Tennessee Valley Authority 10-K

tve-20240930 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (MARK ONE) x ANNUAL REPORT PURSUANT TO SECTION 13, 15(d), OR 37 OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30 , 2024 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission file number 000-52313 TENNESSEE VALLEY AUTHORITY (Exact name of registrant as specified in its charter) A corporate agency of the United States created by an act of Congress (State or other jurisdiction of incorporation or organization) 62-0474417 (IRS Employer Identification No.) 400 W. Summit Hill Drive Knoxville , Tennessee (Address of principal executive offices) 37902 (Zip Code) (865) 632-2101 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered N/A N/A N/A Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13, Section 15(d), or Section 37 of the Act. Yes o No x Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13, 15(d), or 37 of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer o Emerging growth company o Smaller reporting company o Non-accelerated filer x Accelerated filer o If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. x If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x Estimated aggregate market value of the common equity held by non-affiliates of TVA at March 31, 2024: N/A Number of shares of common stock outstanding at November 13, 2024: N/A 1 Table of Contents Table of Contents GLOSSARY OF COMMON ACRONYMS....................................................................................................................................................................................................... 4 FORWARD-LOOKING INFORMATION......................................................................................................................................................................................................... 6 GENERAL INFORMATION............................................................................................................................................................................................................................ 8 PART I ITEM 1. BUSINESS.......................................................................................................................................................................................................................................... 9 The Corporation................................................................................................................................................................................................................................. 9 Service Area....................................................................................................................................................................................................................................... 10 Customers.......................................................................................................................................................................................................................................... 11 Rates.................................................................................................................................................................................................................................................. 12 Power Supply and Load Management Resources............................................................................................................................................................................. 12 Fuel Supply......................................................................................................................................................................................................................................... 21 Transmission...................................................................................................................................................................................................................................... 23 Weather and Seasonality.................................................................................................................................................................................................................... 24 Competition........................................................................................................................................................................................................................................ 24 Research and Development............................................................................................................................................................................................................... 25 Flood Control Activities....................................................................................................................................................................................................................... 26 Environmental Stewardship Activities................................................................................................................................................................................................. 26 Economic Development Activities...................................................................................................................................................................................................... 28 Regulation.......................................................................................................................................................................................................................................... 28 Taxation and Tax Equivalents............................................................................................................................................................................................................. 30 Environmental Matters....................................................................................................................................................................................................................... 30 Human Capital Management.............................................................................................................................................................................................................. 38 ITEM 1A. RISK FACTORS............................................................................................................................................................................................................................ 41 ITEM 1B. UNRESOLVED STAFF COMMENTS............................................................................................................................................................................................ 55 ITEM 1C. CYBERSECURITY......................................................................................................................................................................................................................... 55 ITEM 2. PROPERTIES.................................................................................................................................................................................................................................. 56 Generating Properties........................................................................................................................................................................................................................ 56 Transmission Properties..................................................................................................................................................................................................................... 58 Natural Resource Stewardship Properties......................................................................................................................................................................................... 58 Buildings............................................................................................................................................................................................................................................. 58 Disposal of Property........................................................................................................................................................................................................................... 58 ITEM 3. LEGAL PROCEEDINGS.................................................................................................................................................................................................................. 59 ITEM 4. MINE SAFETY DISCLOSURES...................................................................................................................................................................................................... 59 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES............ 60 ITEM 6. RESERVED...................................................................................................................................................................................................................................... 60 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................................................... 60 Business and Mission......................................................................................................................................................................................................................... 60 Executive Overview............................................................................................................................................................................................................................ 63 Results of Operations......................................................................................................................................................................................................................... 65 Liquidity and Capital Resources......................................................................................................................................................................................................... 70 Key Initiatives and Challenges........................................................................................................................................................................................................... 75 Critical Accounting Estimates.............................................................................................................................................................................................................. 83 New Accounting Standards and Interpretations................................................................................................................................................................................. 89 Legislative and Regulatory Matters.................................................................................................................................................................................................... 89 Environmental Matters....................................................................................................................................................................................................................... 89 Legal Proceedings.............................................................................................................................................................................................................................. 89 Risk Management Activities............................................................................................................................................................................................................... 89 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........................................................................................................................... 92 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......................................................................................................................................................... 93 Consolidated Balance Sheets............................................................................................................................................................................................................ 94 Consolidated Statements of Operations............................................................................................................................................................................................. 93 Consolidated Statements of Comprehensive Income (Loss)............................................................................................................................................................. 96 Consolidated Statements of Cash Flows........................................................................................................................................................................................... 97 Consolidated Statements of Changes in Proprietary Capital............................................................................................................................................................. 98 Notes to Consolidated Financial Statements..................................................................................................................................................................................... 99 Report of Independent Registered Public Accounting Firm (PCAOB ID 42 ) ...................................................................................................................................... 160 2 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE............................................................... 163 ITEM 9A. CONTROLS AND PROCEDURES............................................................................................................................................................................................... 163 Disclosure Controls and Procedures.................................................................................................................................................................................................. 163 Internal Control over Financial Reporting........................................................................................................................................................................................... 163 Report of Independent Registered Public Accounting Firm................................................................................................................................................................ 164 ITEM 9B. OTHER INFORMATION................................................................................................................................................................................................................ 165 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS ..................................................................................................... 165 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE............................................................................................................................. 166 Directors.............................................................................................................................................................................................................................................. 166 Executive Officers............................................................................................................................................................................................................................... 167 Disclosure and Financial Code of Ethics............................................................................................................................................................................................ 168 Insider Trading Policy......................................................................................................................................................................................................................... 168 Committees of the TVA Board............................................................................................................................................................................................................ 168 ITEM 11. EXECUTIVE COMPENSATION..................................................................................................................................................................................................... 170 Compensation Discussion and Analysis............................................................................................................................................................................................. 170 CEO Pay Ratio Disclosure................................................................................................................................................................................................................. 196 Executive Compensation Tables and Narrative Disclosures.............................................................................................................................................................. 197 Director Compensation....................................................................................................................................................................................................................... 208 Compensation Committee Interlocks and Insider Participation.......................................................................................................................................................... 210 Compensation Committee Report...................................................................................................................................................................................................... 210 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS...................................... 211 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE......................................................................................... 211 Director Independence....................................................................................................................................................................................................................... 211 Related Party Transactions................................................................................................................................................................................................................ 211 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES...................................................................................................................................................................... 213 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES..................................................................................................................................................................... 214 ITEM 16. FORM 10-K SUMMARY................................................................................................................................................................................................................. 217 SIGNATURES................................................................................................................................................................................................................................................ 218 3 Table of Contents GLOSSARY OF COMMON ACRONYMS Following are definitions of some of the terms or acronyms that may be used in this Annual Report on Form 10-K for the fiscal year ended September 30, 2024 (the "Annual Report"): Term or Acronym Definition ACPA Anti-Cherrypicking Amendment AI Artificial intelligence AOCI Accumulated other comprehensive income (loss) ARO Asset retirement obligation ART Asset Retirement Trust Bonds Bonds, notes, or other evidences of indebtedness Bull Run Bull Run Fossil Plant CAA Clean Air Act CCR Coal combustion residuals CCRMUs CCR Management Units CO 2 Carbon dioxide COLA(s) Cost-of-living adjustment(s) CSAPR Cross-State Air Pollution Rule CTs Combustion turbine unit(s) Cumberland Cumberland Fossil Plant CVA Credit valuation adjustment CWA Clean Water Act CY Calendar year DBOT Down-blend offering for tritium DCP Deferred Compensation Plan DER Distributed energy resources DOE Department of Energy EIS Environmental Impact Statement ELGs Effluent limitation guidelines EO(s) Executive order(s) EPA Environmental Protection Agency EPRI Electric Power Research Institute ERC Enterprise Risk Council FASB Financial Accounting Standards Board FERC Federal Energy Regulatory Commission FHP Financial Hedging Program FIP Federal Implementation Plan FPA Federal Power Act GAAP Accounting principles generally accepted in the United States of America GAC Grid access charge GEH GE Hitachi Nuclear Energy GHG Greenhouse gas Holdco John Sevier Holdco LLC IRP Integrated Resource Plan IwD Inclusion with Diversity Jacobs Jacobs Engineering Group, Inc. JACTG Johnsonville Aeroderivative Combustion Turbine Generation LLC JHLLC Johnsonville Holdco LLC. JSCCG John Sevier Combined Cycle Generation LLC kWh Kilowatt hours 4 Table of Contents Legacy CCR Rule Legacy Coal Combustion Residuals Rule Legacy SIs Legacy CCR Surface Impoundments LPCs Local power company customers MD&A Management's Discussion and Analysis of Financial Condition and Results of Operations MLGW Memphis Light, Gas and Water Division mmBtu Million British thermal unit(s) MtM Mark-to-market MW Megawatts NAAQS National Ambient Air Quality Standards NAV Net asset value NDT Nuclear Decommissioning Trust NEIL Nuclear Electric Insurance Limited NEPA National Environmental Policy Act NERC North American Electric Reliability Corporation NES Nashville Electric Service NO x Nitrogen oxides NPDES National Pollutant Discharge Elimination System NRC Nuclear Regulatory Commission NYSE New York Stock Exchange PARRS Putable Automatic Rate Reset Securities PPAs Power purchase agreements QTE Qualified technological equipment and software RCRA Resource Conservation and Recovery Act RECs Renewable energy certificates RFP Request for proposal RP Restoration Plan SCCG Southaven Combined Cycle Generation LLC SCRs Selective catalytic reduction systems SEC Securities and Exchange Commission SERP Supplemental Executive Retirement Plan SHLLC Southaven Holdco LLC SIPs State implementation plans SMR Small modular reactor(s) SO 2 Sulfur dioxide TDEC Tennessee Department of Environment & Conservation TIPS Treasury Inflation-Protected Securities TPBAR Tritium-producing burnable absorber rods TVA Tennessee Valley Authority TVA Act Tennessee Valley Authority Act of 1933, as amended TVA Board TVA Board of Directors TVARS Tennessee Valley Authority Retirement System U.S. Treasury United States Department of the Treasury USACE U.S. Army Corps of Engineers VIE(s) Variable interest entity(ies) XBRL eXtensible Business Reporting Language 5 Table of Contents FORWARD-LOOKING INFORMATION This Annual Report on Form 10-K for the fiscal year ended September 30, 2024 contains forward-looking statements relating to future events and future performance. All statements other than those that are purely historical may be forward-looking statements. In certain cases, forward-looking statements can be identified by the use of words such as "may," "will," "should," "expect," "anticipate," "believe," "intend," "project," "plan," "predict," "assume," "forecast," "estimate," "objective," "possible," "probably," "likely," "potential," "speculate," "aim," "aspiration," "goal," "seek," "strategy," "target," the negative of such words, or other similar expressions. Although the Tennessee Valley Authority ("TVA") believes that the assumptions underlying any forward-looking statements are reasonable, TVA does not guarantee the accuracy of these statements. Numerous factors could cause actual results to differ materially from those in any forward-looking statements. These factors include, among other things: • Significant additional costs for TVA to manage and operate its coal combustion residuals ("CCR") facilities; • The cost of complying with known, anticipated, or new environmental requirements, some of which could render continued operation of many of TVA's aging coal-fired generation units not cost-effective or result in their removal from service, perhaps permanently; • Federal legislation aimed specifically at curtailing TVA's activities, including legislation that may require the divestiture of TVA or the sale of certain of TVA's assets; restrict access to its U.S. Treasury account; eliminate its sole authority to set rates; restrict its authority to manage the Tennessee River system; lower the debt ceiling on bonds, notes, or other evidences of indebtedness (collectively, "Bonds") specified in the Tennessee Valley Authority Act of 1933, as amended ("TVA Act"); or limit its ability to pay its Chief Executive Officer or other employees competitive salaries; • New, existing, or amended laws, regulations, executive orders ("EOs"), or administrative order or interpretations, including those related to climate change and other environmental matters, and the costs of complying with these laws, regulations, EOs, or administrative orders or interpretations; • Loss of TVA's protected service territory if the Federal Energy Regulatory Commission ("FERC") were to limit the application of the anti-cherrypicking provision, or if Congress were to eliminate the anti-cherrypicking provision, without corresponding legislative modifications to the territorial limitations imposed by the fence; • Additional federal reliability standards set forth by the North American Electric Reliability Corporation ("NERC") and approved by FERC and the costs of complying with these new standards; • The failure of TVA's generation, transmission, navigation, flood control, and related assets and infrastructure, including CCR facilities, dams, and spent nuclear fuel storage facilities, to operate as anticipated, resulting in health, safety, or environmental problems, lost revenues, damages, or other costs that are not reflected in TVA's financial statements or projections, including due to aging, technological issues, or extreme weather conditions; • Significant delays and additional costs, and/or inability to obtain necessary regulatory approvals, licenses, or permits, for major projects, including for assets that TVA needs to serve its existing and future load and to meet its carbon reduction aspirations; • Risks associated with the operation of nuclear facilities or other generation and related facilities, including CCR facilities and dams; • Events at a nuclear facility, whether or not operated by or licensed to TVA, which, among other things, could lead to increased regulation or restriction on the construction, ownership, operation, or decommissioning of nuclear facilities or on the storage of spent fuel, obligate TVA to pay retrospective insurance premiums, reduce the availability and affordability of insurance, increase the costs of operating TVA's existing nuclear units, or cause TVA to forego future construction at these or other facilities; • The inaccuracy of certain assumptions about the future, including economic forecasts, anticipated energy and commodity prices, cost estimates, construction schedules, power demand forecasts, potential regulatory environments, and the appropriate generation mix to meet demand; • Circumstances that cause TVA to change its determinations regarding the appropriate mix of generation assets; • Inability to continue to operate certain assets, especially nuclear facilities, including due to the inability to obtain, or loss of, regulatory approval for the operation of assets; • Physical attacks, threats, or other interference causing damage to TVA's facilities or interfering with TVA's operations; • Other unforeseeable occurrences negatively impacting TVA assets or their supporting infrastructure; • Events at TVA facilities, which, among other things, could result in loss of life, damage to the environment, damage to or loss of the facility, or damage to the property of others; • Events that negatively impact TVA's reliability, including problems at other utilities or at TVA facilities or the increase in intermittent sources of power; • Disruption of supplies of fuel, purchased power, or other critical items or services, which may result from, among other things, economic conditions, weather conditions, physical or cyber attacks, political developments, international trade restrictions or tariffs, legal actions, mine closures or reduced mine production, increases in fuel exports, environmental regulations affecting TVA's suppliers, transportation or delivery constraints, shortages of raw materials, supply chain difficulties, labor shortages, force majeure events, forced outages, intentional defaults, strikes, inflation, or similar events and which may, among other things, hinder TVA's ability to operate its assets, to complete projects on time and on budget, and meet its contractual obligations to deliver power; • Global conflicts, terrorist activities, or military actions by the United States ("U.S.") government and its allies; 6 Table of Contents • Cyber attacks on TVA's assets or the assets of third parties upon which TVA relies, which may become more frequent and sophisticated due to advances in artificial intelligence ("AI"); • The failure of TVA's information technology systems; • Lower future demand for electricity than TVA currently expects or is financially planning for, which would lead to unexpected revenue constraints that could negatively impact TVA's ability to meet financial obligations, including those associated with financing of projects to meet the anticipated demand; • The need for significant future contributions associated with TVA's pension plans, other post-retirement benefit plans, or health care plans; • Limitations on TVA's ability to borrow money, which may result from, among other things, TVA's approaching or substantially reaching the debt ceiling or TVA's losing access to the debt markets, and which may impact TVA's ability to make planned capital investments; • Downgrades of TVA's credit ratings or the United States' sovereign credit ratings which may negatively impact TVA and the owners of TVA securities; • Changes in technology, which, among other things, may affect relationships with customers and require TVA to change how it conducts its operations; • Loss of competitive edge due to TVA's governmental status affecting TVA's ability to keep up with technological changes; • Changes in the market price of commodities such as purchased power, coal, uranium, natural gas, fuel oil, crude oil, construction materials, reagents, or emission allowances; • A limitation on the market for TVA Bonds, which may be influenced by the fact that the payment of principal and interest on TVA securities is not guaranteed by the U.S. government; • Failure to attract or retain an appropriately qualified, diverse, and inclusive workforce; • Changes in the membership of the TVA Board of Directors ("TVA Board") or TVA senior management, which may impact how TVA operates; • Loss of quorum of the TVA Board, which may limit TVA's ability to adapt to meet changing business conditions; • Weather conditions, including changing weather patterns, extreme weather conditions, and other events such as flooding, droughts, wildfires, heat waves, and snow or ice storms that may result from climate change, which may hamper TVA's ability to supply power, cause customers' demand for power to exceed TVA's then-present power supply, pose health, safety, or environmental risks, or otherwise negatively impact TVA's operations or financial condition; • Events affecting the supply or quality of water from the Tennessee River system or Cumberland River system, or elsewhere, which could interfere with TVA's ability to generate power; • Catastrophic events, such as fires, earthquakes, explosions, solar events, electromagnetic pulses, geomagnetic disturbances, droughts, floods, hurricanes, tornadoes, polar vortexes, icing events, pipeline explosions, or other casualty events, wars, national emergencies, terrorist activities, pandemics, widespread public health crises, geopolitical events, or other similar destructive or disruptive events; • Ineffectiveness of TVA's financial control system to control issues and instances of fraud or to prevent or detect errors; • Inability to use regulatory accounting for certain costs; • Inability of TVA to implement its business strategy successfully, including due to the increased use in the public of distributed energy resources or energy-efficiency programs; • Inability of TVA to achieve or maintain its cost reduction goals, which may require TVA to increase rates and/or issue more debt than planned; • Failure of TVA’s organizational structure to adequately support TVA’s anticipated business needs or enable it to meet the needs of its current or potential customers; • Inability of TVA to adapt its business model to changes in the utility industry and customer preferences and to remain cost competitive; • Changes in commodity prices, investment prices, interest rates, currency exchange rates, or inflation rates; • Reliability or creditworthiness of counterparties including but not limited to customers, suppliers, renewable resource providers, and financial institutions; • Changes in the U.S. economy and volatility in financial markets; • Ineffectiveness of TVA’s disclosure controls and procedures or its internal control over financial reporting; • Changes in customer preferences for energy produced from cleaner generation sources; • Increases in TVA’s financial liabilities for decommissioning its nuclear facilities and retiring other assets; • The requirement or decision to make additional contributions to TVA’s Nuclear Decommissioning Trust (“NDT”) or Asset Retirement Trust (“ART”); • Events or changes involving transmission lines, dams, and other facilities not operated by TVA, including those that affect the reliability of the interstate transmission grid of which TVA’s transmission system is a part and those that increase flows across TVA’s transmission grid; • Actions taken, or inaction, by the U.S. government relating to the national debt ceiling or automatic spending cuts in government programs; • Inability to respond quickly enough to current or potential customer demands or needs or to act solely in the interest of ratepayers; • Addition or loss of customers by TVA or TVA’s local power company customers (“LPCs”); • Differences between estimates of revenues and expenses and actual revenues earned and expenses incurred; • Changes in the market price of equity securities, debt securities, or other investments; 7 Table of Contents • An increase in TVA’s cost of capital, which may result from, among other things, changes in the market for Bonds, disruptions in the banking system or financial markets, changes in the credit rating of TVA or the U.S. government, or, potentially, an increased reliance by TVA on alternative financing should TVA approach its debt limit; • Costs or liabilities that are not anticipated in TVA’s financial statements for third-party claims, natural resource damages, environmental cleanup activities, or fines or penalties associated with unexpected events such as failures of a facility or infrastructure; • Adverse effects from regional health and other emergencies; • Negative impacts on TVA's reputation; or • Other unforeseeable events. See also Part I, Item 1A, Risk Factors, and Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of factors that could cause actual results to differ materially from those in any forward-looking statement. New factors emerge from time to time, and it is not possible for TVA to predict all such factors or to assess the extent to which any factor or combination of factors may impact TVA's business or cause results to differ materially from those contained in any forward-looking statement. TVA undertakes no obligation to update any forward-looking statement to reflect developments that occur after the statement is made, except as required by law. GENERAL INFORMATION Fiscal Year References to years (2024, 2023, etc.) in this Annual Report on Form 10-K for the fiscal year ended September 30, 2024 are to TVA's fiscal years ending September 30 except for references to years in the biographical information about directors and executive officers in Part III, Item 10, Directors, Executive Officers, and Corporate Governance, as well as to years that are preceded by "CY," which references are to calendar years. Notes References to "Notes" are to the Notes to Consolidated Financial Statements contained in Part II, Item 8, Financial Statements and Supplementary Data in this Annual Report. Property TVA generally does not own real property or real property interests (collectively, "real property"). TVA typically acquires real property in the name of the United States ("U.S."), and legal title in such real property is entrusted to TVA as the agent of the U.S. to accomplish the purposes of the TVA Act. TVA acquires personal property in the name of TVA. Accordingly, unless the context indicates the reference is to TVA's personal property, any statement in this Annual Report referring to TVA property shall be read as referring to the real property of the U.S. that has been entrusted to TVA as its agent. Available Information TVA files annual, quarterly, and current reports with the Securities and Exchange Commission ("SEC") under Section 37 of the Securities Exchange Act of 1934 (the "Exchange Act"). TVA's SEC filings are available to the public at www.tva.com, free of charge, as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. Information contained on or accessible through TVA's website shall not be deemed to be incorporated into, or to be a part of, this Annual Report or any other report or document that TVA files with the SEC. All TVA SEC reports are available to the public without charge from the website maintained by the SEC at https://www.sec.gov. 8 Table of Contents PART I ITEM 1. BUSINESS The Corporation General The Tennessee Valley Authority ("TVA") is a corporate agency and instrumentality of the United States ("U.S.") that was created in 1933 by federal legislation in response to a proposal by President Franklin D. Roosevelt. TVA was created to, among other things, improve navigation on the Tennessee River, reduce the damage from destructive flood waters within the Tennessee River system and downstream on the lower Ohio and Mississippi Rivers, further the economic development of TVA's service area in the southeastern U.S., and sell the electricity generated at the facilities TVA operates. Today, TVA operates the nation's largest public power system and supplies power to a population of approximately 10 million people. TVA also manages the Tennessee River, its tributaries, and certain shorelines to provide, among other things, year-round navigation, flood damage reduction, and affordable and reliable electricity. Consistent with these primary purposes, TVA also manages the river system and public lands to provide recreational opportunities, adequate water supply, improved water quality, cultural and natural resource protection, and economic development. 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. In addition, the TVA Board of Directors ("TVA Board") has established two councils — the Regional Resource Stewardship Council and the Regional Energy Resource Council — to advise TVA on its stewardship activities in the Tennessee Valley and its energy resource activities. Initially, all TVA operations were funded by federal appropriations. Direct appropriations for the TVA power program ended in 1959, and appropriations for TVA's stewardship, economic development, and multipurpose activities ended in 1999. Since 1999, TVA has funded all of its operations almost entirely from the sale of electricity and power system financings. TVA's power system financings consist primarily of the sale of bonds, notes, or other evidences of indebtedness (collectively, "Bonds") and secondarily of alternative forms of financing, such as lease arrangements. As a wholly-owned government corporation, TVA is not authorized to issue equity securities. TVA's Mission of Service TVA was built for the people, created by federal legislation, and charged with a unique mission - to improve the quality of life in a seven-state region through the integrated management of the region's resources. TVA's mission focuses on three key areas: • Energy — Delivering reliable, low cost, clean energy; • Environment — Caring for the region's natural resources; and • Economic Development — Creating sustainable economic growth. TVA's Strategic Priorities While TVA's mission has not changed since it was established in 1933, the climate in which TVA operates continues to evolve. To continue to deliver its mission of service while evolving for future success, TVA must realize five strategic priorities: • People Advantage — Amplifying the energy, passion, and creativity within each TVA employee; • Operational Excellence — Building on TVA's best-in-class reputation for reliable service and competitively priced power; • Financial Strength — Investing in the future, while keeping energy costs as low as possible; • Powerful Partnerships — Promoting progress through the shared success of TVA's customers and stakeholders; and • Igniting Innovation — Pursuing innovative solutions for TVA and its customers and communities. 9 Table of Contents Service Area 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"). TVA supplies power in most of Tennessee, northern Alabama, northeastern Mississippi, and southwestern Kentucky, and in portions of northern Georgia, western North Carolina, and southwestern Virginia. Under the TVA Act, subject to certain minor exceptions, TVA may not, without the enactment of authorizing federal legislation, enter into contracts that would have the effect of making it, or the wholesale customers that distribute TVA power ("local power company customers" or "LPCs"), a source of power supply outside the area for which TVA or its LPCs were the primary source of power supply on July 1, 1957. 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. Note (1) TVA Locations shown here are in service as of September 30, 2024 . (2) In addition to the locations above, TVA owns approximately one megawatt ("MW") of nameplate capacity among nine operating solar installations across the Tennessee Valley region with six installations in Tennessee, two in Alabama, and one in Mississippi. 