What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-11-13 compared with 2024-11-14 · 327 added, 430 removed, 771 unchanged (50% of the section changed)

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ENERGY ENVIRONMENT ECONOMIC DEVELOPMENT

• Energy — Delivering reliable, low cost, clean energy;

• Energy — Delivering reliable and low cost energy;

• Environment — Caring for the region's natural resources;

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While TVA's mission has not changed since it was established in 1933, the climate in which TVA operates continues to evolve.

The business and economic environment has become more challenging due to economic conditions;

tougher environmental standards;

and the need to diversify its power supply and adapt to changing customer usage behaviors, new technologies, and emerging, non-traditional competition.

To continue to deliver its mission of service while evolving for future success, TVA must realize five strategic priorities, which are comprised of several strategic elements each:

Foster a culture that embraces, adapts quickly to, and anticipates changes needed for TVA to excel in the future public power utility marketplace

Support inclusion with diversity efforts to attract and retain the best talent for TVA

Deliver an efficient and agile HR service model that enables enterprise effectiveness

Develop the next generation of

TVA leaders Nation’s top nuclear fleet by 2025

Achieve leading operational performance by managing the generation fleet based on the mission of each asset

• Gas and hydro to top quartile

• Coal fleet based on end of life

Increase generation and transmission capacity while fostering excellence in project management and construction

Advance TVA’s grid capabilities to increase flexibility for future additions and to meet the reliability and resiliency needs of the future

Accelerate the deployment of existing clean technologies including solar, storage, energy efficiency, and demand response Maintain financial health while funding TVA's energy transition

Ensure sufficient revenues to meet financial commitments

(revenue requirements)

Evolve the public power model while incorporating Valley Vision 2035 Build partnerships and

community connections to enable solutions

Champion the public power model through the region’s energy expansion

Align with TVA's customers and

economic development

agencies to target industries that are critical to the Valley’s long-term success

Responsibly foster excellence in natural resource management and environmental stewardship as TVA transitions to the energy system of the future Advance energy transformation in the Valley through leveraging technology and innovation in all of TVA's work

Refine innovation framework to align with TVA’s strategic intent

Support the development of new technologies to further

accelerate decarbonization and prepare to deploy commercially viable technologies

TVA's mission sets the stage for its strategic planning process that includes strategic objectives, initiatives, and scorecards for performance designed to provide clear direction for improving TVA's core business.

The business and economic environment has become more challenging due to economic conditions, changing environmental standards, new technologies, and emerging, non-traditional competition.

TVA is focused on unleashing American energy, while working together with partners to meet electricity needs, protect resources, and grow the region's economy.

TVA's mission sets the stage for its strategic planning process that includes strategic priorities, strategic elements, initiatives, and scorecards for performance designed to provide clear direction for improving TVA's core business.

TVA's five strategic priorities are below.

TVA's strategic priorities may be revisited for future years once a Board quorum is restored.

Linking the Mission to Performance

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2025 Corporate Measure Weight Actual Threshold Target Stretch

TVA total spending ($ millions) 40% $ 7,496 $ 8,049 $ 7,810 $ 7,570

Load not served (system minutes) 30% 2.3 4.5 4.1 3.2

Annualized nuclear online reliability loss factor (%) 15% 3.22 % 3.00 % 2.00 % 1.00 %

Combined cycle equivalent forced outage rate (%) 10% 1.2 % 6.4 % 5.5 % 4.0 %

Coal equivalent forced outage rate (%) 5% 4.8 % 18.2 % 15.2 % 8.6 %

2025 Corporate Measure Weight Threshold Target Stretch

Strategic Business Unit ("SBU") Controllable / Operating and Maintenance ("O&M") and Base Capital Spend 40% $5,187 $5,061 $4,935

Strategic Business Unit ("SBU") Controllable / Operating and Maintenance ("O&M") and Base Capital Spend ($ millions) (1)

40% $4,623 $5,187 $5,061 $4,935

Transmission Performance Indicator (2)

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Nuclear Performance Indicator (3)

15% 9.84% 2.77% 2.00% 1.23%

Power Operations Performance Indicator (4)

15% 193 50 100 200

Serious Injury Incident Rate (5)

15% 0.01 0.04 0.02 0.00

(1) Strategic Business Unit ("SBU") Controllable Operating & Maintenance ("O&M") and Base Capital Spend equals the total Non-Fuel O&M and Base Capital expenses for corporate and operational SBU organizations (excludes Board of Directors).

(2) Transmission Performance Indicator is an aggregate measure of the overall reliability of TVA's transmission system.

(3) The Nuclear Performance Indicator is the Annualized Online Reliability Loss Factor, which is the 12-month ratio of all generation losses minus refueling outage ("RFO") and exempt losses to reference energy generation minus RFO and exempt losses in a normal fuel cycle period, per standard industry guidelines.

This measure monitors performance between refueling outages to obtain high unit and energy production reliability.

(4) The Power Operations Performance Indicator is an aggregate measure of the overall reliability of TVA's power operations generation fleet based on key performance measures in Gas, Hydro, and Coal that are intended to ensure that TVA's fleet of power operations generation assets is available and reliable to meet system demand.

(5) The Serious Injury Incident Rate is a mathematical calculation used by Edison Electric Institute that quantifies the extent of injury for serious injuries and fatalities from events within the control of the employee and/or the employer.

2026 Corporate Measure (1)

Weight Threshold Target Stretch

SBU Controllable O&M and Base Capital Spend 40% 2% SBU O&M /

4% Capital Over Budget 2026 Budget 2% SBU O&M /

4% Capital Under Budget

Serious Injury Incident Rate 15% 0.03 0.01 0.00

Transmission Performance Indicator 15% 50 100 200

Generation Performance Indicator 15% 50 100 200

Nuclear Performance Indicator 15% Equidistant from Target 2% Comparable Fleet Top Quartile 24-month average as of September 2025

(1) All measures are the same as 2025;

however, the Power Operations Performance Indicator is now named the Generation Performance Indicator.

Executive Overview

TVA's operating revenues were $13.7 billion and $12.3 billion for the years ended September 30, 2025 and 2024, respectively.

Operating revenues increased for the year ended September 30, 2024 as compared to the prior year, primarily as a result of higher effective base rates and higher sales volume, partially offset by lower fuel rates.

Effective base rates were higher primarily due to the TVA Board action to approve a 4.5 percent wholesale base rate increase beginning in 2024 and the pandemic credits ending on September 30, 2023.

The higher sales volume was driven by a 20 percent increase in cooling degree days as compared to the same period of the prior year.

Lower fuel rates were primarily due to lower coal, natural gas, and purchased power prices.

Operating revenues increased for the year ended September 30, 2025 as compared to the prior year, primarily as a result of higher effective fuel rates, higher effective base rates, and increased sales volume.

Higher effective fuel rates were due primarily to using higher cost coal and natural gas generation due to less availability of nuclear generation as compared to the same period of the prior year.

Effective base rates were higher primarily due to the TVA Board of Directors' ("TVA Board") action to approve a 5.25 percent wholesale base rate increase effective October 1, 2024.

The increased sales volume was primarily driven by higher sales to residential and small commercial and industrial customers as well as increases within the data processing, hosting, and related services sector.

Total operating expenses increased $1.0 billion for the year ended September 30, 2025, as compared to the prior year, primarily due to an increase in fuel and purchased power expense.

Fuel and purchased power expense increased $732 million for the year ended September 30, 2025, as compared to the same period of the prior year, primarily due to higher demand for purchased power as a result of less availability of nuclear generation, higher effective fuel rates, and higher purchased power market prices.

Depreciation and amortization expense increased $133 million primarily as a result of increases in the amortization expense of decommissioning costs recovered in rates and amortization expense of finance leases, the decision to retire Kingston Fossil Plant ("Kingston"), and additions to net completed plant.

In addition, there was a $76 million increase in Operating and maintenance expense primarily due to increases in payroll and benefit costs related to severance costs associated with Enterprise Transformation Program ("ETP") efforts, labor escalation for cost of living increases, and higher medical claims, partially offset by a decrease in nuclear outage expense primarily due to fewer nuclear refueling outages.

Commercial operations began on Johnsonville Aeroderivative Combustion Turbine Units ("CTs") 21-30 in 2025, and TVA has ongoing natural gas projects at its Cumberland Fossil Plant ("Cumberland") site and Kingston site, an aeroderivative CT project at TVA's Allen CT site, and a new Caledonia simple cycle CT project on TVA land.

TVA is also evaluating natural gas projects for the replacement generation for the second unit at Cumberland and a new CT project at TVA's Lagoon Creek site.

In the third quarter of 2025, TVA submitted a construction permit application to the Nuclear Regulatory Commission ("NRC") for a BWRX-300 reactor at the Clinch River Nuclear Site, and in July 2025, the NRC accepted the application for review.

On January 22, 2025, TVA reached an all-time record high peak power demand of approximately 35,430 megawatts ("MW").

This peak was nearly 1,100 MW greater than TVA's previous all-time peak and over 1,100 MW greater than TVA's peak power demand during Winter Storm Elliott in December 2022.

In addition, TVA reached a second highest peak power demand of approximately 34,284 MW on January 21, 2024.

Total operating expenses decreased $274 million for the year ended September 30, 2024, as compared to the prior year, primarily due to a decrease in fuel and purchased power expense.

Fuel and purchased power expense decreased $432 million for the year ended September 30, 2024, as compared to the same period of the prior year, primarily due to lower coal, natural gas, and purchased power prices.

Depreciation and amortization expense decreased $75 million for the year ended September 30, 2024, as compared to the prior year, primarily driven by a decrease in depreciation expense associated with the retirement of Bull Run Fossil Plant ("Bull Run").

These decreases were partially offset by a $269 million increase in Operating and maintenance expense primarily due to increases in payroll and benefit costs due to labor escalation for cost of living increases and additional headcount to support operational needs, outage expense driven by an increase in nuclear outage days, and contract labor costs primarily related to strategic project work and power operations performance improvement activities.

Commercial operations began on Paradise Combustion Turbine Units ("CTs") 5-7 on December 29, 2023.

TVA also has ongoing natural gas projects at its Johnsonville, Cumberland, and Kingston sites and is evaluating natural gas projects for the replacement generation for the second unit at Cumberland, a new Caledonia CT plant on TVA land, and an aeroderivative CT project at TVA's Allen site.

In addition, the first license renewal application was submitted to the Nuclear Regulatory Commission in January 2024 for the three units at Browns Ferry Nuclear Plant following the completion of a Supplemental Environmental Impact Statement ("EIS").

TVA documented its final decision related to the retirement of Kingston with the Record of Decision on April 2, 2024.

TVA plans to retire the nine coal-fired units at Kingston by the end of calendar year ("CY") 2027 and replace the retired generation with an energy complex that includes natural gas, battery storage, and solar.

On May 8, 2024, the Environmental Protection Agency ("EPA") published its final legacy coal combustion residual ("CCR") rule ("Legacy CCR Rule"), which expands the scope of the existing regulatory requirements of EPA's 2015 CCR rule, as revised ("2015 CCR Rule"), to include two additional classes of CCR units:

legacy CCR surface impoundments ("Legacy SIs") and CCR management units ("CCRMUs").

As a result of the enactment of the final rule, during 2024, TVA recorded additional estimated AROs of $3.1 billion and recorded a corresponding regulatory asset of $3.1 billion due to these AROs being associated with closed sites and asset retirement costs having been fully depreciated.

