Tennessee Valley Authority 10-K

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