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. This provision, called the "anti-cherrypicking" provision, prevents the Federal Energy Regulatory Commission ("FERC") from ordering TVA to provide access to its transmission lines to others to deliver power to customers within TVA's defined service area. As a result, the anti-cherrypicking provision reduces TVA's exposure to loss of its customers. 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 and Item 1A, Risk Factors — Regulatory, Legislative, and Legal Risks — TVA could lose its protected service territory. In 2024, the revenues generated from TVA's electricity sales were $12.1 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. 10 Table of Contents Customers TVA is primarily a wholesaler of power, selling power to LPCs that then resell power to their customers at retail rates. TVA's LPCs consist of (1) municipalities and other local government entities ("municipalities") and (2) customer-owned entities ("cooperatives"). These municipalities and cooperatives operate public power electric systems whose primary purpose is not to make a profit but to supply electricity to the general public or the cooperatives' members. TVA also sells power directly to certain end-use customers, primarily large commercial and industrial loads and federal agencies with loads larger than 5,000 kilowatts. Whether TVA or an LPC serves a new power customer is determined by the applicable TVA-LPC wholesale power contract. Each contract contains a formula that balances the size of the LPC and the amount of any TVA infrastructure investment to determine which party is entitled to serve the new customer. 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 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 TVA's operating revenues. Local Power Company Customers Revenues from LPCs accounted for approximately 90 percent of TVA's total operating revenues for 2024. TVA had wholesale power contracts with 153 LPCs at September 30, 2024. 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, Power Supply Flexibility Agreements available to LPCs that have executed long-term Partnership Agreements 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. Revised flexibility agreements were made available to LPCs in August 2023. These revised agreements permit projects to be located anywhere in TVA's service area, connected either to the LPC distribution system or to TVA's transmission system, and make it easier for LPCs to partner on projects. As of September 30, 2024, 102 LPCs had signed a Power Supply Flexibility Agreement. LPCs purchase power under contracts with terms of five or 20 years to terminate. TVA's two largest LPCs — Memphis Light, Gas and Water Division ("MLGW") and Nashville Electric Service ("NES") — have contracts with a five-year and a 20-year termination notice period, respectively. Sales to MLGW and NES accounted for nine percent and eight percent, respectively, of TVA's total operating revenues for 2024. TVA and LPCs continue to work together to meet the changing needs of consumers around the Tennessee Valley. 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 to no more than 10 percent during any consecutive five-fiscal-year period, as more specifically described in the agreements. 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. As of September 30, 2024, 148 LPCs had signed the Partnership Agreement with TVA. The power contracts between TVA and LPCs provide for the purchase of power by LPCs at the wholesale rates established by the TVA Board. Under the TVA Act, the TVA Board is authorized to regulate LPCs to carry out the purposes of the TVA Act through contract terms and conditions as well as through rules and regulations. TVA regulates LPCs primarily through the provisions of TVA's wholesale power contracts. All of the power contracts between TVA and the LPCs require that power purchased from TVA be sold and distributed to the ultimate consumer without discrimination among consumers of the same class and prohibit direct or indirect discriminatory rates, rebates, or other special concessions. In addition, there are a number of wholesale power contract provisions through which TVA seeks to ensure that the electric system revenues of the LPCs are used only for electric system purposes. Furthermore, almost all of these contracts specify the resale rates and charges at which the LPC must resell TVA power to its customers. These rates are revised from time to time, subject to TVA approval, to reflect changes in costs, including changes in the wholesale cost of power. TVA also regulates LPC policies for customer deposits, termination of service for non-payment, providing information to consumers, and billing through a service practice policy framework. TVA's regulatory framework provides for consistent regulatory policy for ratepayers across the Tennessee Valley, while recognizing local considerations. The regulatory provisions in TVA's wholesale power contracts are designed to carry out the objectives of the TVA Act, including the objective of providing for an adequate supply of power at the lowest feasible rates. See Rates — Rate Methodology below. Other Customers Revenues from directly served industrial customers accounted for approximately seven percent of TVA's total operating revenues in 2024. Contracts with these customers are subject to termination by the customer or TVA upon a minimum notice period that varies according to a number of factors, including the customer's contract demand and the period of time service has been provided. TVA also serves seven federal customers, including U.S. Department of Energy ("DOE") facilities and military installations, which accounted for approximately one percent of TVA's total operating revenues in 2024. 11 Table of Contents 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, Renewable Energy Certificate ("REC") sales, and certain other ancillary goods or services. Other revenue accounted for approximately two percent of TVA's total operating revenues in 2024. Rates Rate Authority The TVA Act gives the TVA Board sole responsibility for establishing the rates TVA charges for power. These rates are not subject to judicial review or to review or approval by any state or other federal regulatory body. Under the TVA Act, TVA is required to charge rates for power that will produce gross revenues sufficient to provide funds for: • Operation, maintenance, and administration of its power system; • Payments to states and counties in lieu of taxes ("tax equivalents"); • Debt service on outstanding indebtedness; • Payments to the 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"); and • 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 23 — Related Parties . TVA fulfilled its requirement to repay $1.0 billion of the Power Program Appropriation Investment in 2014; therefore, the repayment of this amount is no longer a component of rate setting. Rate Methodology TVA uses a seasonal time of use wholesale rate structure comprised of base demand and energy rates, a fuel rate, and a grid access charge ("GAC") . In setting the base rates, TVA uses a debt-service coverage methodology to derive annual revenue requirements in a manner similar to that used by other public power entities that also use the debt-service coverage rate methodology. Under the debt-service coverage 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. TVA's rate structure includes a focus on TVA's long-term pricing by aligning rates with underlying cost drivers. TVA recovers fuel costs and tax equivalent payments associated with fuel cost adjustments through a monthly rate reflecting the forecasted costs of fuel. Fuel costs are allocated to three groups of customers: (1) Standard Service (residential and small commercial customers), (2) large general service customers with contract demands greater than 5 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. Power Supply and Load Management Resources General TVA seeks to balance production capabilities with power supply requirements by promoting the conservation and efficient use of electricity and, when necessary, buying, building, or leasing assets or entering into power purchase agreements ("PPAs"). TVA also seeks to employ a diverse mix of energy generating sources and works toward obtaining greater amounts of its power supply from clean (low or zero carbon-emitting) resources. Currently, TVA is working with stakeholders and the public on the 2025 Integrated Resource Plan ("IRP"), a comprehensive plan that will help shape TVA's energy system through 2050. The IRP is expected to be TVA’s compass for power generation decisions as well as for long-term operational and financial planning. TVA is making investments in its generating portfolio and infrastructure to both help meet the growing demand for electricity and modernize the fleet while also allowing TVA to maintain competitive rates and high reliability and work toward an increasingly clean power system. As TVA continues to evaluate the impact of retiring its coal-fired fleet by 2035 and works to accelerate the growth of renewables, it also continues to evaluate adding flexible lower carbon-emitting gas plants as a strategy 12 Table of Contents to maintain reliability. Commercial operations began on Paradise Combustion Turbine Units ("CTs") 5-7 on December 29, 2023. TVA also has ongoing natural gas projects at its Johnsonville, Cumberland, and Kingston sites and is evaluating natural gas projects for the replacement generation for the second unit at Cumberland, a new Caledonia CT plant on TVA land, and an aeroderivative CT project at TVA's Allen site. TVA is committed to investing in the future of nuclear with the evaluation of emerging advanced nuclear technologies, such as small modular reactors ("SMRs"), while also investing in its existing nuclear assets and working to renew its nuclear generation fleet licenses. TVA has been implementing the Hydro Life Extension Program with a focus on improving the availability and flexibility of the hydroelectric fleet and exploring new hydroelectric pumped-storage power to support the grid. It is also investing in research and development for technology around hydrogen fuel and carbon capture, utilization, and storage. In addition, the Inflation Reduction Act of 2022 ("Inflation Reduction Act") 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 exploring funding opportunities of various types, including opportunities involving pumped-storage, solar, carbon capture, hydrogen, energy efficiency, and transmission, among others; however, this exploration does not guarantee that TVA or its partners will receive funds. See Research and Development below, Item 1A, Risk Factors — Operational Risks , and Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio. Power generating facilities operated by TVA at September 30, 2024, included three nuclear sites, 18 natural gas and/or oil-fired sites, four coal-fired sites, 29 conventional hydroelectric sites, one pumped-storage hydroelectric site, one diesel generator site, and nine operating solar installations. See Item 2, Properties — Generating Properties — Net Capability for a discussion of the units at these facilities. TVA also acquires power under PPAs of varying durations, including short-term contracts of less than 24-hours in duration. 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 For the years ended September 30 Generation Resource (1) 2024 2023 2022 Nuclear 39% 42% 39% Natural gas and/or oil-fired 23% 22% 22% Coal-fired 13% 13% 13% Hydroelectric 7% 8% 8% Purchased power 18% 15% 18% Note (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 contains the majority of non-hydro renewable energy supply. TVA acquires RECs in connection with certain purchased power transactions and sells some of these RECs to 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 lowering emissions, including GHG emissions, 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 . Nuclear At September 30, 2024, TVA had three nuclear sites consisting of seven units in operation. The units at Browns Ferry Nuclear Plant ("Browns Ferry") are boiling water reactor units, and the units at Sequoyah Nuclear Plant ("Sequoyah") and Watts Bar Nuclear Plant ("Watts Bar") are pressurized water reactor units. Operating information for each of these units is included in the table below. TVA Nuclear Power At September 30, 2024 Nuclear Unit Summer Net Capability (MW) Net Capacity Factor for 2024 (%) Date of Expiration of Operating License Browns Ferry Unit 1 1,227 85.8 2033 Browns Ferry Unit 2 1,208 97.8 2034 Browns Ferry Unit 3 1,227 85.2 2036 Sequoyah Unit 1 1,152 83.2 2040 Sequoyah Unit 2 1,140 78.5 2041 Watts Bar Unit 1 1,157 92.3 2035 Watts Bar Unit 2 1,121 92.1 2055 13 Table of Contents Nuclear Fleet License Extensions . TVA is seeking to renew all nuclear generation units' licenses for an additional 20 years. The first license renewal application was submitted to the Nuclear Regulatory Commission ("NRC") in January 2024 for the three units at Browns Ferry. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio — Nuclear Fleet License Extensions. Other Nuclear Initiatives . 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 and Note 22 — Commitments and Contingencies — Contingencies for a discussion of TVA's nuclear decommissioning liabilities and the related trust and nuclear insurance, which discussions are incorporated herein by reference. TVA's Sequoyah Unit 2 tripped on July 30, 2024, due to failure of the main generator. As a result, the project to restack and rewind the main generator was pulled forward in the Nuclear Life Extension ("NLE") plan. The unit will remain offline until project completion, which is expected in spring 2025. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Sequoyah Nuclear Plant Unit 2 . Natural Gas and/or Oil-Fired At September 30, 2024, TVA's natural gas and oil-fired fleet consisted of 85 combustion turbine power blocks (68 simple-cycle units, one cogeneration unit, and 14 combined-cycle power units, accounting for 12,656 MW of summer net capability, and two idled units at Allen Combustion Turbine Facility: Units 17 and 18). In 2024, Allen CTs 1-16 and Johnsonville CTs 11-16 were retired. Fifty-three of the simple-cycle units are currently capable of quick-start response allowing full generation capability in approximately 10 minutes. The economic dispatch of natural gas-fired plants depends on both the day-to-day price of natural gas and the price of other available intermediate resources such as coal-fired plants. TVA uses simple-cycle units to meet peaking or backup power needs. As TVA evaluates the retirement of its coal-fired fleet and works to accelerate the growth of renewables, it also continues to evaluate adding flexible lower carbon-emitting gas plants as a strategy to maintain reliability. The natural gas-fired fleet supports renewable expansion by providing reliability across all hours, as well as the flexibility to help manage ramping and intermittency. Commercial operations began on Paradise CTs 5-7 on December 29, 2023. TVA also has ongoing natural gas projects at its Johnsonville, Cumberland, and Kingston sites and is evaluating natural gas projects for the replacement generation for the second unit at Cumberland, a new Caledonia CT plant on TVA land, and an aeroderivative CT project at TVA's Allen site. TVA may decide to make further strategic investments in natural gas-fired facilities in the future by purchase, construction, or lease, to help support portfolio diversification and system reliability. See Item 2, Properties — Generating Properties, Note 8 —Leases, and Note 14 — Debt and Other Obligations for a discussion of lease arrangements into which TVA has entered in connection with certain combined cycle 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 . Coal-Fired At September 30, 2024, TVA had four coal-fired plants consisting of 24 active units, accounting for 5,815 MW of summer net capability. TVA considers units to be in an active state when the unit is generating, available for service, or temporarily unavailable due to equipment failures, inspections, or repairs. 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 is pursuing a programmatic approach for the evaluation of its sites where coal combustion residuals ("CCR") are stored to meet all applicable state and federal regulations. 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 continues to work toward a 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 8,418 MW. 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. In January 2023, TVA issued its Record of Decision to retire the two coal-fired units at Cumberland by the end of calendar year ("CY") 2026 and CY 2028. In April 2024, TVA issued its Record of Decision to retire the nine coal-fired units at Kingston by CY 2027. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio . 14 Table of Contents Diesel Generators At September 30, 2024, TVA had one diesel generator plant consisting of five units, and this facility accounted for nine MW of summer net capability. These units are not currently dispatched for generation to the transmission grid. Hydroelectric Pumped-Storage At September 30, 2024, TVA had four units at Raccoon Mountain Pumped-Storage Plant ("Raccoon Mountain") with a total net summer capability of 1,715 MW. These units are utilized to balance the transmission system as well as generate power. TVA uses electricity generated by its fleet during periods of low demand to operate pumps that fill the reservoir at Raccoon Mountain. 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 to ensure the reliability and resiliency of the grid, particularly as intermittent renewables like solar continue to be added to the generation mix. In 2023, TVA announced sites for a potential future pumped-storage facility. After completing an Environmental Impact Statement ("EIS"), TVA will select a site based on a wide range of environmental, social, and technical factors. Exploratory drilling is occurring. Renewable Energy Resources 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 seeks to obtain greater amounts of its power supply from clean resources to work towards carbon emission reductions. As a result, TVA is working to increase its renewable energy portfolio by investing in existing hydroelectric assets through the Hydro Life Extension Program, securing renewable PPAs, and exploring Self-Directed Solar projects. TVA also encourages renewable power and offers renewable resources through various current programs and offerings, including the Green Invest Program, which matches customer demand with renewable supply and is designed to meet the needs of customers at scale. See Power Purchase and Other Agreements for information on TVA’s PPAs, including renewable agreements, and 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 for a discussion of TVA's RFPs. Conventional Hydroelectric Dams. At September 30, 2024, TVA's hydroelectric fleet consisted of 29 conventional hydroelectric dams throughout the Tennessee River system with 109 conventional hydroelectric units (106 active units and three units in long-term outage and unavailable for service), that accounted for 3,757 MW of summer net capability. Wilbur Hydroelectric Facility Units 1-3 were in long-term outage and unavailable for service at September 30, 2024. 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. When these factors are unfavorable, TVA must increase its reliance on higher cost generation plants and purchased power. In addition, TVA receives a portion of energy generated by eight of the U.S. Army Corps of Engineers ("USACE") dams on the Cumberland River system, and electric generation from the USACE dams is dependent on the same factors that affect generation from the TVA-owned dams . See Dam Safety Assurance Program and Weather and Seasonality below. 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, 2024, Hiwassee Hydro Unit 2 accounted for 86 MW of the conventional hydroelectric summer net capability. TVA has a Hydro Life Extension Program which focuses on recovering and preserving TVA's extensive hydroelectric fleet, improving efficiency and flexibility, and ensuring long-term reliability of this vital clean energy asset. As part of this program, TVA is working to add additional carbon free capacity to some of its existing hydroelectric units. In a separate effort, TVA is working to improve transmission system reliability by upgrading or adding synchronous condensing capability to several of the conventional hydro units in the fleet. Hydroelectric generation is 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. In 2023, TVA signed a Memorandum of Understanding ("MOU") with the DOE to enhance collaboration on hydropower technology development. Joint efforts are focusing on evaluating and demonstrating different approaches for operating hydropower plants to meet the electricity grid's changing needs. 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 15 Table of Contents 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 the National Environmental Policy Act ("NEPA") and other applicable laws. In 2021, TVA purchased land for this development, and in 2022, environmental reviews were completed. The challenges affecting the U.S. solar industry are also being seen in TVA's Self-Directed Solar project. The project has experienced delays and cost increases due to escalations from supply chain limitations. TVA has elected to pursue a competitive selection process with third parties for the development of the photovoltaic ("PV") solar facility to be located on the site. TVA plans to enter into a long-term PPA to purchase the energy generated by the facility. An RFP has been issued to this effect, and selection of the awardee is anticipated in early CY 2025. In November 2022, the TVA Board approved the opportunity for TVA to explore the development of an additional utility-scale solar project, contingent on successfully completing environmental reviews under NEPA and other applicable laws and obtaining the necessary state permits. The project would utilize TVA land, deploying a solar cap system on the closed CCR facility at the TVA Shawnee Fossil Plant in Paducah, Kentucky. 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. In addition to the hydroelectric units above, TVA owns nine operating solar installations that account for approximately one MW of nameplate capacity. 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 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 the benefit of installation verifications with regard to whether their solar PV system has met the Green Connect Program Standards. 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, 2024, more than 1,950 MW of renewable PPAs have been matched to customers through the Green Invest Program. In addition, Generation Flexibility is a solution available to LPCs participating in TVA's Partnership Agreement 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 solar renewable resources through purchasing renewable solar energy generated in the Tennessee Valley. The product is sold in blocks of 200 kWh or matches 100 percent of a customer's electricity usage (available through select LPCs). During the year ended September 30, 2024, participants purchased 67,122 MWh through the Green Switch Program. The Green Flex Program gives commercial and industrial customers the ability to meet sustainability goals and to make renewable energy claims through RECs from wind generation located outside TVA's service area. During the year ended September 30, 2024, participants purchased approximately 694,000 RECs through the Green Flex Program. TVA tracks its renewable energy commitments and claims through the management of RECs. The RECs, which each represent one megawatt-hour ("MWh") of renewable energy generation, are principally associated with wind, solar, biomass, and low-impact hydroelectric. TVA continues to evaluate ways to adjust to customer preferences and requirements for cleaner and greener energy, including the acquisition of RECs from renewable purchased power that can be sold to customers to meet their needs. Overall, TVA will procure 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. 16 Table of Contents Total Renewable Energy Resources . As of September 30, 2024, TVA's total renewable energy resources amounted to 9,766 MW. Of this amount, 6,964 MW are operating while 2,802 MW are contracted but not yet online. In addition, TVA has 299 MW from Self-Directed Solar projects currently under development, which are not represented in the table below. Notes (1) Contracted resources are executed PPAs expected to come online at a future date. (2) Hydroelectric power consists of 3,757 MW from TVA-owned conventional hydroelectric facilities and 779 MW from renewable PPAs. (3) TVA acquires RECs in connection with certain purchased power transactions and sells some of these RECs to 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. TVA's operating renewables by location and by source are detailed below: Notes (1) In-Valley refers to the renewable energy that is sourced within TVA's service territory. Out-of-Valley refers to the renewable energy that is sourced outside of TVA's service territory and solely consists of wind power. (2) See Power Purchase and Other Agreements below. PPAs also include capability from various historical renewable energy programs primarily with individuals and small businesses. (3) TVA acquires RECs in connection with certain purchased power transactions and sells some of these RECs to 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. 17 Table of Contents Distributed Energy Resources Consumer desire for energy choice, among other things, is driving the expectation for flexible options in the electric industry. TVA and LPCs are working together to leverage the strengths of the Tennessee Valley public power model to provide distributed energy solutions that are economical, sustainable, and flexible. TVA will focus on the safety and reliability impacts of these resources as they are interconnected to the grid and will aim to ensure that the pricing of electricity remains as low as feasible. Additional regulatory considerations and analysis may be required as the distributed energy resources ("DER") market, technologies, and programs evolve. 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 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. 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. New energy management systems and energy storage technologies present opportunities for more sophisticated and integrated operation of the entire grid. The advent of electric vehicles and small-scale renewable generation has hastened the development of energy storage technologies that have the potential to mitigate the intermittent supply issues associated with many renewable generation options. 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 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 with EV policies, improving charging infrastructure availability, expanding EV availability and offerings, and spreading EV consumer awareness. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Electric Vehicles. On-site 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. Such systems can afford the consumer benefits through reduced consumption, increased comfort, detailed energy use data, and savings from time-sensitive rate structures. TVA and LPCs must consider the impacts of integration from changes in energy usage patterns resulting from the operation of such systems. Demand response systems that take advantage of the increasing sophistication in communication to homes, businesses, and distribution system assets also afford the opportunity for more granular control of system demand. Technologies can manage individual customer systems to shift usage from peak to off-peak periods and create significant reductions in the need for peak generation output or curtail usage for short periods to balance system demand. More sophisticated distribution control systems can also lower peak demand through control of excess voltage on the grid on either a dispatchable or continuous basis. Some large industrial customers also have the capacity to respond within a designated notice period and can augment operational flexibility by providing ancillary services. See Community Energy Portfolio below . Community Energy Portfolio TVA continues to make investments in its community energy portfolio, consisting of energy efficiency, demand response, renewable, and resiliency programs, as part of its commitment to meet the Tennessee Valley’s growing energy needs and to support a decarbonized and more resilient grid. TVA is expanding its portfolio and plans to invest more than $1.5 billion in its energy efficiency and demand response programs from 2024 – 2028. Over this five-year period, TVA anticipates approximately 2,200 gigawatt hours of net incremental energy efficiency savings and expects to have over 2,200 MW of demand response portfolio capacity in 2028. These amounts are forward-looking and subject to various uncertainties. See Forward-Looking Information and Item 1A, Risk Factors. In 2024, TVA invested $173 million in its energy efficiency and demand response programs. As of September 30, 2024, TVA has 1,444 MW of demand response peak season portfolio capacity and effectively reduced 2024 energy needs by approximately 205 gigawatt hours of net incremental energy efficiency savings. TVA's community energy portfolio consists of programs aimed at balancing system needs by lowering costs, shaping energy usage, increasing capacity, and decarbonizing the grid, all through the participation of end-use consumers. These programs help end-use consumers save on their bills and reduce some of the need for new generation in the future and are offered to both end-use residential customers and businesses and industries. TVA also has energy programming focused on expanding partnerships, improving program access, and catalyzing investment in communities where all individuals can benefit from TVA's resources. TVA's Community Energy Efficiency Programs, a component of the community energy portfolio, include (1) the Home Uplift Program, which completes home evaluations and makes high-impact home energy upgrades for qualifying homeowners at no cost to the homeowners, (2) the School Uplift Program, which assists schools with adopting strategic energy management practices, and (3) the Small Business Uplift Program, which assists small businesses located within underserved communities with energy evaluations and energy improvement investments provided by TVA at no cost to the small business. 18 Table of Contents TVA anticipates additional community energy programs to be developed over the coming years to grow the community energy portfolio. See Distributed Energy Resources above for further discussion on demand response systems. Power Purchase and Other Agreements 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 2024, TVA acquired approximately 98 percent of the power that it purchased through the long-term PPAs described below, including agreements for long-term renewable generation resources, and approximately two percent on the spot market. During 2023, TVA acquired approximately 92 percent of the power that it purchased through long-term PPAs, approximately six percent through short-term PPAs, and approximately two percent on the spot market. TVA's capability provided by PPAs is primarily provided under contracts that expire through 2044 and are described in the table below. 19 Table of Contents Power Purchase Agreements (1) At September 30, 2024 Type of Facility Location Number of Contracts Contract Capacity (MW) (2) Contract Termination Date Renewable PPAs Operating Solar Tennessee 8 430 2032 - 2044 Solar Alabama 2 302 2037 - 2041 Solar Mississippi 1 150 2044 Total Operating Solar 11 882 Wind Tennessee 1 25 2025 Wind Iowa 2 299 2030 - 2031 Wind Kansas 2 366 2032 - 2033 Wind Illinois 3 550 2032 - 2033 Total Operating Wind 8 1,240 Hydroelectric Tennessee, Kentucky, and North Carolina 2 779 2035 and upon three years' notice Landfill Gas Tennessee 1 5 2031 Subtotal Operating 22 2,906 Contract Renewable Resources (3) 300 Total Renewable Operating PPAs 3,206 Contracted (not yet online) Solar (4) 21 2,802 Total Renewable Contracted PPAs 21 2,802 Nonrenewable PPAs Operating Diesel Tennessee 4 59 2028 - 2032 Diesel Alabama 1 10 2035 Diesel Mississippi 2 46 2028 Total Operating Diesel 7 115 Natural Gas (5) Alabama 3 2,068 2024 - 2033 Natural Gas (5) Georgia 3 646 2024-2025 Natural Gas Illinois 1 479 2028 Natural Gas Missouri 1 50 2025 Natural Gas Pennsylvania 1 500 2028 Total Operating Natural Gas 9 3,743 Coal Georgia 1 250 2026 Coal Mississippi 1 500 2026 Lignite Mississippi 1 440 2032 Total Operating Coal 3 1,190 Battery Storage Mississippi 1 50 2044 Total Nonrenewable Operating PPAs 20 5,098 Contracted (not yet online) Nuclear 1 14 Battery Storage (4) 4 320 Total Nonrenewable Contracted PPAs 5 334 20 Table of Contents Notes (1) TVA acquires RECs in connection with certain purchased power transactions and sells some of these RECs to 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) Represents capability specified in TVA's PPA contracts. The measurement for nonrenewable resources is contracted capacity, adjusted for any contractual summer output constraints. The measurement for renewable resources is contracted capacity of the renewable resources' nameplate capacity. Nameplate capacity does not account for real-time operating constraints, such as intermittency of renewable resources associated with weather, delivery mechanisms, or other factors. (3) Contract Renewable Resources is capability from various historical renewable energy programs that consist of PPAs primarily with individuals and small businesses. (4) 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 and Challenges — Optimum Energy Portfolio — Renewable Power Purchase Agreements . (5) Included in the table above is 500 MW of power delivery in Alabama and 250 MW of power delivery in Georgia that expired on September 30, 2024. 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. TVA fulfills this requirement through the Dispersed Power Production Program. At September 30, 2024, there were 1,197 generation sources, with a combined qualifying capacity of 279 MW, whose power TVA purchases under this program. Fuel Supply General 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 Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Financial Results — Operating Expenses. Nuclear Fuel Current Fuel Supply . Converting uranium to nuclear fuel generally involves four stages: the mining and milling of uranium ore to produce uranium concentrates; the conversion of uranium concentrates to uranium hexafluoride gas; the enrichment of uranium hexafluoride; and the fabrication of the enriched uranium hexafluoride into fuel assemblies. TVA plans to continue using contracts of various products, lengths, and terms as well as inventory to meet the projected nuclear fuel needs of its nuclear fleet. The net book value of TVA's nuclear fuel was $1.3 billion at both September 30, 2024 and 2023. On May 13, 2024, President Biden signed the Prohibiting Russian Uranium Imports Act into law. Further restrictions on working with, and sanctions against, Russia or Russian entities may be forthcoming. TVA's currently contracted supply on nuclear fuel will not be impacted by the new law or future sanctions or restrictions related to Russia. TVA's nuclear fuel is supplied primarily by U.S., Canadian, Australian, and European Union sources, and TVA has existing physical inventories located in the United States and Canada sufficient to fuel its reactors for many years. Further, existing federal law already prohibited TVA from purchasing Russian or Chinese nuclear fuel. TVA is not contracted to purchase any Russian or Chinese origin nuclear fuel, and has no Russian or Chinese origin nuclear fuel in inventory for use in its reactors. TVA could be impacted by higher market prices as a result of general market impacts resulting from the new law and other potential trade restrictions; however, at this time TVA's nuclear fuel is obtained predominantly through long-term contracts. TVA, the DOE, and certain nuclear fuel contractors have entered into agreements, referred to as the Down-blend Offering for Tritium ("DBOT"), that provide for the production, processing, and storage of low-enriched uranium that is to be made using surplus DOE highly enriched uranium and other uranium. Low-enriched uranium can be fabricated into fuel for use in a nuclear power plant. Production of the low-enriched uranium began in 2019 and is contracted to continue through September 2027. Contract activity after that date will consist of storage and flag management. Flag management ensures that the uranium is unencumbered by policy restrictions, so that it can be used in connection with the production of tritium. Under the terms of the interagency agreement between the DOE and TVA, the DOE will reimburse TVA for a portion of the costs of converting the highly enriched uranium to low-enriched uranium. See Note 1 — Summary of Significant Accounting Policies — Down-blend Offering for Tritium for a more detailed discussion of the DBOT project. Low-Level Radioactive Waste. Certain materials and supplies used in the normal operation of nuclear electrical generating units are potentially exposed to low levels of radiation. TVA sends shipments of low-level radioactive waste to burial facilities in Clive, Utah, and Andrews, Texas. TVA is capable of storing some low-level radioactive waste at its own facilities for an extended period of time, if necessary. Spent Nuclear Fuel. All three nuclear sites have dry cask storage facilities. Sequoyah will need additional capacity by 2029. Browns Ferry will need additional capacity by 2037. Watts Bar will need additional capacity by 2039. To recover the cost of providing long-term, on-site storage for spent nuclear fuel, TVA filed a breach of contract suit against the U.S. in the U.S. Court of Federal Claims in 2001. As a result of this lawsuit and related agreements, TVA has collected approximately $483 million through 2024. Tritium-Related Services. TVA and the DOE are engaged in a long-term interagency agreement under which TVA will, at the DOE's request, irradiate tritium-producing burnable absorber rods ("TPBARs") to assist the DOE in producing tritium for 21 Table of Contents the Department of Defense ("DOD"). This agreement, which ends in 2040, requires the DOE to reimburse TVA for the costs that TVA incurs in connection with providing irradiation services and to pay TVA an irradiation services fee at a specified rate per TPBAR over the period when irradiation occurs. In general, TPBARs are irradiated for one operating cycle, which lasts about 18 months. At the end of the cycle, TVA removes the irradiated rods and loads them into a shipping cask. The DOE then ships them to its tritium-extraction facility. TVA loads a fresh set of TPBARs into the reactor during each refueling outage. Irradiating the TPBARs does not affect TVA's ability to safely operate the reactors to produce electricity. TVA has provided irradiation services using Watts Bar Unit 1 since 2003 and Watts Bar Unit 2 since 2021. TVA has increased its production to within currently licensed limits for Watts Bar Unit 1 and expects to be within licensed limits for Watts Bar Unit 2 in April 2025. The DOE notified TVA of future increased needs for tritium, and TVA submitted a License Amendment Request in 2023 to fulfill this request. This request was approved by the NRC in April 2024. 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. Natural Gas and Fuel Oil During 2024, TVA purchased a significant amount of its natural gas requirements from a variety of suppliers under contracts with terms of up to five years and purchased substantially all of its fuel oil requirements on the spot market . The net book value of TVA's natural gas inventory was $23 million and $25 million at September 30, 2024 and 2023, respectively. The net book value of TVA's fuel oil inventory was $72 million and $84 million at September 30, 2024 and 2023, respectively. At September 30, 2024, 61 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. TVA uses contracts of various lengths and terms to meet the projected natural gas needs of its natural gas fleet. During 2024, TVA arranged for the transportation of natural gas on eight separate pipelines, with approximately 69 percent being transported on two pipelines. During 2024, TVA maintained a total of approximately 1,887,883 million British thermal unit(s) ("mmBtu") per day of firm transportation capacity on eight major pipelines, with approximately 63 percent of total firm transportation capacity being maintained on two pipelines. TVA utilizes natural gas storage services at eight facilities with a total capacity of 7.8 billion per cubic feet ("Bcf") of firm service and 7.3 Bcf of interruptible service to manage the daily balancing requirements of the eight pipelines used by TVA, with approximately 52 percent of the total storage capacity being maintained at two facilities. During 2024, storage levels were generally maintained at between 40 and 80 percent of the maximum contracted capacity at each facility. As TVA's natural gas requirements grow, it is anticipated that additional storage capacity may need to be acquired to meet the needs of the generating assets. In 2025, TVA expects to increase its storage portfolio by approximately three percent. Coal Coal consumption at TVA's coal-fired generating facilities during both 2024 and 2023 was approximately 12 million tons. At September 30, 2024 and 2023, TVA had 28 days and 21 days of system-wide coal supply at full burn rate, respectively, with net book values of $191 million and $204 million, respectively. 22 Table of Contents TVA utilizes both short-term and long-term coal contracts. During 2024, long-term contracts made up 94 percent of coal purchases, and short-term contracts accounted for the remaining six percent. TVA plans to continue using contracts of various lengths, terms, and coal quality to meet its expected consumption and inventory requirements. During 2024 and 2023, TVA purchased coal by basin as follows: The following charts present the proportion of each delivery method TVA utilizes for its coal supply for the periods indicated: Coal inventory decreased at September 30, 2024 as compared to September 30, 2023. Coal supply availability and transportation performance continued to improve in 2023 and 2024. Throughout 2024, TVA was able to meet burn and increase inventory stockpiles due to current market conditions reflecting an approximate balance between demand and available supply, weaker export markets, and stable natural gas prices. TVA also invested in additional multi-year coal supply contracts to help provide stability in coal supply availability. These investments are expected to support fuel resilience with TVA's overall coal supply. Transmission The TVA transmission system is one of the largest high-voltage transmission systems in North America. TVA's transmission system has 69 interconnections with 13 neighboring electric systems and delivered approximately 163 billion kWh of electricity to TVA customers in 2024. In carrying out its responsibility for transmission grid reliability in the TVA service area, the TVA transmission grid has operated with 99.999 percent reliability since 2000. See Item 2, Properties — Transmission Properties . Pursuant to its Transmission Service Guidelines, TVA offers transmission services to eligible customers to transmit wholesale power in a manner that is comparable to TVA's own use of the transmission system. TVA has also adopted and operates in accordance with its published Transmission Standards of Conduct and separates its transmission function from its 23 Table of Contents power marketing function. 