This peak was over 800 MW greater than TVA's previous all-time peak set in January 2024.

TVA's economic development efforts and programs continued to help attract or expand businesses and industries in the Tennessee Valley.

These companies announced projected capital investments of $8.9 billion and are expected to create 10,368 jobs and retain 42,393 jobs.

These companies announced projected capital investments of over $6.6 billion and are expected to create 9,316 jobs and retain 43,254 jobs.

These amounts are forward-looking and are subject to various uncertainties.

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Sales of Electricity

Sales of electricity, which accounted for nearly all of TVA's operating revenues, were 162,933 million and 157,311 million kilowatt hours ("kWh") for 2024 and 2023, respectively.

Total sales of electricity in 2024 includes 137 million kWh of pre-commercial generation at Paradise CTs 5-7, all of which was recognized in the three months ended December 31, 2023.

Total sales of electricity in 2023 includes 99 million kWh of pre-commercial generation at Colbert CT Units 9-11.

Sales of electricity were 167,612 million and 162,933 million kilowatt hours ("kWh") for 2025 and 2024, respectively.

The total sales of electricity in 2025 included 99 thousand kWh of pre-commercial generation at Johnsonville Aeroderivative CT Units 21-30.

The total sales of electricity in 2024 included 137 thousand kWh of pre-commercial generation at Paradise CTs 5-7.

TVA sells power at wholesale rates to LPCs that then resell the power to their customers at retail rates.

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The following charts show a breakdown of TVA's energy load:

Information included in the charts above was derived from energy usage of directly served customers and customers served by LPCs during CY 2023, and these graphs will continue to be updated on a CY basis.

Information included in the charts above was derived from energy usage of directly served customers and customers served by LPCs during calendar year ("CY") 2024, and these graphs will continue to be updated on a CY basis.

Weather affects both the demand for TVA power and the price for that power.

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Variation from Normal Change from Prior Period

2024 Normal Percent Variation 2023 Normal Percent Variation Percent Change

2025 Normal Percent Variation 2024 Normal Percent Variation Change Percent Change

Heating Degree Days 2,888 3,132 (7.8) % 2,801 3,152 (11.1) % 87 3.1 %

Cooling Degree Days 1,888 1,824 3.5 % 1,954 1,824 7.1 % (66) (3.4) %

Sales of electricity increased approximately four percent for the year ended September 30, 2024, as compared to the same period of the prior year.

The increased sales volume for LPCs was primarily driven by an increase in cooling degree days of 20 percent.

For industries directly served, sales of electricity increased primarily within the data processing, hosting, and related services sector due to business-specific factors.

Sales of electricity increased approximately three percent for the year ended September 30, 2025, as compared to the prior year.

Financial Results

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Total operating revenues $ 13,672 $ 12,314 $ 1,358 11.0 %

(1) Represents revenue capitalized during pre-commercial operations at Paradise CTs 5-7 in 2024 and Colbert CTs 9-11 in 2023.

(1) Represents revenue capitalized during pre-commercial operations at Johnsonville Aeroderivative CT Units 21-30 in 2025 and Paradise CT Units 5-7 in 2024.

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.

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See Part I, Item 1, Business — Rates — Rate Methodology .

In August 2024, the TVA Board approved a 5.25 percent wholesale base rate increase (excluding fuel) effective October 1, 2024.

This adjustment is estimated to produce an additional $495 million of revenue during 2025.

The changes in revenue components are summarized below:

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Long-term partnership credits for LPCs (231) (215) (16) 7.4 %

Pandemic relief credits (1)

— (225) 225 (100.0) %

Other charges and credits (1)

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Total operating revenues $ 13,672 $ 12,314 $ 1,358 11.0 %

(1) In 2022, the TVA Board approved a 2.5 percent monthly base rate credit, the Pandemic Recovery Credit, which was effective for 2023.

The pandemic credits ended September 30, 2023.

(1) Includes economic development credits to promote growth in the Tennessee Valley, hydro preference credits for residential customers of LPCs, and demand response credits allowing TVA to reduce industrial customer usage in periods of peak demand to balance system demand.

See Note 18 — Revenue.

(3) Represents revenue capitalized during pre-commercial operations at Paradise CTs 5-7 in 2024 and Colbert CTs 9-11 in 2023.

Operating revenues increased $260 million for the year ended September 30, 2024, as compared to the prior year, primarily due to a $862 million increase in base revenue.

(2) Represents revenue capitalized during pre-commercial operations at Johnsonville Aeroderivative CT Units 21-30 in 2025 and Paradise CT Units 5-7 in 2024.

Operating revenues increased $1.4 billion for the year ended September 30, 2025, as compared to the prior year, primarily due to a $690 million increase in base revenue.

The $690 million increase in base revenue was driven by a $400 million increase attributable to higher effective base rates and a $290 million increase attributable to higher sales volume.

The increase in effective base rates was primarily due to the TVA Board action to approve a 4.5 percent wholesale base rate increase beginning in 2024 and the pandemic credits ending on September 30, 2023.

The higher sales volume was primarily due to an increase in cooling degree days of 20 percent.

Partially offsetting the increase in base revenue was a $627 million decrease in fuel cost recovery revenue.

The $627 million decrease in fuel cost recovery revenue was driven by a $774 million decrease attributable to lower fuel rates partially offset by a $147 million increase attributable to higher sales volume.

The lower fuel rates were primarily due to lower coal, natural gas, and purchased power prices.

The increase in effective base rates was primarily due to the TVA Board action to approve a 5.25 percent wholesale base rate increase effective October 1, 2024.

The higher sales volume was driven primarily by higher sales to residential and small commercial and industrial customers as well as increases within the data processing, hosting, and related services sector.

In addition, there was a $670 million increase in fuel cost recovery revenue driven by a $572 million increase attributable to higher effective fuel rates and a $98 million increase attributable to higher sales volume.

The higher effective fuel rates were due primarily to using higher cost coal and natural gas generation due to less availability of nuclear generation as compared to the prior year.

See Sales of Electricity above for further discussion of the change in the volume of sales of electricity and Operating Expenses below for further discussion of the change in fuel expense.

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(4) Total cost per kWh is based on a weighted average.

Fuel expense decreased $380 million for the year ended September 30, 2024, as compared to the prior year.

This decrease was primarily due to a decrease in effective fuel rates due to lower coal and natural gas prices, resulting in a $373 million decrease in fuel expense.

Additionally, fuel expense decreased $46 million due to the deferral of unplanned coal costs during the summer of 2024 and the recovery of unplanned fuel costs in the prior year that were deferred in the summer of 2022.

Partially offsetting these decreases was an increase of $39 million in fuel expense due to higher demand for energy.

Purchased power expense decreased $52 million for the year ended September 30, 2024, as compared to the prior year.

This decrease was primarily due to lower purchased power market prices compared to the same period of the prior year, resulting in a decrease of $259 million.

Additionally, purchased power expense decreased $43 million due to the deferral of unplanned purchased power costs from less availability of nuclear and hydro generation and the recovery of unplanned

purchased power costs in the prior year that were deferred in the summer of 2022.

Partially offsetting these decreases was an increase of $250 million in purchased power expense due to higher demand for energy, and to a lesser extent, less availability of nuclear and hydro generation.

Fuel expense increased $207 million for the year ended September 30, 2025, as compared to the prior year.

An increase of $194 million was due primarily to higher effective fuel rates related to using higher cost coal and natural gas generation due to less availability of nuclear generation as compared to the prior year.

Additionally, fuel expense increased $22 million due to the recovery of prior year deferrals of unplanned coal costs, and gas prices being lower than forecasted during the summer of 2025.

Partially offsetting these increases was a decrease of $9 million due to more availability of hydro generation as compared to the prior year.

Purchased power expense increased $525 million for the year ended September 30, 2025, as compared to the prior year.

This increase was primarily due to higher demand for energy and less availability of TVA nuclear generation, resulting in an increase of $305 million.

Additionally, purchased power expense increased $173 million due to higher purchased power market prices as compared to the prior year.

Finally, purchased power expense increased $47 million due to the recovery of prior year deferrals of unplanned purchased power costs, and gas and purchased power prices being lower than forecasted during the summer of 2025.

Operating and maintenance expense increased $76 million for the year ended September 30, 2025, as compared to the prior year.

This increase was primarily due to $126 million of increased payroll and benefit costs primarily due to labor escalation for cost of living increases and additional headcount to support operational needs, a $39 million increase in outage expense primarily due to an increase in nuclear outage days, and $30 million of increased contract labor costs primarily related to strategic project work and power operations performance improvement activities.

In addition, there was a $12 million increase in materials and supplies related to power operations performance improvement activities and other natural gas project work and a $9 million increase in expenditures related to TVA's New Nuclear Program.

Depreciation and amortization expense decreased $75 million for the year ended September 30, 2024, as compared to the prior year.

The decrease was primarily driven by a decrease in depreciation expense of $206 million related to the decision to retire Bull Run, as Bull Run became fully depreciated in the fourth quarter of 2023.

Partially offsetting this decrease was a $44 million increase in depreciation primarily related to TVA's decision to retire Cumberland and Kingston, a $38 million increase in amortization expense from amortization of finance leases and retirement of regulatory assets, and a $19 million increase due to Colbert CTs 9-11 and Paradise CTs 5-7 being placed into service in the fourth quarter of 2023 and the first quarter of 2024, respectively.

The remainder of the partially offsetting increase was primarily due to depreciation of other additions to net completed plant.

This increase was primarily due to $136 million of increased payroll and benefit costs primarily due to labor escalation for cost of living increases, severance costs associated with ETP efforts, and higher medical claims.

Partially offsetting these increases was a $48 million decrease in outage expense primarily due to fewer nuclear refueling outages.

Depreciation and amortization expense increased $133 million for the year ended September 30, 2025, as compared to the prior year.

The increase was primarily driven by an increase of $43 million related to amortization expense of decommissioning costs recovered in rates and amortization expense of finance leases and an increase in depreciation expense of $18 million related to the decision in April 2024 to retire Kingston.

Additionally, there was an increase due to depreciation of additions to net completed plant.

See Note 1 — Summary of Significant Accounting Policies — Property, Plant, and Equipment, and Depreciation — Depreciation .

Tax equivalents expense decreased $36 million for the year ended September 30, 2024, as compared to the prior year.

This change was primarily driven by a decrease in the tax equivalents collected in the fuel cost recovery.

Tax equivalents expense increased $76 million for the year ended September 30, 2025, as compared to the prior year.

This change was primarily driven by an increase in TVA's revenue from sales of electricity in 2024, which is used as the basis for calculating tax equivalent expense.

Additionally, tax equivalents expense increased due to an increase in the tax equivalents collected in the fuel cost recovery.

Generating Sources.

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Purchased power (coal-fired) 5,593 4 % 2,207 1 %

Purchased power (wind) (6)

3,642 2 % 2,286 2 %

Purchased power (hydroelectric) 3,472 2 % 2,751 2 %

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Total power supply 170,470 100 % 165,693 100 %

(1) The generation for 2023 includes 99 million kWh of pre-commercial generation at Colbert CTs 9-11.

The generation for 2024 includes 137 million kWh of pre-commercial generation at Paradise CTs 5-7.

(1) The generation for 2024 includes 99 thousand kWh of pre-commercial generation at Johnsonville Aeroderivative CT Units 21-30.

The generation for 2024 includes 137 thousand kWh of pre-commercial generation at Paradise CT Units 5-7.

