equal rights of all female employees across TVA.

• Women Empowered — supports women at all stages of their careers and advocates for the equal rights of all

female employees across TVA.

This extends externally as TVA supports inclusion, networking, and developmental opportunities for girls and young women in local communities.

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TVA continues to improve employment opportunities for underrepresented populations within TVA’s workforce, to partner with colleges and universities for internships and recent graduates, and to maintain its status as a top industry employer for military veterans.

While public reports have shown that employees in all sectors of the United States economy have been voluntarily leaving the workforce as a result of the COVID-19 pandemic at an historically high rate, TVA’s voluntary attrition rate has remained stable, and an area that TVA continues to monitor while also listening to workforce needs.

TVA believes this is largely attributable to its People Advantage focus, which includes competitive compensation and comprehensive benefits programs, inclusion and well-being programs, flexible workplace practices, and an environment that promotes retention of its complex and valuable workforce.

While TVA’s voluntary attrition rate reflects a slight year-over-year rise, it aligns with TVA’s historical rates over the past several years and further aligns with TVA’s projection for 2023 at 2.4 percent.

In addition, the TVA voluntary attrition rate in 2021 and 2022 fell well below the national, utility, and government benchmarks.

The stability that results from retaining talent is an area of strength that is critical to TVA’s success.

Competitive Total Rewards.

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TVA’s competitive benefits portfolio supports the values and needs of its employees.

TVA provides market-based and competitive compensation which includes an annual incentive plan that is designed to reward accomplishments against established business and individual goals within a given year.

TVA provides market-based and competitive compensation which includes an annual incentive plan designed to reward accomplishments against established annual business and individual goals.

All eligible employees participate in TVA's annual incentive plan, including TVA's represented employee population.

Additionally, in support of its cultural commitment to IwD, TVA periodically reviews compensation practices to promote fairness and equity.

TVA has engaged third party vendors to conduct independent pay equity analysis and continues to monitor its pay practices and to provide its leaders with tools to assist in making equitable pay decisions.

To support and care for the well-being of employees and their families, examples of comprehensive and competitive benefits TVA currently offers include:

TVA has engaged third party vendors to conduct independent pay equity analyses and continues to monitor its pay practices and to provide its leaders with tools to assist in making equitable pay decisions.

To support and care for the well-being of employees and their families, examples of comprehensive and competitive benefits currently offered by TVA include:

• medical, vision, dental, life, accident, and disability insurance

• paid time-off

• leave donation

• health savings accounts

• flexible spending accounts

• tuition reimbursement

• well-being incentives

• employee assistance programs

• behavioral and medical telemedicine

• 401(k) retirement

• dependent scholarships

• family caregiving benefits

• leave donation

• dependent scholarship program

• family building benefits

• paid time-off

• flexible work schedules

• wellness incentives

• employee assistance programs

• health savings account

Development and Training.

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In 2022, employees and contractors engaged in over 738,2 00 hours of training.

Leadership and Development and Succession Planning.

TVA encourages personal and professional development and has strategic leadership development programs designed to prepare employees to step into leadership positions, accepting the additional responsibilities, expectations, and challenges faced by each level of leadership.

Leadership Development and Succession Planning.

TVA encourages personal and professional development and has strategic leadership development programs designed to prepare employees to step into leadership positions and to accept the

additional responsibilities, expectations, and challenges faced by each level of leadership.

TVA also has advanced leadership programs designed to further prepare leaders for executive level positions, which require an extensive interview and assessment process for selection.

Through TVA’s talent review and succession planning program, 97% of director and executive level roles have at least one succession candidate identified.

Continuous focus on and support of leadership development is maintained through means such as talent discussions at least annually at every level of the organization, which includes attention to developing a diverse leadership pipeline.

Through TVA’s talent review and succession planning program, 98 percent of director and executive level roles have at least one succession candidate identified, with 94 percent having at least one ready-now succession candidate.

Continuous focus on and support of leadership development is maintained through means such as talent discussions at least annually at every level of the organization, which include attention to developing a diverse leadership pipeline.

TVA has established goals for female and people of color representation in leadership and plans to update these goals to continuously improve this representation.

TVA's work in this key area is focused on equipping leaders to champion engagement across the enterprise, leveraging and understanding the employee voice to make informed decisions that drive engagement, and enhancing policies and resources that support holistic employee well-being and promote engagement.