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 . Additional transmission upgrades may be required to maintain reliability. 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 investments in the new system operations center, energy management system, and fiber optic network. 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 recognition of the challenges of integrating intermittent and inverter-based resources to the power system, TVA established the Future Grid Performance initiative. The primary goal is to maintain a stable and reliable grid while fostering the evolution of the energy system of the future, one of TVA's strategic elements of Operational Excellence. Secondary goals include improving processes to facilitate an evolving resource mix with new technologies, optimizing approaches and tools to ensure system stability and performance in the future grid, and evaluating and adopting new grid technologies. This initiative seeks to address grid needs to keep the grid reliable and stable as TVA transitions to an energy system that has a greater share of intermittent and inverter-based resources, such as renewables and battery storage, connected to the transmission system. In addition, TVA is working on various projects with universities, Electric Power Research Institute ("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 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 Weather affects both the demand for and the market prices of electricity. TVA's power system is generally a dual-peaking system in which the demand for electricity peaks during the summer and winter months to meet cooling and heating needs. TVA uses degree days to measure the impact of weather on its power operations. Degree days measure the extent to which the TVA system 23-station average temperatures vary from 65 degrees Fahrenheit. See Item 1, Business — Flood Control Activities , Item 1, Business — Environmental Matters — Climate Change — Physical Impacts of Climate Change, Item 1A, Risk Factors — Risks Related to the Environment and Catastrophic Events, and Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Sales of Electricity. Competition TVA provides electricity in a service area that is largely free of competition from other electric power providers. This service area is defined primarily by provisions of law and long-term contracts. The region in which TVA or LPCs that distribute TVA power may provide power is limited and is often referred to as the "fence." Under the FPA, the Anti-Cherrypicking Amendment ("ACPA") limits the ability of others to use the TVA transmission system for the purpose of serving customers within TVA's service area. State service territory laws limit unregulated third parties' ability to sell electricity to consumers. All TVA wholesale power contracts are all requirements contracts; however, Power Supply Flexibility Agreements available to LPCs that have executed long-term Partnership Agreements 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. Revised flexibility agreements were made available to LPCs in August 2023. These revised agreements permit projects to be located anywhere in TVA's service area, connected either to the LPC distribution system or to TVA's transmission system, and make it easier for LPCs to partner on projects. 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. These threats underscore the need for TVA to design rates and strategically price its products and services to be competitive. 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. TVA also faces competition in the form of emerging technologies. Improvements in energy efficiency technologies, smart technologies, and energy storage technologies may reduce the demand for centrally provided power. 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 24 Table of Contents rates. 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. As technology develops, consumers' demands for access to diverse products and services may increase, and customers could choose another utility to meet some or all of their power needs where available, pursue self-generation to meet some or all of their power needs, or move their operations outside of TVA's service territory. Research and Development 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 challenges. Each year, TVA's annual research portfolio is updated based on a broad range of operational and industry drivers to assess key technology gaps, performance issues, or other significant issues, addressed through research and development. Core research activities directly support optimization of TVA's generation and transmission assets, air and water quality, energy utilization, and distributed/clean energy integration. 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. TVA places a high priority on providing innovation and research efforts to close gaps and develop the energy system of the future which are organized around its transformative innovation initiatives: advanced nuclear solutions, decarbonization options, storage integration, regional grid transformation, electric vehicles evolution, connected communities, and the newest - Future Grid Performance. TVA has placed an 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 is designed to both catalyze and support TVA’s decarbonization initiative. 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, one of TVA's strategic elements of Operational Excellence. 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. 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 contractual relationships are important steps in the early stages of evaluation as TVA considers the economic feasibility of advanced nuclear reactors. These contractual relationships are also intended to leverage innovations to improve advanced nuclear designs, streamline licensing pathways, find efficiencies in construction methods, and optimize operating expenses. For example, TVA has entered into a multi-party collaborative arrangement to advance the global development of the GE Hitachi Nuclear Energy BWRX-300 SMR. See Note 21 — Collaborative Arrangement for additional information on the multi-party collaboration arrangement. TVA currently believes that this advanced nuclear reactor technology is most readily available for deployment with the fewest risks; as such, TVA is evaluating this technology in greater detail, while still considering other advanced reactor technologies. 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 is also partnering on the exploration of fusion technology. TVA is a founding member of the Low Carbon Resources Initiative ("LCRI"), which is a coalition of utilities and researchers led by EPRI and the Gas Technology Institute. The LCRI's purpose is to engage, inform, support, and accelerate global low-carbon solutions creating pathways to advance carbon reducing technologies for large scale utility deployment. The initial five-year initiative from 2020 to 2024 will extend into 2027 and includes foundational technical research and demonstration projects 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 plans to continue involvement with LCRI to support demonstrations of technologies itself and gain knowledge from other demonstrations which can support pathways to decarbonization. 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. To support this initiative, in 2023 TVA entered into an MOU to study the development, construction, and operation of carbon capture, utilization, transportation, and sequestration infrastructure at or near TVA’s Ackerman and Paradise Combined Cycle Plants. 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 2023, TVA began construction near Vonore, Tennessee. The 20 MW battery system was installed in the first quarter of 2024, and the site is progressing toward construction completion with the expectation to begin testing and commissioning by the first quarter of 2025. TVA is also evaluating a battery energy storage system utilizing grid-forming inverters. Additionally, TVA is contracting for several battery energy storage systems to be deployed in the region by third-party developers who will make their systems available for TVA dispatch as described in Part II, Item 7, 25 Table of Contents Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Renewable Power Purchase Agreements. The system integration lessons learned from these projects will guide future application of battery storage as part of the evolving bulk power system in the region. TVA is studying the optimal siting and design for another pumped-storage plant as described in Power Supply and Load Management Resources — Hydroelectric Pumped-Storage . TVA is also evaluating the potential of short duration battery alternatives to lithium-ion and long duration storage alternatives to pumped-storage. TVA continues to develop potential electrification programs, in addition to the Fast Charge Network, that improve resource use and reduce environmental impacts 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. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Electric Vehicles. TVA has 23 Connected Communities pilot projects with many different stakeholders across four focus areas: Broadband and Digital Literacy, Economic Empowerment, Energy and Environmental Justice, and Enhanced Community Resiliency. Connected Communities pilot projects are aimed at addressing today’s challenges with community-driven information and technology solutions for a modernized energy system. Connected Communities has ten community partnerships to provide consulting services to test a framework for engaging communities to help set goals, scope projects, and apply for funding. Research will continue to identify best practices, better understand challenges in the Tennessee Valley, and scale up learnings from the projects to broader applications throughout the Tennessee Valley. TVA and LPCs are engaged in several initiatives related to regional grid transformation. Research includes technologies and applications advancement in intelligent distribution systems. Smart meter technology has the potential to shift usage patterns away from peak demand times which could change costs significantly. Additionally, intelligent transmission systems would give TVA the ability to nearly instantaneously diagnose problems, make corrections, and engage transmission and generation resources quickly so that power would keep flowing. 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. 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 . Finally, in 2023, TVA began an initiative called Future Grid Performance. This initiative seeks to address grid needs to keep the grid reliable and stable as TVA transitions to an energy system that has a greater share of intermittent and inverter-based resources, such as renewables and battery storage, connected to the transmission system. See Transmission above for more information on this initiative. Flood Control Activities The Tennessee River watershed has one of the highest annual rainfall totals of any watershed in the U.S., averaging 51 inches per year. During 2024, approximately 52 inches of rain fell in the Tennessee Valley. 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 just above normal rainfall at 104 percent of normal and runoff at 81 percent of normal during 2024. Although runoff for 2024 was below normal due to fewer significant rain events, the winter and spring timing of above normal rainfall 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 $406 million in 2024 and $10.1 billion over TVA's recorded history. Environmental Stewardship Activities TVA's mission includes managing the Tennessee River, its tributaries, and federal lands along the shoreline to provide, among other things, year-round navigation, flood damage reduction, affordable and reliable electricity, recreational opportunities, adequate water supply, improved water quality, and natural resource protection. There are 49 dams that comprise TVA's integrated reservoir system. Each dam may also have ancillary structures used to support or assist the main dam's function. The reservoir system provides approximately 800 miles of commercially navigable waterways and also provides significant flood reduction benefits both within the Tennessee River system and downstream on the lower Ohio and Mississippi Rivers. The 26 Table of Contents 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. 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 Tennessee Valley's natural resources, including reducing carbon intensity and air emissions; minimizing waste; 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; 650,000 surface acres of reservoir water; and 293,000 acres of reservoir lands. TVA accomplishes this mission and supports the objectives of the TVA Environmental Policy through implementation of its natural resources stewardship strategy. 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 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 with the stewardship strategy and includes ten focus areas that provide a comprehensive view of resource stewardship efforts. 27 Table of Contents Economic Development Activities Economic development, along with energy production and environmental stewardship, is one of the primary statutory purposes of TVA. Economic development programs developed by TVA support all communities, including rural and economically distressed communities, across the Tennessee Valley . Through its economic development activities, TVA endeavors to recruit and retain companies in targeted business sectors, foster capital investment and job growth, and assist communities in the Tennessee Valley with economic growth opportunities. TVA seeks to achieve these goals through a combination of initiatives and partnerships with LPCs, regional, state, and local agencies, and communities by providing financial incentives, technical services, industry expertise, and site-selection assistance to new and existing businesses in the Tennessee Valley. 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 2024, TVA's economic development efforts and programs helped attract or expand 175 companies into the TVA service area. These companies announced the following economic performance measures: Economic Performance Measure At September 30, 2024 (1) Projected capital investments $8.9 billion Jobs expected to be created (#) (2) 10,368 Jobs expected to be retained (#) (3) 42,393 Notes (1) These amounts are forward-looking and are subject to various uncertainties. Amounts may differ materially based upon a number of factors, including, but not limited to, economic downturns or recessions. See Forward-Looking Information and Item 1A, Risk Factors. (2) "New jobs" in the TVA fiscal year are newly created, paid positions at a facility of a TVA customer. “Positions” are calculated by adding (1) the number of full-time, on-site employees and/or independent contractors at the facility, (2) the total number of full-time work-from-home employees and independent contractors who reside in the TVA service territory and who spend 100% of their work time on facility-related matters, and (3) the total hours worked on facility-related matters by (a) full-time and part-time on-site employees at the facility and (b) full-time and part-time work-from-home employees who reside in the TVA service territory and who spend less than 100% of their work time on facility-related matters, divided by the number of work hours of such employees based on a 40 hour work week. A “TVA customer” means an entity that purchases power from TVA or a distributor of TVA power. New jobs reported by TVA may include positions created during the current TVA fiscal year and certified projections of anticipated positions to be created within a five-year time frame. New job numbers reported by TVA are certified and provided to TVA by TVA customers. (3) "Retained jobs" are paid positions at a facility of a TVA customer that were created prior to the current TVA fiscal year and that continue to be filled in the current TVA fiscal year. “Positions” are calculated by adding (1) the number of full-time, on-site employees and/or independent contractors at the facility, (2) the total number of full-time work-from-home employees and independent contractors who reside in the TVA service territory and who spend 100% of their work time on facility-related matters, and (3) the total hours worked on facility-related matters by (a) full-time and part-time on-site employees at the facility and (b) full-time and part-time work-from-home employees who reside in the TVA service territory and who spend less than 100% of their work time on facility-related matters, divided by the number of work hours of such employees based on a 40 hour work week. A “TVA customer” means an entity that purchases power from TVA or a distributor of TVA power. Retained job numbers reported by TVA are certified and provided to TVA by TVA customers. Regulation TVA is required to comply with comprehensive and complex laws, regulations, and orders. The costs of complying with these laws, regulations, and orders are expected to be substantial, and costs could be significantly more than TVA anticipates. Congress TVA exists pursuant to the TVA Act as enacted by Congress and carries on its operations in accordance with this legislation. Congress can enact legislation expanding or reducing TVA's activities, change TVA's structure, and even eliminate TVA. Congress can also enact legislation requiring the sale of some or all of the assets TVA operates or reduce the U.S.'s ownership in TVA. To allow TVA to operate more flexibly than a traditional government agency, Congress exempted TVA from all or parts of certain general federal laws that govern other agencies, such as federal labor relations laws and the laws related to the hiring of federal employees, the procurement of supplies and services, and the acquisition of land. Other federal laws enacted since the creation of TVA that are applicable to other agencies have been made applicable to TVA, including those related to paying employees overtime and protecting the environment, cultural resources, and civil rights. Securities and Exchange Commission Section 37 of the Securities Exchange Act of 1934 (the "Exchange Act") requires TVA to file with the Securities and Exchange Commission ("SEC") such periodic, current, and supplementary information, documents, and reports as would be required pursuant to Section 13 of the Exchange Act if TVA were an issuer of a security registered pursuant to Section 12 of the Exchange Act. Section 37 of the Exchange Act exempts TVA from complying with Section 10A(m)(3) of the Exchange Act, which requires each member of a listed issuer's audit committee to be an independent member of the board of directors of the issuer. Since TVA is an agency and instrumentality of the U.S., securities issued or guaranteed by TVA are "exempted securities" under the Securities Act of 1933, as amended (the "Securities Act"), and may be offered and sold without registration under the Securities Act. In addition, securities issued or guaranteed by TVA are "exempted securities" and "government 28 Table of Contents securities" under the Exchange Act. TVA is also exempt from Sections 14(a)-(d) and 14(f)-(h) of the Exchange Act (which address proxy solicitations) insofar as those sections relate to securities issued by TVA, and transactions in TVA securities are exempt from rules governing tender offers under Regulation 14E of the Exchange Act. Also, since TVA securities are exempted securities under the Securities Act, TVA is exempt from the Trust Indenture Act of 1939 insofar as it relates to securities issued by TVA, and no independent trustee is required for these securities. Federal Energy Regulatory Commission Under the FPA, TVA is not a "public utility," a term which primarily refers to investor-owned utilities. Therefore, TVA is not subject to the full jurisdiction that FERC exercises over public utilities under the FPA. TVA is, however, an "electric utility" and a "transmitting utility" as defined in the FPA and, thus, is directly subject to certain aspects of FERC's jurisdiction. Under the FPA, for example, TVA (1) must comply with certain standards designed to maintain transmission system reliability; (2) can be ordered to interconnect its transmission facilities with the electrical facilities of independent generators and of other electric utilities that meet certain requirements; (3) can be ordered to transmit wholesale power provided that the order (a) does not impair the reliability of the TVA or surrounding systems, (b) meets the applicable requirements concerning terms, conditions, and rates for service, and (c) does not implicate the ACPA; (4) could be subject to FERC review of the transmission rates and the terms and conditions of service that TVA provides; and (5) is prohibited from (a) reporting false information on the price of electricity sold at wholesale or the availability of transmission capacity to a federal agency with intent to fraudulently affect the data being compiled by the agency and (b) using manipulative or deceptive devices or contrivances in connection with the purchase or sale of power or transmission services subject to FERC's jurisdiction. In addition, the FPA provides FERC with authority (1) to order refunds of excessive prices on short-term sales (transactions lasting 31 days or less) by all market participants, including TVA, in price gouging situations if such sales are through an independent system operator or regional transmission organization under a FERC-approved tariff; (2) to issue regulations requiring the reporting, on a timely basis, of information about the availability and prices of wholesale power and transmission service by all market participants, including TVA; (3) to investigate electric industry practices, including TVA's operations that are subject to FERC's jurisdiction; and (4) to impose civil penalties of up to $1 million per day for each violation of the provisions of the FPA discussed in the prior paragraph that are applicable to TVA. Criminal penalties may also result from such violations. Furthermore, while not required to do so, TVA has elected to implement various FERC orders and regulations pertaining to public utilities on a voluntary basis to the extent that they are consistent with TVA's obligations under the TVA Act. Finally, on July 28, 2023, FERC issued Order No. 2023. The order updates the procedures for interconnecting generating facilities and is intended to address interconnection queue backlogs, improve certainty in the interconnection process, and encourage the evaluation of alternative transmission technologies. TVA has revised its generation interconnection procedures and agreements to align with Order No. 2023, effective November 1, 2024. NERC Compliance TVA is subject to federal reliability standards that are set forth by NERC and approved by FERC. These standards are designed to maintain the reliability of the bulk electric system, including TVA's generation and transmission system, and include areas such as maintenance, training, operations, planning, modeling, critical infrastructure, physical and cyber security, vegetation management, and facility ratings. TVA recognizes that reliability standards and expectations continue to become more complex and stringent for transmission systems. 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. 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 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 Environmental Protection Agency ("EPA") in a variety of areas, including air quality control, water quality control, management and disposal of solid and hazardous wastes, and greenhouse gas ("GHG") reductions to address climate change. 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. 29 Table of Contents States The Supremacy Clause of the U.S. Constitution prohibits states, without federal legislative consent, from regulating the manner in which the federal government conducts its activities. As a federal agency, TVA is exempt from regulation, control, and taxation by states except in certain areas where Congress has clearly made TVA subject to state regulation. See Environmental Matters below. Other Federal Entities TVA's activities and records are also subject to review to varying degrees by other federal entities, including the Government Accountability Office and the Office of Management and Budget ("OMB"). There is also an Office of the Inspector General which reviews TVA's activities and records. Taxation and Tax Equivalents TVA is not subject to federal income taxation. In addition, neither TVA nor its property, franchises, or income is subject to taxation by states or their subdivisions. The TVA Act, however, does require TVA to make tax equivalent payments to states and counties in which TVA conducts power operations or in which TVA has acquired properties previously subject to state and local taxation. The total amount of these payments is five percent of gross revenues from the sale of power during the preceding year excluding sales or deliveries to other federal agencies and off-system sales with other utilities, with a provision for minimum payments under certain circumstances. Except for certain direct payments TVA is required to make to counties, distribution of tax equivalent payments within a state is determined by individual state legislation. Environmental Matters 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. 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 EPA to set National Ambient Air Quality Standards ("NAAQS") for certain air pollutants. EPA has set NAAQS for ozone, particulate matter, sulfur dioxide ("SO 2 "), nitrogen oxides ("NO x "), carbon monoxide, and lead. Over the years, EPA has made the NAAQS more stringent. Each state must develop a plan to be approved by EPA for achieving and maintaining NAAQS within its borders. 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 and public permitting processes. TVA fossil fuel-fired plants can be impacted by these requirements. Currently, all TVA generating units are located in areas designated as attainment areas. On March 6, 2024, however, EPA finalized more stringent NAAQS for particulate matter that may increase the likelihood of certain areas in TVA’s service territory being designated as non-attainment areas. TVA could incur significant costs associated with upgrades to facilities if such facilities are in areas that are redesignated as being in non-attainment. The more stringent NAAQS are currently subject to a legal challenge seeking to overturn the standards. Revised Cross-State Air Pollution Rule. TVA power plants are subject to EPA's Cross-State Air Pollution Rule ("CSAPR"). CSAPR addresses air pollution from upwind states in the U.S. 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 "Revised CSAPR Update Rule"), the Shawnee Fossil Plant ("Shawnee") facility is subject to reduced ozone-season NO x allowances and has been required to use most of its allowance inventory. In 2024, TVA monitored forecasted needs and utilized purchased allowances for the Shawnee facility. A longer-term compliance strategy for the facility is being developed that may include installing NO x control upgrades, incorporating operational changes, and continuing to purchase allowances. When completed, this strategy will help TVA comply with both the Revised CSAPR Update Rule and the Federal Implementation Plan Addressing Regional Ozone Transport for the 2015 Ozone NAAQS. TVA has obtained approval from the State of Kentucky for construction of seven selective catalytic reduction systems ("SCRs") at the Shawnee facility. In 2024, TVA constructed an SCR on Shawnee Unit 7 and is constructing SCRs at three additional Shawnee Units by the end of 2025. As of September 30, 2024, TVA had spent $189 million and expects to spend an additional $51 million. TVA is evaluating plans for the remaining units. Federal Implementation Plan Addressing Regional Ozone Transport for the 2015 Ozone NAAQS. On March 15, 2023, EPA issued final regulations known as the "Good Neighbor Plan" to reduce NO x emissions from power plants and certain industrial facilities. With the Good Neighbor Plan, EPA issued its Federal Implementation Plan ("FIP") that covers 23 states, including Alabama, Kentucky, and Mississippi, to reduce the interstate transport of NO x . Under the rule, beginning with the 2023 ozone season, power plants in 22 states, including Alabama, Kentucky, and Mississippi, are required to participate in a NO x 30 Table of Contents trading program. Over time, the emission budgets will decline based on the level of reductions achievable through phased installation of emissions controls at power plants starting in 2024. The rule also establishes daily emission rates for coal steam electric generating units greater than or equal to 100 MW in the covered states beginning with the 2024 ozone season. To help comply with these regulations, TVA is developing a longer-term compliance strategy for its Shawnee facility that may include installing NO x control upgrades, incorporating operational changes, and continuing to purchase allowances. See Revised Cross-State Air Pollution Rule above. During 2023, EPA issued interim rules to stay the effectiveness of the 2023 FIP requirements for emission sources in several states, including Kentucky, Mississippi, and Alabama. The Good Neighbor Plan itself has been challenged in the United States Court of Appeals for the District of Columbia Circuit ("D.C. Circuit"), and applications were filed with the U.S. Supreme Court to stay the plan while its merits are being litigated. On June 27, 2024, the U.S. Supreme Court stayed the Good Neighbor Plan. The stay prevents EPA from applying the Good Neighbor Plan in 23 affected states, including Alabama, Kentucky, and Mississippi, pending the disposition of the petition for review. TVA cannot predict the outcome of the litigation or how it may impact its operations. Mercury and Air Toxics Standards for Electric Utility Units . On May 7, 2024, EPA published a final rule that strengthens and updates the Mercury and Air Toxics Standards (“MATS”) for electric generating units ("EGUs") to reflect recent developments in control technologies. The rule lowers the emission standard for filterable particulate matter ("PM") from 0.030 lbs/MMBtu to 0.010 lbs/MMBtu, with compliance to be demonstrated solely through the use of PM Continuous Emission Monitoring Systems. The rule is subject to legal challenges. If the challenges are not successful, the rule could require TVA to refurbish existing pollution control equipment at some of its coal-fired units, and the cost of such refurbishments could be substantial. Environmental Agreements. In 2011, TVA entered into two substantively similar agreements, one with 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-fired units and invest $290 million in certain TVA environmental projects. See Note 22 — Commitments and Contingencies — Legal Proceedings — Environmental Agreements , which discussion is incorporated herein by reference. Acid Rain Program. 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. TVA continues to reduce SO 2 and NO x emissions from its coal-fired plants, and the SO 2 allowances allocated to TVA under the Acid Rain Program are sufficient to cover the operation of its coal-fired plants. In the TVA service area, the limitations imposed on SO 2 and NO x emissions by the CSAPR program are more stringent than the Acid Rain Program. Therefore, TVA does not anticipate that the Acid Rain Program will impose any additional material requirements on TVA. Regional Haze Program . EPA issued the Clean Air Visibility Rule, which required certain older sources to install best available retrofit technology. No additional controls or lower operating limits are required for any TVA units to meet best available retrofit technology requirements. In 2017, EPA published the final rule that changed some of the requirements for Regional Haze State Implementation Plans ("SIPs"). 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 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 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, EPA issued a final action stating that 15 states, including Kentucky, failed to submit a complete SIP, which triggered a two-year deadline for EPA to promulgate a FIP for the state unless Kentucky submits, and EPA approves, a SIP satisfying the visibility protection requirements of the CAA. TVA negotiated with Kentucky and agreed to accept a federal limit for SO 2 emissions starting January 1, 2028. In August 2023, TVA submitted a Title V permit application to the Kentucky Division of Air Quality that incorporates this limit. TVA anticipates that it could meet this limit by installing control technologies for the seven uncontrolled Shawnee units. On June 4, 2024, the Kentucky Division of Air Quality made Kentucky's Regional Haze SIP available for public comments and expects to submit the final SIP to EPA after consideration of those public comments. See Revised Cross-State Air Pollution Rule above for additional information regarding TVA’s plans to control the Shawnee units. 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 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 ("SSM"). Historically, SIPs developed under the CAA typically excluded periods of SSM, but in June 2015, EPA finalized a rule to eliminate such exclusions ("2015 Rule"). Environmental petitioners and several states filed petitions for judicial review of the 2015 Rule before the D.C. Circuit. On March 1, 2024, the D.C. Circuit determined that EPA exceeded its authority in removing the SSM exemptions from SIPs without showing the exemptions impede compliance with the CAA. TVA cannot predict the outcome of future SIP submittals in responding to the March 2024 decision of the D.C Circuit. 31 Table of Contents New York Petition to Address Impacts from Upwind High Emitting Sources . In 2018, the State of New York filed a petition with EPA under Section 126(b) of the CAA to address ozone impacts on New York from the NO x emissions from sources emitting at least 400 tons of NO x in CY 2017 from nine states including Kentucky. The New York petition requests that EPA require daily NO x limits for several Kentucky utility units including the Shawnee units. 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, 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 EPA's denial of the petition, and in July 2020, the D.C. Circuit vacated EPA's denial of the petition and remanded the petition to EPA for reconsideration. Specific impacts to TVA cannot be determined until EPA takes further action on the petition. GHG Emissions. On May 9, 2024, EPA published a final rule that (1) repeals the Affordable Clean Energy Rule addressing GHG emissions from existing fossil fuel-fired electric generation units (“EGUs”), (2) establishes guidelines for GHG emissions from existing fossil-fuel fired steam generating EGUs, (3) finalizes revisions to the New Source Performance Standards (“NSPS”) for GHG emissions from new and reconstructed fossil fuel-fired stationary combustion turbine EGUs, and (4) finalizes revisions to the NSPS for GHG emissions from fossil fuel-fired steam generating EGUs that undertake a large modification. The degree of GHG emission reduction would depend on the EGU’s retirement date, and the cost of such reductions would likely be substantial. TVA is still evaluating the potential impact of the rule on its new natural gas-fired EGUs, but the impact would also likely be substantial. Provisions of the rule addressing GHG emissions from base load natural gas-fired EGUs would apply to new combined cycle ("CC") gas plants at which construction commenced after May 23, 2023. Base load CC gas plants subject to the rule would be required by January 1, 2032, to control 90 percent of the GHG emissions, most likely through carbon capture and storage. EPA did not finalize guidelines for GHG emissions from existing fossil fuel-fired stationary combustion turbine EGUs in this rulemaking. The rule is subject to legal challenges. Under the new rule, TVA would be required to reduce GHG emissions from any coal-fired units that it continues to operate beyond January 1, 2032. Climate Change Emissions. 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 2023 CY 2022 Nitrogen Oxide (NO x ) (2) Total NO x Emissions (MT) 13,221 15,270 Total NO x Emissions Intensity (MT/Net MWh) 0.000098 0.000113 Sulfur Dioxide (SO 2 ) (2) Total SO 2 Emissions (MT) 17,736 22,331 Total SO 2 Emissions Intensity (MT/Net MWh) 0.000131 0.000165 Mercury (Hg) Total Hg Emissions (kg) 47.4 39.2 Total Hg Emissions Intensity (kg/Net MWh) 0.0000004 0.0000003 Notes (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 2023, 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 49 million tons, resulting in a TVA system average, as delivered, CO 2 emission rate of 625 lbs/MWh. This represents a 58 percent and 53 percent reduction in mass carbon emissions and TVA's carbon emission rate, respectively, from 2005 levels. While TVA continues down the path of lowering emissions, including GHG emissions, there will be fluctuations in TVA's emission numbers as a result of various factors, including electricity usage in the Tennessee Valley and changes in the power supply mix, as TVA continues to make operational decisions to keep the system reliable and deliver low-cost energy. The achievement of TVA's carbon reduction efforts, and its ability to maintain system reliability during the transition to cleaner forms of energy, is subject to numerous risks. See Forward-Looking Information , and Item 1A, Risk Factors — Operational Risks — TVA may not be able to meet its carbon reduction aspirations, which may result in additional capital expenditures or higher operating expense. Report on Climate-Related Risks . On December 30, 2022, the Government Accountability Office ("GAO") publicly released a report entitled Tennessee Valley Authority: Additional Steps Are Needed to Better Manage Climate-Related Risks . This report examines climate-related risks to TVA's operations and steps TVA has taken to manage climate-related risks as well 32 Table of Contents as additional steps needed. In the report, GAO made recommendations, including that TVA conduct an inventory of assets and operations vulnerable to climate change and develop a resilience plan that identifies and prioritizes resilience measures. TVA provided a response to GAO in June 2023 outlining completed and planned TVA actions to address the recommendations. To strengthen TVA’s climate resiliency, TVA has established new priority actions in TVA’s Climate Adaptation Plan. Based on the information provided and the release of the 2024 Climate Adaptation Plan, GAO agreed to close all the recommendations on August 14, 2024. Executive Actions. President Biden has taken several executive actions 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. In addition, EO 13990 re-established an Interagency Working Group and tasked it with identifying areas and other key decisions where agencies should consider the social cost of GHG, which is a modeled metric used to estimate damages that GHG causes across society. On September 21, 2023, President Biden announced that he approved recommendations from the Interagency Working Group on the expanded use of the social costs of GHG for budgeting, procurement, and other agency decisions, including reaffirming its use for environmental reviews where appropriate. • 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, 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 U.S. 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. • On April 21, 2023, President Biden issued EO 14096, “Revitalizing Our Nation's Commitment to Environmental Justice for All.” EO 14096, among other things, details the administration’s policy to take a whole-of-government approach to environmental justice and to advance environmental justice by implementing and enforcing the nation’s environmental and civil rights laws, preventing pollution, addressing climate change and its effects, and working to clean up legacy pollution that is harming human health and the environment. In addition, EO 14096 directs each federal agency to make achieving environmental justice part of its mission and to submit an environmental justice strategic plan to the Chair of the Council on Environmental Quality within 18 months of the date of the order and every four years thereafter. TVA is voluntarily pursuing multiple policies and programs in the Tennessee Valley that support the goals and policies of these executive actions. See Actions Taken by TVA to Reduce GHG Emissions below. TVA must consider executive actions within the context of statutory requirements imposed by Congress when carrying out its mission such as the TVA Act, which requires power to be sold at rates as low as feasible, and the Energy Policy Act of 1992, which requires the use of least-cost resource planning. TVA performs long-term least-cost resource planning through its Integrated Resource Plan process. 33 Table of Contents Paris Agreement . The U.S. 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. In April 2021, the Biden Administration announced its GHG NDCs for 2030 under the Paris Agreement, and these NDCs establish a new target for the U.S. to achieve a 50 to 52 percent reduction from 2005 levels in economy-wide net GHG pollution in 2030. TVA's own operations have achieved GHG reductions from 2005 levels that are in excess of 50 to 52 percent. Litigation . 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 22 — Commitments and Contingencies — Legal Proceedings for additional information. Indirect Consequences of Regulation or Business Trends . Legal, technological, political, and scientific developments regarding climate change may create new opportunities and risks. The potential indirect consequences could include an increase or decrease in electricity demand, increased demand for clean generation from alternative energy sources, and subsequent impacts to business reputation and public opinion. See Power Supply and Load Management Resources . Physical Impacts of Climate Change. 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, heat waves, 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 updated its Climate Adaptation Plan in 2024. 