(2) Generation from TVA-owned renewable resources (non-hydroelectric) is less than one percent for all periods shown and therefore is not represented in the table above.

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TVA acquires Renewable Energy Certificates ("RECs") in connection with certain purchased power transactions and sells some of these RECs to customers.

(6) At September 30, 2024, 2,286 MWs previously classified as Purchased power (other renewables) has been reclassified to Purchased power (wind) to conform to current year presentation.

In addition to power supply sources included here, TVA offers energy efficiency programs that effectively reduce energy

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Total interest expense increased $130 million for the year ended September 30, 2025, as compared to the prior year.

This was primarily driven by a $23 million increase from higher average balances on long-term debt and an $8 million increase from higher average rates on short-term debt, partially offset by a $13 million decrease from lower average rates on long-term debt, a $5 million decrease from lower average balances on short-term debt, and a $3 million decrease due to lower interest expense related to finance leases.

This increase was primarily driven by a $97 million increase from higher average balances and rates on long-term debt, and a $51 million increase in interest on other financing leases, primarily driven by the lease financing arrangement with Johnsonville Aeroderivative Combustion Turbine Generation LLC ("JACTG").

This increase was partially offset by an $18 million decrease in interest on short-term debt primarily due to lower average balances and rates.

Other Income, Net

Other income, net increased $21 million for the year ended September 30, 2025, as compared to the prior year.

This increase was primarily driven by market gains on TVA's Investment funds and increases in interest income due to higher interest rates as compared to the prior year.

This increase was driven by increases in external services primarily due to additional transmission projects as a result of economic

development and higher interest income on cash investments due to a higher balance of cash held during the year, partially offset by lower short-term rates earned on that cash.

Other Net Periodic Benefit Cost

Other net periodic benefit cost decreased $101 million for the year ended September 30, 2024, as compared to the prior year.

The decrease is primarily due to a decrease in the amount of deferred pension costs recognized.

As a result of plan design changes, future contributions are expected to exceed the expense under U.S.

Accordingly, TVA discontinued this regulatory accounting practice as all such deferred costs were recovered as of September 30, 2023.

In addition, Other net periodic benefit cost is subject to significant economic assumptions, such as changes in the discount rate used to measure the benefit plans, that can materially impact TVA.

Other net periodic benefit cost increased $7 million for the year ended September 30, 2025, as compared to the prior year.

The increase is primarily due to the decreases in the discount rates used to measure net periodic benefit cost for the year ended September 30, 2025, as compared to the prior year.

Other net periodic benefit cost is subject to significant economic assumptions, such as changes in the discount rate, COLA, and the rate of return on plan assets, that can materially impact TVA.

See Note 21 — Benefit Plans .

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TVA depends on various sources of liquidity to meet cash needs and contingencies.

TVA's primary sources of liquidity

are cash from operations and proceeds from the issuance of short-term debt in the form of discount notes, along with periodic

issuances of long-term debt.

TVA's balance of short-term debt typically changes frequently as TVA issues discount notes to

meet short-term cash needs and pay scheduled maturities of discount notes and long-term debt.

TVA's next significant power bond maturity is $1.0 billion in May 2025.

TVA's primary sources of liquidity are cash from operations and proceeds from the issuance of short-term debt in the form of discount notes, along with periodic issuances of long-term debt.

TVA's balance of short-term debt typically changes frequently as TVA issues discount notes to meet short-term cash needs and pay scheduled maturities of discount notes and long-term debt.

TVA had $1.4 billion of power bonds mature in November 2025.

TVA's next significant power bond maturity is $1.0 billion in February 2027.

The periodic amounts of short-term debt issued are determined by near-term expectations for cash receipts, cash expenditures, and funding needs, while seeking to maintain a target range of cash and cash equivalents on hand.

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In addition, cash balances may include collateral received from counterparties.

In addition to cash from operations and proceeds from the issuance of short-term and long-term debt, TVA's sources of liquidity include four long-term revolving credit facilities totaling $2.7 billion, a $150 million credit facility with the United States Department of the Treasury ("U.S.

In addition to cash from operations and proceeds from the issuance of short-term and long-term debt, TVA's sources of liquidity include four revolving credit facilities totaling $2.7 billion, a $150 million credit facility with the United States Department of the Treasury ("U.S.

Treasury"), and proceeds from other financings.

See Note 15 — Debt and Other Obligations — Credit Facility Agreements.

TVA issued $4.0 billion and $1.0 billion of power bonds during 2025 and 2024, respectively.

In addition, TVA redeemed $1.0 billion of power bonds during both 2025 and 2024 due to maturity.

The TVA Board authorized TVA to issue power bonds and enter into other financing arrangements in an aggregate amount not to exceed $3.0 billion during 2026.

In the fourth quarter of 2024, TVA issued $1.0 billion of power bonds maturing in August 2034.

For additional information about TVA debt issuance activity and debt instruments issued and outstanding at September 30, 2025 and 2024, including rates, maturities, outstanding principal amounts, and redemption features, see Note 15 — Debt and Other Obligations — Debt Securities Activity and Debt Outstanding .

Other financing arrangements may include, but are not limited to, lease financings, energy prepayments from customers, and other similar agreements.

In the first quarter of 2025, TVA entered into an $800 million construction management agreement and lease financing arrangement with Johnsonville Aeroderivative Combustion Turbine Generation LLC ("JACTG").

TVA may also engage in other alternative forms of financing such as sales of receivables, or loans, from time to time.

The TVA Act authorizes TVA to issue Bonds in an amount not to exceed $30.0 billion outstanding at any time.

The TVA Act authorizes TVA to issue bonds, notes, or other evidences of indebtedness (collectively, "Bonds") in an amount not to exceed $30.0 billion outstanding at any time.

Bonds outstanding, excluding unamortized discounts and premiums and net exchange gains from foreign currency transactions, at September 30, 2025 and 2024, were $22.1 billion (including current maturities) and $20.2 billion (including current maturities), respectively.

The balance of Bonds outstanding directly affects TVA's capacity to meet operational liquidity needs and to strategically use Bonds to fund certain capital investments as management and the TVA Board may deem desirable.

Other options for financing not subject to the limit on Bonds, including lease financings (see Lease Financings below and Note 11 —

Variable Interest Entities ), could provide supplementary funding if needed.

Currently, TVA expects to utilize a combination of Bonds and additional power revenues through power rate increases to meet its ongoing operational liquidity needs while making planned capital investments through the decade.

TVA may also utilize available funding through the Inflation Reduction Act of 2022 ("Inflation Reduction Act") and the Bipartisan Infrastructure Law ("BIL"), other federal funding opportunities, or other third-party financing arrangements.

See Lease Financing s, Key Initiatives and Challenges — Optimum Energy Portfolio — Decarbonization , Note 11 — Variable Interest Entities , and Note 14 — Debt and Other Obligations for additional information.

Other options for financing not subject to the limit on Bonds, including certain lease financings (see Lease Financings below and Note 12 — Variable Interest Entities ), could provide supplementary funding if needed.

Currently, TVA expects to utilize a combination of Bonds, other financings, or potentially additional power revenues through power rate increases to meet its ongoing operational liquidity needs while making planned capital investments.

TVA may also utilize available funding through the Inflation Reduction Act of 2022 ("IRA") and the Bipartisan Infrastructure Law ("BIL"), other federal funding opportunities, or other third-party financing arrangements.

See Lease Financing s, Key Initiatives and Challenges — Funding Opportunities , Note 12 — Variable Interest Entities , and Note 15 — Debt and Other Obligations for additional information.

TVA may from time to time seek to retire or purchase its outstanding debt through cash purchases and/or exchanges for securities, in open market purchases, privately negotiated transactions, or otherwise.

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Power bonds and discount notes have a first priority and equal claim of payment out of net power proceeds.

Net power proceeds are defined as the remainder of TVA's gross power revenues after deducting the costs of operating, maintaining, and administering its power properties and tax equivalents, but before deducting depreciation accruals or other charges representing the amortization of capital expenditures, plus the net proceeds from the sale or other disposition of any power facility or interest therein.

capital expenditures, plus the net proceeds from the sale or other disposition of any power facility or interest therein.

In addition to power bonds and discount notes, TVA had long-term debt associated with certain VIEs outstanding at September 30, 2025.

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Discount notes — % 4.37 % 4.76 % 5.37 %

TVA ended the year at September 30, 2024, with a higher balance of short-term debt as compared to September 30, 2023.

The increase was primarily due to higher redemptions of long-term debt compared to the previous year, and the timing of cash flows.

TVA ended the year at September 30, 2025, with a lower balance of short-term debt as compared to September 30, 2024.

The decrease was primarily due to higher redemptions of short-term debt compared to the previous year, and the timing of cash flows, including higher cash from issuance of long-term bonds in the fourth quarter in anticipation of cash needed to pay bond maturities in November 2025.

TVA generally uses proceeds from the issuance of power bonds to refinance maturing power bonds or other financing obligations, as necessary, or for other power system purposes.

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At this time, TVA anticipates the balance of Bonds and other financing obligations will increase in future years due to an expected increase in capital expenditures.

TVA issued $1.0 billion of power bonds during both 2024 and 2023.

TVA redeemed $1.0 billion and $29 million of power bonds during 2024 and 2023, respectively.

For additional information about TVA debt issuance activity and debt instruments issued and outstanding at September 30, 2024 and 2023, including rates, maturities, outstanding principal amounts, and redemption features, see Note 14 — Debt and Other Obligations — Debt Securities Activity and Debt Outstanding .

TVA Bonds are traded in the public bond markets and are listed on the New York Stock Exchange ("NYSE") except for TVA's discount notes, the 2009 Series B power bonds, and the power bonds issued under TVA's electronotes ® program.

TVA's Putable Automatic Rate Reset Securities ("PARRS") are traded on the NYSE under the exchange symbols "TVC" and "TVE." Other bonds listed on the NYSE are assigned various symbols by the exchange, which may be noted on the NYSE's website.

TVA Bonds are traded in the public bond markets and are listed on the New York Stock Exchange ("NYSE") except for TVA's discount notes, and the 2009 Series B power bonds.

TVA's Putable Automatic Rate Reset Securities ("PARRS") are traded on the NYSE under the exchange symbols "TVC" and "TVE." Other bonds listed on the NYSE are assigned various

symbols by the exchange, which may be noted on the NYSE's website.

TVA has also listed certain bonds on foreign exchanges from time to time, including the Luxembourg, Hong Kong, and Singapore Stock Exchanges.

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government addresses situations of approaching its debt limit.

The outlook on the ratings of TVA is currently stable with S&P Global Ratings ("S&P") and Fitch Ratings, Inc.

however, the outlook on TVA's ratings from Moody's Investors Service, Inc.

("Moody's") is negative due to Moody's change in the U.S.

government rating outlook.

TVA's rated senior unsecured Bonds are currently rated Aaa, AA+, and AA+, by Moody's, Fitch, and S&P, respectively.

On November 10, 2023, Moody's Investors Service, Inc.

("Moody's") revised the outlook on the U.S.

government's credit ratings from stable to negative, and subsequently determined on November 13, 2023, to revise the outlook on TVA's ratings from stable to negative due to the change in the government rating outlook.

On May 16, 2025, Moody's downgraded the U.S.

government's credit rating from Aaa to Aa1, and on May 19, 2025, Moody's subsequently downgraded TVA's rating from Aaa to Aa1, and the outlook was revised to stable.