Strong engagement levels impact all of TVA’s strategic priorities.

Strong engagement levels impact all TVA strategic priorities.

TVA's work in this key area is focused on enhancing the people experience by focusing on the whole person, maximizing engagement and organizational performance, equipping leaders to build an engaged workforce, and advancing the environment for active and ongoing communication between employees and leaders.

Employee Engagement Survey.

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The survey is administered a minimum of twice annually to all employees and measures overall engagement and drivers of engagement.

The survey results provide real-time insights and analytics and are compared to a normative database comprised of other relative external benchmarks to identify strengths and opportunities for improvement.

The survey results provide real-time insights and analytics and are compared to a normative database comprised of other relative external benchmarks to help identify strengths and opportunities for improvement.

Results from the surveys are shared with employees and used by TVA leadership and business units to improve and monitor progress against People Advantage objectives.

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Engagement, which measures the sense of commitment and involvement, and Inclusion, which measures the sense of belonging at work.

In 2021, TVA’s engagement score of 82% places it at top decile among over 750 companies from various industries.

Workplace Flexibility.

As part of its People Advantage strategic priority, TVA strives to create a work environment that is welcoming, supportive, and responsive to the changing needs of the workforce.

Recognizing the changing work environment, largely fostered by the COVID-19 pandemic, and responding to employee appreciation of flexibility in work location in 2021, TVA established a workplace flexibility initiative called “Reimagining How We Work.” The objective of the initiative is to promote workplace flexibility guided by safety, performance, inclusion, and engagement.

Instead of returning to what was, TVA is embracing a more flexible future that puts people at the center of all it does to maximize its performance and mission.

Recognizing the changing work environment, largely fostered by the COVID-19 pandemic, and the strength in performance that was achieved by the workforce in 2021, TVA continued “Reimagining How We Work” with the objective to maximize flexibility and performance.

As TVA transitions out of the COVID-19 pandemic, it is exploring how to continue to work effectively and deliver on TVA’s mission of service while providing flexibility to a workforce that includes on-site, field, and hybrid workers.

Safety, Employee Health, and Well-being.

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TVA's safety program is based on the fundamentals of a safety management system, which includes management commitment, employee engagement, hazard recognition and control, worksite analysis, contractor safety management, training, review, and continuous improvement.

TVA’s safety training aims to educate employees on the elements of the safety program and foster a culture of awareness.

In 2022, TVA launched an active shooter training series and enhanced existing programs regarding heat stress and various chemical awareness courses.

Employees’ tactical skills and knowledge are enhanced through participation in dynamic learning programs that teach employees how to work together safely.

Employee engagement is critical to the success of the program.

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As a federal agency, TVA is also required to complete regulatory compliance inspections of its facilities on an annual basis.

The COVID-19 pandemic has brought the importance of employee health, well-being, and retention into sharp focus.

In 2022, TVA Safety expanded efforts to recognize safety successes by recognizing contractors for the first time during the TVA Annual Safety Awards.

TVA has also focused on engaging with industry leaders and developing internal safety talent through participation in Middle Tennessee Occupational Safety and Health Administration Council, the American Society of Occupational Safety Professional Executive Forum, and Edison Electric Institute, and appointment to the Department of Labor’s Federal Advisory Council on Occupational Safety and Health.

TVA has provided support for its employees throughout the pandemic to ensure the retention of valuable talent and to enhance well-being.

This support includes establishing a mental health advocacy program, providing unlimited Employee Assistance Program sessions, enhancing paid leave, and providing tutoring resources, onsite vaccination clinics, and wellness incentives for vaccinations.

In 2020, TVA established an Employee Relief Fund to support employees adversely affected by the COVID-19 pandemic and natural disasters and has continued those distributions in 2021 to assist employees.

TVA’s safety accomplishments in 2021 include:

• Consistent decline in recordable injuries and illnesses;

• Industry top decile performance in recordable injury rate and top quartile performance in serious injury rate in 2021.

This support includes implementing emergency back-up care support for child and adult dependents, establishing a mental health advocacy program, providing unlimited Employee Assistance Program sessions, enhancing paid leave, and providing tutoring resources, onsite vaccination clinics, and wellness incentives for vaccinations.