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 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 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 to enable greater integration of renewables on the grid, 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 continues to invest in energy efficiency in its operations and offer 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. Also, TVA has partnered with the University of Tennessee Baker School for Public Policy and Public Affairs and with diverse stakeholders from across the Tennessee Valley to conduct a Valley Pathways Study, which is focused on building a competitive and clean economy for the Tennessee Valley. This study examines potential scenarios for all economic sectors across the Tennessee Valley that will support sustainable growth and a viable and preferred decarbonization pathway. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Optimum Energy Portfolio . 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. 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. In addition, TVA's decarbonization initiative is aimed at understanding and applying clean resources to support the reduction of carbon emissions from its power supply, and TVA is exploring several technologies as part of these efforts. See Research and Development above. Renewable/Clean Energy Standards Thirty-five 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 18 of those states and the District of Columbia, the requirement is for a 100% clean electricity standard or goal by 2050 or earlier. One state within the TVA service area, North Carolina, has a mandatory renewable and clean energy goal that, while not applying directly to TVA, does apply to TVA's LPCs serving retail customers in that state. 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. 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. Likewise, the Mississippi Public Service Commission adopted an energy efficiency rule applying to electric and natural gas providers in the state, and TVA is supplying information on participation in TVA's energy efficiency programs to support the covered Mississippi LPCs. 34 Table of Contents Water Quality Control Developments Waters of the United States . On May 25, 2023, the Supreme Court in Sackett v. EPA narrowed the interpretation of the scope of “waters of the United States” under the CWA. Specifically, the Court ruled that CWA jurisdiction extends only to wetlands that have continuous surface connection with relatively permanent bodies of water connected to traditional interstate navigable waters. In reaching its decision, the Court rejected the “significant nexus” standard for determining the jurisdiction of the CWA that was articulated by Justice Kennedy in the Court’s Rapanos decision. The result of this decision is that fewer waters will be subject to CWA permitting or other restrictions. In response to the Sackett v. EPA decision, EPA and the Army Corps of Engineers (“ACE”) published a final rule in the Federal Register in September 2023 that reestablishes, for the third time, the definition of waters of the United States. The new definition encompasses fewer water bodies than the previous definition. As such, ACE permits will no longer be required for some streams and wetlands that would have been included based on the previous “significant nexus” standard. Cooling Water Intake Structures. In 2014, EPA released a final rule under Section 316(b) of the CWA relating to cooling water intake structures ("CWIS") for existing power generating facilities. 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 ("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-fueled and nuclear-fueled facilities and will likely require capital upgrades to ensure compliance. Most TVA facilities are projected to require retrofit of CWIS with "fish-friendly" screens and fish return systems to achieve compliance with the new rule. 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. In addition, the responsible state agencies must provide all permit applications to the U.S. Fish and Wildlife Service for a 60-day review prior to public notice and an opportunity to comment during the public notice. As a result, the permit may include requirements for additional studies of threatened and endangered species arising from U.S. Fish and Wildlife Service comments and may require additional measures to be taken to protect threatened and endangered species and critical habitats directly or indirectly related to the plant cooling water intake. 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 activities have begun and are expected to continue through the 2028 - 2030 timeframe. These compliance activities include the requirement to conduct and submit studies on entrainment mortality, and these studies will be submitted as part of the permit renewal process. Using these studies, the state permitting agency will determine if the existing technology exhibits best technology or if alternative technology is required to achieve BTA. To address impingement mortality, a facility has 180 days after its reissued NPDES permit becomes effective to select impingement compliance options and submit a compliance schedule for implementation. A waiver from having to implement its impingement compliance requirements can be obtained if the facility will be retiring in the next five-year permit cycle. EPA has never previously applied the requirements under Section 316(b) to hydroelectric facilities. However, in September 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 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 Region 10 permits cannot be determined at this time. Hydrothermal Discharges. EPA and many states continue to focus regulatory attention on potential effects of hydrothermal discharges. Many TVA plants have variances from thermal standards under Section 316(a) of the CWA that are subject to review as NPDES permits are renewed. Specific data requirements in the future will be determined based on negotiations between TVA and state regulators. If plant thermal limits are made more stringent, TVA may have to install cooling towers at some of its plants and operate installed cooling towers more often. This could result in a substantial cost to TVA. Steam-Electric Effluent Guidelines . In October 2020, EPA issued final revised electric effluent limitations guidelines ("ELGs") for bottom ash transport water and FGD wastewater. The primary impact for TVA is on the operation of existing coal-fired generation facilities. The revision also includes a subcategory for which Cumberland would qualify that provides TVA greater flexibility in meeting the ELGs. The revision includes two additional subcategories for low utilization units and units that cease coal combustion by the end of CY 2028. In October 2021, TVA filed notices of planned participation preserving the option for TVA's Bull Run, Cumberland, and Kingston plants to participate in the subcategory for units that cease coal combustion by the end of CY 2028. On May 9, 2024, EPA issued final steam ELGs. This rule is expected to significantly impact wastewater treatment options at coal combustion facilities with waste streams that operate past 2028. This rule establishes more stringent technology-based effluent limitations for four waste streams: flue gas desulfurization (“FGD”) wastewater, bottom ash transport water (“BATW”), combustion residual leachate (“CRL”), and legacy wastewater. The rule also establishes a new subcategory for CRL called unmanaged CRL, which includes discharges of CRL that the permitting authority determines are the functional equivalent 35 Table of Contents of direct discharges of CRL or groundwater that meets the definition of CRL that is pumped to the surface and discharged to the waters of the United States. The 2024 ELGs are based on performance of specific technologies applied to these wastewaters. The rule establishes a general applicability category and a 2034 retirement subcategory for existing coal generation and retains the 2028 retirement subcategory and voluntary incentives program from the 2020 rule. The 2024 rule is likely to affect TVA’s operating fossil sites, including Kingston, Cumberland, Gallatin, and Shawnee, and imposes additional reporting requirements for Bull Run. Additionally, this rule could impact any sites with CRL that have repowered or in the future could repower with steam electric generation. TVA is evaluating the applicability of this rule on all facilities as appropriate. Currently, the rule is subject to legal challenges. If the challenges are not successful, TVA could incur substantial costs to comply with the rule. In 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 EPA's 2020 rule. The Tennessee Department of Environment and Conservation ("TDEC") issued a final permit for Cumberland in the first quarter of 2024. In addition, consistent with the 2024 rule, on August 6, 2024, TVA submitted requests to state regulatory authorities to modify NPDES permits for Kingston, Cumberland, Shawnee, and Gallatin to incorporate into the permits limitations in EPA's 2024 rule. Other Water Quality Control Requirements . As is the case in other industrial sectors, TVA and other utilities are also facing more stringent requirements related to drinking water standards, including new limits and requirements for per- and polyfluoroalkyl substances, 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. Cleanup of Solid and Hazardous Wastes TVA Sites. Historical operations by TVA and other entities 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 RCRA permit issued by the Alabama Department of Environmental Management ("ADEM"). On September 30, 2024, 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 $15 million and was included in Accounts payable and accrued liabilities and Other long-term liabilities on the Consolidated Balance Sheets. ADEM issued a renewed permit to TVA in July 2023, with a 10-year term. The new permit will not have any adverse impacts on TVA. In addition, the Environmental Research Center has an active groundwater monitoring program as part of a permitted corrective action plan. Non-TVA Sites. TVA is aware of alleged hazardous-substance releases at certain non-TVA areas for which it may have some liability. See Note 22 — Commitments and Contingencies — Contingencies — Environmental Matters . Coal Combustion Residuals. EPA published its final rule governing CCR in 2015. 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. 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 EPA's CCR rule ("CCR Rule") instead of self-implementation. In 2020, 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. On May 8, 2024, EPA published its final legacy CCR Rule ("Legacy CCR Rule"), which expands the scope of the existing regulatory requirements of the 2015 CCR Rule to include two additional classes of CCR units: Legacy Surface Impoundments (“Legacy SIs”) and Coal Combustion Residual Management Units (“CCRMUs”). Legacy SIs include inactive surface impoundments at retired generating facilities that were exempt from the 2015 CCR Rule. CCRMUs are a newly defined category that includes previously unregulated areas at CCR facilities where CCR was beneficially reused in an unencapsulated manner, disposed, placed, or managed on land outside of CCR units regulated by the 2015 CCR Rule. TVA completed applicability reports for multiple Legacy SIs by the November 8, 2024 deadline and as authorized by regulation is still evaluating whether other CCR units might constitute Legacy SIs. For CCRMUs, TVA must complete the initial round of facility evaluation reports by February 8, 2026, and the subsequent round by February 8, 2027. During 2024, TVA recorded additional estimated AROs of $3.1 billion as a result of EPA's Legacy CCR Rule and recorded a corresponding regulatory asset of $3.1 billion due to these AROs being associated with closed sites and asset retirement costs having been fully depreciated. These amounts are forward-looking and are subject to various uncertainties, and actual amounts may differ materially based upon a number of factors, including, but not limited to, the outcome of legal challenges to the Legacy CCR Rule, ongoing evaluations of the number and scope of newly regulated units, and determinations on final closure requirements and performance standards. See Forward-Looking Information and Item 1A, Risk Factors for a discussion of additional factors. Revisions to the additional estimated non- 36 Table of Contents nuclear AROs from the Legacy CCR Rule will be made whenever factors indicate that the timing or amounts of estimated cash flows have changed. See also Note 13 — Asset Retirement Obligations . In addition, EPA has recently interpreted its CCR Rule in a way that could challenge TVA's predominant closure methodology for many units, thereby potentially creating significant additional costs with implementing closure. In August 2015, TDEC issued an order that includes an iterative process through which TVA and TDEC will investigate, assess, and remediate any unacceptable risks resulting from CCR management and disposal at TVA CCR units in the State of Tennessee. As part of this process, TVA has submitted environmental assessment reports (“EARs”) to TDEC, and after the EARs are approved, TVA will submit Corrective Action/Risk Assessment (“CARA”) Plans that will identify the unacceptable risks and TVA's proposed remediation. TDEC will review the CARA Plans and provide comments, and TVA will make revisions to address TDEC's comments until TDEC approves a final CARA Plan for each site. The public also will have an opportunity to review and comment on each CARA Plan prior to TDEC's approval of the final plan. During 2024, TDEC approved EARs for John Sevier, Cumberland, Kingston, Allen, and Watts Bar, and TVA submitted initial drafts of the CARA Plans for John Sevier, Cumberland, Allen, Watts Bar, and Kingston. TVA also submitted an initial draft of the Gallatin Ash Pond Complex CARA Plan to TDEC in January 2024 pursuant to a consent order and agreement. 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 Residual Facilities for a discussion of the Gallatin Ash Pond Complex. As discussed above, revisions of these initial draft CARA Plans will continue through the iterative process until the final plans are approved. 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 Impacts Associated with CCR Management Activities . There is increased attention among EPA, environmental groups, and state regulatory agencies on impacts to groundwater associated with CCR management activities. As a result, TVA may be required to change how it manages CCR at some of its plants, potentially resulting in higher costs. 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 From 1970 to 2024, TVA spent approximately $6.8 billion on controls to reduce emissions from its coal-fired power plants, including $28 million, $25 million, and $16 million in 2024, 2023, and 2022, respectively, on clean air controls. In addition, TVA has reduced emissions by idling or retiring coal-fired units and relying more on cleaner energy resources including natural gas and nuclear generation and renewable sources. 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 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. See Power Supply and Load Management Resources — Coal-Fired above and Estimated Required Environmental Expenditures below. SO 2 Emissions and NO x Emissions. To reduce SO 2 emissions, TVA operates scrubbers on 17 of its coal-fired units and switched to lower-sulfur coal at certain coal-fired units. To reduce NO x emissions, TVA operates SCRs on 18 coal-fired units, operates low-NO x burners or low-NO x combustion systems on 20 units, optimized combustion on all 24 units, and operates NO x control equipment year round when units are operating (except during start-up, shutdown, and maintenance periods). TVA has also retired 35 of 59 coal-fired units. In 2024, TVA constructed an SCR on Shawnee Unit 7 and is constructing SCRs at three additional Shawnee Units by the end of 2025. TVA is evaluating plans for the remaining units. Except for six units at Shawnee, the remaining coal-fired units in the TVA fleet have scrubbers and SCRs. See Power Supply and Load Management Resources — Coal-Fired above. Particulate Emissions. To reduce particulate emissions of air pollutants, TVA has equipped all of its coal-fired units with scrubbers, mechanical collectors, electrostatic precipitators, and/or bag houses. Greenhouse Gas Emissions . Various federal agencies, including 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. There could be additional material costs if further reductions of GHGs, including CO 2 , are mandated by legislative, executive, regulatory, or judicial actions and if more stringent emission reduction requirements for conventional pollutants are established. These costs cannot reasonably be predicted at this time because of the uncertainty of these actions. 37 Table of Contents Estimated Required Environmental Expenditures The following table contains information about TVA's current estimates on projects related to environmental laws and regulations. Estimated Potential Environmental Expenditures (1)(2) As of September 30, 2024 (in millions) 2025 2026 2027 - 2029 (3) Total Coal Combustion Residual Program (4) $ 342 $ 472 $ 1,575 $ 2,389 Clean Air Act control projects (5) 83 16 58 157 Clean Water Act requirements (6) 20 24 47 91 Notes (1) These estimates are subject to change as additional information becomes available and as regulations change. (2) These estimates include $111 million, $116 million, and $258 million for 2025, 2026, and 2027 - 2029, 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) These estimates do not include expenditures expected to be incurred after 2029. (4) Includes known costs necessary for both federal and state compliance with the CCR rule, including requirements for the closure of facilities, post-closure maintenance, monitoring, and inspections. TVA is continuing to evaluate the rules and their impact on its operations, including the cost and timing estimates of related projects. 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 Note 13 — Asset Retirement Obligations. (5) 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. (6) Includes projects that TVA is currently planning to comply with revised rules under the Clean Water Act regarding CWIS and ELGs for steam electric power plants. Human Capital Management People Strategy and TVA's Values The employees of TVA continued to advance TVA’s unique mission and business goals to create an environment that supports and responds to the changing needs of its workforce, using People Advantage and four other Strategic Priorities (Operational Excellence, Financial Strength, Powerful Partnerships, and Igniting Innovation) to help create a culture that lives up to its values. Paramount to TVA's focus on human capital and its People Advantage priority are three specific pillars: (1) Inclusion with Diversity ("IwD"), (2) Talent, and (3) Engagement, all of which are briefly highlighted below. To help shape an inclusive work environment that values all voices, TVA has intensified its efforts over the past few years to integrate IwD into its culture and make its efforts and progress sustainable and a part of TVA's daily operations. Inclusion with Diversity TVA recognizes inclusion as a journey, not a destination, and has continued to make significant strides throughout 2024 by acknowledging that its people bring more to the workplace than simply skills. Looking ahead, TVA and its industry will face challenging new technologies, customer expectations, and environmental requirements. TVA further illustrates its commitment to employees and communities by championing Employee Resource Groups and various diversity councils across TVA. Diversity Impact Awards also reflect the effectiveness of TVA’s diversity efforts, which extend outside of TVA. Talent Attracting and Retaining Talent. The strength of TVA lies in the collective power from the diverse knowledge, experiences, and perspectives that its employees bring from a variety of backgrounds. TVA recruits talent primarily from across the Tennessee Valley region and utilizes a talent framework to deliver enterprise workforce needs supporting attraction, selection, development, engagement, and performance. TVA actively engages with key community and university partners to recruit talent in craft, engineering, information technology, and professional positions, and continues to improve employment opportunities and the talent pool within TVA’s workforce through early career apprenticeships and internships. TVA's top majors for its intern population are engineering, computer science, data analytics, and business/finance. Healthy Attrition. TVA’s voluntary attrition rates continue to fall well below the national, utility, and government benchmarks, with the majority of TVA's attrition note d as “healthy” attrition (e.g., retirements). TVA believes this stability is critical to TVA’s success in a complex and competitive work environment and among a highly skilled workforce. Competitive Total Rewards. TVA’s total rewards package is a significant factor in attracting and retaining top talent. TVA provides market-based and competitive compensation and benefits, which includes an annual incentive plan (extended to all eligible employees, including TVA's represented employee population). Additionally, in support of its cultural commitment to IwD, 38 Table of Contents TVA periodically reviews and monitors compensation pay practices to promote fairness and equity and continues to provide leaders with tools to assist in making equitable pay decisions. Development and Training. As TVA continues to adapt to the evolving demands of the industry, it seeks to motivate people to do their best work by aligning employee development, skills, and capabilities with what TVA needs to succeed now and in the future. TVA provides individual and team training opportunities as well as development opportunities for all employee levels. In-person and online learning events are offered and encouraged, and TVA also provides tuition reimbursement opportunities for academic programs aligned with TVA’s business and workforce development needs. Leadership Development and Succession Planning. TVA encourages and motivates employees to seek development and leadership opportunities. With the assistance of TVA’s talent review and succession planning program, 91 percent of director and executive level roles have at least one succession candidate identified and at least one ready-now succession candidate. A continuous focus on and support of leadership development has helped TVA meet or exceed established goals for female and people of color representation in leadership. TVA believes that its strength lies in the collective power from the diverse knowledge, experiences, and perspectives that its employees bring. To inspire the best from its people, TVA utilizes a talent management framework to deliver enterprise workforce needs supporting talent attraction, selection, development, engagement, and performance. Engagement Strong engagement levels impact all TVA strategic priorities. TVA’s employee engagement survey is administered a minimum of annually to all employees and measures overall engagement and drivers of engagement. 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. Safety and Employee Health. Safety is one of TVA’s core values. 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. Further, management illustrates its commitment to human capital by including a safety metric in its incentive compensation metrics that tracks the serious injury incident rate and applies to all eligible participants in TVA’s annual program. A keen focus on safety helps TVA maintain top quartile ranking in workforce engagement, top quartile serious injury performance, and a clear link to other key areas such as IwD. 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 strategy is critical to the achievement of its strategic priorities as it prepares the workforce for the future. Its employees are represented by six collective bargaining agreements and nine labor unions. This reflects 57 percent of TVA's internal workforce, or approximately 6,000 employees. With the addition of collective bargaining agreements and labor unions for TVA's contractors, there are a total of nine collective bargaining agreements and 17 labor unions. 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. Ethics Ethics and integrity have been highly valued and essential elements of TVA's culture since TVA's establishment in 1933. TVA's Ethics & Compliance ("E&C") office aims to help employees make the right decisions when the right decisions may not be clear. TVA requires all employees and certain contractors to take annual ethics training and attest to a code of conduct, which sets forth standards for adhering to core values and conducting its affairs with openness, honesty, and integrity every day. In response to these efforts and a review by Ethisphere ® , TVA became the first federal agency to receive the Compliance Leader Verification TM ("CLV") certification, applicable for 2022-2023. In December 2023, TVA received its second consecutive certification from Ethisphere ® , applicable for 2024-2025, and remains the only federal agency to have received the CLV certification at this time. Key Metrics 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. 39 Table of Contents Key measures of success in TVA’s People Advantage strategic priority are set forth below at or for the years ended September 30 (unless otherwise noted): Goal Actual Performance Measures 2025 2024 2023 People of color representation in leadership (%) (1) 13.0 % 11.1 % 10.9 % Female representation in leadership (%) (1) 22.0 % 19.4 % 19.7 % Diverse external hires (%) (2) 42.0 % 39.2 % 41.4 % Voluntary attrition (%) (3) 2.4 % 1.2 % 1.4 % Engagement (100-point scale) (4) Top Quartile (≥77) 82 81 Inclusion (100-point scale) (5) Median (≥72) 74 75 Recordable injuries (#) (6) 0 25 32 Serious injury incident rate (7) 0.02 0.00 0.02 Serious injury incidents (7) 0 0 3 Ethics violations (8) 0 17 23 Notes (1) Defined as first line supervisors and above. (2) Defined as external hires who are female, persons of color, or persons with disabilities. (3) Voluntary attrition measures and accounts for all employees who leave the business voluntarily during a fiscal year. (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, at November 2023. Benchmark data is provided by the third-party administrator of the survey, based on data collected from over 550 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, at November 2023. Benchmark data is provided by the third-party administrator of the survey, based on data collected from over 550 organizations. Benchmarks are updated at least annually using data from the previous 12-month period. (6) Retroactive cases can affect annual recordable injury counts reported. (7) Based on the Edison Electric Institute criteria developed by industry peers. (8) Ethics violations are determined by performing a comprehensive assessment across TVA of substantiated ethics violations involving violation of ethical laws or TVA's Code of Conduct; refusal or failure to cooperate with investigations; violation of equal opportunity policies or remedial actions; mishandling of classified information, privacy information, or security incidents; misuse of government property or official time; theft or unauthorized possession of property; falsification of safety-related documents; falsification or failure to correct TVA documents; and associated disciplinary and/or corrective actions taken. Workforce Demographics Employee Demographics At September 30 2024 2023 Number of employees 11,312 10,901 Employees represented by collective bargaining unit 57% of employees represented, or approximately 6,000 employees 58% of employees represented, or approximately 6,000 employees Trades and labor employees 3,357 3,293 Average tenure (years) 12 12 Average age 45.4 45.4 All Employees Leadership New Hires At September 30 At September 30 At September 30 2024 2023 2024 2023 2024 2023 Female 2,401 2,289 323 309 261 267 People of Color 1,428 1,363 184 171 161 206 Military, Veteran 1,910 1,883 352 336 115 148 Disabled 877 844 139 134 49 44 Note All data is based upon self-reported information provided to TVA. In addition to the employees above, TVA also had approximately 16,800 and 15,600 contractors on September 30, 2024 and 2023, respectively, providing intermittent or full-time services to achieve critical strategic objectives. The majority of these contractors are managed by TVA suppliers that are providing services to TVA and primarily provide construction, maintenance, and modification work on TVA property and facilities as well as supplemental staffing for projects in support of various business needs. 40 Table of Contents ITEM 1A. RISK FACTORS The risk factors described below, as well as the other information included in this Annual Report on Form 10-K for the fiscal year ended September 30, 2024 (the "Annual Report"), should be carefully considered. Risks and uncertainties described in these risk factors could cause future results of TVA operations to differ materially from historical results as well as from the results anticipated in forward-looking statements. Although the risk factors described below are the ones that TVA considers material, additional risk factors that are not presently known to TVA or that TVA presently does not consider material may also impact TVA's business operations. See Forward Looking Information above for a description of some matters that could affect the below risks or generate new risks. The occurrence of any of the following could have a material adverse effect on TVA's cash flows, results of operations, or financial condition. For ease of reference, the risk factors are presented in eight categories: (1) regulatory, legislative, and legal risks; (2) operational risks; (3) cybersecurity and information technology risks; (4) financial, economic, and market risks; (5) human capital and management risks; (6) risks related to the environment and catastrophic events; (7) accounting and financial reporting risks; and (8) general risk factors. REGULATORY, LEGISLATIVE, AND LEGAL RISKS TVA may become subject to additional environmental regulations or may be required to expend significant funds in the future to comply with current regulations. Laws, regulations, orders, and their interpretation pose a threat of substantially increasing TVA's cost of operations, including through prompting the early retirement of generation facilities, requiring significant capital expenditures to reduce carbon emissions, or causing TVA to change its anticipated methodology for closing CCR facilities. Possible areas of future laws or regulations include, but are not limited to, CCR, GHGs, ELGs, water quality, air quality, renewable energy portfolio standards, and natural gas production and transmission. See Item 1, Business — Environmental Matters — Clean Air Act Programs and Regulations for a discussion of EPA's new greenhouse gas emission standards and guidelines and new Mercury and Air Toxics Standards, Item 1, Business — Environmental Matters — Water Quality Control Developments for a discussion of EPA's new effluent limitation guidelines, Item 1, Business — Environmental Matters — Cleanup of Solid and Hazardous Wastes — Coal Combustion Residuals for a discussion of recent revisions to EPA's CCR Rule, and Item 1, Business — Environmental Matters — Climate Change — Executive Actions for a discussion of recent executive actions regarding climate change. Litigation may affect the timing and requirements of new regulatory proposals or may indirectly affect TVA, potentially even when TVA is not involved. Failure to comply with environmental requirements can result in enforcement actions and litigation, which can lead to the imposition of significant civil liability, including fines and penalties, criminal sanctions, and/or temporary or permanent closure of non-compliant facilities. New environmental laws, regulations, or orders may become applicable to TVA or the facilities it operates, and existing environmental laws or regulations may be revised, enforced, or reinterpreted in a way that adversely affects TVA. EPA's recent regulations relating to closure of CCR facilities and EPA's revised interpretation of CCR regulations are pertinent examples. These rules will likely require TVA to incur significant additional costs with implementing closure, subject to the completion of any required environmental investigations or studies and any required approval of appropriate state regulators. TVA expects that these costs will substantially increase constraints related to TVA’s debt ceiling and increase risks related to, among other things, (1) maintaining TVA’s desired mix of generation assets, (2) meeting TVA’s carbon-reduction aspirations, and (3) operating TVA's assets or their supporting infrastructure in a manner TVA considers most efficient, each of which is discussed below in these Risk Factors. Complicating these matters further, over the last several decades, U.S. Administrations have increasingly relied on regulations and executive orders to implement environmental policies and objectives in the absence of Congressional agreement regarding new legislation. This condition, which creates instability and unpredictability of environmental regulations, seems likely to persist and could increase due to apparent polarization between the two main political parties. As a result, TVA often must comply with and otherwise adapt to environmental regulations without assurance of their continued effect. TVA often does not have the ability to anticipate, or prepare in advance for, changes in regulatory approaches that may be implemented following a change in Administration. The Supreme Court’s recent decision in Loper Bright Enterprises v. Raimondo overturned the Court’s longstanding deferral to the applicable agency’s interpretation of regulations. TVA is unable to predict whether, or to what extent, this decision will alter the outcome of judicial reviews of current or future regulations. TVA does not know whether risks related to current and future regulations affecting TVA will be significantly mitigated by the decision in Loper Bright . New, existing, or amended laws, regulations, and administrative or executive orders, or congressional actions or inactions, create certain risks due to unique aspects of TVA’s structure and business. TVA is subject to significant laws, regulations, and orders under federal law, including some that do not apply to private electric companies. The cost of complying with these laws, regulations, and orders is substantial, and costs could be 41 Table of Contents significantly more than TVA anticipates, especially concerning environmental and nuclear compliance. In addition, TVA is required to obtain numerous regulatory permits and approvals from governmental agencies, and a failure to timely obtain desired approvals or to comply with any law, regulation, or order may cause TVA to change how it operates certain assets or pay fines for continuing to operate the assets. Moreover, since states are sometimes authorized to implement environmental programs so long as they implement the minimum federal standards in compliance, performance, and enforcement, TVA is often required to work with state agencies and officials in numerous jurisdictions to ensure compliance. Amendments to existing laws or future additional laws, regulations, and administrative or executive orders present additional risks, the occurrence of which is likely increased due to the potential for stakeholder activism. Further, federal administrative or executive orders could induce TVA to change the way it conducts its business. See Item 1, Business — Environmental Matters — Climate Change — Executive Actions for a discussion of recent executive actions regarding climate change. Furthermore, Congress could act or fail to act on various issues that may impact TVA, including but not limited to action or inaction related to the national debt ceiling or automatic spending cuts in government programs. In addition, Congress may pass laws in the future specifically applicable to TVA. These may include, but are not limited to, the following: • A divestment or forced sale of TVA assets, which could trigger change of control provisions in certain material contracts, in addition to other costs and potential business disruptions; • A revocation of the TVA Board’s sole authority to set electricity rates under the TVA Act, which could result in material adverse impacts on TVA’s ability to meet financial obligations; • A restriction on TVA accessing or controlling its funds that are on deposit in its U.S. Treasury account; • A lowering of TVA’s debt ceiling from the $30.0 billion outstanding provided for in the TVA Act, which could inhibit TVA’s ability to raise capital necessary for essential business functions or for investing in carbon free technologies; • A restriction on TVA’s authority to manage the Tennessee River system with power system operations, which could negatively impact TVA’s operations of certain electric generation facilities; and • A limitation on TVA’s ability to pay its CEO or other employees competitive wages, which could negatively impact TVA’s ability to hire and retain talent needed to effectively fulfill TVA’s mission. Although it is difficult to predict new laws, regulations, or administrative or executive orders, or congressional action or inaction, or how such laws, regulations, orders, actions, or inactions may impact TVA, any resulting change could require TVA to make substantial additional capital expenditures or abandon certain projects, which could negatively affect TVA's cash flows, results of operations, and financial condition. TVA's governmental status may interfere with its ability to quickly respond to the needs of its current or potential customers or to act solely in the interest of its ratepayers. As a governmental entity, TVA has certain legal requirements that prevent it from responding as quickly to potential changes in the market or requests from current or potential customers as might be desired or in comparison to other utilities. For example, TVA is required to comply with the National Environmental Policy Act ("NEPA"), which requires environmental reviews to be completed before TVA decides to pursue certain projects. The delay in responding to requests could damage relationships with current customers, deter potential customers from moving into TVA's service territory, or damage TVA's reputation. TVA's nature as a governmental entity imposes additional pressures that most companies do not face, including most significantly the requirements to support economic development, simultaneously manage a river system for commerce, recreation, flood control, and power generation, and promote recreational opportunities within its service territory. TVA funds these operations almost entirely from the sale of electricity. In addition, TVA must balance these obligations with the objective to provide power at the lowest feasible rates. If TVA does not adequately communicate how it fulfills its various missions and the value it provides, its reputation may be harmed, which may result in political pressure to change its nature or operations as well as in the loss of public support. TVA is involved in various legal and administrative proceedings, the outcomes of which may affect TVA's finances and operations. TVA is involved in a wide range of legal and administrative proceedings and is likely to become involved in future additional proceedings in the ordinary course of business or as a result of, among other things, catastrophic events or environmental conditions arising from TVA property or areas where TVA has disposed of materials or property. For a discussion of certain current material legal proceedings, see Note 22 — Commitments and Contingencies — Legal Proceedings . The additional proceedings could involve, among other things, challenges to TVA’s CCR facilities, challenges to TVA's natural gas-fired plants and related pipelines, suits asserting nuisance claims under state law related to coal-fired plants, challenges to the anti-cherrypicking provision, challenges under NEPA, challenges under the Freedom of Information Act, and challenges to TVA’s authority to set rates and enter into contracts. Although TVA cannot predict the outcome of the individual matters in which TVA is involved or will become involved, the resolution of 42 Table of Contents these matters could require TVA to make expenditures in excess of established reserves and in substantial amounts. Similarly, resolution of any such proceedings may require TVA to change its business practices or procedures, incur additional capital or operational expense, change how it operates its fossil-fueled units, cease construction of new natural gas-fired plants, reduce emissions to a greater extent or at a faster pace than TVA had planned, close existing CCR facilities sooner than planned, close existing CCR facilities using a different methodology than planned, build new CCR facilities sooner than planned, build new CCR facilities that were not planned, cease operation of some coal-fired units, adjust its rates, or terminate or modify contracts. These events individually or in the aggregate could have a material adverse effect on TVA’s cash flows, results of operations, and financial condition. TVA could lose its protected service territory. TVA’s service area is defined primarily by provisions of law and long-term contracts. The fence limits the region in which TVA or LPCs that distribute TVA power may provide power. The anti-cherrypicking provision precludes FERC from ordering TVA to transmit power for others if that power would be consumed within the TVA service area. State service territory laws limit unregulated third parties’ ability to sell electricity to consumers. From time to time, there have been efforts to circumvent the protection of the anti-cherrypicking provision. In addition, the protections afforded by the anti-cherrypicking provision conceivably could be affected by future federal legislation. If FERC were to limit the application of the anti-cherrypicking provision or if federal legislation were to eliminate or limit the application of the anti-cherrypicking provision without corresponding legislative modifications to the territorial limitations imposed by the fence, TVA could face increased competition and may lose some of its customers. TVA may become subject to additional NERC requirements. TVA is subject to federal reliability standards set forth by NERC and approved by FERC. TVA recognizes that reliability standards and expectations continue to become more complex and stringent for transmission systems. If TVA fails to comply with the mandatory reliability standards, TVA could be subject to increased compliance obligations, sanctions or both. Complying with these or additional requirements set forth by NERC may require significant capital expenditures and may negatively affect TVA's cash