TVA was not required to post additional collateral due to the downgrade.

The outlook on the ratings of TVA is also currently stable with Fitch Ratings, Inc.

("Fitch") and S&P Global Ratings ("S&P").

TVA's rated senior unsecured Bonds are currently rated Aa1, AA+, and AA+, by Moody's, Fitch, and S&P, respectively.

TVA's short-term discount notes are not rated.

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See Note 12 — Variable Interest Entities.

In addition, TVA previously entered into leasing transactions to obtain third-party financing for 24 peaking CTs as well as certain qualified technological equipment and software ("QTE").

See Note 1 — Summary of Significant Accounting Policies for information about reacquired rights associated with these lease financing activities.

Summary Cash Flows

A major source of TVA's liquidity is operating cash flows resulting from the generation and sale of electricity.

Cash, cash equivalents, and restricted cash totaled $523 million and $521 million at September 30, 2024 and 2023, respectively.

Cash, cash equivalents, and restricted cash totaled $1.6 billion and $523 million at September 30, 2025 and 2024, respectively.

A summary of cash flow components for the years ended September 30 follows:

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Net cash flows provided by operating activities increased $321 million for the year ended September 30, 2025, as compared to the same period of the prior year.

The increase was primarily due to lower fuel prices and purchased power payments.

This increase was partially offset by lower revenue collections and higher payroll and benefit related payments compared to the same period of the prior year.

Revenue collections decreased primarily due to lower fuel and purchased power prices that were partially offset by the wholesale base rate increase that began in 2024, pandemic credits which ended in September 2023, and higher sales volume.

The increase was primarily due to higher revenue collections.

Revenue collections increased primarily due to the increase in the 2025 wholesale base rate in addition to higher sales volume and higher effective fuel rates.

This increase was partially offset by higher payroll and benefit-related payments in addition to higher fuel and purchased power payments as compared to the same period of the prior year.

Investing Activities .

The majority of TVA's investing cash flows are due to investments to acquire, upgrade, or maintain generating and transmission assets, including environmental projects and the purchase of nuclear fuel.

Net cash flows used in investing activities increased $597 million for the year ended September 30, 2024, as compared to the prior year, primarily driven by increased expenditures for capacity expansion projects partially offset by decreased expenditures for nuclear fuel during the period.

Nuclear fuel expenditures vary depending on the number of outages and the prices and timing of purchases of uranium and enrichment services.

Net cash flows used in investing activities increased $1.1 billion for the year ended September 30, 2025, as compared to the same period of the prior year, driven by increased expenditures for capacity expansion projects, primarily related to natural gas builds and upgrades to the nuclear fleet.

Financing Activities .

TVA's cash flows provided by or used in financing activities are primarily driven by the timing and level of cash flows provided by operating activities, cash flows used in investing activities, and net issuance and redemption of debt instruments to maintain a strategic balance of cash on hand.

Net cash flows provided by financing activities increased $467 million for the year ended September 30, 2024, as compared to the prior year, primarily due to higher net short-term debt issuances for capacity expansion projects.

Higher net cash flows provided by operating activities were offset by higher net cash used in investing activities which resulted in the need for net debt issuances to maintain targeted cash balance levels during the period.

Net cash flows provided by financing activities increased $1.8 billion for the year ended September 30, 2025, as compared to the prior year, primarily due to higher debt issuances and proceeds from debt of variable interest entities.

Higher net cash flows provided by both financing and operating activities were partially offset by higher net cash used in investing activities.

This net activity contributed to the need for debt issuances to maintain higher targeted cash balance levels at year end due to the timing of debt maturities.

TVA anticipates a need to increase debt in the coming years as it continues to invest in power system assets, which may result in positive net cash flows provided by financing activities in future periods.

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$ 4,678 $ 4,344 $ 3,616 $ 3,021 $ 3,772

(1) Currently, TVA expects to utilize a combination of Bonds and additional power revenues through power rate increases to meet its ongoing operational liquidity needs while making planned capital investments through the decade.

TVA may also utilize available funding through the Inflation Reduction Act and the BIL, other federal funding opportunities, or other third-party financing arrangements.

(1) Currently, TVA expects to utilize a combination of Bonds, other financings, or potentially additional power revenues through power rate increases to meet its ongoing operational liquidity needs while making planned capital investments.

TVA may also utilize available funding through the IRA and the BIL, other federal funding opportunities, or other third-party financing arrangements.

Estimated capital expenditures only include expenditures that are currently planned.

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Key Initiatives and Challenges

Optimum Energy Portfolio

TVA must continuously evaluate all generation and transmission assets to ensure an optimal energy portfolio that provides safe, clean, and reliable power while maintaining flexibility and fiscal responsibility to the people of the Tennessee Valley.

Additional load growth for the foreseeable future is expected to challenge capacity position.

TVA is focused on building an American energy future — one that provides energy security and national security.

Additional load growth for the foreseeable future is expected to challenge TVA's capacity position.

New capacity will be needed to support this load growth, replace retiring and expiring capacity, and enable further electrification of the economy.

As discussed in Liquidity and Capital Resources , at this time, TVA anticipates the balance of Bonds and other financing obligations will increase in future years due to an expected increase in capital expenditures.

In addition, TVA expects inflationary pressures to persist in 2025.

See Supply Chain and Inflation Pressures below.

To ensure TVA continues to provide affordable, reliable, and clean energy, it will need to be efficient in managing its operating costs and is undertaking a cost optimization project designed to reduce planned cost increases by approximately $950 million from 2024-2026 to address these pressures.

TVA is making investments in its generating portfolio and infrastructure to both help meet the growing demand for electricity and modernize the fleet while also allowing TVA to maintain competitive rates and high reliability and work toward an increasingly clean power system.

As TVA continues to evaluate the impact of retiring its coal-fired fleet by 2035 and works to accelerate the growth of renewables, it also continues to evaluate adding flexible lower carbon-emitting gas plants as a strategy to maintain reliability.

TVA is also evaluating other capacity expansion projects, and in the third quarter of 2024, TVA issued a request for proposal ("RFP") for capacity for terms through December 2029.

TVA is currently evaluating proposals related to the RFP.

In addition, TVA is committed to investing in the future of nuclear with the evaluation of emerging advanced nuclear technologies, such as small modular reactors ("SMRs"), and is increasing its renewable energy portfolio by securing PPAs and developing projects such as TVA's Self-Directed Solar.

It is also investing in research and development for decarbonization technologies including battery storage, carbon capture, carbon sequestration and utilization, new hydroelectric pumped-storage, energy efficiency, demand response, electrification, commercial resiliency, and hydrogen.

TVA is working with stakeholders and the public on the 2025 Integrated Resource Plan ("IRP"), a comprehensive plan that will help shape TVA's energy system through 2050.

TVA is also preparing an EIS to evaluate the impacts associated with the IRP in alignment with the National Environmental Policy Act ("NEPA").

The draft IRP and EIS were published on September 23, 2024.

TVA will be holding in-person meetings across the region and public webinars to gather feedback during the public comment period, which runs through December 11, 2024.

TVA will review and evaluate public input and conduct further analysis to appropriately incorporate feedback provided during the public comment period.

Public comments on the draft IRP and EIS will be addressed in the final EIS.

The final IRP, which is expected to be published in 2025, will include power supply mix ranges, recommendations for strategic portfolio direction through 2035, and information on factors that will influence portfolio direction from 2035 to 2050.

The final IRP is expected to be presented to the TVA Board in 2025 for its consideration of the IRP recommendations.

TVA continues to evaluate and pursue funding opportunities under the Inflation Reduction Act and the BIL to help offset the cost of qualifying projects.

In many cases, TVA is directly or indirectly eligible to seek BIL funded opportunities through agency-sponsored and implemented funding opportunities.

The Inflation Reduction Act makes certain tax-exempt entities, including TVA, eligible for a direct-pay option for certain tax credits for clean energy generation projects.

Projects eligible for funding under the Inflation Reduction Act or the BIL tend to be capital intensive.

In addition, the funding legislation requires TVA to expend large sums of its own funds before becoming eligible to receive funding.

For example, grant programs typically require at least a 50 percent cost share, and the Inflation Reduction Act credits may cover only about 30 percent to 40 percent of qualified basis of projects, generally received as a tax refund the year following when the project is placed in service.

In addition, obtaining this funding often requires TVA to meet certain additional requirements, to submit information returns to the IRS, and to retain adequate books and records to support its filings.

For TVA to receive direct pay under the Inflation Reduction Act for projects beginning construction on or after January 1, 2026, TVA will be required to meet domestic content requirements, unless a cost or availability exception applies.

While meeting these requirements would automatically qualify the project for a 10 percent addition to the base credit, the cost of complying with these requirements may exceed this additional bonus.

TVA has established a Federal Funding Project Management Office (“FFPMO”) that governs and supports TVA’s federal funding strategy to help position TVA and Tennessee Valley partners to leverage funding from the Inflation Reduction Act and the BIL.

The FFPMO is responsible for overseeing opportunities, assessing TVA's BIL and Inflation Reduction Act eligibility,

prioritizing and coordinating proposal development, and seeking to capture funding opportunities for TVA.

The FFPMO also acts as a conduit for LPCs and business partners to potentially access the Inflation Reduction Act and BIL funds.

TVA is currently exploring funding opportunities of various types, including opportunities involving pumped-storage, solar, carbon capture, hydrogen, energy efficiency, and transmission, among others.

This exploration does not guarantee that TVA or its partners will receive funds.

In October 2024, a TVA-led coalition that includes 10 LPCs was selected by the Department of Energy to enter negotiations for the Grid Resilience and Innovation Partnership grant.

This $250 million grant would provide for more than 80 TVA and LPC transmission projects to increase grid capacity, mitigate extreme weather risks, and expedite development of clean energy projects.

TVA is also currently pursuing efforts to claim Inflation Reduction Act credits.

Coal-Fired Fleet.

TVA is evaluating the impact of retiring the balance of the coal-fired fleet by 2035.

TVA will prepare environmental reviews pursuant to NEPA prior to making a decision on retiring or building any plant.

TVA plans to retire the two coal-fired units at Cumberland, which at September 30, 2024, accounted for 2,470 MW of TVA's summer net capability.

TVA plans to replace generation for one unit with a 1,450 MW combined cycle plant that is expected to be operational by the end of CY 2026 when the first unit is scheduled to be retired.

The second unit is scheduled to be retired by the end of CY 2028, and in May 2023, TVA published the notice of intent to conduct an EIS to study potential environmental impacts associated with the proposed construction and operation of facilities to replace part of that generation.

See Natural Gas-Fired Units below.

In 2023, TVA made available to the public a draft EIS to assess the impacts associated with the potential retirement of Kingston and the construction and operation of facilities to replace that generation.

The final EIS was published in February 2024, and TVA documented its final decision with the Record of Decision on April 2, 2024.

TVA plans to retire the nine coal-fired units at Kingston by the end of CY 2027 and replace the retired generation with an energy complex that includes 1,500 MW of natural gas, 100 MW of battery storage, and 3-4 MW of solar.

See Natural Gas-Fired Units below.

TVA expects to issue an RFP in the future for the battery storage and solar related to the energy complex.

TVA continues to evaluate adding flexible gas plants as a strategy to maintain reliability.

TVA is also committed to investing in the future of nuclear with the evaluation of emerging advanced nuclear technologies, such as small modular reactors ("SMRs"), and developing projects such as a solar cap system on closed coal combustion residual ("CCR") facilities.