TVA’s safety and well-being accomplishments in 2022 include a focus on psychological safety to enable a deeper understanding of how TVA’s response to failure directly impacts employees and their ability to learn and improve, being a recipient of the Meritorious Award for work associated with the Middle Tennessee Federal Field Health and Safety Council, and maintaining top quartile serious injury performance.

Partnerships with Unions.

TVA has a long-standing policy of acknowledging and working with recognized representatives of its employees, and that policy is reflected in long-term agreements to recognize the unions (or their successors) that represent TVA employees.

TVA’s labor construct is complex and unique – different from private utility peers and with union influence that has the ability to reach national levels – primarily governed by the TVA Act.

TVA’s labor construct is complex and unique.

Primarily governed by the TVA Act, its labor population is different from private utility peers, with an influence that has the ability to reach national levels.

Neither the federal labor relations laws covering most private sector employers, nor those covering most federal agencies, apply to TVA.

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Its employees and contractors are represented by seven collective bargaining agreements and a total of 17 labor unions.

This reflects 60% of TVA’s workforce, or approximately 6,000 employees.

This reflects 58 percent of TVA’s workforce, or approximately 6,000 employees.

TVA’s partnerships with these unions go back more than 80 years and form the backbone of TVA and its ability to serve the people of the Tennessee Valley.

Recent accomplishments to strengthen the relationship between TVA and its labor unions include:

• Continued low-cost, reliable energy to residents across the Tennessee Valley:

– TVA and the Trades and Labor Council for Annual Employees announced a 10-year extension on their agreement in 2020.

– TVA and the North America’s Building Trades Unions announced a 10-year extension of their Project Labor Agreement in 2021, which provides stability for staffing of construction and maintenance projects throughout the Tennessee Valley and strengthens the relationship.

• Adoption of the Code of Excellence ("COE") — a union led partnership to promote the highest quality of work, best work practices, and the development of a highly skilled workforce – to drive business outcomes by applying the SPARQ principles of Safety, Professionalism, Accountability, Relationships, and Quality, including:

– During a year of unprecedented challenges, TVA set the industry benchmark for pandemic response and delivered strong operational excellence with one of the safest and most productive years on record, and TVA attributes this success in part to its strong union partnerships.

– Union-led labor management panel has partnered to reduce g rievances (the number of grievances filed during 2017 was more than four times that of the grievances filed during 2021).

Recent accomplishments to strengthen the relationship between TVA and its labor unions include integrating union partners in TVA’s comprehensive workforce optimization strategy, in alignment with operational and asset transition strategies that position TVA to meet strategic imperatives over the next decade;

renewing the Collective Bargaining Agreement between TVA and the Engineering Association ("EA") through September 2024;

establishing the Professionalism, Integrity, Excellence, Relationships, and Service team, which is a union-led partnership between the EA and TVA focused on enterprise issues that could be solved by leaders and employees;

and collaborating with union partners in support of “We Work Everywhere to Serve” to provide structured flexibility to TVA’s leaders and represented employees in how employees work.

Awards and other recognition help TVA understand its strengths, identify opportunities for improvement, bolster employee pride, and better attract and retain diverse talent.

Recognition in 2021 included:

• Forbes America's Best Large Employers 2021 - #2 in Utilities industry

• Forbes Best Employers by State 2021 - Top 5 in Tennessee for third consecutive year

• 2021 Diversity Impact Awards TM Top 10 Diversity Action Award

• Ranked in Top 100 - 2021 America's Most Loved Workplaces ® ( Newsweek in partnership with Best Practice Institute)

• 2021 Military Friendly ® Employer Top 10

• Best in Class 401(k) Plan

2022 TVA recognition included:

• 2022 – Ethisphere ® Compliance Leader Verification TM – first federal agency to receive certification

• Chief Learning Officer – 2022 Learning Elite Bronze

• Urban League of Greater Chattanooga, Inc.

– Inclusion by Design Award

• 2022 Diversity Impact Award – Top 10 Diversity Action Award

• 2022 VETS Indexes Employer Awards – VETS Indexes 5 Star Employer

• 2022 National Organization on Disability – Leading Disability Employer

• 2022 Military Friendly ® Employers – Ranked No.

• 2022 Forbes List of America's Best Employers by State – Ranked Top 15 in Tennessee for Fourth Consecutive Year

• 2022 Military Friendly ® Supplier Diversity Program Award – Ranked No.