flows, results of operations, and financial condition. OPERATIONAL RISKS TVA's management and operation of CCR facilities expose it to additional costs and risks. TVA operates coal-fired units that produce CCR as byproducts of the power production process. TVA manages CCR in dedicated, protective facilities operated by TVA. TVA has closed some of these facilities and is in the process of closing others. Many of these facilities do not have liners, as they were constructed prior to the requirement that such facilities be built with liners. TVA has been ordered by TDEC to undertake investigations at all CCR facilities in Tennessee. TVA has also been involved in litigation related to certain CCR facilities, and to resolve one such lawsuit, TVA agreed to remove or beneficially reuse significant amounts of CCR material at Gallatin Fossil Plant ("Gallatin"). TVA could be subject to similar litigation or orders in the future and could be required to restrict or stop the use of some or all CCR facilities that were not required to be closed by the CCR Rule or relocate CCR material to lined facilities. Further, TVA has decided to move all CCR material at Allen Fossil Plant rather than closing the CCR facilities in place as originally planned, which subjects TVA to additional costs and transportation-related risks. Moreover, EPA's new CCR rule will likely require TVA to incur significant additional costs with implementing closure, and EPA has recently interpreted its CCR rule in a way that could challenge TVA's predominant closure methodology for many units, thereby potentially creating significant additional costs with implementing closure. The ultimate resolution of matters relating to CCR obligations could have a material adverse effect on TVA's cash flows, results of operation, and financial condition. TVA relies on certain assumptions about the future that may prove inaccurate, including when determining the appropriate mix of generation assets. TVA uses certain assumptions that are presently justifiable to develop its future plans. Such assumptions include economic forecasts, anticipated energy and commodity prices, cost estimates, construction schedules, power demand forecasts, potential regulatory environments, and the appropriate generation mix to meet demand. Should these assumptions be inaccurate, or be superseded by subsequent events, TVA's plans may not be effective in achieving the intended results. In determining TVA’s power generation assets should consist of a mix of nuclear, coal-fired, natural gas-fired, and renewable power sources, including hydroelectric, TVA considered various factors, including the anticipated availability of its nuclear units, the availability of non-nuclear facilities, the forecasted cost of natural gas and coal, the forecasted demand for electricity, its carbon reduction aspirations, and environmental compliance including the expense of adding air pollution controls to its coal-fired units. If any of these assumptions materially change or are impacted by subsequent events, TVA's generation mix may not address its operational needs in the most efficient and cost-effective manner. Additionally, reallocating the mix of power generation assets from the planned mix may result in additional capital and operational expense. Furthermore, achieving TVA's carbon reduction aspirations may require TVA to make significant capital investments, including investments in new technologies, and take a long time. TVA may retire coal-fired and natural-gas fired generation facilities sooner than planned to meet carbon reduction aspirations, which also may require significant capital expenditures or additional power purchases, potentially causing an adverse 43 Table of Contents effect on TVA's cash flows, results of operations, and financial condition, as well as TVA's ability to meet electricity demand. TVA may not be able to meet its carbon reduction aspirations, which may result in additional capital expenditures or higher operating expense. The achievement of TVA's carbon reduction aspirations, and its ability to maintain system reliability during the transition to cleaner forms of energy, is subject to numerous risks beyond TVA's control that are difficult to predict and may prevent TVA from timely achieving such aspirations. New federal laws could impose carbon reduction aspirations that are more aggressive and time-sensitive than TVA's plans. Occurrences that may prevent TVA from achieving its carbon reduction aspirations in a timely manner include, but are not limited to, the following: • Federal law or policy could restrict TVA's ability to use natural gas or nuclear power, which are each essential for TVA to reduce its carbon emissions. • TVA may not receive timely approval from federal and state regulators for construction and operation of new natural gas assets and attendant infrastructure (e.g., pipelines). • TVA may have difficulty obtaining resources or labor needed to complete projects on time and within budget. • Legal challenges may slow or restrict TVA's ability to replace coal generation with cleaner forms of energy. These challenges may, for instance, come in the form of direct legal challenges to TVA projects or through challenges to TVA's environmental reviews or the attempts of TVA or third parties to obtain necessary licenses and permits. • Potential delays in projects, along with now-anticipated load growth, may force TVA to rely on coal-fired generation more heavily, or longer, than it had previously projected. • As to TVA's longer term carbon reduction aspirations, the development of new technologies necessary to meet these aspirations may not occur as quickly, feasibly, or cost-effectively as necessary. • TVA's unique federal least-cost planning obligations may prevent TVA from moving forward with carbon-free generation as quickly as utilities that do not have the same requirements. TVA may experience delays and incur additional costs in its major projects or may be unable to obtain necessary regulatory approval for them. Among other projects, TVA is building new natural gas-fired generation facilities, seeking to improve the reliability and resiliency of its transmission system, undertaking repairs at certain hydroelectric facilities and dams, and closing some coal-fired plants and their supporting infrastructure. These activities involve risks of overruns in the cost of labor and materials, as well as potential delays, in beginning or completing these repairs, closures, or other projects. Further cancellation or delay of projects related to these activities may adversely affect TVA's cash flows, financial condition, and results of operations. Such cancellation or delays may result from, among other things, changes in market conditions, changes in laws or regulations, unanticipatedly high environmental remediation costs, lack of productivity, human error, supply chain challenges, regional health emergencies, the failure to schedule activities properly, TVA's inability to obtain the necessary regulatory approvals or licenses, TVA's decision to cancel construction of a facility or cancel another type of project, including due to delays, cost overruns, changes in customer preferences, or changes in requirements applicable to how TVA conducts construction, repair, or closure activities. Further, if projects are not completed according to specifications, TVA may suffer, among other things, delays in receiving licenses, reduced plant efficiency, reduced transmission system integrity and reliability, and higher operating costs. TVA faces certain risks arising solely from its operation of nuclear units. TVA has seven operating nuclear units. Unique risks associated with these units include the following: Hazard Risks . Hazards exist with the use of radioactive material in energy production, including management, handling, storage, and disposal. Further, a nuclear incident at one of TVA's facilities could have significant consequences including loss of life, damage to the environment, damage to or loss of the facility, and damage to non-TVA property. Although TVA carries certain types of nuclear insurance, the amount that TVA is required to pay in connection with a nuclear incident could significantly exceed the amount of coverage provided by insurance. The licensee of each nuclear reactor has a contingent obligation to pay a retrospective premium, equal to its proportionate share of the loss in excess of the primary level, regardless of proximity to the incident of fault, up to a maximum of approximately $166 million per reactor, per incident. With TVA's seven reactors, the maximum total contingent obligation per incident is $1.2 billion. This retrospective premium is payable at a maximum rate currently set at approximately $25 million per year, per incident, per reactor. In addition, following an incident TVA may have to pay retrospective insurance premiums, and may experience a reduction in the availability of nuclear insurance, an increase in the cost of nuclear insurance, an increase in the costs of operating nuclear units, or increased regulation or restrictions on the construction, operation, and decommissioning of nuclear facilities. Moreover, federal legislation could impose revenue-raising measures on the nuclear industry to pay claims exceeding the limit for a single incident under the Price-Anderson Act. Further, the availability or price of insurance may be impacted by TVA's acts or omissions, such as a failure to properly maintain a facility, or events outside of TVA's control, such 44 Table of Contents as an equipment manufacturer's inability to meet a guideline, specification, or requirement. Decommissioning Costs . TVA maintains a Nuclear Decommissioning Trust ("NDT") for the purpose of providing funds to decommission its nuclear facilities. The NDT is invested in securities generally designed to achieve a return in line with overall equity and debt market performance. TVA might have to make unplanned contributions to the NDT if, among other things: • The value of the investments in the NDT declines significantly or the investments fail to achieve the assumed real rate of return; • The decommissioning funding requirements are changed by law or regulation; • The assumed real rate of return on plan assets, which is currently five percent, is lowered by the TVA Board or the actual real rate of return does not achieve the assumed rate; • The actual costs of decommissioning are more than planned, including as a result of inflation; • Changes in technology and experience related to decommissioning cause decommissioning cost estimates to increase significantly; • TVA is required to decommission a nuclear plant sooner than it anticipates; or • The NRC guidelines for calculating the minimum amount of funds necessary for decommissioning activities are materially changed. If TVA were to have to make additional contributions to the NDT, the contributions may negatively affect TVA's cash flows, results of operations, and financial condition. Regulatory Risks . The NRC has broad authority to adopt regulations related to the licensing, operating, and decommissioning of nuclear generation facilities and may adopt regulations as a result of events that occur at nuclear facilities in the U.S. or throughout the world. These regulations can result in significant restrictions or requirements on TVA. To comply with existing, new, or modified regulations, TVA may be required to make substantial capital expenditures at its nuclear plants or make substantial contributions to the NDT. In addition, if TVA were to fail 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. Moreover, the NRC may not approve future requests from TVA to extend the operating licenses for its nuclear units. Waste Disposal. TVA's nuclear operations produce various types of nuclear waste materials, including spent fuel. TVA has been storing the spent fuel in accordance with NRC regulations in anticipation that a final storage site for all such waste will be developed and put in operation by the U.S. government. If no such site is forthcoming or if no alternative disposal or reuse plan is developed, TVA might be required to arrange for the safe and permanent disposal of the spent fuel itself. Such a requirement would cause TVA to incur substantial expense, including substantial capital expenditures, and could cause TVA to change how it operates its nuclear plants. Availability of Components. Nuclear facilities require specialized components and access to intellectual property for operation. As the number of reliable suppliers of such components decreases and access to intellectual property is reduced, the availability of the components and access to the intellectual property also will likely decrease. If TVA were unable to secure either the original components, intellectual property, or replacements approved for use by the NRC, TVA might have to change how it conducts its operations, which may result in substantial expense. Further, limitations on global trade resulting from future and past pandemics and global conflicts, or other limitations on global shipping, such as international trade restrictions or sanctions, could materially decrease the availability or increase the cost of necessary or desired equipment. Cost of Nuclear Fuel. The relatively low cost of nuclear fuel per megawatt of production is a primary justification for the relatively high costs of developing and constructing nuclear facilities. Future constraints on the availability of nuclear fuel could cause the cost of operating these facilities to be materially higher than expected. Such constraints could arise from, among other things, increased demand from greater adoption of nuclear power by TVA and other domestic and global electric suppliers, global conflicts, and/or limitations on global trade and global shipping. TVA may not be able to operate one or more of its nuclear power units. If operating issues were to develop with TVA nuclear power units that were not correctable, TVA may choose to shut down one or more units or be ordered to do so by the NRC. Returning the unit(s) to operation could be a lengthy and expensive process, or might not be feasible depending on circumstances. In either case, TVA's cash flows, results of operations, financial condition, and reputation may be negatively affected. The inability to operate all of TVA's nuclear units may cause TVA to rely more on forms of generation that produce more carbon, thus making it more difficult for TVA to meet its carbon reduction aspirations or meet reliability goals. 45 Table of Contents Physical attacks, threats, or other interference could damage or interfere with TVA's facilities and operations. TVA has an extensive generation and transmission system and supporting infrastructure that includes, among other things, TVA's generation facilities and transmission infrastructure such as substations, towers, and control centers. Some of TVA's hydroelectric facilities include navigation locks for commerce along the Tennessee River system. TVA also operates flood control dams and supporting infrastructure. Because of TVA's status as a government corporation and TVA's role as the primary power provider for its service territory, individuals, groups, or nation states may target TVA with physical attacks or threats of such attacks. Events such as war, armed conflicts, terrorist attacks, or similar disruptive events may increase the risks of these attacks targeting critical physical infrastructure in the U.S. Although TVA's operations are protected by automated monitoring systems, TVA Police and Emergency Management, TVA employees, local law enforcement, or a combination thereof, it may not be possible to effectively deter or prevent such attacks. These attacks could pose health and safety risks, significantly disable or destroy TVA assets, interfere with TVA's operations, result in additional regulatory or security requirements or litigation, increase the costs of nuclear licensing or compliance, and otherwise negatively affect TVA's cash flows, results of operations, and financial condition. In addition, following a physical attack or threat, TVA may incur increased costs for added security measures, including additional physical plant security and security personnel, increased capability, or other necessary measures. TVA's assets or their supporting infrastructure may not operate as planned. Many of TVA's assets, including generation, transmission, navigation, and flood control assets, have been operating for several decades and have been in nearly constant service since they were completed. As such, they require regular maintenance, repair, and replacement in order to continue uninterrupted operation. Additionally, certain of TVA's newer assets utilize advanced technology that could experience technical or operating issues. The failure of TVA's assets or supporting infrastructure, including information technology systems, to perform as planned may cause health, safety, or environmental problems and may even result in events such as the failure of a dam, the inability to maintain a reservoir at the normal or expected level, or an incident at a coal-fired, gas-fired, or nuclear plant or a CCR facility. If these assets or their supporting infrastructure were to fail to operate as planned, if necessary repairs or upgrades were delayed or could not be completed as quickly as anticipated, or if necessary spare parts were unavailable, TVA: • May have to invest a significant amount of resources to repair or replace the assets or the supporting infrastructure; • May have to remediate collateral damage caused by a failure of the assets or the supporting infrastructure; • May not be able to maintain the integrity or reliability of the generation or transmission system at normal levels; • May have to operate less economical sources of power; • May have to purchase replacement power on the open market at prices greater than its generation costs; • May be required to invest substantially to meet more stringent reliability standards; • May be unable to maintain insurance on affected facilities, may be required to pay higher premiums for coverage, or may have to make certain repairs or upgrades to maintain insurance or to avoid higher premiums; • May be unable to operate the assets for a significant period of time or in the same manner as previously operated; and/or • May not be able to meet its contractual obligations to deliver power. Any of these potential outcomes, among other things, may negatively affect TVA's cash flows, results of operations, financial condition, and reputation. TVA's operations present significant safety risks that are not able to be completely eliminated. TVA's safety program, no matter how well designed and operated, may not completely prevent accidents. In addition to the potential human cost of accidents, which could include injury to employees or members of the public, significant accidents could impact TVA's ability to carry out operations, cause it to shut down facilities, subject it to additional regulatory scrutiny, expose it to litigation, damage its reputation, interfere with its ability to attract or retain a skilled workforce, or harm its financial condition. The aging of TVA's physical infrastructures and systems may increase the risk of accidents, especially if not properly maintained. TVA's service reliability could be affected by problems at other utilities or at TVA facilities, or by the increase in intermittent sources of power. TVA's transmission facilities are directly interconnected with the transmission facilities of neighboring utilities and are thus part of the larger interstate power transmission grid. Certain of TVA's generation and transmission assets are critical to maintaining reliability of the transmission system. Additionally, TVA uses assets that belong to third parties to transmit power and maintain reliability. Accordingly, problems at other utilities as well as at TVA's facilities, including disruptions or black-outs caused by an event such as a severe storm, generator or transmission facility outage on a neighboring system, or the actions of a neighboring utility, may cause interruptions in TVA's service to its customers, 46 Table of Contents increase congestion on the transmission grid, or reduce service reliability. The increasing installation of intermittent sources of power, such as wind and solar, as well as the retirement of coal-fired plants, may place additional strain on TVA's and neighboring systems, and additional transmission upgrades may be required to maintain reliability. 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. TVA's supplies of fuel, purchased power, or other critical items may be disrupted or obtained at a higher cost than planned. TVA purchases coal, uranium, natural gas, fuel oil, and electricity from a number of suppliers. TVA contracts for conversion of uranium into nuclear fuel and purchases other items, such as anhydrous ammonia, liquid oxygen, or replacement parts that are critical to the operation of certain generation assets. TVA also purchases power from other power producers when the purchase of such power is appropriate due to economic opportunities or operational concerns. TVA's reliance on purchased power may increase if the demand for power increases in TVA's service territory, and purchased power may become more costly, or perhaps be unavailable, if the demand for power also increases in surrounding service territories. Examples of circumstances that may disrupt, or materially increase the cost of, the future delivery of fuel, purchased power, contracted services, or other critical supplies include but are not limited to cyber attacks; war or physical attacks, including the wars in Ukraine and Israel; political developments, international trade restrictions or tariffs, or legal actions; mine closures or reduced mine production; increase in demand for power by other power systems which reduces the amount of power that is available for purchase by TVA; increases in fuel exports; environmental regulations affecting TVA's suppliers; transportation or delivery constraints; the failure of suppliers to timely deliver the services or supplies to TVA at budgeted costs due to force majeure events, forced outages not caused by force majeure events, opportunistic non-performance or intentional defaults by suppliers; shortages of raw materials; supply chain difficulties; increased cost of components and labor; strikes or work stoppages; inflation; availability of personnel being impacted by regional health emergencies; or similar events. If one of TVA's suppliers were to fail to perform under the terms of its contract with TVA, TVA might have to purchase replacement fuel, power, or other critical supplies, perhaps at a significantly higher price than TVA is entitled to pay under the contract. TVA may not be able to recover this difference from the original supplier. In addition, any disruption of TVA's supplies could require TVA to operate higher cost generation assets, thereby negatively affecting TVA's cash flows, results of operations, and financial condition. Moreover, if TVA were unable to acquire enough replacement fuel, power, or supplies, or were to have insufficient reserves to offset the loss, TVA may not be able to operate certain assets in the manner TVA determines is in its best interests or provide enough power to meet demand or provide power on a basis TVA considers most reliable. As a result, power curtailments, brownouts, or even blackouts could occur. Global conflicts, terrorist activities, or military actions could adversely affect TVA’s business. Global conflicts and terrorism, as well as any retaliatory military action by the United States and its allies, may have an adverse effect on TVA through increased political, economic, and financial market instability and volatility in the prices for natural gas and oil. Future acts of terrorism could be directed against companies operating in fuel and energy transportation and distribution, which may adversely affect TVA’s ability to do business. TVA may experience increased costs to implement increased security, including additional plant security and security personnel. This situation could extend not only to fuel and minor components but could materially increase costs or decrease availability of large components needed for TVA’s capital projects. CYBERSECURITY AND INFORMATION TECHNOLOGY RISKS TVA’s facilities and information infrastructure may not operate as planned due to cyber threats to TVA’s assets and operations. TVA’s operations are heavily computerized and include assets such as information technology and networking systems. As with all industries, the reliance on computerization and networking makes TVA a target for cyber attacks, and the risk of such attacks may increase as individual devices and equipment become accessible via the internet. TVA has been targeted by cyber attacks in the past and anticipates that it will be targeted in the future. These attacks may have been carried out, or in the future could be carried out, by individuals, groups, or nation states. TVA employs extensive cyber safeguards and works with industry specialists and relevant governmental authorities to deter, stop, or mitigate cyber attacks. Despite implementation of these security measures, TVA's facilities and information infrastructure may be subject to or vulnerable to disability, failures, or unauthorized access. Furthermore, as technology becomes more prevalent in energy infrastructure, TVA's infrastructure may be subject to increased cyber vulnerability in the future. Cyber attacks could come through one or more of a number of means, such as computer viruses, malicious or destructive code, phishing attacks, denial of service attacks, or ransomware. Cyber attacks may result in security breaches that may be detrimental to TVA's operations, including third parties' improperly accessing TVA's system and demanding ransom based on threats to expose sensitive data, including data from employees, customers, and financial parties, to gain operational control, or to expose security vulnerabilities specific to TVA’s facilities. In such a case, a cyber attack could compromise sensitive data, significantly disrupt operations, require additional expenditures for 47 Table of Contents cybersecurity, negatively affect TVA’s cash flows, results of operations, financial condition, and reputation, and pose health and safety risks to TVA personnel and the customers and communities that TVA serves. Because the investigation of any cybersecurity breach is inherently unpredictable and would require substantial time to complete, TVA may not be able to quickly remediate the consequences of any breach, which may increase the costs and enhance the negative consequences associated with a breach. Additionally, the theft, damage, or improper disclosure of sensitive data may subject TVA to penalties and claims from third parties or increased governmental oversight. Cyber attacks on third parties or the failure of their technology infrastructure could interfere with or harm TVA. Many third parties on which TVA relies for services, including for transferring funds to non-TVA entities or receiving delivery of products in the ordinary course of business, are heavily computerized and use assets such as information technology and networking systems. These providers' systems are susceptible to cybersecurity and data breaches and outages from fire, floods, power loss, telecommunications failures, physical attack, and similar events. If any of these third parties were to experience interference from cyber attacks or significant system failures or outages, which events have occurred in the past and may occur again in the future, the services they provide TVA could be disrupted. This disruption could interfere with TVA’s ability to perform its obligations to others, transfer funds, obtain fuel or critical parts, supplies, or services, or make payments, which in turn could negatively affect TVA’s cash flows, results of operations, financial condition, and reputation. Additionally, the theft, damage, or improper disclosure of sensitive data held by these third parties may subject TVA to further harm. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Safeguarding Assets — Cybersecurity for a discussion of recent cyber attacks on third parties. The failure of TVA’s information technology systems could have adverse consequences to TVA. TVA’s operations are dependent upon the proper functioning of its internal systems, including the information technology systems that support TVA’s underlying business processes. Any significant failure or malfunction of such information technology systems may result in disruptions of TVA’s operations. TVA relies on information technology systems, including the internet and cloud systems, to support a variety of business processes and activities and to store sensitive data. Some of TVA’s information technology systems may be dependent upon cloud service providers. These providers’ systems are susceptible to cybersecurity and data breaches and outages from fire, floods, power loss, telecommunications failures, security violations, and similar events. Failure to prevent or mitigate data loss from system failures or outages could materially affect the results of operations, financial condition, and cash flows of TVA. The emergence of artificial intelligence technology could create challenges for TVA, and TVA may not be able to adopt the use of technology in step with private utilities. TVA’s sensitive information may be subject to improper disclosure or fabrication by artificial intelligence (“AI”) and machine learning technologies on systems external to TVA, leading to compromises in cybersecurity. AI and machine learning technology may also be flawed, and data sets used in generative AI may be insufficient or contain biased, incorrect, or incomplete information. Additionally, inconsistent application of AI regulations and guidance in the industry may make the intellectual property ownership and license rights to certain information unclear. TVA could suffer reputational damage or face operational challenges because of any inconsistencies or flaws in the application of AI or machine learning technology. TVA could also face costs in complying with any new regulations concerning AI. The cost of implementing new AI regulations or the consequences of not complying with any future regulations could harm TVA’s financial condition. Moreover, AI may be used to enhance malicious cyber attacks. FINANCIAL, ECONOMIC, AND MARKET RISKS Demand for electricity could be higher or lower in the future than TVA currently expects or is financially planning for. TVA’s current asset strategy and capital financing approach are based on assumptions drawn from recent trends suggesting increased demand for TVA electricity over the next several decades. This demand has arisen from, and seems likely to continue to arise from, among other things, increasing population in TVA’s service territory, utilization of AI that uses significantly more power than traditional data processing, cryptocurrency mining, greater usage and adoption of electric vehicles, and economic development, including new or expanded data centers. Some factors that could unexpectedly lead to lower demand than TVA has planned for include one or more of the following: extended or severe economic downturns or recessions, loss of customer demand due to higher-than-expected adoption of TVA flexibility options that allow customers to produce a certain percent of their own power needs, unexpectedly high utilization of DER, increased energy efficiency and conservation, and loss of customers, including through loss of TVA’s restricted service territory. Because TVA is investing heavily in developing its energy portfolio to meet increasing loads, lower-than-anticipated demand could lead to a reduction in planned revenue streams, which may constrain TVA’s financial condition and results of operations. 48 Table of Contents If future demand were to be higher than TVA can address through execution of its current asset strategy, TVA may have to purchase additional generation or capacity at rates much higher than TVA can produce electricity itself. The higher that demand is at such time nationally, the more expensive such additional generation or capacity is likely to be. In addition, if capacity were not available elsewhere, TVA may have to take emergency measures to curtail load, including requiring rolling blackouts. On the programmatic side, TVA may be forced to raise rates or waitlist prospective industrial or commercial customers. These outcomes would likely have a material adverse effect on TVA’s financial condition and results of operations, including through negative impacts to TVA’s reputation. TVA could have to make significant future contributions to fund its qualified pension plan, and the increasing costs of the plan and employee benefits could adversely affect TVA's results of operations, financial condition, or cash flows. On September 30, 2024, TVA's qualified pension plan had assets of approximately $8.7 billion compared to liabilities of approximately $11.0 billion. The plan is mature with approximately 21,000 retirees and beneficiaries receiving benefits of approximately $750 million per year. The costs of providing benefits depend upon a number of factors, including, but not limited to, provisions of the plan; changing experience and assumptions related to terminations, retirements, and mortality; rates of increase in compensation levels; rates of return on plan assets; discount rates used in determining future benefit obligations and required funding levels; optional forms of benefit payments selected; future government regulation; and levels of contributions made to the plan. The pension plan covers substantially all of TVA's full-time annual employees hired prior to July 1, 2014. Although the plan has been frozen to new participants since July 1, 2014, TVA's payment obligation under the pension plan is substantial, and changes in any one or more of these factors could cause TVA's benefit expenditures under the plan to increase and significantly exceed TVA's planned contributions. Unfavorable financial market conditions, including those arising from inflation and changes in interest rates, may cause lower-than-expected rates of return on plan assets, loss in value of the investments, and lower discount rates used in determining future benefit obligations. These changes would negatively impact the funded status of the plan and may require TVA to make contributions in excess of the amounts planned. In addition to the costs of the plan, the costs of providing health care benefits to TVA's employees and retirees have increased in recent years. Additional contributions to the plan and absorption of additional costs for the pension plan, health care plans, and other employee benefits would negatively affect TVA's cash flows, results of operations, and financial condition. TVA’s reliance on debt markets may make TVA more vulnerable to being unable to meet cash requirements than private utilities that can issue equity securities. TVA uses cash provided by operations together with proceeds from power system financings to fund its current cash requirements. TVA's power system financings consist primarily of the sale of Bonds and secondarily of alternative forms of financing, such as lease arrangements. It is critical that TVA continue to have access to the debt markets to meet its cash requirements. The importance of having access to the debt markets is enhanced by the fact that TVA, unlike most utilities, relies almost entirely on debt capital, since as a governmental instrumentality, TVA cannot issue equity securities. TVA’s access to the debt markets could be negatively impacted by market disruptions, including disruptions that result from systemic risks to the banking system and the financial markets. Moreover, rapid increases in interest rates beyond planning levels, especially as financing needs are increasing, or disruptions in the market due to rapid changes in interest rates, could impact TVA's cost of funds or ability to raise funds to meet cash needs. TVA's debt ceiling may limit TVA's ability to carry out its business in the event that TVA were to approach or reach it. Approaching or reaching the debt ceiling may negatively affect TVA's business by limiting TVA's ability to access capital markets and by increasing the amount of debt TVA must service without new debt capital. This occurrence may restrict TVA's ability to raise debt capital to acquire new power program assets or maintain existing ones, to carry out upgrades or improvements to existing assets or build new ones, to purchase power under long-term PPAs, or to meet regulatory requirements. A single generating facility could cost hundreds of millions of dollars or even billions depending on the fuel type, and TVA's ability to use new debt to fund strategic capital investments will decrease as TVA's debt increases and as the cost of projects increases. In addition, approaching or reaching the debt ceiling may lead to increased legislative or regulatory oversight of TVA's activities and could lead to negative rating actions by credit rating agencies. Operating at higher balances of Bonds subject to the $30.0 billion debt limit reduces TVA's financial flexibility for using financing to handle emergencies or other rapid cash funding needs and increases operational risks in management of the portfolio of Bonds subject to the debt limit. TVA, together with owners of TVA securities, may be impacted by downgrades of TVA's credit ratings. TVA’s current credit ratings are not based solely on its underlying business or financial condition but are based to a large extent on TVA's status as a wholly-owned government corporation and the legislation that defines TVA’s business structure. Key characteristics of TVA’s business defined by legislation include (1) the TVA Board's ratemaking authority; (2) the current competitive environment, which is defined by the fence and the anti-cherrypicking provision; and (3) TVA’s status as a corporate agency and instrumentality of the United States. If Congress takes any action that 49 Table of Contents effectively alters any of these characteristics, TVA's credit ratings could be downgraded. Although TVA Bonds are not obligations of the United States, TVA, as a corporate agency and instrumentality of the United States, may be impacted by a downgrade of the United States’ sovereign credit ratings. Such a downgrade has and could again in the future, among other things, lead to a downgrade of TVA’s credit rating. Additionally, future events that may negatively impact TVA’s financial condition or reputation, including those discussed elsewhere in these Risk Factors, may lead to downgrades of TVA’s credit ratings, and the criteria used by the credit rating agencies to assign ratings could be changed at any time, which could result in changes to TVA’s ratings. Downgrades of TVA’s credit ratings, particularly downgrades related to TVA-specific factors, may have material adverse effects on TVA’s cash flows, results of operations, and financial condition, as well as on investors in TVA securities. Among other things, a downgrade could increase TVA’s interest expense by increasing the interest rates that TVA pays on new debt securities that it issues. Such an increase may reduce the amount of cash available for other purposes, which may require TVA to borrow more, to reduce other expenses or capital investments, or to increase power rates. A downgrade may also result in TVA’s having to post collateral under certain physical and financial contracts that contain ratings triggers. A downgrade below a contractual threshold may specifically prevent TVA from borrowing under four credit facilities totaling $2.7 billion or posting letters of credit as collateral under these facilities. As of September 30, 2024, there were $566 million of letters of credit outstanding under these facilities. If TVA were no longer able to post letters of credit as collateral, TVA would likely have to post cash as collateral, which would negatively affect TVA’s liquidity. Further, a downgrade may lower the price of TVA securities in the secondary market, thereby negatively impacting investors who sell TVA securities after the downgrade and diminishing the attractiveness and marketability of TVA securities in the secondary market as well as new TVA debt securities. Changes in technology could affect relationships with customers, require TVA to change how it conducts its operations, or impact TVA's financial condition. TVA's primary business is to sell power it produces, for the most part, from large facilities such as nuclear power plants, hydroelectric facilities, natural gas-fired facilities, and coal-fired units. TVA sells power to LPCs and directly served customers. Research and development activities are ongoing to improve existing and alternative technologies to produce or store electricity, including large-scale energy storage, gas or wind turbines, fuel cells, microturbines, solar cells, and distributed energy or storage resources. Advances in these or other alternative technologies could reduce the costs of such production methods to a level that will enable these technologies to compete effectively with traditional power plants such as those used by TVA. These technologies could be more appealing to customers and could lead them to pressure TVA to modify power contracts to allow customers to generate some of their own power requirements or purchase power from other suppliers. Other customers might also cease purchasing power from TVA altogether. To the extent that sales to such customers are reduced or eliminated, TVA's cash flows, results of operations, and financial condition could be negatively affected. TVA could also be required to modify how it operates its traditional plants or further modify its generation mix to reduce reliance on these facilities. Additionally, demand could change in terms of amount or timing as more devices and equipment become connected to the internet, allowing for real-time adjustments in consumption of power. Such increased control over power consumption could, among other things, affect how TVA operates its facilities or dispatches power, or require TVA to change its pricing structure or rates. TVA could lose its competitive edge if it fails to keep up with changes in technology. TVA’s competitive position could be impacted if TVA is unable to deploy new technology in a cost-effective and competitive manner. This process of enhancing or replacing TVA’s technology infrastructure involves significant development and implementation costs to keep pace with changing technologies and customer demand. If TVA fails to successfully implement critical technology infrastructure, or if it does not provide the anticipated benefits or meet customer demands, such failure could negatively affect TVA’s business strategy as well as impact its results of operations, financial position, and cash flows. Additionally, TVA may fail to fully capitalize on new technology, including AI, due to cybersecurity risk aversion or unique regulations applicable to TVA, leading to a loss in competitive edge or inability to efficiently solve future problems. TVA is subject to a variety of market risks that may negatively affect TVA's cash flows, results of operations, and financial condition. TVA is subject to a variety of market risks, including but not limited to the following: Commodity Price Risk . TVA's rates may increase if prices of commodities critical to operations, including coal, uranium, natural gas, fuel oil, crude oil, construction materials, or emission allowances, were to increase. An increase in rates may reduce demand and negatively impact TVA's cash flows, results of operations, and financial condition. 