In addition, TVA issued a request for proposal ("RFP") in April 2025 for up to 2,250 MW of new build energy resources for potential PPAs.

Energy resources that may participate in this RFP are utility-scale natural gas, battery energy storage systems ("BESS"), solar plus BESS, and solar generation that demonstrate the ability to be commercially operable by CY 2031.

TVA is currently evaluating proposals related to the RFP and plans to issue awards in 2027.

Natural Gas-Fired Units.

During 2019, the TVA Board approved an expansion of peaking gas replacement capacity at the Paradise facility.

Pre-commercial plant operations began on Paradise CTs 5-7 in the first quarter of 2024, and the units became operational on December 29, 2023, with a total summer net capability of 681 MW.

As of September 30, 2024 , TVA had spent $394 million on this expansion.

A 500 MW aeroderivative CT project at TVA’s Johnsonville site has been approved for $619 million, contingent on the successful completion of environmental reviews under NEPA and other applicable laws.

TVA completed the NEPA review and received the air permits for the Johnsonville facility, and as of September 30, 2024, TVA had spent $568 million on this project.

TVA expects to spend an additional $51 million on this project and anticipates the project will enter commercial operations in the third quarter of 2025.

See Note 22 — Commitments and Contingencies — Legal Proceedings — Case Involving Johnsonville Aeroderivative Combustion Turbine Project for a discussion of a lawsuit involving this project.

See Note 24 — Subsequent Events for financing related to this project.

As discussed in Coal-Fired Fleet above, TVA is replacing generation for one unit at Cumberland with a 1,450 MW combined cycle plant that is expected to be operational by the end of CY 2026.

As of September 30, 2024, TVA had spent $945 million on this project, and expects to spend an additional $1.2 billion through CY 2026.

TVA continues to evaluate adding flexible gas plants as a strategy to maintain reliability.

TVA approved an aeroderivative CT project at TVA’s Johnsonville site for $652 million.

Pre-commercial plant operations began on Johnsonville Aeroderivative CT Units 25-28 in the first quarter of 2025 and began on Units 21-24 and 29-30 in the second quarter of 2025.

Commercial plant operations began on Units 21-25 and 27-30 on May 6, 2025, and Unit 26 on August 20, 2025.

The units have a total summer net capability of 530 MW.

As of September 30, 2025, TVA had spent $646 million on this project, and TVA expects to spend an additional $6 million on this project.

TVA is replacing generation for one unit at Cumberland with a 1,450 MW combined cycle plant that is expected to be operational by the end of CY 2026.

See Coal-Fired Fleet below.

As of September 30, 2025, TVA had spent $1.8 billion on this project, and expects to spend an additional $312 million through CY 2026.

In addition, as of September 30, 2025, TVA had spent $184 million on long lead time equipment in connection with the potential project to replace generation for the second unit at Cumberland.

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To operate the Cumberland Combined Cycle Plant, TVA has contracted for the transportation of gas from a gas pipeline that will need to be constructed.

Numerous permits from various state and federal agencies are required for construction of the pipeline.

Two cases are currently pending before the United States Court of Appeals for the Sixth Circuit ("Sixth Circuit"), one challenging the Tennessee Department of Environment and Conservation’s order issuing a water quality certification under § 401 of the Clean Water Act (“CWA”) for construction of the pipeline and one challenging the Army Corps of Engineers’ issuance of a permit for construction pursuant to § 404 of the CWA.

On October 11, 2024, the Sixth Circuit issued an order staying the permit in each respective case until the court can review the merits of these cases.

The court is scheduled to review the merits on December 10, 2024.

A case is also pending before the United States Court of Appeals for the District of Columbia Circuit challenging FERC’s issuance of a certificate for the pipeline.

While TVA is not a party in these cases, they could result in delays to commercial operation of the Cumberland facility or may lead to additional costs if the gas pipeline must be constructed in an alternate location than is currently planned.

TVA is currently unable to predict the outcome of these cases.

To construct the pipeline, the pipeline company, Tennessee Gas Pipeline Company, L.L.C.

(“Tennessee Gas”), obtained permits from various state and federal agencies and a certificate of public convenience and necessity from the Federal Energy Regulatory Commission (“FERC”).

Challenges to two permits were brought in the United States Court of Appeals for the Sixth Circuit ("Sixth Circuit"), and on October 11, 2024, the Sixth Circuit issued orders staying the permits until the court could review the merits of these cases.

On April 4, 2025, the Sixth Circuit denied the petitions for review in both cases, and on April 15, 2025, the Sixth Circuit lifted the temporary stay.

A challenge to the FERC certificate is pending before the United States Court of Appeals for the District of Columbia Circuit (“D.C.

Circuit heard oral arguments on the merits on March 4, 2025, and on September 30, 2025, the D.C.

Circuit issued an opinion upholding FERC's decision to issue the certificate of public convenience for the pipeline.

See Note 23 — Commitments and Contingencies — Legal Proceedings — Case Involving Cumberland Combined Cycle Plant for a discussion of another lawsuit involving this project.

As discussed in Coal-Fired Fleet above, TVA is constructing a 1,500 MW combined cycle plant that is expected to be operational by the end of CY 2027.

As of September 30, 2024, TVA had spent $662 million on this project and expects to spend

an additional $2.1 billion through CY 2027.

To operate the Kingston combined cycle plant, TVA will contract for the transportation of gas from a gas pipeline that will need to be constructed.

TVA is continuing to explore a 500 MW New Caledonia simple cycle CT project on TVA land contingent on the successful completion of environmental reviews under NEPA and other applicable laws .

The draft EIS for New Caledonia was made available for public comment in July 2024, and the final EIS is expected to be published in 2025.

To replace the nine coal-fired units at Kingston, TVA is constructing a 1,500 MW combined cycle plant that is expected to be operational by the end of CY 2027.

See Coal-Fired Fleet below.

As of September 30, 2025, TVA had spent $1.8 billion on this project and expects to spend an additional $1.1 billion through CY 2027.

In addition, in March 2025, TVA issued an RFP for battery storage related to the Kingston energy complex and is currently evaluating proposals related to the RFP.

To operate the Kingston Combined Cycle Plant, TVA has contracted for the transportation of gas from a gas pipeline that will need to be constructed.

To construct the pipeline, the pipeline company, East Tennessee Natural Gas, LLC ("East Tennessee"), has obtained permits from various state and federal agencies and a certificate of public convenience and necessity from FERC.

See Note 23 — Commitments and Contingencies — Legal Proceedings — Challenge to Kingston Construction Permit for information about a challenge to the Kingston construction permit.

TVA is constructing a 500 MW New Caledonia simple cycle CT project on TVA land following the completion of environmental reviews under the National Environmental Policy Act ("NEPA") and other applicable laws .

The draft Environmental Impact Statement ("EIS") for New Caledonia was made available for public comment in July 2024, the final EIS was published in January 2025, and TVA documented its final decision with the Record of Decision on February 13, 2025.

As of September 30, 2025 , TVA had spent $300 million on the New Caledonia project and could spend up to an additional $565 million.

TVA is also exploring a 200 MW aeroderivative CT project at TVA's Allen site.

TVA is also constructing a 200 MW aeroderivative CT project at TVA's Allen site following the completion of environmental reviews under NEPA and other applicable laws .

The draft EIS for Allen was made available for public comment in March 2025, the final EIS was published in July 2025, and TVA documented its final decision with the Record of Decision on September 25, 2025.

As of September 30, 2025, TVA had spent $231 million on the project at Allen and could spend up to an additional $132 million.

Finally, TVA is exploring a potential project at Lagoon Creek.

Decarbonization.

TVA's decarbonization initiative is aimed at understanding and applying clean resources to support the reduction of carbon emissions from its power supply.

Related to its carbon reduction efforts, TVA has established six guiding principles which are as follows:

• Prioritize the needs of Tennessee Valley stakeholders as TVA works to achieve its goals by maintaining low rates and high reliability, and attracting new jobs in the Tennessee Valley.

• Use best-available science and support research and policies that further carbon-free dispatchable technologies.

• Partner with LPCs and other customers and communities to support economy-wide decarbonization efforts and the strategic electrification of other sectors, such as transportation.

• Maintain nuclear generation, hydro generation, and a strong transmission grid as key enabling assets.

• Be transparent with stakeholders in measuring and sharing TVA's progress, and listen and work effectively with all its stakeholders to understand their priorities and needs.

• Adapt to new technologies and changing policies, and be willing and open to changing TVA's plans and projects to achieve deep carbon reduction.

TVA has partnered with the University of Tennessee Baker School for Public Policy and Public Affairs and with diverse stakeholders from across the Tennessee Valley to conduct a Valley Pathways Study, which is focused on building a competitive and clean economy for the Tennessee Valley.

This study examines potential scenarios for all economic sectors across the Tennessee Valley that will support sustainable growth and a viable and preferred decarbonization pathway.

The preliminary findings from the Valley Pathways Study were released in February 2024.

As part of the decarbonization efforts, in 2022, the TVA Board approved a programmatic approach to exploring advanced nuclear technology, which is one of several technologies TVA is exploring.

Other decarbonization technologies TVA is exploring in addition to advanced nuclear include battery storage, carbon capture, carbon sequestration and utilization, new hydroelectric pumped-storage, energy efficiency, demand response, electrification, commercial resiliency, and hydrogen.

TVA also is increasing its renewable energy portfolio to work towards carbon emission reductions and meet customer preferences by investing in existing assets, encouraging renewable power through various current programs and offerings, and securing renewable PPAs through RFPs, among others.

See below, Part I, Item 1, Business — Power Supply and Load Management Resources — Renewable Energy Resources and Community Energy Portfolio , and Part I, Item 1, Business — Research and Development for further discussion of TVA's decarbonization efforts.

See also Part I, Item 1, Business — Environmental Matters — Climate Change for a discussion of the impact of executive actions and climate-related regulations on TVA.

Renewable Power Purchase Agreements .

In recent years, TVA has issued RFPs in order to meet customer preferences and requirements for cleaner energy.

TVA will procure the renewable energy and sell the resulting

RECs to specific customers, allowing TVA to increase renewable energy in the Tennessee Valley without additional costs to other TVA customers.

These agreements help to align the core values of TVA and the public power model with the desire of TVA's customers for renewable energy.

TVA issued a carbon-free RFP in 2022, and during 2024, TVA signed six power purchase agreements totaling 991 MW of solar generation and 220 MW of battery storage capacity from the carbon-free RFP that are expected to come online by the end of CY 2028.

TVA’s existing solar PPA portfolio is not immune from the challenges affecting the U.S.

solar industry.

Similar to the experience of the rest of the industry, the majority of TVA’s contracted PPAs from previous RFPs that are not yet online have been impacted by project delays and price increases.

Self-Directed Solar.

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

In 2021, TVA purchased land for this development, and in 2022, environmental reviews were completed.

The challenges affecting TVA’s RFPs are also being seen in TVA's Self-Directed Solar project.

The project has experienced delays and cost increases due to escalations from supply chain limitations.

As of September 30, 2024, TVA had spent $53 million on the 200 MW project.

TVA has elected to pursue a competitive selection process with third parties for the

development of the photovoltaic solar facility to be located on the site.

TVA plans to enter into a long-term PPA to purchase the energy generated by the facility.

An RFP has been issued to this effect, and selection of the awardee is anticipated in early CY 2025.