Top 10, three years in a row

• One of the largest U.S.

Contributor to Helmets to Hardhats Program

TVA actively monitors internal metrics to remain aware of human capital trends and to ensure that it is making measurable progress on its People Advantage objectives.

Through monitoring sources such as data and performance

dashboards, one-on-one engagements between leaders and employees, and engagement surveys, TVA obtains information that helps it understand its performance and make adjustments, if needed.

• 2022 DiversityInc’s – Top Companies for Utilities Award – Ranked No.

TVA actively monitors internal metrics to remain aware of human capital trends and to strive to ensure that it is making measurable progress on its People Advantage objectives.

Through monitoring sources such as data and performance dashboards, one-on-one engagements between leaders and employees, and engagement surveys, TVA obtains information that helps it understand its performance and make adjustments, as needed.

Key measures of success in TVA’s People Advantage strategic priority are set forth below:

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40.0 % 41.4 % 39.4 %

Regrettable losses (%) (3)

N/A 1.6 % 1.0 %

Voluntary attrition (%) (3)

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Engagement (100-point scale) (4)

Top Quartile (≥79) 81 82

Inclusion (100-point scale) (5)

Median (≥72) 72 74

Recordable injuries (#) (6)

Serious injury incident rate (7)

0.00 0.02 0.03

Serious injury incidents (7)

Ethics violations 0 28 33

(1) Defined as first line supervisors and above.

(2) Defined as external hires who are female, persons of color, and persons with disabilities.

(3) Regrettable Loss is generally defined as voluntary terminations by employees with acceptable performance ratings.

For 2022, this measure will be replaced by Voluntary Attrition, which is a more inclusive measure and accounts for all employees who leave the business voluntarily during a fiscal year.

(3) Voluntary Attrition measures and accounts for all employees who leave the business voluntarily during a fiscal year.

The slight increase in voluntary attrition rates from 2021 to 2022 still aligns with historical TVA rates and remains significantly below those of the greater external market.

(4) Based on score from Employee Engagement Survey defined as degree to which employees invest their cognitive, emotional, and behavioral energies toward positive organizational outcomes.

The score of 82 reported in TVA’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021, was based on results from a February 2021 survey instead of results received later from a September 2021 survey (79).

Benchmark data is provided by the third party administer of the survey, based on data collected from over 750 organizations.

Benchmarks are updated at least annually using data from the previous 12-month period.

(5) Based on score from Employee Engagement Survey defined as the degree to which employees sense they belong at work.

(6) Defined as the number of recordable injuries and illnesses per 100 full-time employees per year.

The score of 74 reported in TVA’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021 , was based on results from a February 2021 survey instead of results received later from a September 2021 survey (72).

Benchmark data is provided by the third party administer of the survey, based on data collected from over 750 organizations.

Benchmarks are updated at least annually using data from the previous 12-month period.

(6) Retroactive cases may affect annual recordable injury counts as reported.

The final number for 2021 reflects an adjustment from 29 to 30 due to a retroactive case submitted after filing the 2021 Annual Report.

(7) Based on the Edison Electric Institute criteria developed by industry peers.

Workforce Demographics

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Number of employees on September 30 10,390 10,192

Represented by collective bargaining unit 60% Represented, or approximately 6,000 employees 60% Represented, or approximately 6,000 employees

Employees represented by collective bargaining unit 58% of employees represented, or approximately 6,000 employees 60% of employees represented, or approximately 6,000 employees

Trades and labor employees 3,198 3,261

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Average age 45.7 44.1

In addition to the employees above, TVA also had approximately 15,500 and 13,800 contractors on September 30, 2021 and 2020, respectively, providing both intermittent or full-time services.

The majority of these contractors are managed by TVA suppliers that are providing services to TVA.

All Employees Leadership New Hires

2021 2020 2021 2020 2021 2020

Female 2,159 2,076 288 270 276 211

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Military, Veteran 1,822 1,822 315 318 122 107

Disabled 773 779 114 112 38 24

All data is based upon self-reported information provided to TVA.

In addition to the employees above, TVA also had approximately 16,200 and 15,500 contractors on September 30, 2022 and 2021, respectively, providing intermittent or full-time services.

The majority of these contractors are managed by TVA suppliers that are providing services to TVA.

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 1. Business