50 Table of Contents Investment Price Risk . TVA is exposed to investment price risk in its NDT, Asset Retirement Trust ("ART"), pension plan, Supplemental Executive Retirement Plan ("SERP"), Deferred Compensation Plan ("DCP"), and Restoration Plan ("RP"). If the value of the investments held in the NDT or the pension fund were to either decrease or fail to increase in accordance with assumed rates of return, TVA may be required to make substantial contributions to these funds. In addition, although TVA is not required to make contributions to the ART, it may choose to do so, particularly if TVA's estimates of its non-nuclear asset retirement obligation liabilities were to increase. TVA may also choose to make contributions to the SERP, DCP, and RP from time to time. Interest Rate Risk . Changes in interest rates may, variably, increase the amount of interest that TVA pays on new Bonds that it issues, decrease the return that TVA receives on short-term investments, decrease the value of the investments in the NDT, ART, pension fund, SERP, DCP, and RP, increase the amount of collateral that TVA is required to post in connection with certain of its derivative transactions, increase the losses on the mark-to-market valuation of certain derivative transactions into which TVA has entered, or some combination of these. Counterparty Credit and Performance Risk . TVA is exposed to the risk that its counterparties will not be able to perform their contractual obligations. If TVA's counterparties were to fail to perform their obligations, TVA's cash flows, results of operations, and financial condition may be adversely affected. In addition, the failure of a counterparty to perform may make it difficult for TVA to perform its obligations, particularly if the counterparty were a supplier of electricity or fuel. Currency Exchange Rate Risk . Over the next several years, TVA expects to spend a significant amount of capital on various projects. A portion of this amount may be spent on contracts that are denominated in one or more foreign currencies. TVA's two issues of Bonds denominated in British pounds sterling are hedged by currency swap agreements. The value of the U.S. dollar compared with other currencies has fluctuated widely in recent years, including as a result of changes in political and economic conditions. If not effectively managed, foreign currency exposure could negatively impact TVA's counterparty risk, cash flows, results of operations, and financial condition. The market for TVA Bonds might be limited. Although many TVA Bonds are listed on stock exchanges, there can be no assurances that any market will develop or continue to exist for any Bonds. Additionally, no assurances can be made as to the ability of the holders to sell their Bonds or as to the price at which holders will be able to sell their Bonds. Future trading prices of Bonds will depend on many factors, including prevailing interest rates, the then-current ratings assigned to the Bonds, the amount of Bonds outstanding, the time remaining until the maturity of the Bonds, the redemption features of the Bonds, the market for similar securities, and the level, direction, and volatility of interest rates generally, as well as the liquidity of the markets for those securities. When a particular series of Bonds is offered through underwriters, those underwriters may attempt to make a market in the Bonds. Dealers other than underwriters may also make a market in TVA Bonds. However, the underwriters and dealers are not obligated to make a market in any TVA Bonds and may terminate any market-making activities at any time without notice. Further, certain investors and underwriters use the environmental impact or sustainability of a company or industry as a criterion for deciding whether to invest in that company or industry. TVA's use of fossil fuels, among other things, could lead such investors or underwriters to not purchase TVA Bonds or reduce the attractiveness of TVA Bonds as compared to other investments, thereby limiting the market for TVA Bonds. Moreover, some investors may no longer be able to hold TVA securities after specified dates if TVA's performance on certain metrics fails to meet investor requirements on metrics such as the carbon intensity, carbon emissions, or operation of thermal coal-fired or natural gas-fired assets. In addition, legal limitations may affect the ability of banks and others to invest in Bonds. For example, national banks may purchase TVA Bonds for their own accounts in an amount not to exceed 10 percent of unimpaired capital and surplus. Also, TVA Bonds are "obligations of a corporation which is an instrumentality of the United States" within the meaning of Section 7701(a)(19)(C)(ii) of the Internal Revenue Code for purposes of the 60 percent of assets limitation applicable to U.S. building and loan associations. These limitations on TVA Bond investors also may limit the market for TVA Bonds. Payment of principal and interest on TVA securities is not guaranteed by the U.S government. Although TVA Bonds are not obligations of the United States, TVA, as a corporate agency and instrumentality of the United States, may be impacted by a downgrade of the United States' sovereign credit ratings. Principal and interest on TVA securities are payable solely from TVA's net power proceeds. Net power proceeds are the remainder of TVA's gross power revenues after deducting the costs of operating, maintaining, and administering its power properties and payments to states and counties in lieu of taxes, but before deducting depreciation accruals or other charges representing the amortization of capital expenditures, plus the net proceeds from the sale or other disposition of any 51 Table of Contents power facility or interest therein. If TVA were to experience extreme financial difficulty and were unable to make payments of principal or interest on its Bonds, the federal government would not be legally obligated to prevent TVA from defaulting on its obligations. An inability to pay some or all of the principal or interest owed on a TVA security would likely have a negative impact on the market for TVA Bonds generally and TVA's financial condition, reputation, and relationship with the investment community, and could result in cross-defaults in other financial arrangements. HUMAN CAPITAL AND MANAGEMENT RISKS Failure to attract and retain an appropriately qualified, diverse, and inclusive workforce may negatively affect TVA's results of operations. TVA's business depends on its ability to recruit and retain key executive officers as well as skilled professional and technical employees. Labor is subject to external factors that are beyond TVA's control, including the highly competitive market for skilled workers and leaders, inflation, regional health emergencies, and workforce participation rates. The inability to attract and retain an appropriately qualified, diverse, and inclusive workforce could adversely affect TVA's ability to, among other things, operate and maintain generation and transmission facilities, complete large construction projects, and successfully implement its continuous improvement initiatives. Changes in the membership of the TVA Board and TVA senior management could impact how TVA operates. The TVA Board is comprised of up to nine part-time members serving staggered, five-year terms. One to two Board members' terms typically expire each year. In addition, there is always the possibility that one or more members of TVA's senior management may retire or otherwise leave TVA. The individuals filling either the TVA Board or senior management positions may wish to change how TVA operates in whole or in part. If the changes were not successful or TVA were unable to adapt properly to such changes, TVA's financial condition, results of operations, reputation, and relationship with customers could be negatively affected. Loss of a quorum of the TVA Board could limit TVA's ability to adapt to changing business conditions. Under the TVA Act, a quorum of the TVA Board is five members. Becoming a member of the TVA Board requires confirmation by the U.S. Senate following appointment by the President. This process has been and could again in the future be subject to extended delays. The President may remove TVA Board members, and the TVA Board members may resign or otherwise leave office before a successor is commissioned. As a result, a delay in the appointment or confirmation of directors, or the removal of directors by the President, can threaten the TVA Board's quorum. The TVA Board is responsible for, among other things, establishing the rates TVA charges for power as well as TVA's long-term objectives, policies, and plans. Accordingly, the loss of a quorum for an extended period of time would impair TVA's ability to change rates and to modify these objectives, policies, and plans. Such an impairment would likely have a negative impact on TVA's ability to respond to significant changes in technology, the regulatory environment, or the industry overall and, in turn, negatively affect TVA's cash flows, results of operations, financial condition, and reputation. The TVA Board currently has eight members. RISKS RELATED TO THE ENVIRONMENT AND CATASTROPHIC EVENTS Weather conditions may hamper TVA's ability to supply power or negatively impact net revenue, and weather conditions may cause customers' demand for power to exceed TVA's then-present power supply capabilities. Weather may have a material adverse effect on TVA’s cash flows, results of operations, and financial condition, including through the following non-exclusive foreseeable scenarios: • Extreme temperatures may increase the demand for power and require TVA to purchase power at high prices to meet customer demand, whereas unusually mild weather may result in decreased demand for power and lead to reduced electricity sales. • Periods of either high or low levels of rainfall may impede river traffic, impacting barge deliveries of critical items such as coal and equipment for power facilities. • High river water temperatures in the summer may limit TVA's ability to use water from the Tennessee or Cumberland River systems for cooling at certain of TVA's generating facilities, thereby limiting its ability to operate these generating facilities. This situation would be aggravated during periods of reduced rainfall or drought. • Changes in the climate may make, or may be making, such shifts in weather more common or extreme. Climate change may cause catastrophic events like droughts, floods, wildfires, heat waves, and snow or ice storms to occur more frequently in the Tennessee Valley region. In response, TVA may be required to, among other things, change its generation mix or change how it conducts its operations. • Extreme weather conditions or damage resulting from storms or other catastrophic events could stress TVA's transmission and distribution systems, communication systems, and technology, including information technology, resulting in increased restoration, maintenance, and capital costs and reduced reliability, and may 52 Table of Contents even result in events such as the failure of a dam or an incident at a coal-fired, gas-fired, or nuclear plant or a CCR facility. Events that affect the supply or quality of water from the Tennessee River system and Cumberland River system, or elsewhere, may interfere with TVA's ability to generate power. An inadequate supply of water in the Tennessee River system and Cumberland River system could negatively impact TVA's cash flows, results of operations, and financial condition, including potentially reducing generation at TVA's hydroelectric plants, which may require TVA to increase reliance on more expensive generation sources or purchase more energy in the market likely at higher costs; negatively affecting generation at coal-fired and nuclear plants, which depend on water from the river systems near which they are located for cooling and for use in boilers where water is converted into steam to drive turbines; or negatively affecting generation at TVA's gas-fired facilities not located near a river, which nonetheless require alternative sources of water, such as from wells or local utility companies. Further, the water for these purposes must be of a particular quality for use in TVA's equipment. When the available water is not of sufficient quality for TVA's use, TVA must either treat the water or obtain alternate sources. An inadequate supply of quality water could result, among other things, from periods of low rainfall or drought, the withdrawal of water from the river systems by governmental entities or others, incidents affecting bodies of water not managed by TVA, supply issues that affect water providers, or intrusive aquatic plants and animals such as eel grass, algae, and mussels that block cooling water intake pipes or otherwise interfere with the operation of TVA's generation facilities. While TVA manages the Tennessee River and a large portion of its tributary system to provide much of the water necessary for the operation of its power plants, the USACE operates and manages other bodies of water upon which some of TVA's facilities rely. Events at these bodies of water or their associated hydroelectric facilities may interfere with the flow of water and may result in TVA's having insufficient water quality to meet the needs of some of its generating plants. If TVA were to have insufficient water supply of the quality necessary to meet the needs of its plants, TVA may be required to reduce generation at its affected facilities to levels compatible with the available supply of quality water, or take additional steps that change how TVA conducts its operations or that otherwise cause TVA to incur additional expense. Catastrophic events are an ever present risk of financial loss and disruption to TVA's business. TVA's cash flows, results of operations, and financial condition may be adversely affected, either directly or indirectly, by catastrophic events such as fires, earthquakes, explosions, solar events, electromagnetic pulses, geomagnetic disturbances, droughts, floods, hurricanes, tornadoes, polar vortexes, icing events, pipeline explosions, or other casualty events, wars, national emergencies, terrorist activities, pandemics or epidemics, widespread public health crises, geopolitical conflicts, or other similar destructive or disruptive events. These events, the frequency and severity of which are unpredictable, may, among other things, cause health, safety, or environmental problems; limit or disrupt TVA's ability to generate and transmit power; lead to legislative or regulatory changes that affect the construction, operation, and decommissioning of nuclear units and the storage of spent fuel; limit or disrupt TVA's ability to provide flood control and river management; reduce the demand for power; disrupt fuel or other supplies; require TVA to produce additional tritium; cause or exacerbate an economic downturn; require TVA to make substantial capital investments for repairs, improvements, or modifications; negatively affect the cost or availability of insurance; or cause or exacerbate instability in the financial markets. Additionally, some studies have predicted that climate change may cause catastrophic events, such as heat waves, droughts, and floods, to occur more frequently or with greater intensity in the Tennessee Valley region, which could adversely impact TVA. These destructive or disruptive events may present special risks to TVA’s nuclear plants. If public opposition to nuclear power were to make operating nuclear plants less feasible because of any of these events, TVA may be forced to shut down its nuclear plants. This would make it substantially more difficult for TVA to obtain greater amounts of its power supply from low or zero carbon emitting resources and to replace its generation capacity when faced with retiring or idling certain coal-fired units. ACCOUNTING AND FINANCIAL REPORTING RISKS TVA's financial control system cannot guarantee that all control issues and instances of fraud or errors will be prevented or detected. No financial control system, no matter how well designed and operated, can provide absolute assurance that the objectives of the control system will be met, and no evaluation of financial controls can provide absolute assurance that all control issues and instances of fraud or errors can or will be prevented or detected. The design of any system of financial controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. 53 Table of Contents TVA may be unable to use regulatory accounting for some or all costs. TVA uses regulatory accounting to defer certain costs. To qualify for regulatory accounting, costs must meet certain accounting criteria and be approved for regulatory accounting treatment by the TVA Board in its capacity as TVA's regulator. When costs do not meet, or cease to meet, these criteria, or if the TVA Board were to disallow the treatment or were to cease to be TVA's sole regulator in such areas, TVA may not be able to defer those costs. Such an inability to defer costs would likely have a substantial impact on TVA's financial condition and results of operations and could impact the timing and amounts of TVA's rate recovery. For a discussion of regulatory accounting, see Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates . GENERAL RISK FACTORS TVA may not be able to implement its business strategy successfully. TVA's financial condition and results of operations are largely dependent on the extent to which it can implement its business strategy successfully. TVA's strategy includes maintaining low rates, aligning operations and maintenance costs with revenues, being responsible stewards, living within its means, meeting reliability expectations, and providing a balanced portfolio, in light of TVA's strategic priorities. The strategic priorities are Powerful Partnerships, People Advantage, Operational Excellence, Igniting Innovation, and Financial Strength. This strategy is subject to business, economic, and competitive uncertainties and contingencies, many of which are beyond TVA’s control. Such uncertainties include customer energy-efficiency programs that are designed to reduce energy demand; energy-efficiency efforts by customers not related to TVA’s energy-efficiency programs; increased customer use of DER, such as solar panels and other technologies, as well as the use of energy storage technologies; and macroeconomic factors impacting economic growth or contraction within TVA’s service territory, which could affect energy demand. If TVA is unable to successfully implement its business strategy, TVA’s financial condition and results of operations could be negatively affected. See Item 1, Business — Environmental Matters and Human Capital Management , Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges , and Part III, Item 11, Executive Compensation — C ompensation Discussion and Analysis for additional information regarding TVA's strategic objectives. TVA's cost reduction efforts may not be successful. TVA is undertaking a cost optimization project to partially offset cost increases expected for the years 2024 through 2026, and achieving this goal may prove challenging, particularly if inflation rates remain high. The failure to achieve or maintain cost reduction targets could adversely affect TVA's rates, reputation, cash flows, results of operations, and financial condition. Moreover, if TVA fails to limit rate increases as provided in the long-term Partnership Agreements, participating LPCs have a right to renegotiate or terminate the Partnership Agreements. TVA's organizational structure may not adequately support TVA's anticipated business needs or enable it to meet the needs of its current or potential customers. TVA has been modifying its organizational structure to better adapt to the forecasted economic environment. If TVA's assumptions about either its forecasts or the proper internal structure of the company to meet the expected environment are inaccurate or if this structure does not adequately support TVA's needs, TVA could face operational or financial challenges that could adversely affect its cash flows, results of operations, and financial condition as well as TVA's ability to attract or retain a skilled workforce and to meet the needs of its current or potential customers. TVA may have difficulty adapting its business model to changes in the utility industry and customer preferences. The traditional business model for power production, selling power from centrally located plants, is facing pressure from a variety of sources, including the potential for self-generation by current or potential customers, new technologies such as energy storage, and increased energy efficiency. These pressures may reduce the demand for TVA power. If TVA does not or cannot adapt to this pressure by adequately changing its business model, TVA's financial condition and results of operations could be negatively affected. TVA's reputation may be negatively impacted. As with any company, TVA's reputation is a vital element of its ability to effectively conduct its business. TVA's reputation could be harmed by a variety of factors, including failure of a generating asset or supporting infrastructure; failure to effectively manage land and other natural resources entrusted to TVA; real or perceived violations of environmental regulations, including those related to climate change; real or perceived issues with TVA's safety culture or work environment; inability to meet its human capital management goals; inability to meet its carbon reduction 54 Table of Contents aspirations; inability to keep its electricity rates stable; involvement in a class-action or other high-profile lawsuit; significant delays in construction projects; occurrence of or responses to cyber attacks or security vulnerabilities; acts or omissions of TVA management or acts or omissions of a contractor or other third-party working with or for TVA, which actually or perceivably reflect negatively on TVA; measures taken to offset reductions in demand or to supply rising demand; or a significant dispute with one of TVA's customers. Any deterioration in TVA's reputation may harm TVA's relationships with its customers and stakeholders, may increase its cost of doing business, may interfere with its ability to attract and retain a qualified, inclusive, and diverse workforce, may impact TVA's ability to raise debt capital, and may potentially lead to the enactment of new laws and regulations, or the modification of existing laws and regulations, that negatively affect the way TVA conducts its business. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. ITEM 1C. CYBERSECURITY Risk Management TVA’s cybersecurity risk management programs and processes exist under a written cybersecurity policy, which provides the foundation for TVA’s information security programs. Under the policy, TVA engages assessors, consultants, auditors, and other third parties. All TVA employees, contractors, grantees, other federal agencies, state and local governments, industry partners, and others who possess TVA information or who operate, use, or have access to TVA's information systems are made responsible for complying with TVA's cybersecurity policy and information security-related communications, plans, practices, procedures, and standards issued as part of the information security programs. TVA’s cybersecurity risk management framework provides the structure for protecting against cybersecurity threats, including through promoting risk management efforts, situational awareness, and cyber risk modeling and simulations. Within this framework, TVA operates numerous programs under internal written policies and procedures, which are aimed at helping protect TVA’s information resources. These include a vulnerability management program to help address cybersecurity threats to TVA digital assets; a patch and remediation management program to help computer systems remain current with software patches or software updates; an offensive threat management program to emulate threat actor activities; a cybersecurity training program to help educate employees and contractors, including by providing scenarios designed to train the workforce on responding to cybersecurity incidents; implementation of standard terms and conditions where appropriate in TVA’s supply chain contracts to help mitigate TVA’s cybersecurity risk, including through requiring timely notice of vendor cybersecurity incidents and data impacts and compliance with laws, regulations, and TVA’s policies on cybersecurity; and a program to accomplish cybersecurity event detection alerting. These programs are based on principles from the National Institute of Standards and Technology and certain regulatory standards that are designed to protect against cybersecurity incidents, including the North American Electric Reliability Corporation Critical Infrastructure Protection Standards and Nuclear Regulatory Commission cybersecurity standards, and are periodically assessed by third-party experts. In the last three fiscal years, TVA has not experienced any material cybersecurity incidents. TVA is not currently aware of any potential cybersecurity threats, including as a result of any previous cybersecurity incidents, that may have materially affected or are reasonably likely to materially affect TVA, including its business strategy, results of operations, or financial condition; however, TVA cannot provide assurance that it will not be materially affected in the future by cybersecurity risks or any future material risks. For more information on TVA’s cybersecurity related risks, see Item 1A, Risk Factors – Cybersecurity and Information Technology Risks in this Annual Report. Governance The TVA Board is ultimately responsible for oversight of the identification, management, and mitigation of enterprise-wide risk, including cybersecurity risk, and receives reports from the Audit, Risk, and Cybersecurity Committee (“Audit Committee”). The Audit Committee is a standing committee of the TVA Board and advises the TVA Board on a variety of matters, including TVA’s processes for identifying, monitoring, and mitigating enterprise risk and reviewing and overseeing strategies for addressing TVA’s cybersecurity, data, and privacy policies and response protocols. The Audit Committee meets at least quarterly. Reporting to the Audit Committee and the TVA Board is the risk counsel comprised of TVA’s top leaders and the Chief Risk Officer (“CRO”), which is responsible for the highest level of management oversight of risk at TVA. The risk committee’s primary purpose is to oversee TVA’s management of enterprise-wide risks with policy implications reported to the TVA Board or a designated TVA Board committee. The risk committee oversees a subordinate committee that provides comprehensive risk oversight of TVA’s security, artificial intelligence, privacy, and technology risks consistent with TVA’s mission, strategic imperatives, and approved financial and operational plans. 55 Table of Contents TVA’s governance, oversight, execution, and support activities include quarterly Enterprise Risk and Assurance updates to the Audit Committee, an annual alignment with TVA’s broader risk management framework and business planning initiatives, and tactical and intentional initiatives focused on reducing risk, increasing maturity, and helping ensure regulatory compliance and adherence. TVA engages in various audits in order to provide assurance of TVA’s effective management of cybersecurity risk and risk as a whole and is also subject to required external audits to ensure compliance with certain regulatory standards that are designed to protect against cybersecurity incidents. TVA's current VP, Cybersecurity serves as Chief Information Security Officer ("CISO"). The current CISO is also designated as the Chief Artificial Intelligence Officer and the agency’s Federal Senior Intelligence Coordinator. Starting in operational technology as part of nuclear generation, the current CISO has spent his career in public power in various North American Electric Reliability Corporation regions and has been in the industry for over 25 years. He has led Cybersecurity for over 10 years in the sector. He was previously the CISO of the New York Power Authority, and he has experience supporting all verticals of electric operations, from the perspectives of security, resiliency, and recovery. He is a Certified Information Security Manager and has previously held Chair and Co-chair roles in the industry, such as with the Electric Subsector Coordinating Council's Cyber Mutual Aid Committee. He seeks to focus on information sharing and building partnerships to enable understanding of emerging threats. The current CISO remains active in various security organizations and the broader industry. He has a degree in Computer Science and a Master of Business Administration. ITEM 2. PROPERTIES TVA holds personal property in its own name but generally holds real property as agent for the U.S. TVA may acquire real property as an agent of the U.S. by negotiated purchase or by eminent domain. Generating Properties At September 30, 2024, TVA-operated generating assets consisted of seven nuclear units, 24 active coal-fired units, 70 simple-cycle gas units (68 active units and two idled units), one cogeneration unit, 14 combined-cycle gas power blocks, 109 conventional hydroelectric units (106 active units and three units in long-term outage and unavailable for service), four pumped-storage hydroelectric units, five diesel generator units, and nine operating solar installations. As of September 30, 2024, four of the combined-cycle power blocks were leased to special purpose entities ("SPEs") and leased back to TVA under long-term leases. See Note 11 — Variable Interest Entities and Note 14 — Debt and Other Obligations — Lease/Leasebacks . In addition, TVA is leasing the three Caledonia combined-cycle power blocks under a long-term lease. For a discussion of these assets, see Item 1, Business — Power Supply and Load Management Resources . Net Capability Net capability is defined as the ability of an electric system, generating unit, or other system component to carry or generate power for a specified time period. It does not include real-time bulk electrical system operating constraints such as transmission line loading limitations, fuel availability such as coal, gas, and seasonal river reservoir levels, fuel blend, severe weather events, environmental and/or other regulatory constraints, transmission system outages, generator outages, or generator derates. Summer net capability as presented in the table below reflects the expected output of individual resources at TVA’s anticipated summer demand peak. The summation of those individual resources does not include the real-time bulk electrical system operating constraints previously noted. See also Item 1A, Risk Factors — Operational Risks and Risks Related to the Environment and Catastrophic Events. In addition to the TVA-operated generating facilities presented in the table below, TVA also has 8,304 MWs of operating capacity available through PPAs. At September 30, 2024, these contracts were comprised of 3,206 MWs of renewable PPAs and 5,098 MWs of nonrenewable PPAs. The summation of TVA's PPAs under contract does not include real-time operating constraints, such as intermittency of renewable resources associated with weather or other factors. See Item 1, Business — Power Supply and Load Management Resources — Power Purchase and Other Agreements for information on TVA's renewable and nonrenewable power purchase contracts by resource type and location. 56 Table of Contents The following table summarizes TVA's summer net capability in MW at September 30, 2024: SUMMER NET CAPABILITY At September 30, 2024 Source of Capability Location Number of Units Summer Net Capability (MW) Date First Unit Placed in Service (CY) Date Last Unit Placed in Service (CY) TVA-Operated Generating Facilities Nuclear Browns Ferry Alabama 3 3,662 1974 1977 Sequoyah Tennessee 2 2,292 1981 1982 Watts Bar Tennessee 2 2,278 1996 2016 Total Nuclear 7 8,232 Coal-Fired Cumberland Tennessee 2 2,470 1973 1973 Gallatin Tennessee 4 976 1956 1959 Kingston Tennessee 9 1,298 1954 1955 Shawnee Kentucky 9 1,071 1953 1955 Total Coal-Fired 24 5,815 Natural Gas and/or Oil-Fired (1)(2) Simple-Cycle Combustion Turbine Allen (3) Tennessee 4 92 1971 1972 Brownsville Tennessee 4 425 1999 1999 Colbert Alabama 11 1,041 1972 2023 Gallatin Tennessee 8 534 1975 2000 Gleason Tennessee 3 463 2000 2000 Johnsonville Tennessee 13 708 1975 2000 Kemper Mississippi 4 273 2002 2002 Lagoon Creek Tennessee 12 844 2001 2002 Marshall County Kentucky 8 571 2002 2002 Paradise Kentucky 3 681 2023 2023 Subtotal Simple-Cycle Combustion Turbine 70 5,632 Combined-Cycle Combustion Turbine Ackerman (4) Mississippi 1 713 2007 2007 Allen (5) Tennessee 1 1,106 2018 2018 Caledonia (6) Mississippi 3 819 2003 2003 John Sevier (7) Tennessee 1 871 2012 2012 Lagoon Creek (8) Tennessee 1 596 2010 2010 Magnolia Mississippi 3 951 2003 2003 Paradise (9) Kentucky 1 1,100 2017 2017 Southaven Mississippi 3 802 2003 2003 Subtotal Combined-Cycle Combustion Turbine 14 6,958 Co-Generation Johnsonville Tennessee 1 66 1975 2000 Total Natural Gas and/or Oil-Fired 85 12,656 Hydroelectric Conventional Plants Alabama 36 1,169 1925 1962 Georgia 2 37 1931 1956 Kentucky 5 225 1944 1948 North Carolina 6 478 1940 1956 Tennessee (3)(10) 60 1,848 1912 1972 Pumped-Storage (11) Tennessee 4 1,715 1978 1979 Total Hydroelectric 113 5,472 Diesel Generator Meridian Mississippi 5 9 1998 1998 TVA Non-hydro Renewable Resources (12) 1 TVA Other Nonrenewable Resources (12) 5 Total TVA-Operated Generating Facilities Summer Net Capability 32,190 Notes (1) See Generating Properties above for a discussion of TVA-operated natural gas and/or oil-fired facilities subject to leaseback and long-term lease arrangements. (2) As of September 30, 2024, 92 MW of peak firing short-term capability of simple-cycle combustion turbine units was not operational and would require additional investment for dependable use; therefore, this short-term capability is not presented in the table above. (3) As of September 30, 2024, TVA had two idled units at Allen CT Facility (Units 17 and 18) and three units that were in long-term outage and unavailable for service at Wilbur Hydroelectric Facility (Units 1-3). These units are included in their respective locations in the table above; however, the capability from these units is excluded. 57 Table of Contents (4) Ackerman Combined Cycle Facility is a single steam cycle unit driven by two gas turbines (2x1 configuration). (5) Allen Combined Cycle Facility is a single steam cycle unit driven by two gas turbines (2x1 configuration). (6) Caledonia Combined Cycle Plant ("Caledonia CC") is currently a leased facility operated by TVA. (7) John Sevier Combined Cycle Facility ("John Sevier CCF") is a single steam cycle unit driven by three gas turbines (3x1 configuration). (8) Lagoon Creek Combined Cycle Facility is a single steam cycle unit driven by two gas turbines (2x1 configuration). (9) Paradise Combined Cycle Facility is a single steam cycle unit driven by three gas turbines (3x1 configuration). (10) Includes 86 MW of summer net capability associated with Hiwassee Hydro Unit 2. See Item 1, Business — Power Supply and Load Management Resources — Renewable Energy Resources — Conventional Hydroelectric Dam s. (11) See Item 1, Business — Power Supply and Load Management Resources — Hydroelectric Pumped-Storage for a discussion of Raccoon Mountain Pumped-Storage Plant. (12) TVA owns approximately one MW of renewable solar capability among nine operating solar installations, and Allen Combined Cycle Facility has five MW of nonrenewable biomass capability. Transmission Properties TVA's transmission system interconnects with systems of surrounding utilities and, at September 30, 2024, consisted primarily of approximately 2,500 circuit miles of 500 kilovolt, 12,000 circuit miles of 161 kilovolt, and 1,900 circuit miles of other voltage transmission lines; 5,196 miles of fiber optic lines; 583 transmission substations, power switchyards, and switching stations; and 1,351 customer connection points (customer, generation, and interconnection). Natural Resource Stewardship Properties TVA operates and maintains 49 dams and manages approximately 11,000 miles of reservoir shoreline, 293,000 acres of reservoir land, 650,000 surface acres of reservoir water, and approximately 148 public recreation areas throughout the Tennessee Valley, including campgrounds, day-use areas, and boat launching ramps. Additionally, TVA manages over 153 agreements for commercial recreation (such as campgrounds and marinas). As part of its stewardship responsibilities, TVA approval is required to be obtained before any obstruction affecting navigation, flood control, or public lands can be constructed across, along, or in the Tennessee River and its tributaries. These public lands and waters managed by TVA provide both conservation and sustainable recreation. Buildings TVA has buildings and structures located throughout its service area to support TVA's mission of service. These buildings and structures include generation and transmission facilities, corporate offices, customer service centers, power service centers, warehouses, visitor centers, and crew quarters. Two significant buildings are its Knoxville Office Complex and the Chattanooga Office Complex in Tennessee. See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations — Key Initiatives and Challenges — Real Property Portfolio . Disposal of Property TVA has broad authority to dispose of personal property but only limited authority to dispose of real property. TVA's primary, but not exclusive, authority to dispose of real property is as follows: TVA has authority to dispose of surplus real property at a public auction; TVA may dispose of real property for certain specified purposes, including providing replacement lands for certain entities whose lands were flooded or destroyed by dam or reservoir construction, providing real property for recreational use, and granting easements and rights-of-way upon which are located transmission or distribution lines; TVA can dispose of real property in connection with the construction of generating plants or other facilities under certain circumstances; and TVA has authority to grant easements for rights-of-way and other purposes. The Basic Tennessee Valley Authority Power Bond Resolution adopted by the TVA Board on October 6, 1960, as amended on September 28, 1976, October 17, 1989, and March 25, 1992 (the "Basic Resolution") prohibits TVA (1) from mortgaging any part of its power properties and (2) from disposing of all or any substantial portion of these properties unless TVA provides for a continuance of the interest, principal, and sinking fund payments due and to become due on all outstanding Bonds, or for the retirement of such Bonds. 58 Table of Contents ITEM 3. LEGAL PROCEEDINGS From time to time, TVA is party to or otherwise involved in lawsuits, claims, proceedings, investigations, and other legal matters ("Legal Proceedings") that have arisen in the ordinary course of conducting its activities. While the outcome of the Legal Proceedings to which TVA is a party cannot be predicted with certainty, any adverse outcome to a Legal Proceeding involving TVA may have a material adverse effect on TVA's financial condition, results of operations, and cash flows. For a discussion of Legal Proceedings involving TVA, see Note 22 — Commitments and Contingencies — Legal Proceedings, which discussion is incorporated by reference into this Item 3. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 59 Table of Contents PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Not applicable. ITEM 6. RESERVED Not applicable. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in millions except where noted) The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader understand the Tennessee Valley Authority ("TVA"), its financial condition, results of operations, and cash flows, and its present business environment. The MD&A is provided as a supplement to, and should be read in conjunction with, TVA's consolidated financial statements and the accompanying notes thereto contained in Item 8, Financial Statements and Supplementary Data of this Annual Report on Form 10-K for the fiscal year ended September 30, 2024 (the "Annual Report"). See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in TVA's Annual Report on Form 10-K for the year ended September 30, 2023, filed with the Securities and Exchange Commission ("SEC") on November 14, 2023, for a discussion of variance drivers for the year ended September 30, 2023, as compared to the year ended September 30, 2022. The MD&A includes the following sections: • Business and Mission — a general description of TVA's business, objectives, strategic priorities, and core capabilities; • Executive Overview — a general overview of TVA's activities and results of operations for 2024; • Results of Operations — an analysis of TVA's consolidated results of operations for 2023 and 2024; • Liquidity and Capital Resources — an analysis of cash flows, a description of aggregate contractual obligations, and an overview of financial position; • Key Initiatives and Challenges — an overview of current and future initiatives and challenges facing TVA; • Critical Accounting Estimates — a summary of significant estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes; • Legislative and Regulatory Matters — a summary of laws and regulations that may impact TVA; and • Risk Management Activities — a description of TVA's risk governance and exposure to various market risks. Business and Mission Business TVA operates the nation's largest public power system. At September 30, 2024, TVA had 61 directly served customers, which include seven federal agency customers, and 153 local power company customers ("LPCs") that serve approximately 10 million people in parts of seven southeastern states. TVA generates nearly all of its revenues from the sale of electricity, and in 2024 revenues from the sale of electricity totaled $12.1 billion. As a wholly-owned agency and instrumentality of the United States ("U.S."), however, TVA differs from other electric utilities in a number of ways: • TVA is a government corporation. • The area in which TVA sells power is limited by the Tennessee Valley Authority Act of 1933, as amended, (the "TVA Act"), under a provision known as the "fence"; however, another provision of federal law known as the Anti-Cherrypicking Amendment ("ACPA") generally protects TVA from being forced to provide access to its transmission lines to others for the purpose of delivering power to customers within substantially all of TVA's defined service area. • The rates TVA charges for power are set solely by the TVA Board of Directors ("TVA Board") and are not set or reviewed by another entity, such as a public utility commission. In setting rates, however, the TVA Board is charged by the TVA Act to have due regard for the primary objectives of the TVA Act, including the objective that power be sold at rates as low as feasible. 