In November 2022, the TVA Board approved the opportunity for TVA to explore the development of an additional utility-scale solar project, contingent on successfully completing environmental reviews under the NEPA and other applicable laws and obtaining the necessary state permits.

The project would utilize TVA land, deploying a solar cap system on the closed CCR facility at the TVA Shawnee Fossil Plant in Paducah, Kentucky.

As of September 30, 2024, TVA had spent $56 million on the 99 MW project and expects to spend an additional $206 million.

TVA is exploring a 350 MW project at TVA's Lagoon Creek site for four additional CTs.

TVA completed an EIS for 16 units at the site prior to construction of the currently operational 12 units, and TVA is evaluating the existing EIS for NEPA adequacy.

As of September 30, 2025, TVA had spent $1 million on the project at Lagoon Creek and could spend up to an additional $669 million.

Amid growth in energy-intensive sectors including artificial intelligence and data centers, TVA is exploring a diverse range of advanced nuclear technologies to help shape the most effective, scalable, secure solutions for the region's growing economy.

TVA continues to evaluate these nuclear technologies for potential deployment across TVA's seven-state region as directed by the TVA Board through the establishment of the New Nuclear Program.

TVA is strategically partnering with innovative companies to advance the development of new nuclear technologies and to develop a technology, a supply chain, a delivery model, and an industry that can unleash American energy and attract and support companies.

Small Modular Reactors .

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The Record of Decision was signed in 2022.

The TVA Board has approved up to $350 million to explore advanced reactor technology options under the New Nuclear Program.

In the second quarter of 2025, TVA requested public comment on a draft Supplemental EIS that addresses the potential environmental effects associated with site preparation, construction, operation, and decommissioning of one SMR at the Clinch River site.

In May 2025, TVA submitted a construction permit application to the NRC for an SMR at the Clinch River Site, and the NRC accepted the application for review in July 2025.

In addition, while evaluating alternatives for potential advanced nuclear at the Clinch River Nuclear Site, TVA is exploring the feasibility of applying a similar approach that could deploy additional SMRs at Clinch River and other TVA-owned properties.

The TVA Board has approved up to $350 million to explore advanced reactor technology options under the New Nuclear

Of this amount, TVA had spent $251 million as of September 30, 2025.

The New Nuclear Program provides a systematic roadmap for TVA’s exploration of advanced nuclear technology.

Collaboration with other interested parties will be an important aspect of this program, and TVA has entered into several agreements with technology progressive organizations that allow for mutual collaboration to explore advanced reactor designs as a next-generation nuclear technology.

In December 2022, TVA entered into a multi-party collaborative arrangement to advance the global deployment of the GE Hitachi Nuclear Energy ("GEH") BWRX-300 SMR.

GEH is responsible for standard design development.

In addition, TVA and a consortium of co-applicants applied for a U.S.

Department of Energy ("DOE") grant to support the future development of a small modular reactor at TVA's Clinch River site in January 2025 and submitted a revised application in April 2025.

See Funding Opportunities below.

The New Nuclear Program provides a systematic roadmap for TVA’s exploration of advanced nuclear technology, and collaboration with other interested parties will be an important aspect of this program.

In December 2022, TVA entered into a multi-party collaborative arrangement to advance the global deployment of the GE Vernova Hitachi Nuclear Energy ("GVH")

BWRX-300 SMR.

GVH is responsible for standard design development.

See Note 22 — Collaborative Arrangement for additional information.

One of the first tasks the New Nuclear Program is pursuing is a project to develop an NRC construction permit application at the Clinch River Nuclear Site.

See also Other Nuclear below.

The decision to potentially build SMRs continues to be part of the ongoing discussion as part of the asset strategy for TVA’s future generation portfolio, and any future decision to construct any reactor, advanced or otherwise, would require approval by the TVA Board and the NRC.

As of September 30, 2025, TVA had spent $342 million to date on work regarding SMRs, including work to complete the early site permit application for the Clinch River Nuclear Site and work associated with the New Nuclear Program above.

Of these amounts, the U.S.

Department of Energy ("DOE") had reimbursed TVA $29 million.

Of these amounts, the DOE had reimbursed TVA $29 million.

Additional expenditures will be determined based on future project development.

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Subject to the completion of all appropriate environmental reviews, TVA is seeking to renew all nuclear generation units' licenses for an additional 20 years.

The first license renewal application was submitted to the NRC in January 2024 for the three units at Browns Ferry following the completion of a Supplemental EIS prepared by TVA to assess the environmental impacts associated with renewing the Browns Ferry Nuclear Plant licenses.

As of September 30, 2024, TVA had spent $32 million to support the subsequent license renewal ("SLR") of the three units at Browns Ferry and expects to spend up to an additional $10 million to complete the Browns Ferry SLR.

The first license renewal application was submitted to the NRC in January 2024 for the three units at Browns Ferry Nuclear Plant.

As of September 30, 2025, TVA had spent $37 million to support the subsequent license renewal ("SLR") of the three units at Browns Ferry and could spend up to an additional $5 million to complete the Browns Ferry SLR.

Other Nuclear .

In 2025, TVA signed a PPA to purchase up to 50 MW of electricity from the Kairos Power Hermes 2 Plant in Oak Ridge, Tennessee.

The capacity is anticipated to come online as early as 2030.

In addition, in 2025, TVA and ENTRA1 Energy signed an agreement to explore the development of plants that could provide TVA with up to 6 gigawatts of new nuclear power generation in TVA's seven-state region through the deployment of six ENTRA1 Energy Plants utilizing NuScale's SMR technology.

TVA is also supporting the development of Type One Energy's stellarator fusion reactor at TVA's former Bull Run Fossil Plant ("Bull Run").

In 2025, Type One Energy entered into a service contract with TVA under which TVA's Power Service Shops will develop custom welding and fabrication techniques and create parts for Type One's project.

Type One Energy's fusion project aims to supply the Tennessee Valley with secure, reliable, and clean energy.

TVA has also signed an agreement with Oklo Inc.

to explore the feasibility of recycling TVA’s used fuel at the company’s planned facility in Oak Ridge, Tennessee and pathways for TVA to purchase energy from Oklo Inc.’s proposed SMRs.

Coal-Fired Fleet.

TVA is evaluating the impact of retiring the balance of the coal-fired fleet by 2035, and that evaluation

includes environmental reviews and TVA Board of Directors ("TVA Board") approval.

TVA is also reviewing how recent executive orders ("EOs"), the evolving regulatory environment, and overall system performance are impacting the operation of its coal-fired fleet.

An evaluation of the continued operation of coal-fired units is being conducted and will consider material condition, plant performance, system flexibility needs, environmental requirements, grid support, and other factors.

TVA plans to retire the two coal-fired units at Cumberland, which, at September 30, 2025, accounted for 2,470 MW of TVA's summer net capability.

TVA plans to replace generation for one unit with a 1,450 MW combined cycle plant that is expected to be operational by the end of CY 2026 when the first unit is scheduled to be retired.

The second unit is scheduled to be retired by the end of CY 2028, and TVA is exploring potential sites for the proposed construction and operation of facilities to replace part of that generation.

TVA plans to retire the nine coal-fired units at Kingston by the end of CY 2027 and replace the retired generation with an energy complex that includes at least 1,500 MW of natural gas, 100 MW of battery storage, and 3-4 MW of solar.

See Natural Gas-Fired Units above.

Hydroelectric Pumped-Storage.

New hydroelectric pumped-storage is one of several technologies that TVA is exploring to help meet peak demands and allow more baseload generation while ensuring the reliability and resiliency of the grid.

In 2023, TVA announced sites for a potential future pumped-storage facility and, in May 2025, a draft EIS was made available for public comment.

The preferred alternative would have at least four pump-turbines with a total generation capacity between 1,200 MWs and 1,600 MWs.

TVA will determine whether to move forward on the preferred alternative based on a wide range of environmental, social, and technical factors, and need.

Exploratory drilling is ongoing.

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 ("Shawnee") in Paducah, Kentucky.

As of September 30, 2025, TVA had spent $161 million on the project and expects to spend an additional $101 million through 2029.

The project's capacity is 99 MW;

however, there is an estimated maximum of 96 MW that will be available for distribution due to interconnection limits.

Cost Reduction Initiatives

TVA must continue to drive efficiencies and cost savings across the enterprise to provide low-cost, reliable power, while funding the capital investment needed to meet growing demand.

TVA has undertaken a cost optimization initiative designed to reduce planned cost increases by approximately $950 million during the three-year period from 2024 to 2026.

TVA met its reduction targets for 2024 and 2025 and has plans to meet the targets set for 2026.

This effort has evolved into an Enterprise Transformation Program ("ETP") designed to enable TVA to deliver at least

$500 million of sustainable reductions to planned cost increases in 2026 and beyond to support future fleet investments needed to meet growing demand.

TVA's ETP is focused on improving financial health, enhancing asset performance, automating

processes, optimizing third-party spend through supply chain, and making the workforce more efficient.

As part of these efforts, certain employees are eligible for severance payments.

See Note 3 — Restructuring .

The organizational design efforts associated with the ETP were complete as of September 30, 2025;

however, the ETP is ongoing as TVA executes the focus areas described above.

Funding Opportunities

TVA continues to evaluate and pursue funding opportunities under the IRA and the BIL to help offset the cost of qualifying projects.

In many cases, TVA is directly or indirectly eligible to seek BIL funded opportunities through agency-sponsored and implemented funding opportunities.

This exploration does not guarantee that TVA or its partners will receive funds.

The IRA makes certain tax-exempt entities, including TVA, eligible for a direct-pay option for certain tax credits for zero-emission energy projects or generation.

Obtaining these credits requires TVA to meet certain requirements, to submit tax returns to the Internal Revenue Service ("IRS"), and to retain adequate books and records to support its filings.

For TVA to receive direct pay under the IRA for projects beginning construction on or after January 1, 2026, TVA will be required to meet domestic content requirements, unless a cost or availability exception can be established.

At September 30, 2025, TVA recorded $72 million in Accounts receivable, net related to these tax credits.

On January 20, 2025, the President issued EO 14154, “Unleashing American Energy,” which in part instructed agencies to pause the disbursement of funds appropriated under the IRA and BIL.

On January 21, 2025, the Office of Management and Budget issued Memorandum M-25-11, which clarified that EO 14154 requires agencies to pause disbursement of funds appropriated under the IRA or the BIL only for programs that are inconsistent with the policy of section 2 of EO 14154, related to the Green New Deal, including consumer mandates on electric vehicles and appliances.

While the IRA and BIL funding freeze under EO 14154 likely does not apply to funding that TVA is seeking, other governmental actions and funding restrictions may delay any award of grants for which TVA has applied under these acts.

Furthermore, the President and Administration have taken a number of other actions that may impact TVA, and multiple court decisions may affect the implementation of these actions.

TVA is currently reviewing these actions and related court decisions to evaluate the impact to TVA and is updating its policies and programs as appropriate.

On July 4, 2025, the President signed into law the budget reconciliation bill referred to as the One Big Beautiful Bill Act ("Act").

Among other things, the Act introduces significant changes to a range of federal tax credit programs under the IRA, many of which are directly relevant to TVA’s ongoing and planned energy initiatives.

These changes include terminations, modifications, and new restrictions on various clean energy and efficiency credits and could directly affect the financial viability of clean-energy alternatives and the cost or availability of power acquired through solar PPAs.

TVA continues to evaluate its energy portfolio to actively develop long-term plans to take into consideration these changes, which may impact future decisions related to the mix of energy sources TVA utilizes.

TVA is currently evaluating the impact of these legislative changes.

In October 2024, a TVA-led coalition that includes 10 LPCs was selected by the DOE to enter negotiations for the Grid Resilience and Innovation Partnerships grant.

This $250 million grant, of which TVA would receive approximately 70% for TVA projects, would provide funds for more than 80 TVA and LPC transmission and distribution projects that are designed to increase grid capacity and mitigate extreme weather risks.

The upcoming phase will focus on concluding negotiations around terms and conditions and aligning on implementation and compliance processes for the award.

In January 2025, TVA and a consortium of co-applicants applied for a U.S.

DOE grant to support the potential development and future deployment of an SMR at TVA’s Clinch River site.

The potential development and any future deployment of an SMR at the Clinch River site are subject to TVA Board approval.

TVA is following a structured planning process that advances the Clinch River project in phases at which the TVA Board will evaluate and consider approving any next steps.

This funding could support not only the deployment of this first of-a-kind technology, but also help establish the supply chain for advanced nuclear and support future deployment of the reactor across the United States.

In April 2025, TVA and the consortium of co-applicants submitted a revised application to address new DOE guidance regarding the grant.

Integrated Resource Plan

The Integrated Resource Plan ("IRP") is a risk-informed, comprehensive study of TVA's energy resources and how TVA plans to meet future electricity demand across the service territory.

The IRP considers a range of potential future scenarios as well as resource deployment strategies that TVA could employ within those futures.

The IRP meets TVA’s requirements for a least cost planning program under Section 113 of the Energy Policy Act of 1992.

In May 2023, TVA issued a Notice of Intent to initiate development of a new IRP and associated Programmatic EIS.

TVA published a draft IRP and EIS in September 2024 and received public comments on these draft documents.

The final IRP was expected to be published in 2025;

however, publication of the final IRP has been delayed.

Fiber Optic Network

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

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

The new fiber optic lines will improve the

reliability and resiliency of the generation and transmission system while enabling the system to better accommodate distributed energy resources ("DER") as they enter the market.

As of September 30, 2025 , TVA had spent $278 million on installation of the fiber optic lines and expects to spend an additional $22 million through 2027.

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The new secured facility is being built to accommodate a new energy management system and adapt to new regulatory requirements, and will improve reliability, have improved physical security from the previous center, and be flexible to help accommodate operational growth requirements, including future renewables.

Construction of the facility is expected to be complete in CY 2024, and the facility is expected to be fully operational in CY 2026.

Construction of the facility was completed in FY 2025, and the facility is expected to be fully operational in CY 2026.

As of September 30, 2025, TVA had spent $326 million on the project and expects to spend an additional $4 million.

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

The new digital system will have higher capacity and speed for communications with the TVA grid and for inputs from monitoring equipment, will network the new control center with existing locations, and will enable better remote visibility and control to help mitigate reliability implications of climate change.

The system is expected to be complete in CY 2027.

As of September 30, 2025, TVA had spent $95 million on the project and expects to spend an additional $13 million.

Automated Energy Exchange Platform.

In October 2021, an automated energy exchange, the Southeast Energy Exchange Market ("SEEM"), took effect.

The exchange was created to facilitate more short-term power exchanges and will be an enhancement to the existing market.

TVA completed the appropriate environmental reviews, and during the third quarter of 2022, the TVA Board approved the creation of a zero-cost, non-firm transmission service to allow TVA to participate in SEEM.

In November 2022, the SEEM market began transacting.

In July 2023, the United States Court of Appeals for the District of Columbia Circuit ("D.C.

Circuit") remanded the Federal Energy Regulatory Commission's ("FERC") approval of SEEM, sending the matter back to FERC for additional proceedings.

On December 17, 2023, the petitioners filed another appeal on the theory that FERC's failure to act promptly after the D.C.

Circuit's remand created a new appealable event.

On June 14, 2024, in response to the D.C.

Circuit's remand directives, FERC issued an order directing the parties to submit briefs to supplement the record on the issues of whether SEEM is a loose power pool and whether SEEM's geographic requirement violates the open access principles of FERC Order No.

The SEEM market is continuing to transact pending the disposition of the legal challenges.

Electric Vehicles

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

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

In 2021, the TVA Board approved new policies and an optional wholesale EV rate aimed at encouraging the development of charging infrastructure in the Tennessee Valley.

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

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

TVA is also working with LPCs, state agencies, and third-party charging developers to create the Fast Charge Network.

This will be a foundational network of public fast charging stations at least every 50 miles along interstates and major highways across its seven -state service area.

In 2021, TVA began a partnership with the State of Tennessee for the development and funding of Fast Charge Tennessee, the portion of the Fast Charge Network that covers Tennessee, and in 2022 TVA launched the Fast Charge Network.

As of September 30, 2024, 39 sites were complete and operational with 39 additional sites under contract for development.

TVA had spent $7 million on fast charging network charging stations as of September 30, 2024.

TVA also plans to electrify 100 percent of its light-duty and 50 percent of its medium-duty vehicles in the TVA fleet.

The adoption of EVs in the Tennessee Valley continues to grow, and TVA is working to ensure that the benefits of this rapid growth are secured, while also helping LPCs proactively avoid issues in their distribution systems.

Also in 2021, TVA and five other major utilities formed the Electric Highway Coalition to develop a network of fast charging stations along all major highway routes within their service area.

Since formation, the Electric Highway Coalition has gained significant interest from additional utilities and other EV collaboratives.

In 2022, the Electric Highway Coalition merged with the Midwest Electric Vehicle Charging Infrastructure Collaboration to create the National Electric Highway Coalition with members committed to coordinate the development of EV charging infrastructure across the central U.S.

Sustainability and Social Responsibility

Sustainability has been and continues to be a focus in support of TVA's mission to deliver affordable and reliable energy, steward the environment, and create sustainable economic growth.

TVA has a Chief Sustainability Officer (“CSO”) who oversees an enterprise-wide Sustainability Steering Council and a Sustainability Working Group, which together provide guidance and support for the development of TVA's Sustainability Program.

The CSO is also a member of TVA’s Risk Management Steering Committee.

TVA’s sustainability work is categorized into five areas:

• Economic Impact — Affordable, reliable power supports residents and attracts businesses

• Environment — Protecting the region's air, land, water, and historic resources

• Social — Investing in communities and employees to uplift all

• Governance — Governance enables TVA to build a clean energy future

• Foundational — Values most fundamental to carrying out TVA's mission

Economic Impact Environment Social Governance Foundational

Clean energy Air, water, and waste management Community vitality and engagement Corporate impact Energy affordability and reliability

Flood and drought management

Biodiversity and stewardship Customer engagement and partnerships Cyber and physical security Ethics and compliance

Innovation Climate adaptation and resilience Diversity, equity, and inclusion Financial health Health and safety

Supply chain Cultural resource management

Environmental justice

Valley economy Workforce preparedness

TVA issued its 2023 Sustainability Report on May 6, 2024.

This comprehensive Sustainability Report aligns with global reporting standards and will serve as a baseline for annual corporate sustainability reporting.

TVA also publishes two other sustainability-related documents:

a Federal Sustainability Report and Implementation Plan, which addresses TVA's responsibilities related to federal sustainability performance, and an Environmental, Social, and Governance Sustainability Report, which uses a utility-focused and investor-driven reporting template developed by the Edison Electric Institute.

TVA also issues other reports related to sustainability and social responsibility, including a Diversity, Equity, Inclusion and Accessibility Report, which highlights the actions TVA has taken in the Diversity, Equity, Inclusion, and Accessibility area, the results achieved, and the plans to continue to focus and improve, among other reports.

Extreme Flooding Preparedness

Updates to the TVA analytical hydrology model completed in 2009 indicated that under "probable maximum flood" conditions, some of TVA's dams might not have been capable of regulating the higher flood waters.

A "probable maximum flood" is an extremely unlikely event;

however, TVA has a responsibility to provide protection for its nuclear plants against such events.

As a result, TVA installed a series of modifications at four dams.

Since 2009, TVA has performed further hydrology modeling of portions of the TVA watershed using updated modeling tools.

Hydrology models were submitted for Sequoyah Nuclear Plant ("Sequoyah") Units 1 and 2 in 2012.

However, concerns regarding TVA dam stability and revised hydrology analyses led to the submittal of a new hydrologic analysis for Sequoyah Units 1 and 2 in 2020.

To resolve additional dam stability issues identified later in 2020, TVA submitted a revision to the Sequoyah model in April 2023.

The new hydrologic analysis for Sequoyah Units 1 and 2 was approved by the NRC in March 2024.

TVA submitted models for Watts Bar Nuclear Plant ("Watts Bar") Units 1 and 2 in December 2023 to incorporate a methodology approved by the NRC subsequent to its review of a previous hydrology submittal for Watts Bar.

TVA will subsequently address conditions at Browns Ferry as needed.

As of September 30, 2024, TVA had spent $158 million on the modifications and improvements related to extreme flooding preparedness.

TVA has concluded that the revised hydraulic modeling and associated submittal of license amendment requests to update the Sequoyah and Watts Bar licensing bases have demonstrated appropriate design margins such that additional flood mitigating systems are no longer needed at these two sites.

Therefore, TVA submitted a letter to the NRC in September 2024 to decommit from the commitment to implement an improved flood model mitigation system at these two sites.

Sequoyah Nuclear Plant Unit 2

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As a result, the project to restack and rewind the main generator was pulled forward in the Nuclear Life Extension ("NLE") plan.

The unit will remain offline until project completion, which is expected in spring 2025.

As of September 30, 2024, TVA had spent $25 million related to this project and expects to spend an additional $57 million.

Hurricane Helene

In late September 2024, Hurricane Helene caused significant damage in communities in East Tennessee and Western North Carolina.

Flood of record was approached or exceeded in many areas.

TVA completed inspections at numerous dams, finding no substantial impacts.

Shoreline erosion at Nolichucky Dam did not impact the dam's integrity and has subsequently been repaired.

In addition, TVA stored a substantial amount of water in tributary reservoirs that has since been released downstream in a controlled manner to recover flood storage capacity.

TVA is working on debris management at Douglas Reservoir to help mitigate potential downstream movement.

TVA's efforts may also include aiding other agencies in their recovery efforts, including supporting major disaster declarations with the Federal Emergency Management Agency.

TVA is evaluating the financial impact of the storm.

In June 2025, the unit returned to service, and as of September 30, 2025, TVA had spent $133 million related to this project and could spend up to an additional $8 million.

In October 2025, TVA received $48 million of property loss insurance proceeds related to this project.

Coal Combustion Residuals

Coal Combustion Residuals Facilities .

TVA is pursuing a programmatic approach to address environmental impacts related to the previous storage and disposal of its CCR in accordance with applicable law (“CCR Program”).

TVA is pursuing a programmatic approach to address environmental impacts related to the previous storage, use and disposal of its CCR in accordance with applicable law (“CCR Program”).

Under the CCR Program, TVA performed stability remediation of all at-risk facilities, completed the conversion of all operational coal-fired plants to dry CCR storage, and ceased operation of wet CCR storage facilities.

Dry generation and dewatering projects .

TVA has accomplished the conversion from wet to dry handling of CCR materials at all operating coal plants with the completion of dry generation and/or dewatering projects at Bull Run, Cumberland, Gallatin Fossil Plant ("Gallatin"), Kingston, and Shawnee Fossil Plant ("Shawnee").