60 Table of Contents • TVA is not authorized to raise capital by issuing equity securities. TVA relies primarily on cash from operations and proceeds from power program borrowings to fund its operations and is authorized by the TVA Act to issue bonds, notes, or other evidences of indebtedness (collectively, "Bonds") in an amount not to exceed $30.0 billion outstanding at any given time. Although TVA's operations were originally funded primarily with appropriations from Congress, TVA has not received any appropriations from Congress for any activities since 1999 and, as directed by Congress, has funded essential stewardship activities primarily with power revenues. TVA's Mission of Service TVA was built for the people, created by federal legislation, and charged with a unique mission - to improve the quality of life in a seven-state region through the integrated management of the region's resources. TVA's mission focuses on three key areas: ENERGY ENVIRONMENT ECONOMIC DEVELOPMENT • Energy — Delivering reliable, low cost, clean energy; • Environment — Caring for the region's natural resources; and • Economic Development — Creating sustainable economic growth. 61 Table of Contents While TVA's mission has not changed since it was established in 1933, the climate in which TVA operates continues to evolve. The business and economic environment has become more challenging due to economic conditions; tougher environmental standards; and the need to diversify its power supply and adapt to changing customer usage behaviors, new technologies, and emerging, non-traditional competition. To continue to deliver its mission of service while evolving for future success, TVA must realize five strategic priorities, which are comprised of several strategic elements each: Foster a culture that embraces, adapts quickly to, and anticipates changes needed for TVA to excel in the future public power utility marketplace Support inclusion with diversity efforts to attract and retain the best talent for TVA Deliver an efficient and agile HR service model that enables enterprise effectiveness Develop the next generation of TVA leaders Nation’s top nuclear fleet by 2025 Achieve leading operational performance by managing the generation fleet based on the mission of each asset • Gas and hydro to top quartile • Coal fleet based on end of life Increase generation and transmission capacity while fostering excellence in project management and construction Advance TVA’s grid capabilities to increase flexibility for future additions and to meet the reliability and resiliency needs of the future Accelerate the deployment of existing clean technologies including solar, storage, energy efficiency, and demand response Maintain financial health while funding TVA's energy transition Ensure sufficient revenues to meet financial commitments (revenue requirements) Evolve the public power model while incorporating Valley Vision 2035 Build partnerships and community connections to enable solutions Champion the public power model through the region’s energy expansion Align with TVA's customers and economic development agencies to target industries that are critical to the Valley’s long-term success Responsibly foster excellence in natural resource management and environmental stewardship as TVA transitions to the energy system of the future Advance energy transformation in the Valley through leveraging technology and innovation in all of TVA's work Refine innovation framework to align with TVA’s strategic intent Support the development of new technologies to further accelerate decarbonization and prepare to deploy commercially viable technologies TVA's mission sets the stage for its strategic planning process that includes strategic objectives, initiatives, and scorecards for performance designed to provide clear direction for improving TVA's core business. Linking the Mission to Performance TVA has formulated key performance measures to support its strategic priorities. The intent of these measures is to align employees to TVA's mission by focusing its collective efforts on operational excellence, fiscal responsibility, economic development, and environmental stewardship. The measures are designed to promote teamwork, encourage high performance behaviors, and motivate TVA employees to achieve goals aligned with TVA's mission and values. The 2024 corporate results compared with targets for these key measures are reflected in the chart below, and the subsequent chart reflects the 2025 approved corporate measures. See Part III, Item 11, Executive Compensation — Compensation Discussion and Analysis for information regarding how the 2024 measures are calculated. 62 Table of Contents 2024 Corporate Measure Weight Actual Threshold Target Stretch TVA total spending ($ millions) 40% $ 7,496 $ 8,049 $ 7,810 $ 7,570 Load not served (system minutes) 30% 2.3 4.5 4.1 3.2 Annualized nuclear online reliability loss factor (%) 15% 3.22 % 3.00 % 2.00 % 1.00 % Combined cycle equivalent forced outage rate (%) 10% 1.2 % 6.4 % 5.5 % 4.0 % Coal equivalent forced outage rate (%) 5% 4.8 % 18.2 % 15.2 % 8.6 % 2025 Corporate Measure Weight Threshold Target Stretch Strategic Business Unit ("SBU") Controllable / Operating and Maintenance ("O&M") and Base Capital Spend 40% $5,187 $5,061 $4,935 Transmission Performance Indicator 15% 50 100 200 Nuclear Performance Indicator 15% 2.77 2.00 1.23 Power Operations Performance Indicator 15% 50 100 200 Serious Injury Incident Rate 15% 0.04 0.02 0.00 Executive Overview TVA's operating revenues were $12.3 billion and $12.1 billion for the years ended September 30, 2024 and 2023, respectively. Operating revenues increased for the year ended September 30, 2024 as compared to the prior year, primarily as a result of higher effective base rates and higher sales volume, partially offset by lower fuel rates. Effective base rates were higher primarily due to the TVA Board action to approve a 4.5 percent wholesale base rate increase beginning in 2024 and the pandemic credits ending on September 30, 2023. The higher sales volume was driven by a 20 percent increase in cooling degree days as compared to the same period of the prior year. Lower fuel rates were primarily due to lower coal, natural gas, and purchased power prices. On January 17, 2024, TVA reached an all-time record high peak power demand of approximately 34,577 megawatts ("MW"). This peak was nearly 1,100 MW greater than TVA's previous all-time peak and over 1,100 MW greater than TVA's peak power demand during Winter Storm Elliott in December 2022. In addition, TVA reached a second highest peak power demand of approximately 34,284 MW on January 21, 2024. Total operating expenses decreased $274 million for the year ended September 30, 2024, as compared to the prior year, primarily due to a decrease in fuel and purchased power expense. Fuel and purchased power expense decreased $432 million for the year ended September 30, 2024, as compared to the same period of the prior year, primarily due to lower coal, natural gas, and purchased power prices. Depreciation and amortization expense decreased $75 million for the year ended September 30, 2024, as compared to the prior year, primarily driven by a decrease in depreciation expense associated with the retirement of Bull Run Fossil Plant ("Bull Run"). These decreases were partially offset by a $269 million increase in Operating and maintenance expense primarily due to increases in payroll and benefit costs due to labor escalation for cost of living increases and additional headcount to support operational needs, outage expense driven by an increase in nuclear outage days, and contract labor costs primarily related to strategic project work and power operations performance improvement activities. Commercial operations began on Paradise Combustion Turbine Units ("CTs") 5-7 on December 29, 2023. TVA also has ongoing natural gas projects at its Johnsonville, Cumberland, and Kingston sites and is evaluating natural gas projects for the replacement generation for the second unit at Cumberland, a new Caledonia CT plant on TVA land, and an aeroderivative CT project at TVA's Allen site. In addition, the first license renewal application was submitted to the Nuclear Regulatory Commission in January 2024 for the three units at Browns Ferry Nuclear Plant following the completion of a Supplemental Environmental Impact Statement ("EIS"). TVA documented its final decision related to the retirement of Kingston with the Record of Decision on April 2, 2024. TVA plans to retire the nine coal-fired units at Kingston by the end of calendar year ("CY") 2027 and replace the retired generation with an energy complex that includes natural gas, battery storage, and solar. On May 8, 2024, the Environmental Protection Agency ("EPA") published its final legacy coal combustion residual ("CCR") rule ("Legacy CCR Rule"), which expands the scope of the existing regulatory requirements of EPA's 2015 CCR rule, as revised ("2015 CCR Rule"), to include two additional classes of CCR units: legacy CCR surface impoundments ("Legacy SIs") and CCR management units ("CCRMUs"). As a result of the enactment of the final rule, during 2024, TVA recorded additional estimated AROs of $3.1 billion and recorded a corresponding regulatory asset of $3.1 billion due to these AROs being associated with closed sites and asset retirement costs having been fully depreciated. 63 Table of Contents TVA's economic development efforts and programs continued to help attract or expand businesses and industries in the Tennessee Valley. These companies announced projected capital investments of $8.9 billion and are expected to create 10,368 jobs and retain 42,393 jobs. These amounts are forward-looking and are subject to various uncertainties. Amounts may differ materially based upon a number of factors, including, but not limited to, economic downturns or recessions. See Forward-Looking Information and Part I, Item 1A, Risk Factors for a discussion of additional factors, and see Part I, Item 1, Business — Economic Development Activities for definitions of "new jobs" and "retained jobs." 64 Table of Contents Results of Operations Sales of Electricity Sales of electricity, which accounted for nearly all of TVA's operating revenues, were 162,933 million and 157,311 million kilowatt hours ("kWh") for 2024 and 2023, respectively. Total sales of electricity in 2024 includes 137 million kWh of pre-commercial generation at Paradise CTs 5-7, all of which was recognized in the three months ended December 31, 2023. Total sales of electricity in 2023 includes 99 million kWh of pre-commercial generation at Colbert CT Units 9-11. TVA sells power at wholesale rates to LPCs that then resell the power to their customers at retail rates. TVA also sells power to directly served customers, consisting primarily of federal agencies and customers with large or nonstandard loads. In addition, power exceeding TVA's system needs is sold under exchange power arrangements with certain other power systems. The following chart compares TVA's sales of electricity by customer type for the years ended September 30, 2024 and 2023: Sales of Electricity For the years ended September 30 (millions of kWh) The following charts show a breakdown of TVA's energy load: Note Information included in the charts above was derived from energy usage of directly served customers and customers served by LPCs during CY 2023, and these graphs will continue to be updated on a CY basis. 65 Table of Contents Weather affects both the demand for TVA power and the price for that power. TVA uses degree days to measure the impact of weather on its power operations. Degree days measure the extent to which the TVA system 23-station average temperatures vary from 65 degrees Fahrenheit. Degree Days Variation from Normal Change from Prior Period 2024 Normal Percent Variation 2023 Normal Percent Variation Percent Change Heating Degree Days 2,801 3,152 (11.1) % 2,774 3,132 (11.4) % 1.0 % Cooling Degree Days 1,954 1,824 7.1 % 1,634 1,824 (10.4) % 19.6 % Sales of electricity increased approximately four percent for the year ended September 30, 2024, as compared to the same period of the prior year. The increased sales volume for LPCs was primarily driven by an increase in cooling degree days of 20 percent. For industries directly served, sales of electricity increased primarily within the data processing, hosting, and related services sector due to business-specific factors. Financial Results The following table compares operating results for 2024 and 2023: Summary Consolidated Statements of Operations For the years ended September 30 (in millions) 2024 2023 Change Percent Change Operating revenues $ 12,314 $ 12,054 $ 260 2.2 % Operating expenses 10,086 10,360 (274) (2.6) % Operating income 2,228 1,694 534 31.5 % Other income, net 71 61 10 16.4 % Other net periodic benefit cost 98 199 (101) (50.8) % Interest expense 1,066 1,056 10 0.9 % Net income $ 1,135 $ 500 $ 635 127.0 % Operating Revenues. Operating revenues for the years ended September 30, 2024 and 2023, were $12.3 billion and $12.1 billion, respectively. The following table compares TVA's operating revenues for the periods indicated: Operating Revenues by Customer Type For the years ended September 30 (in millions) 2024 2023 Change Percent Change Operating revenues Local power companies $ 11,138 $ 10,903 $ 235 2.2 % Industries directly served 868 864 4 0.5 % Federal agencies and other 125 135 (10) (7.4) % Revenue capitalized during pre-commercial plant operations (1) (3) (3) — — % Other revenue 186 155 31 20.0 % Total operating revenues $ 12,314 $ 12,054 $ 260 2.2 % Note (1) Represents revenue capitalized during pre-commercial operations at Paradise CTs 5-7 in 2024 and Colbert CTs 9-11 in 2023. TVA's two largest LPCs — Memphis Light, Gas and Water Division ("MLGW") and Nashville Electric Service ("NES") — have contracts with a five-year and a 20-year termination notice period, respectively. Sales to MLGW and NES accounted for nine percent and eight percent, respectively, of TVA's total operating revenues during both the years ended September 30, 2024 and 2023. TVA's rate structure uses pricing signals to indicate seasons and hours of higher cost to serve its customers and to capture a portion of TVA's fixed costs in fixed charges. The structure includes three base revenue components: time of use demand charges, time of use energy charges, and a grid access charge ("GAC"). The demand charges are based upon the customer's peak monthly usage. The energy charges are based on time differentiated kWh used by the customer. Both of these components can be significantly impacted by weather. The GAC captures a portion of fixed costs and is offset by a corresponding reduction to the energy rates. The GAC also reduces the impact of weather variability to the overall rate structure. 66 Table of Contents 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 to no more than 10 percent during any consecutive five-fiscal-year period, as more specifically described in the agreements. 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. As of September 30, 2024, 148 LPCs had signed the 20-year Partnership Agreement with TVA. In addition to base revenues, the rate structure includes a separate fuel rate that includes the costs of natural gas, fuel oil, purchased power, coal, emission allowances, nuclear fuel, and other fuel-related commodities; realized gains and losses on derivatives purchased to hedge the costs of such commodities; and payments to states and counties in lieu of taxes ("tax equivalents") associated with the fuel cost adjustments. See Part I, Item 1, Business — Rates — Rate Methodology . In August 2024, the TVA Board approved a 5.25 percent wholesale base rate increase (excluding fuel) effective October 1, 2024. This adjustment is estimated to produce an additional $495 million of revenue during 2025. The changes in revenue components are summarized below: Changes in Revenue Components For the years ended September 30 (in millions) 2024 2023 Change Percent Change Base revenue Energy revenue $ 5,065 $ 4,687 $ 378 8.1 % Demand revenue 3,891 3,654 237 6.5 % Grid access charge 622 589 33 5.6 % Long-term partnership credits for LPCs (215) (199) (16) 8.0 % Pandemic relief credits (1) — (225) 225 (100.0) % Other charges and credits (2) (638) (643) 5 (0.8) % Total base revenue 8,725 7,863 862 11.0 % Fuel cost recovery 3,398 4,025 (627) (15.6) % Off-system sales 8 14 (6) (42.9) % Pre-commercial operations (3) (3) (3) — — % Revenue from sales of electricity 12,128 11,899 229 1.9 % Other revenue 186 155 31 20.0 % Total operating revenues $ 12,314 $ 12,054 $ 260 2.2 % Notes (1) In 2022, the TVA Board approved a 2.5 percent monthly base rate credit, the Pandemic Recovery Credit, which was effective for 2023. The pandemic credits ended September 30, 2023. (2) Includes economic development credits to promote growth in the Tennessee Valley, hydro preference credits for residential customers of LPCs, and demand response credits allowing TVA to reduce industrial customer usage in periods of peak demand to balance system demand. See Note 17 — Revenue. (3) Represents revenue capitalized during pre-commercial operations at Paradise CTs 5-7 in 2024 and Colbert CTs 9-11 in 2023. Operating revenues increased $260 million for the year ended September 30, 2024, as compared to the prior year, primarily due to a $862 million increase in base revenue. The $862 million increase in base revenue was driven by a $637 million increase attributable to higher effective base rates and a $225 million increase attributable to higher sales volume. The increase in effective base rates was primarily due to the TVA Board action to approve a 4.5 percent wholesale base rate increase beginning in 2024 and the pandemic credits ending on September 30, 2023. The higher sales volume was primarily due to an increase in cooling degree days of 20 percent. Partially offsetting the increase in base revenue was a $627 million decrease in fuel cost recovery revenue. The $627 million decrease in fuel cost recovery revenue was driven by a $774 million decrease attributable to lower fuel rates partially offset by a $147 million increase attributable to higher sales volume. The lower fuel rates were primarily due to lower coal, natural gas, and purchased power prices. See Sales of Electricity above for further discussion of the change in the volume of sales of electricity and Operating Expenses below for further discussion of the change in fuel expense. 67 Table of Contents Operating Expenses. Operating expense components as a percentage of total operating expenses for 2024 and 2023 consisted of the following: Operating Expenses For the years ended September 30 (in millions) 2024 2023 Change Percent Change Operating expenses Fuel $ 2,169 $ 2,549 $ (380) (14.9) % Purchased power 1,581 1,633 (52) (3.2) % Operating and maintenance 3,641 3,372 269 8.0 % Depreciation and amortization 2,138 2,213 (75) (3.4) % Tax equivalents 557 593 (36) (6.1) % Total operating expenses $ 10,086 $ 10,360 $ (274) (2.6) % The following table summarizes TVA's expenses for various fuels for the years indicated: Fuel Expense for TVA-Operated Facilities (1) For the years ended September 30 (in millions) Fuel Expense By Source Cost per kWh (4) 2024 2023 2024 2023 Coal (2) $ 770 $ 877 $ 3.53 $ 4.18 Natural gas and/or oil-fired (3) 1,062 1,293 2.76 3.74 Nuclear fuel 341 337 0.52 0.50 Total fuel $ 2,173 $ 2,507 $ 1.73 $ 2.04 Notes (1) Excludes effects of the fuel cost adjustment in the amounts of $(4) million and $42 million for the years ended September 30, 2024 and 2023, respectively. (2) Fuel expense related to oil consumed for startup at coal-fired facilities was $23 million and $33 million for the years ended September 30, 2024 and 2023, respectively. (3) Fuel expense related to oil consumed for generation at natural gas and/or oil-fired facilities was $8 million and $14 million for the years ended September 30, 2024 and 2023, respectively. (4) Total cost per kWh is based on a weighted average. Fuel expense decreased $380 million for the year ended September 30, 2024, as compared to the prior year. This decrease was primarily due to a decrease in effective fuel rates due to lower coal and natural gas prices, resulting in a $373 million decrease in fuel expense. Additionally, fuel expense decreased $46 million due to the deferral of unplanned coal costs during the summer of 2024 and the recovery of unplanned fuel costs in the prior year that were deferred in the summer of 2022. Partially offsetting these decreases was an increase of $39 million in fuel expense due to higher demand for energy. Purchased power expense decreased $52 million for the year ended September 30, 2024, as compared to the prior year. This decrease was primarily due to lower purchased power market prices compared to the same period of the prior year, resulting in a decrease of $259 million. Additionally, purchased power expense decreased $43 million due to the deferral of unplanned purchased power costs from less availability of nuclear and hydro generation and the recovery of unplanned 68 Table of Contents purchased power costs in the prior year that were deferred in the summer of 2022. Partially offsetting these decreases was an increase of $250 million in purchased power expense due to higher demand for energy, and to a lesser extent, less availability of nuclear and hydro generation. Operating and maintenance expense increased $269 million for the year ended September 30, 2024, as compared to the prior year. This increase was primarily due to $126 million of increased payroll and benefit costs primarily due to labor escalation for cost of living increases and additional headcount to support operational needs, a $39 million increase in outage expense primarily due to an increase in nuclear outage days, and $30 million of increased contract labor costs primarily related to strategic project work and power operations performance improvement activities. In addition, there was a $12 million increase in materials and supplies related to power operations performance improvement activities and other natural gas project work and a $9 million increase in expenditures related to TVA's New Nuclear Program. Depreciation and amortization expense decreased $75 million for the year ended September 30, 2024, as compared to the prior year. The decrease was primarily driven by a decrease in depreciation expense of $206 million related to the decision to retire Bull Run, as Bull Run became fully depreciated in the fourth quarter of 2023. Partially offsetting this decrease was a $44 million increase in depreciation primarily related to TVA's decision to retire Cumberland and Kingston, a $38 million increase in amortization expense from amortization of finance leases and retirement of regulatory assets, and a $19 million increase due to Colbert CTs 9-11 and Paradise CTs 5-7 being placed into service in the fourth quarter of 2023 and the first quarter of 2024, respectively. The remainder of the partially offsetting increase was primarily due to depreciation of other additions to net completed plant. See Note 1 — Summary of Significant Accounting Policies — Property, Plant, and Equipment, and Depreciation — Depreciation . Tax equivalents expense decreased $36 million for the year ended September 30, 2024, as compared to the prior year. This change was primarily driven by a decrease in the tax equivalents collected in the fuel cost recovery. Generating Sources. The following tables show TVA's generation and purchased power by generating source as a percentage of all electrical power generated and purchased (based on kWh) for the periods indicated: Total Power Supply by Generating Source For the years ended September 30 (millions of kWh) 2024 2023 Nuclear 65,235 39 % 67,102 42 % Natural gas and/or oil-fired (1) 38,390 23 % 34,467 22 % Coal-fired 21,752 13 % 20,896 13 % Hydroelectric 12,284 7 % 13,063 8 % Total TVA-operated generation facilities (2)(3) 137,661 82 % 135,528 85 % Purchased power (natural gas and/or oil-fired) (4) 17,144 11 % 13,703 9 % Purchased power (other renewables) (5) 5,930 4 % 6,247 4 % Purchased power (coal-fired) 2,207 1 % 2,722 1 % Purchased power (hydroelectric) 2,751 2 % 1,591 1 % Total purchased power (3) 28,032 18 % 24,263 15 % Total power supply 165,693 100 % 159,791 100 % Notes (1) The generation for 2023 includes 99 million kWh of pre-commercial generation at Colbert CTs 9-11. The generation for 2024 includes 137 million kWh of pre-commercial generation at Paradise CTs 5-7. (2) Generation from TVA-owned renewable resources (non-hydroelectric) is less than one percent for all periods shown and therefore is not represented in the table above. (3) Raccoon Mountain Pumped-Storage Plant net generation is allocated against each TVA-operated generation facility and purchased power type for both the year ended September 30, 2024, and the year ended September 30, 2023. See Part I, Item 1, Business — Power Supply and Load Management Resources — Hydroelectric Pumped-Storage for a discussion of Raccoon Mountain Pumped-Storage Plant. (4) Purchased power (natural gas and/or oil-fired) includes generation from Caledonia CC, which is currently a leased facility operated by TVA. Generation from Caledonia Combined Cycle Plant (" Caledonia CC") was 4,798 million kWh and 4,030 million kWh for the years ended September 30, 2024 and 2023, respectively. (5) Purchased power (other renewables) includes purchased power from the following renewable sources: solar, wind, biomass, and renewable cogeneration. TVA acquires Renewable Energy Certificates ("RECs") in connection with certain purchased power transactions and sells some of these RECs to customers. In addition to power supply sources included here, TVA offers energy efficiency programs that effectively reduce energy needs. In 2024, TVA invested $71 million on its energy efficiency programs and effectively reduced 2024 energy needs by approximately 205 gigawatt hours of net incremental energy efficiency savings. 69 Table of Contents Interest Expense . Interest expense and interest rates for 2024 and 2023 were as follows: Interest Expense and Rates For the years ended September 30 2024 2023 Percent Change Interest expense (1) $ 1,066 $ 1,056 0.9 % Average blended debt balance (2) $ 20,936 $ 20,613 1.6 % Average blended interest rate (3) 4.90 % 4.92 % (0.4) % Notes (1) Includes amortization of debt discounts, issuance, and reacquisition costs, net. (2) Includes average balances of long-term power bonds, debt of VIEs, and discount notes. (3) Includes interest on long-term power bonds, debt of VIEs, and discount notes. Total interest expense increased $10 million for the year ended September 30, 2024, as compared to the prior year. This was primarily driven by a $23 million increase from higher average balances on long-term debt and an $8 million increase from higher average rates on short-term debt, partially offset by a $13 million decrease from lower average rates on long-term debt, a $5 million decrease from lower average balances on short-term debt, and a $3 million decrease due to lower interest expense related to finance leases. Other Income, Net Other income, net increased $10 million for the year ended September 30, 2024, as compared to the prior year. This increase was primarily driven by market gains on TVA's Investment funds and increases in interest income due to higher interest rates as compared to the prior year. Other Net Periodic Benefit Cost Other net periodic benefit cost decreased $101 million for the year ended September 30, 2024, as compared to the prior year. The decrease is primarily due to a decrease in the amount of deferred pension costs recognized. As a result of plan design changes, future contributions are expected to exceed the expense under U.S. GAAP. Accordingly, TVA discontinued this regulatory accounting practice as all such deferred costs were recovered as of September 30, 2023. In addition, Other net periodic benefit cost is subject to significant economic assumptions, such as changes in the discount rate used to measure the benefit plans, that can materially impact TVA. See Note 20 — Benefit Plans . Liquidity and Capital Resources Sources of Liquidity TVA depends on various sources of liquidity to meet cash needs and contingencies. TVA's primary sources of liquidity are cash from operations and proceeds from the issuance of short-term debt in the form of discount notes, along with periodic issuances of long-term debt. TVA's balance of short-term debt typically changes frequently as TVA issues discount notes to meet short-term cash needs and pay scheduled maturities of discount notes and long-term debt. TVA's next significant power bond maturity is $1.0 billion in May 2025. The periodic amounts of short-term debt issued are determined by near-term expectations for cash receipts, cash expenditures, and funding needs, while seeking to maintain a target range of cash and cash equivalents on hand. TVA may hold higher cash balances from time to time in response to potential market volatility or other business conditions. In addition, cash balances may include collateral received from counterparties. In addition to cash from operations and proceeds from the issuance of short-term and long-term debt, TVA's sources of liquidity include four long-term revolving credit facilities totaling $2.7 billion, a $150 million credit facility with the United States Department of the Treasury ("U.S. Treasury"), and proceeds from other financings. See Note 14 — Debt and Other Obligations — Credit Facility Agreements. The TVA Board authorized TVA to issue power bonds and enter into other financing arrangements in an aggregate amount not to exceed $4.0 billion during 2025. In the fourth quarter of 2024, TVA issued $1.0 billion of power bonds maturing in August 2034. Other financing arrangements may include, but are not limited to, lease financings, energy prepayments from customers, and other similar agreements. TVA may also engage in other alternative forms of financing such as sales of receivables, or loans, from time to time. The TVA Act authorizes TVA to issue Bonds in an amount not to exceed $30.0 billion outstanding at any time. Bonds outstanding, excluding unamortized discounts and premiums and net exchange gains from foreign currency transactions, at September 30, 2024 and 2023, were $20.2 billion (including current maturities) and $19.5 billion (including current maturities), respectively. The balance of Bonds outstanding directly affects TVA's capacity to meet operational liquidity needs and to strategically use Bonds to fund certain capital investments as management and the TVA Board may deem desirable. Other options for financing not subject to the limit on Bonds, including lease financings (see Lease Financings below and Note 11 — 70 Table of Contents Variable Interest Entities ), could provide supplementary funding if needed. Currently, TVA expects to utilize a combination of Bonds and additional power revenues through power rate increases to meet its ongoing operational liquidity needs while making planned capital investments through the decade. TVA may also utilize available funding through the Inflation Reduction Act of 2022 ("Inflation Reduction Act") and the Bipartisan Infrastructure Law ("BIL"), other federal funding opportunities, or other third-party financing arrangements. See Lease Financing s, Key Initiatives and Challenges — Optimum Energy Portfolio — Decarbonization , Note 11 — Variable Interest Entities , and Note 14 — Debt and Other Obligations for additional information. TVA may from time to time seek to retire or purchase its outstanding debt through cash purchases and/or exchanges for securities, in open market purchases, privately negotiated transactions, or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, TVA's liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material. Debt Securities . TVA's Bonds are not obligations of the U.S., and the U.S. does not guarantee the payments of principal or interest on Bonds. TVA's Bonds consist of power bonds and discount notes. Power bonds have maturities of between one and 50 years. At September 30, 2024, the average maturity of long-term power bonds was 13.96 years, and the weighted average interest rate was 4.69 percent. Discount notes have maturities of less than one year. Power bonds and discount notes have a first priority and equal claim of payment out of net power proceeds. Net power proceeds are defined as the remainder of TVA's gross power revenues after deducting the costs of operating, maintaining, and administering its power properties and tax equivalents, but before deducting depreciation accruals or other charges representing the amortization of capital expenditures, plus the net proceeds from the sale or other disposition of any power facility or interest therein. In addition to power bonds and discount notes, TVA had long-term debt associated with certain VIEs outstanding at September 30, 2024. See Lease Financing below, Note 11 — Variable Interest Entities , and Note 14 — Debt and Other Obligations for additional information. Power bonds and discount notes are both issued pursuant to Section 15d of the TVA Act and pursuant to the Basic Tennessee Valley Authority Power Bond Resolution adopted by the TVA Board on October 6, 1960, as amended on September 28, 1976, October 17, 1989, and March 25, 1992 (the "Basic Resolution"). The TVA Act and the Basic Resolution each contain two bond tests: the rate test and the bondholder protection test. Under the rate test, TVA must charge rates for power which will produce gross revenues sufficient to provide funds for operation, maintenance, and administration of its power system; tax equivalents; debt service on outstanding Bonds; payments to the 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"); and such additional margin as the TVA Board may consider desirable for investment in power system assets, retirement of outstanding Bonds in advance of maturity, additional reduction of the Power Program Appropriation Investment, and other purposes connected with TVA's power business, 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 23 — Related Parties . The rate test for the one-year period ended September 30, 2024, was calculated after the end of 2024, and TVA met the test's requirements. Under the bondholder protection test, TVA must, in successive five-year periods, use an amount of net power proceeds at least equal to the sum of the depreciation accruals and other charges representing the amortization of capital expenditures and the net proceeds from any disposition of power facilities, for either the reduction of its capital obligations (including Bonds and the Power Program Appropriation Investment) or investment in power assets. The bondholder protection test for the five-year period ended September 30, 2020, was calculated after the end of 2020, and TVA met the test's requirements. TVA must next meet the bondholder protection test for the five-year period ending September 30, 2025, and expects to meet the test. TVA uses proceeds from the issuance of discount notes, in addition to other sources of liquidity, to fund short-term cash needs and scheduled maturities of long-term debt. 71 Table of Contents The following table provides additional information regarding TVA's short-term borrowings. Short-Term Borrowings (in millions) At September 30, 2024 For the year ended September 30, 2024 At September 30, 2023 For the year ended September 30, 2023 Gross Amount Outstanding (at End of Period) or Average Gross Amount Outstanding (During Period) Discount notes $ 1,168 $ 787 $ 432 $ 890 Maximum Month-End Gross Amount Outstanding (During Period) Discount notes N/A $ 1,205 N/A $ 1,864 Weighted Average Interest Rate Discount notes 4.76 % 5.37 % 5.29 % 4.34 % TVA ended the year at September 30, 2024, with a higher balance of short-term debt as compared to September 30, 2023. The increase was primarily due to higher redemptions of long-term debt compared to the previous year, and the timing of cash flows. TVA generally uses proceeds from the issuance of power bonds to refinance maturing power bonds or other financing obligations, as necessary, or for other power system purposes. The total balance of power bonds may decline in periods where redemptions of power bonds exceed issuance due to net positive cash flow from operating and investing activities. At this time, TVA anticipates the balance of Bonds and other financing obligations will increase in future years due to an expected increase in capital expenditures. TVA issued $1.0 billion of power bonds during both 2024 and 2023. TVA redeemed $1.0 billion and $29 million of power bonds during 2024 and 2023, respectively. For additional information about TVA debt issuance activity and debt instruments issued and outstanding at September 30, 2024 and 2023, including rates, maturities, outstanding principal amounts, and redemption features, see Note 14 — Debt and Other Obligations — Debt Securities Activity and Debt Outstanding . TVA Bonds are traded in the public bond markets and are listed on the New York Stock Exchange ("NYSE") except for TVA's discount notes, the 2009 Series B power bonds, and the power bonds issued under TVA's electronotes ® program. TVA's Putable Automatic Rate Reset Securities ("PARRS") are traded on the NYSE under the exchange symbols "TVC" and "TVE." Other bonds listed on the NYSE are assigned various symbols by the exchange, which may be noted on the NYSE's website. TVA has also listed certain bonds on foreign exchanges from time to time, including the Luxembourg, Hong Kong, and Singapore Stock Exchanges. See Part I, Item 1A, Risk Factors — Financial, Economic, and Market Risks for additional information regarding the market for TVA's Bonds. Although TVA Bonds are not obligations of the U.S., TVA, as a corporate agency and instrumentality of the U.S. government, may be impacted if the sovereign credit ratings of the U.S. are downgraded. According to statements made by the credit rating agencies, the U.S. credit rating may face additional downward pressure if policymakers are unable to respond to the country's growing fiscal challenges, if it appears deterioration in debt affordability or fiscal strength is likely to undermine U.S. economic strength or the role of the U.S. dollar or U.S. Treasury bond market, or if a weakening of governance were to occur. Additionally, TVA may be impacted by how the U.S. government addresses situations of approaching its debt limit. The outlook on the ratings of TVA is currently stable with S&P Global Ratings ("S&P") and Fitch Ratings, Inc. ("Fitch"); however, the outlook on TVA's ratings from Moody's Investors Service, Inc. ("Moody's") is negative due to Moody's change in the U.S. government rating outlook. TVA's rated senior unsecured Bonds are currently rated Aaa, AA+, and AA+, by Moody's, Fitch, and S&P, respectively. TVA's short-term discount notes are not rated. TVA is not able to predict the outcome of any rating changes on the U.S. government or any actions that may be taken on TVA because of actions on the government. Lease Financings . TVA has entered into certain leasing transactions with special purpose entities ("SPEs") to obtain third-party financing for its facilities. These SPEs are sometimes identified as VIEs of which TVA is determined to be the primary beneficiary. TVA is required to account for these VIEs on a consolidated basis. See Note 11 — Variable Interest Entities. In addition, TVA previously entered into leasing transactions to obtain third-party financing for 24 peaking CTs as well as certain qualified technological equipment and software ("QTE"). See Note 1 — Summary of Significant Accounting Policies for information about reacquired rights associated with these lease financing activities. 72 Table of Contents Summary Cash Flows A major source of TVA's liquidity is operating cash flows resulting from the generation and sale of electricity. Cash, cash equivalents, and restricted cash totaled $523 million and $521 million at September 30, 2024 and 2023, respectively. A summary of cash flow components for the years ended September 30 follows: Cash provided by (used in): Operating Activities . TVA's cash flows from operations are primarily driven by sales of electricity, fuel expense, and operating and maintenance expense. The timing and level of cash flows from operations can be affected by the weather, changes in working capital, commodity price fluctuations, outages, and other project expenses. Net cash flows provided by operating activities increased $131 million for the year ended September 30, 2024, as compared to the same period of the prior year. The increase was primarily due to lower fuel prices and purchased power payments. This increase was partially offset by lower revenue collections and higher payroll and benefit related payments compared to the same period of the prior year. Revenue collections decreased primarily due to lower fuel and purchased power prices that were partially offset by the wholesale base rate increase that began in 2024, pandemic credits which ended in September 2023, and higher sales volume. Investing Activities . The majority of TVA's investing cash flows are due to investments to acquire, upgrade, or maintain generating and transmission assets, including environmental projects and the purchase of nuclear fuel. Net cash flows used in investing activities increased $597 million for the year ended September 30, 2024, as compared to the prior year, primarily driven by increased expenditures for capacity expansion projects partially offset by decreased expenditures for nuclear fuel during the period. Nuclear fuel expenditures vary depending on the number of outages and the prices and timing of purchases of uranium and enrichment services. Financing Activities . TVA's cash flows provided by or used in financing activities are primarily driven by the timing and level of cash flows provided by operating activities, cash flows used in investing activities, and net issuance and redemption of debt instruments to maintain a strategic balance of cash on hand. Net cash flows provided by financing activities increased $467 million for the year ended September 30, 2024, as compared to the prior year, primarily due to higher net short-term debt issuances for capacity expansion projects. Higher net cash flows provided by operating activities were offset by higher net cash used in investing activities which resulted in the need for net debt issuances to maintain targeted cash balance levels during the period. TVA anticipates a need to increase debt in the coming years as it continues to invest in power system assets, which may result in positive net cash flows provided by financing activities in future periods. 73 Table of Contents Cash Requirements Actual capital expenditures and future planned capital expenditures for property, plant, and equipment additions, including environmental projects and new generation, and nuclear fuel are as follows: Capital Expenditures For the years ended September 30 (in millions) Actual Estimated Capital Expenditures (1) 2024 2025 2026 2027 2028 2029 Capacity expansion expenditures $ 2,020 $ 3,492 $ 2,643 $ 1,896 $ 1,425 $ 1,188 Environmental expenditures (2) 136 111 116 163 61 34 Nuclear fuel 281 265 216 231 526 528 Transmission expenditures 676 811 887 893 613 613 Other capital expenditures (3) 810 1,097 1,220 1,054 793 738 Total capital expenditures $ 3,923 (4) $ 5,776 $ 5,082 $ 4,237 $ 3,418 $ 3,101 Notes (1) Currently, TVA expects to utilize a combination of Bonds and additional power revenues through power rate increases to meet its ongoing operational liquidity needs while making planned capital investments through the decade. TVA may also utilize available funding through the Inflation Reduction Act and the BIL, other federal funding opportunities, or other third-party financing arrangements. Estimated capital expenditures only include expenditures that are currently planned. Additional expenditures may be required, among other things, for TVA to meet growth in demand for power in its service area or to comply with new environmental laws, regulations, or orders. (2) The table includes the capital portion of estimated environmental expenditures. See Part I, Item 1, Business — Environmental Matters — Estimated Required Environmental Expenditures for total estimates on projects related to environmental laws and regulations. (3) Other capital expenditures are primarily associated with short lead time construction projects aimed at the continued safe and reliable operation of generating assets. (4) The numbers above include the change in construction in progress and nuclear fuel expenditures included in Accounts payable and accrued liabilities of $348 million. TVA continually reviews its capital expenditures and financing programs. The amounts shown in the table above are forward-looking amounts based on a number of assumptions and are subject to various uncertainties. Amounts may differ materially based upon a number of factors, including, but not limited to, changes in assumptions about system load growth, environmental regulation, rates of inflation, total cost of major projects, and availability and cost of external sources of capital. See Forward-Looking Information and Part I, Item 1A, Risk Factors . TVA has certain obligations and commitments to make future payments, including contracts executed in connection with certain of the planned construction expenditures. TVA estimates total commitments and contingencies at September 30, 2024, are approximately $6.8 billion for the year ended September 30, 2025, and $47 billion for the years thereafter, of which $3.9 billion and $22.1 billion, respectively, are set forth in the table below. See Note 8 — Leases , Note 11 — Variable Interest Entities , Note 14 — Debt and Other Obligations , Note 20 — Benefit Plans, and Note 22 — Commitments and Contingencies for the obligations and commitments attributable to leases, VIEs and membership interests of VIEs subject to mandatory redemption, debt and leaseback obligations, the retirement plan, and unconditional purchase obligations, respectively, for remaining amounts. Other Commitments and Contingencies Payments due for the years ending September 30 (in millions) 2025 2026 2027 2028 2029 Thereafter Total Interest payments relating to debt (1) $ 1,008 $ 956 $ 895 $ 859 $ 834 $ 10,622 $ 15,174 Interest payments relating to debt of VIEs 44 42 40 39 36 247 448 Interest payments relating to membership interests of VIEs subject to mandatory redemption 1 1 1 1 1 2 7 Purchase obligations Power (2) 412 343 260 219 200 1,227 2,661 Fuel (3) 1,438 884 576 426 353 1,969 5,646 Other (4) 1,017 643 224 58 30 113 2,085 Total $ 3,920 $ 2,869 $ 1,996 $ 1,602 $ 1,454 $ 14,180 $ 26,021 Notes (1) Includes the effects of interest rate derivatives employed to manage interest rate risk. (2) Includes commitments for energy and/or capacity under power purchase agreements ("PPAs") from hydroelectric, diesel, renewable, and gas-fired facilities, as well as transmission service agreements to support purchases of power from the market. Certain PPAs are accounted for as leases and have lease and non-lease components. For these contracts, the lease component is included in lease obligations (see Note 8 — Leases ) and the non-lease component is included in power purchase obligations in the table above. For PPA contracts containing a lease component that have not commenced, the entire commitment amount is included in the table above. (3) Includes commitments to purchase nuclear fuel, coal, and natural gas, as well as related transportation and storage services. 74 Table of Contents (4) Primarily includes long-term service contracts, contracts that contain minimum purchase levels for the purchase of limestone along with related storage and transportation, and contractual obligations related to TVA's load control program. EnergyRight ® Program. TVA purchases certain loans receivable from its LPCs in association with the EnergyRight ® program. Depending on the nature of the energy-efficiency project, loans may have a maximum term of five years or 10 years. The loans receivable are then transferred to a third-party bank with which TVA has agreed to repay in full any loan receivable that has been in default for 180 days or more or that TVA has determined is uncollectible. At September 30, 2024, the total carrying amount of the loans receivable, net of discount, was $56 million. Such amounts are not reflected in the Other Commitments and Contingencies table above. The total carrying amount of the financing obligation was $66 million at September 30, 2024. See Note 9 — Other Long-Term Assets and Note 12 — Other Long-Term Liabilities for additional information. Key Initiatives and Challenges Optimum Energy Portfolio TVA must continuously evaluate all generation and transmission assets to ensure an optimal energy portfolio that provides safe, clean, and reliable power while maintaining flexibility and fiscal responsibility to the people of the Tennessee Valley. Additional load growth for the foreseeable future is expected to challenge capacity position. New capacity will be needed to support this load growth, replace retiring and expiring capacity, and enable further electrification of the economy. As discussed in Liquidity and Capital Resources , at this time, TVA anticipates the balance of Bonds and other financing obligations will increase in future years due to an expected increase in capital expenditures. In addition, TVA expects inflationary pressures to persist in 2025. See Supply Chain and Inflation Pressures below. To ensure TVA continues to provide affordable, reliable, and clean energy, it will need to be efficient in managing its operating costs and is undertaking a cost optimization project designed to reduce planned cost increases by approximately $950 million from 2024-2026 to address these pressures. TVA is making investments in its generating portfolio and infrastructure to both help meet the growing demand for electricity and modernize the fleet while also allowing TVA to maintain competitive rates and high reliability and work toward an increasingly clean power system. As TVA continues to evaluate the impact of retiring its coal-fired fleet by 2035 and works to accelerate the growth of renewables, it also continues to evaluate adding flexible lower carbon-emitting gas plants as a strategy to maintain reliability. TVA is also evaluating other capacity expansion projects, and in the third quarter of 2024, TVA issued a request for proposal ("RFP") for capacity for terms through December 2029. TVA is currently evaluating proposals related to the RFP. 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 is increasing its renewable energy portfolio by securing PPAs and developing projects such as TVA's Self-Directed Solar. It is also investing in research and development for decarbonization technologies including battery storage, carbon capture, carbon sequestration and utilization, new hydroelectric pumped-storage, energy efficiency, demand response, electrification, commercial resiliency, and hydrogen. TVA is working with stakeholders and the public on the 2025 Integrated Resource Plan ("IRP"), a comprehensive plan that will help shape TVA's energy system through 2050. TVA is also preparing an EIS to evaluate the impacts associated with the IRP in alignment with the National Environmental Policy Act ("NEPA"). The draft IRP and EIS were published on September 23, 2024. TVA will be holding in-person meetings across the region and public webinars to gather feedback during the public comment period, which runs through December 11, 2024. TVA will review and evaluate public input and conduct further analysis to appropriately incorporate feedback provided during the public comment period. Public comments on the draft IRP and EIS will be addressed in the final EIS. The final IRP, which is expected to be published in 2025, will include power supply mix ranges, recommendations for strategic portfolio direction through 2035, and information on factors that will influence portfolio direction from 2035 to 2050. The final IRP is expected to be presented to the TVA Board in 2025 for its consideration of the IRP recommendations. TVA continues to evaluate and pursue funding opportunities under the Inflation Reduction Act and the BIL to help offset the cost of qualifying projects. In many cases, TVA is directly or indirectly eligible to seek BIL funded opportunities through agency-sponsored and implemented funding opportunities. The Inflation Reduction Act makes certain tax-exempt entities, including TVA, eligible for a direct-pay option for certain tax credits for clean energy generation projects. Projects eligible for funding under the Inflation Reduction Act or the BIL tend to be capital intensive. In addition, the funding legislation requires TVA to expend large sums of its own funds before becoming eligible to receive funding. For example, grant programs typically require at least a 50 percent cost share, and the Inflation Reduction Act credits may cover only about 30 percent to 40 percent of qualified basis of projects, generally received as a tax refund the year following when the project is placed in service. In addition, obtaining this funding often requires TVA to meet certain additional requirements, to submit information returns to the IRS, and to retain adequate books and records to support its filings. For TVA to receive direct pay under the Inflation Reduction Act for projects beginning construction on or after January 1, 2026, TVA will be required to meet domestic content requirements, unless a cost or availability exception applies. While meeting these requirements would automatically qualify the project for a 10 percent addition to the base credit, the cost of complying with these requirements may exceed this additional bonus. TVA has established a Federal Funding Project Management Office (“FFPMO”) that governs and supports TVA’s federal funding strategy to help position TVA and Tennessee Valley partners to leverage funding from the Inflation Reduction Act and the BIL. The FFPMO is responsible for overseeing opportunities, assessing TVA's BIL and Inflation Reduction Act eligibility, 75 Table of Contents prioritizing and coordinating proposal development, and seeking to capture funding opportunities for TVA. The FFPMO also acts as a conduit for LPCs and business partners to potentially access the Inflation Reduction Act and BIL funds. TVA is currently exploring funding opportunities of various types, including opportunities involving pumped-storage, solar, carbon capture, hydrogen, energy efficiency, and transmission, among others. This exploration does not guarantee that TVA or its partners will receive funds. In October 2024, a TVA-led coalition that includes 10 LPCs was selected by the Department of Energy to enter negotiations for the Grid Resilience and Innovation Partnership grant. This $250 million grant would provide for more than 80 TVA and LPC transmission projects to increase grid capacity, mitigate extreme weather risks, and expedite development of clean energy projects. TVA is also currently pursuing efforts to claim Inflation Reduction Act credits. Coal-Fired Fleet. TVA is evaluating the impact of retiring the balance of the coal-fired fleet by 2035. TVA will prepare environmental reviews pursuant to NEPA prior to making a decision on retiring or building any plant. TVA plans to retire the two coal-fired units at Cumberland, which at September 30, 2024, accounted for 2,470 MW of TVA's summer net capability. TVA plans to replace generation for one unit with a 1,450 MW combined cycle plant that is expected to be operational by the end of CY 2026 when the first unit is scheduled to be retired. The second unit is scheduled to be retired by the end of CY 2028, and in May 2023, TVA published the notice of intent to conduct an EIS to study potential environmental impacts associated with the proposed construction and operation of facilities to replace part of that generation. See Natural Gas-Fired Units below. In 2023, TVA made available to the public a draft EIS to assess the impacts associated with the potential retirement of Kingston and the construction and operation of facilities to replace that generation. The final EIS was published in February 2024, and TVA documented its final decision with the Record of Decision on April 2, 2024. TVA plans to retire the nine coal-fired units at Kingston by the end of CY 2027 and replace the retired generation with an energy complex that includes 1,500 MW of natural gas, 100 MW of battery storage, and 3-4 MW of solar. See Natural Gas-Fired Units below. TVA expects to issue an RFP in the future for the battery storage and solar related to the energy complex. Natural Gas-Fired Units. As TVA continues to evaluate the impact of retiring its coal-fired fleet by 2035 and works to accelerate the growth of renewables, it also continues to evaluate adding flexible lower carbon-emitting gas plants as a strategy to maintain reliability. During 2019, the TVA Board approved an expansion of peaking gas replacement capacity at the Paradise facility. Pre-commercial plant operations began on Paradise CTs 5-7 in the first quarter of 2024, and the units became operational on December 29, 2023, with a total summer net capability of 681 MW. As of September 30, 2024 , TVA had spent $394 million on this expansion. A 500 MW aeroderivative CT project at TVA’s Johnsonville site has been approved for $619 million, contingent on the successful completion of environmental reviews under NEPA and other applicable laws. TVA completed the NEPA review and received the air permits for the Johnsonville facility, and as of September 30, 2024, TVA had spent $568 million on this project. TVA expects to spend an additional $51 million on this project and anticipates the project will enter commercial operations in the third quarter of 2025. See Note 22 — Commitments and Contingencies — Legal Proceedings — Case Involving Johnsonville Aeroderivative Combustion Turbine Project for a discussion of a lawsuit involving this project. See Note 24 — Subsequent Events for financing related to this project. As discussed in Coal-Fired Fleet above, TVA is replacing generation for one unit at Cumberland with a 1,450 MW combined cycle plant that is expected to be operational by the end of CY 2026. As of September 30, 2024, TVA had spent $945 million on this project, and expects to spend an additional $1.2 billion through CY 2026. In addition, as of September 30, 2024, TVA had spent $48 million on long lead time equipment in connection with the potential project to replace generation for the second unit at Cumberland. However, this equipment could be used at other TVA sites if the final project is not approved. TVA could spend up to an additional $1.4 billion on this potential project. To operate the Cumberland Combined Cycle Plant, TVA has contracted for the transportation of gas from a gas pipeline that will need to be constructed. Numerous permits from various state and federal agencies are required for construction of the pipeline. Two cases are currently pending before the United States Court of Appeals for the Sixth Circuit ("Sixth Circuit"), one challenging the Tennessee Department of Environment and Conservation’s order issuing a water quality certification under § 401 of the Clean Water Act (“CWA”) for construction of the pipeline and one challenging the Army Corps of Engineers’ issuance of a permit for construction pursuant to § 404 of the CWA. On October 11, 2024, the Sixth Circuit issued an order staying the permit in each respective case until the court can review the merits of these cases. The court is scheduled to review the merits on December 10, 2024. A case is also pending before the United States Court of Appeals for the District of Columbia Circuit challenging FERC’s issuance of a certificate for the pipeline. While TVA is not a party in these cases, they could result in delays to commercial operation of the Cumberland facility or may lead to additional costs if the gas pipeline must be constructed in an alternate location than is currently planned. TVA is currently unable to predict the outcome of these cases. See Note 22 — Commitments and Contingencies — Legal Proceedings — Case Involving Cumberland Combined Cycle Plant for a discussion of another lawsuit involving this project. As discussed in Coal-Fired Fleet above, TVA is constructing a 1,500 MW combined cycle plant that is expected to be operational by the end of CY 2027. As of September 30, 2024, TVA had spent $662 million on this project and expects to spend 76 Table of Contents an additional $2.1 billion through CY 2027. To operate the Kingston combined cycle plant, TVA will contract for the transportation of gas from a gas pipeline that will need to be constructed. TVA is continuing to explore a 500 MW New Caledonia simple cycle CT project on TVA land contingent on the successful completion of environmental reviews under NEPA and other applicable laws . The draft EIS for New Caledonia was made available for public comment in July 2024, and the final EIS is expected to be published in 2025. As of September 30, 2024 , TVA had spent $121 million on the New Caledonia project and could spend up to an additional $427 million. TVA is also exploring a 200 MW aeroderivative CT project at TVA's Allen site. As of September 30, 2024, TVA had spent $190 million on the project at Allen and could spend up to an additional $163 million. Finally, TVA is exploring a potential project at Lagoon Creek. Decarbonization. TVA's decarbonization initiative is aimed at understanding and applying clean resources to support the reduction of carbon emissions from its power supply. Related to its carbon reduction efforts, TVA has established six guiding principles which are as follows: • Prioritize the needs of Tennessee Valley stakeholders as TVA works to achieve its goals by maintaining low rates and high reliability, and attracting new jobs in the Tennessee Valley. • Use best-available science and support research and policies that further carbon-free dispatchable technologies. • Partner with LPCs and other customers and communities to support economy-wide decarbonization efforts and the strategic electrification of other sectors, such as transportation. • Maintain nuclear generation, hydro generation, and a strong transmission grid as key enabling assets. • Be transparent with stakeholders in measuring and sharing TVA's progress, and listen and work effectively with all its stakeholders to understand their priorities and needs. • Adapt to new technologies and changing policies, and be willing and open to changing TVA's plans and projects to achieve deep carbon reduction. TVA has partnered with the University of Tennessee Baker School for Public Policy and Public Affairs and with diverse stakeholders from across the Tennessee Valley to conduct a Valley Pathways Study, which is focused on building a competitive and clean economy for the Tennessee Valley. This study examines potential scenarios for all economic sectors across the Tennessee Valley that will support sustainable growth and a viable and preferred decarbonization pathway. The preliminary findings from the Valley Pathways Study were released in February 2024. As part of the decarbonization efforts, in 2022, the TVA Board approved a programmatic approach to exploring advanced nuclear technology, which is one of several technologies TVA is exploring. Other decarbonization technologies TVA is exploring in addition to advanced nuclear include battery storage, carbon capture, carbon sequestration and utilization, new hydroelectric pumped-storage, energy efficiency, demand response, electrification, commercial resiliency, and hydrogen. TVA also is increasing its renewable energy portfolio to work towards carbon emission reductions and meet customer preferences by investing in existing assets, encouraging renewable power through various current programs and offerings, and securing renewable PPAs through RFPs, among others. See below, Part I, Item 1, Business — Power Supply and Load Management Resources — Renewable Energy Resources and Community Energy Portfolio , and Part I, Item 1, Business — Research and Development for further discussion of TVA's decarbonization efforts. See also Part I, Item 1, Business — Environmental Matters — Climate Change for a discussion of the impact of executive actions and climate-related regulations on TVA. Renewable Power Purchase Agreements . In recent years, TVA has issued RFPs in order to meet customer preferences and requirements for cleaner energy. TVA will procure the renewable energy and sell the resulting RECs to specific customers, allowing TVA to increase renewable energy in the Tennessee Valley without additional costs to other TVA customers. These agreements help to align the core values of TVA and the public power model with the desire of TVA's customers for renewable energy. TVA issued a carbon-free RFP in 2022, and during 2024, TVA signed six power purchase agreements totaling 991 MW of solar generation and 220 MW of battery storage capacity from the carbon-free RFP that are expected to come online by the end of CY 2028. TVA’s existing solar PPA portfolio is not immune from the challenges affecting the U.S. solar industry. Similar to the experience of the rest of the industry, the majority of TVA’s contracted PPAs from previous RFPs that are not yet online have been impacted by project delays and price increases. 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 NEPA and other applicable laws. In 2021, TVA purchased land for this development, and in 2022, environmental reviews were completed. The challenges affecting TVA’s RFPs are also being seen in TVA's Self-Directed Solar project. The project has experienced delays and cost increases due to escalations from supply chain limitations. As of September 30, 2024, TVA had spent $53 million on the 200 MW project. TVA has elected to pursue a competitive selection process with third parties for the 77 Table of Contents development of the photovoltaic solar facility to be located on the site. TVA plans to enter into a long-term PPA to purchase the energy generated by the facility. An RFP has been issued to this effect, and selection of the awardee is anticipated in early CY 2025. In November 2022, the TVA Board approved the opportunity for TVA to explore the development of an additional utility-scale solar project, contingent on successfully completing environmental reviews under the NEPA and other applicable laws and obtaining the necessary state permits. The project would utilize TVA land, deploying a solar cap system on the closed CCR facility at the TVA Shawnee Fossil Plant in Paducah, Kentucky. As of September 30, 2024, TVA had spent $56 million on the 99 MW project and expects to spend an additional $206 million. Small Modular Reactors . In December 2019, TVA became the first utility in the nation to successfully obtain approval for an early site permit from the Nuclear Regulatory Commission ("NRC") to potentially construct and operate SMRs at TVA’s Clinch River Nuclear Site. The permit is valid through 2039 and therefore provides TVA a great deal of flexibility to make new nuclear decisions based on energy needs and economic factors. In 2021, TVA initiated a Programmatic EIS ("PEIS") that evaluated a variety of alternatives for a proposed advanced nuclear technology park at the Clinch River Nuclear Site and will provide additional flexibility for future decision making. The Record of Decision was signed in 2022. The TVA Board has approved up to $350 million to explore advanced reactor technology options under the New Nuclear Program. Of this amount, TVA had spent $196 million as of September 30, 2024. The New Nuclear Program provides a systematic roadmap for TVA’s exploration of advanced nuclear technology. Collaboration with other interested parties will be an important aspect of this program, and TVA has entered into several agreements with technology progressive organizations that allow for mutual collaboration to explore advanced reactor designs as a next-generation nuclear technology. In December 2022, TVA entered into a multi-party collaborative arrangement to advance the global deployment of the GE Hitachi Nuclear Energy ("GEH") BWRX-300 SMR. GEH is responsible for standard design development. See Note 21 — Collaborative Arrangement for additional information. One of the first tasks the New Nuclear Program is pursuing is a project to develop an NRC construction permit application at the Clinch River Nuclear Site. In addition, while evaluating alternatives for potential advanced nuclear at the Clinch River Nuclear Site, TVA is exploring the feasibility of applying a similar approach that could deploy additional SMRs at Clinch River and other TVA-owned properties. The decision to potentially build SMRs continues to be part of the ongoing discussion as part of the asset strategy for TVA’s future generation portfolio, and any future decision to construct any reactor, advanced or otherwise, would require approval by the TVA Board and the NRC. As of September 30, 2024, TVA had spent $287 million to date on work regarding SMRs, including work to complete the early site permit application for the Clinch River Nuclear Site and work associated with the New Nuclear Program above. Of these amounts, the U.S. Department of Energy ("DOE") had reimbursed TVA $29 million. Additional expenditures will be determined based on future project development. Nuclear Fleet License Extensions . Subject to the completion of all appropriate environmental reviews, TVA is seeking to renew all nuclear generation units' licenses for an additional 20 years. The first license renewal application was submitted to the NRC in January 2024 for the three units at Browns Ferry following the completion of a Supplemental EIS prepared by TVA to assess the environmental impacts associated with renewing the Browns Ferry Nuclear Plant licenses. As of September 30, 2024, TVA had spent $32 million to support the subsequent license renewal ("SLR") of the three units at Browns Ferry and expects to spend up to an additional $10 million to complete the Browns Ferry SLR. Fiber Optic Network . 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 distributed energy resources ("DER") as they enter the market. As of September 30, 2024 , TVA had spent $266 million on installation of the fiber optic lines and expects to spend an additional $34 million through 2027. System Operations Center . A new system operations center was approved by the TVA Board. The new secured facility is being built to accommodate a new energy management system and adapt to new regulatory requirements, and will improve reliability, have improved physical security from the previous center, and be flexible to help accommodate operational growth requirements, including future renewables. Construction of the facility is expected to be complete in CY 2024, and the facility is expected to be fully operational in CY 2026. As of September 30, 2024, TVA had spent $307 million on the project and expects to spend an additional $25 million. Energy Management System. A new energy management system was approved by the TVA Board. 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, will network the new control center with existing locations, and will enable better remote visibility and control to help mitigate reliability implications of climate change. The system is expected to be complete in CY 2027. As of September 30, 2024, TVA had spent $76 million on the project and expects to spend an additional $32 million. 78 Table of Contents Automated Energy Exchange Platform. In October 2021, an automated energy exchange, the Southeast Energy Exchange Market ("SEEM"), took effect. The exchange was created to facilitate more short-term power exchanges and will be an enhancement to the existing market. TVA completed the appropriate environmental reviews, and during the third quarter of 2022, the TVA Board approved the creation of a zero-cost, non-firm transmission service to allow TVA to participate in SEEM. In November 2022, the SEEM market began transacting. In July 2023, the United States Court of Appeals for the District of Columbia Circuit ("D.C. Circuit") remanded the Federal Energy Regulatory Commission's ("FERC") approval of SEEM, sending the matter back to FERC for additional proceedings. On December 17, 2023, the petitioners filed another appeal on the theory that FERC's failure to act promptly after the D.C. Circuit's remand created a new appealable event. On June 14, 2024, in response to the D.C. Circuit's remand directives, FERC issued an order directing the parties to submit briefs to supplement the record on the issues of whether SEEM is a loose power pool and whether SEEM's geographic requirement violates the open access principles of FERC Order No. 888. The SEEM market is continuing to transact pending the disposition of the legal challenges. Electric Vehicles TVA is partnering with LPCs and others to support the electrification of transportation in the Tennessee Valley in a multi-year electric vehicle ("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 2021, the TVA Board approved new policies and an optional wholesale EV rate aimed at encouraging the development of charging infrastructure in the Tennessee 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. TVA is also working with LPCs, state agencies, and third-party charging developers to create the Fast Charge Network. This will be a foundational network of public fast charging stations at least every 50 miles along interstates and major highways across its seven -state service area. In 2021, TVA began a partnership with the State of Tennessee for the development and funding of Fast Charge Tennessee, the portion of the Fast Charge Network that covers Tennessee, and in 2022 TVA launched the Fast Charge Network. As of September 30, 2024, 39 sites were complete and operational with 39 additional sites under contract for development. TVA had spent $7 million on fast charging network charging stations as of September 30, 2024. TVA also plans to electrify 100 percent of its light-duty and 50 percent of its medium-duty vehicles in the TVA fleet. The adoption of EVs in the Tennessee Valley continues to grow, and TVA is working to ensure that the benefits of this rapid growth are secured, while also helping LPCs proactively avoid issues in their distribution systems. Also in 2021, TVA and five other major utilities formed the Electric Highway Coalition to develop a network of fast charging stations along all major highway routes within their service area. Since formation, the Electric Highway Coalition has gained significant interest from additional utilities and other EV collaboratives. In 2022, the Electric Highway Coalition merged with the Midwest Electric Vehicle Charging Infrastructure Collaboration to create the National Electric Highway Coalition with members committed to coordinate the development of EV charging infrastructure across the central U.S. Sustainability and Social Responsibility Sustainability has been and continues to be a focus in support of TVA's mission to deliver affordable and reliable energy, steward the environment, and create sustainable economic growth. TVA has a Chief Sustainability Officer (“CSO”) who oversees an enterprise-wide Sustainability Steering Council and a Sustainability Working Group, which together provide guidance and support for the development of TVA's Sustainability Program. The CSO is also a member of TVA’s Risk Management Steering Committee. TVA’s sustainability work is categorized into five areas: • Economic Impact — Affordable, reliable power supports residents and attracts businesses • Environment — Protecting the region's air, land, water, and historic resources • Social — Investing in communities and employees to uplift all • Governance — Governance enables TVA to build a clean energy future • Foundational — Values most fundamental to carrying out TVA's mission 79 Table of Contents Economic Impact Environment Social Governance Foundational Clean energy Air, water, and waste management Community vitality and engagement Corporate impact Energy affordability and reliability Flood and drought management Biodiversity and stewardship Customer engagement and partnerships Cyber and physical security Ethics and compliance Innovation Climate adaptation and resilience Diversity, equity, and inclusion Financial health Health and safety Supply chain Cultural resource management Environmental justice Valley economy Workforce preparedness TVA issued its 2023 Sustainability Report on May 6, 2024. This comprehensive Sustainability Report aligns with global reporting standards and will serve as a baseline for annual corporate sustainability reporting. TVA also publishes two other sustainability-related documents: a Federal Sustainability Report and Implementation Plan, which addresses TVA's responsibilities related to federal sustainability performance, and an Environmental, Social, and Governance Sustainability Report, which uses a utility-focused and investor-driven reporting template developed by the Edison Electric Institute. TVA also issues other reports related to sustainability and social responsibility, including a Diversity, Equity, Inclusion and Accessibility Report, which highlights the actions TVA has taken in the Diversity, Equity, Inclusion, and Accessibility area, the results achieved, and the plans to continue to focus and improve, among other reports. Extreme Flooding Preparedness Updates to the TVA analytical hydrology model completed in 2009 indicated that under "probable maximum flood" conditions, some of TVA's dams might not have been capable of regulating the higher flood waters. A "probable maximum flood" is an extremely unlikely event; however, TVA has a responsibility to provide protection for its nuclear plants against such events. As a result, TVA installed a series of modifications at four dams. Since 2009, TVA has performed further hydrology modeling of portions of the TVA watershed using updated modeling tools. Hydrology models were submitted for Sequoyah Nuclear Plant ("Sequoyah") Units 1 and 2 in 2012. However, concerns regarding TVA dam stability and revised hydrology analyses led to the submittal of a new hydrologic analysis for Sequoyah Units 1 and 2 in 2020. To resolve additional dam stability issues identified later in 2020, TVA submitted a revision to the Sequoyah model in April 2023. The new hydrologic analysis for Sequoyah Units 1 and 2 was approved by the NRC in March 2024. TVA submitted models for Watts Bar Nuclear Plant ("Watts Bar") Units 1 and 2 in December 2023 to incorporate a methodology approved by the NRC subsequent to its review of a previous hydrology submittal for Watts Bar. TVA will subsequently address conditions at Browns Ferry as needed. As of September 30, 2024, TVA had spent $158 million on the modifications and improvements related to extreme flooding preparedness. TVA has concluded that the revised hydraulic modeling and associated submittal of license amendment requests to update the Sequoyah and Watts Bar licensing bases have demonstrated appropriate design margins such that additional flood mitigating systems are no longer needed at these two sites. Therefore, TVA submitted a letter to the NRC in September 2024 to decommit from the commitment to implement an improved flood model mitigation system at these two sites. Sequoyah Nuclear Plant Unit 2 Sequoyah Unit 2 tripped on July 30, 2024, due to failure of the main generator. As a result, the project to restack and rewind the main generator was pulled forward in the Nuclear Life Extension ("NLE") plan. The unit will remain offline until project completion, which is expected in spring 2025. As of September 30, 2024, TVA had spent $25 million related to this project and expects to spend an additional $57 million. Hurricane Helene In late September 2024, Hurricane Helene caused significant damage in communities in East Tennessee and Western North Carolina. Flood of record was approached or exceeded in many areas. TVA completed inspections at numerous dams, finding no substantial impacts. Shoreline erosion at Nolichucky Dam did not impact the dam's integrity and has subsequently been repaired. In addition, TVA stored a substantial amount of water in tributary reservoirs that has since been released downstream in a controlled manner to recover flood storage capacity. TVA is working on debris management at Douglas Reservoir to help mitigate potential downstream movement. TVA's efforts may also include aiding other agencies in their recovery efforts, including supporting major disaster declarations with the Federal Emergency Management Agency. TVA is evaluating the financial impact of the storm. 80 Table of Contents Coal Combustion Residuals Coal Combustion Residuals Facilities . TVA is pursuing a programmatic approach to address environmental impacts related to the previous storage and disposal of its CCR in accordance with applicable law (“CCR Program”). Under the CCR Program, TVA performed stability remediation of all at-risk facilities, completed the conversion of all operational coal-fired plants to dry CCR storage, and ceased operation of wet CCR storage facilities. Dry generation and dewatering projects . TVA has accomplished the conversion from wet to dry handling of CCR materials at all operating coal plants with the completion of dry generation and/or dewatering projects at Bull Run, Cumberland, Gallatin Fossil Plant ("Gallatin"), Kingston, and Shawnee Fossil Plant ("Shawnee"). Landfills . TVA has made strategic decisions to build and maintain lined and permitted dry storage facilities on TVA-owned property at some TVA locations, enabling these facilities to generate CCR beyond existing dry storage capacity. Lined and permitted landfills are operational at Bull Run, Gallatin, Kingston, and Shawnee. TVA received a State of Tennessee permit for the construction and operation of a new lined landfill at Gallatin, and construction started in 2022. TVA received a State of Tennessee permit for a new lined landfill at Cumberland in 2023, and TVA is currently evaluating the need for construction. Construction of additional lined and dry permitted storage facilities may occur to support future business requirements . CCR facilities closures . TVA is working to close CCR facilities in accordance with federal and state requirements. Closure project schedules and costs are driven by the selected closure methodology (such as closure-in-place or closure-by-removal) and regulatory requirements. TVA's predominant closure methodology is currently closure-in-place, with exceptions at certain facilities, although EPA has recently interpreted its CCR Rule in a way that could challenge TVA's predominant closure methodology for many units, thereby potentially creating significant additional costs with implementing closure. TVA issued a PEIS in June 2016 that programmatically evaluated the closure of CCR impoundments at TVA's coal-fired plants. TVA issued its associated Record of Decision in July 2016. The PEIS assessed the potential environmental effects associated with various modes of impoundment closures and through subsequent NEPA documents specifically evaluated and addressed closure methods at 10 impoundments. TVA subsequently decided to close those impoundments. The method of final closure for each of these facilities will depend on various factors, including approval by appropriate state regulators and applicable closure requirements of state and federal regulations. Additional site-specific NEPA studies will be conducted, as warranted, as other facilities are considered for closure. See Note 13 — Asset Retirement Obligations . Groundwater monitoring . Compliance with the Environmental Protection Agency's ("EPA's") CCR rule ("CCR Rule") requires implementation of a groundwater monitoring program and ongoing analysis. In compliance with the CCR Rule, TVA published the results of the 2023 groundwater testing at its CCR facilities during the second quarter of 2024. Similar to prior years, the tests identified certain CCR units with constituents at statistically significant levels above site-specific groundwater protection standards. TVA has completed an assessment of corrective measures ("ACM"), which analyzes the effectiveness of potential corrective actions, and has published ACM reports to its CCR Rule Compliance Data and Information website. Based on the results of the ACM, TVA is required to select a remedy as soon as feasible. TVA has selected remedies for two of its plants: a groundwater pump and treat system at the Allen East Ash Disposal Area and monitored natural attenuation at Shawnee. TVA continues to investigate and evaluate remedies for its other plants and will continue posting semi-annual progress reports on the status of remedy selection until the final remedy is selected. The cost of these final remedies cannot reasonably be predicted until investigations and evaluations are complete and remedial methods are selected. The final Part A revision to the CCR Rule became effective September 28, 2020. Among other things, the final Part A rule requires unlined CCR surface impoundments to stop receiving CCR and non-CCR waste streams and to initiate closure or retrofit by no later than April 11, 2021. TVA ceased sending CCR and non-CCR waste streams to, and initiated closure of, unlined CCR surface impoundments by the specified deadline. As of September 30, 2024, TVA had spent approximately