TVA has made strategic decisions to build and maintain lined and permitted dry storage facilities on TVA-owned property at some TVA locations, enabling these facilities to generate CCR beyond existing dry storage capacity.

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TVA is working to close CCR facilities in accordance with federal and state requirements.

Closure project schedules and costs are driven by the selected closure methodology (such as closure-in-place or closure-by-removal) and regulatory requirements.

TVA's predominant closure methodology is currently closure-in-place, with exceptions at certain facilities, although EPA has recently interpreted its CCR Rule in a way that could challenge TVA's predominant closure methodology for many units, thereby potentially creating significant additional costs with implementing closure.

Closure project schedules and costs are driven by the selected closure methodology (such as closure-in-place or closure-by-removal) and associated regulatory requirements.

Through implementation of applicable state and federal requirements, TVA anticipates that the predominant closure methodology for its CCR units is closure in place.

TVA issued a PEIS in June 2016 that programmatically evaluated the closure of CCR impoundments at TVA's coal-fired plants.

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TVA subsequently decided to close those impoundments.

The method of final closure for each of these facilities will depend on various factors, including approval by appropriate state regulators and applicable closure requirements of state and federal regulations.

The method of final closure for each of these facilities will depend on various factors, including approval by appropriate regulators and applicable closure requirements of state and federal regulations.

Additional site-specific NEPA studies will be conducted, as warranted, as other facilities are considered for closure.

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Groundwater monitoring .

Compliance with the Environmental Protection Agency's ("EPA's") CCR rule ("CCR Rule") requires implementation of a groundwater monitoring program and ongoing analysis.

Compliance with EPA's CCR rule ("CCR Rule") requires implementation of a groundwater monitoring program and ongoing analysis.

In compliance with the CCR Rule, TVA published the results of the 2024 groundwater testing at its CCR facilities during the second quarter of 2025.

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TVA has completed an assessment of corrective measures ("ACM"), which analyzes the effectiveness of potential corrective actions, and has published ACM reports to its CCR Rule Compliance Data and Information website.

Based on the results of the ACM, TVA is required to select a remedy as soon as feasible.

Based on the results of the ACM, TVA is required to

select a remedy as soon as feasible.

TVA has selected remedies for two of its plants:

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TVA was involved in two lawsuits concerning the CCR facilities at Gallatin.

One of these cases was decided in TVA's favor by the Sixth Circuit, and the other case was resolved by the entry of a consent order and agreement in Davidson County Chancery Court that became effective July 24, 2019.

Under the consent order, TVA agreed to close the existing ash facility by removal, either to an on-site landfill or to an offsite facility.

TVA may also consider options for beneficial reuse of the CCR.

TVA submitted the removal plan for approval to the Tennessee Department of Environment and Conservation ("TDEC") and other applicable parties pursuant to the consent order, which was approved on November 7, 2023.

In addition, TVA submitted an Environmental Assessment Report ("EAR") to TDEC, and TDEC approved the EAR on June 6, 2023.

One case was resolved by the entry of a consent order, under which TVA agreed to close the existing ash facility by removal, either to an on-site landfill or to an offsite facility.

The removal plan and the Environmental Assessment Report ("EAR") were approved by Tennessee Department of Environment and Conservation ("TDEC") in 2023.

TVA submitted the Gallatin Ash Pond Complex Corrective Action/Risk Assessment ("CARA") Plan to TDEC in January 2024.

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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.

On May 8, 2024, EPA published its Legacy CCR Rule, which expands the scope of the existing regulatory requirements of the 2015 CCR Rule to include two additional classes of units:

Legacy SIs and CCRMUs.

On May 8, 2024, EPA published its legacy coal combustion residual rule ("Legacy CCR Rule"), which expanded the scope of the regulatory requirements of the 2015 CCR Rule to include two additional classes of units:

legacy CCR surface impoundments ("Legacy SIs") and CCR Management Units ("CCRMUs").

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.

In 2025, TVA recorded a net decrease of $500 million related to the final Legacy CCR Rule for updated cost estimates.

See Part I, Item 1, Business — Environmental Matters — Cleanup of Solid and Hazardous Wastes — Coal Combustion Residuals, Part I, Item 1A , Risk Factors — Regulatory, Legislative, and Legal Risks , and Note 14 — Asset Retirement Obligations.

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TVA engages in ongoing Tennessee Valley-wide real property portfolio evaluations of buildings, structures, and land as part of the strategic real estate program, which focuses on reducing cost, right-sizing the portfolio, and aligning real estate holdings with TVA's strategic direction.

In addition, TVA continues to operate in a hybrid work environment for those who do not have to be physically present at a TVA facility.

TVA is evaluating its use of the Chattanooga Office Complex and issued an RFP in August 2023 to determine availability for a new Chattanooga, Tennessee facility based on TVA's workplace needs.

No final decisions have been made, and TVA is considering multiple options.

TVA is evaluating its use of the Chattanooga Office Complex.

In February 2025, the TVA Board voted to surplus the Missionary Ridge and Blue Ridge buildings at the Chattanooga Office Complex, subject to Chief Executive Officer ("CEO") determination of disposal.

Subject to such further CEO determination, these buildings will remain in operation until the system operations center becomes fully operational, which is expected in CY 2026.

Supply Chain and Inflation Pressures

TVA continues to experience impacts due to inflation, supply chain material challenges, and labor availability.

This has led to project delays, limited availability, and/or price increases for supplies and labor.

TVA actively manages supply chain volatility with contracting, inventory strategies, and supplier engagement and support.

TVA expects inflationary pressures to persist in 2025.

TVA has been able to manage these challenges with limited business disruptions at this time;

however, should pressures continue long term, TVA could experience more significant disruptions and pressure to further increase power rates.

TVA continues to experience supply chain pressures resulting from inflation, tariffs and other trade restrictions, material constraints, and labor availability.

These factors have contributed to project delays, limited availability of critical materials, and increased costs for both materials and labor.

To help mitigate these risks, TVA actively manages its supply chain through strategic contracting, demand management strategies, and proactive supplier engagement and support.

While most tariff-related impacts have been minor to date, prolonged or project-specific tariffs could have more significant long-term effects.

TVA anticipates that inflationary and tariff pressures will persist into 2026.

Although these challenges have been managed with limited disruption to business operations thus far, continued or escalating pressures could result in more substantial operational impacts and increased pressure on power rates.

Safeguarding Assets

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Any of these activities could negatively impact the ability of TVA to generate, transmit, and deliver power to its customers.

TVA's Police and Emergency Management personnel are active participants with numerous professional and peer physical security organizations in both the electric industry and law

enforcement communities.

TVA's Police and Emergency Management personnel are active participants with numerous professional and peer physical security organizations in both the electric industry and law enforcement communities.

TVA works with the North American Electric Reliability Corporation ("NERC"), the SERC Reliability Corporation, the North American Transmission Forum, and other utilities to implement industry approved recommendations and standards.

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Department of Homeland Security and the public and private sectors to coordinate responses to security threats.

The risk of cybersecurity events such as malicious code attacks, unauthorized access attempts, and social engineering

attempts is intensifying across all industries, including the energy sector.

The risk of cybersecurity events such as malicious code attacks, unauthorized access attempts, and social engineering attempts is intensifying across all industries, including the energy sector.

TVA continues to see increases in malicious activity including phishing campaigns, malicious websites, distributed denial of service attacks, and activity related to business partner compromise, among others.

These types of malicious activity have also been observed by TVA's external vendors, stakeholders, and partners, which has caused the need for heightened awareness and preparedness.

On May 12, 2021, President Biden signed EO 14028, "Improving the Nation's Cybersecurity." This EO is intended to improve the nation's cybersecurity posture and protect federal government networks by improving information-sharing between the U.S.

government and the private sector on cyber issues and strengthening the United States' ability to respond to incidents when they occur.

This EO is focused on specific goals and requirements including actions for zero trust architectures;

cloud services;

FedRAMP programs;

supply chain and contracts;

secure software development;

endpoint detection and response, standardized vulnerability, and incident response operational plans;

threat and vulnerability analysis;

assessment and threat-hunting;

event logging, monitoring, and retention;

and information sharing.

TVA continues to respond to the EO, associated Office of Management and Budget memorandums, and other emerging requirements in alignment with the order.

TVA has submitted all reports as required, established response teams and an oversight structure, and initiated projects as necessary to address the required actions.

See Part I, Item 1C, Cybersecurity for a description of TVA's cybersecurity program and integrated risk management process.

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Critical Accounting Estimates

TVA's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), which require management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

TVA's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S.

("GAAP"), which require management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Each of these estimates varies in regard to the level of judgment involved and its potential impact on TVA's financial results.

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Activities involved with the retirement of these assets could include decontamination and demolition of structures, removal and disposal of wastes, and site restoration.

TVA periodically reviews its estimated ARO liabilities.

TVA periodically reviews its estimated asset retirement obligation ("ARO") liabilities.

Revisions to the ARO estimates are made whenever factors indicate that the timing or amounts of estimated cash flows have changed.

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Estimating the amount and timing of future expenditures includes, among other things, making projections of the timing and duration of the asset retirement process and predicting how costs will escalate with inflation.

These costs are predominantly CCR closure, CCR post-closure care and

monitoring, and plant powerhouse asbestos removal.

These costs are predominantly CCR closure, CCR post-closure care and monitoring, and plant powerhouse asbestos removal.

CCR closure estimates are primarily closure-in-place except for specific ponds located at Allen and Gallatin, which are closure-by-removal.

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The decommissioning method is determined based on several factors including available technologies, environmental studies, cost factors, resource availability, and timing requirements.

As these factors are considered and decommissioning methods are determined, the detailed project schedules and estimates are adjusted.

As these factors are considered and decommissioning closure methods are determined, the detailed project schedules and estimates are adjusted.

Non-nuclear decommissioning cost estimates, including CCR post-closure care and monitoring costs and asbestos removal, are studied for revision at least every five years, but revised more frequently if updated cost information becomes available that causes management's expectation of cost to change materially.

TVA completed the study of its non-nuclear plant decommissioning obligations in September 2025, resulting in a decrease of $27 million.

See Note 11 — Regulatory Assets and Liabilities — Non-Nuclear Decommissioning Costs .

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In 2025, TVA recorded a net decrease of $500 million in the AROs related to the final Legacy CCR Rule for updated cost estimates.

TVA continues to evaluate the impact of the rule on its operations, including cost and timing estimates of related projects.

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Investment Funds .

The assets in the NDT, ART, SERP, DCP, and RP are generally measured at fair value based on quoted market prices or other observable market data such as interest rate indices.

The assets in the NDT, ART, SERP, DCP, and RP are generally measured at fair value based on

quoted market prices or other observable market data such as interest rate indices.

These investments are primarily U.S.

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The currency and interest rate swaps are classified as Level 2 valuations as the rate curves and interest rates affecting the fair value of the contracts are based on observable data.

Commodity Derivatives .

TVA enters into commodity contracts for natural gas that require physical delivery of the contracted quantity of the commodity.

The natural gas derivative contracts are classified as Level 2 valuations based on market approaches which utilize short-term and mid-term market-quoted prices from an external industry brokerage firm.

Commodity Contract Derivatives .

TVA enters into certain commodity contract derivatives for natural gas that require physical delivery of the contracted quantity.

The natural gas commodity contract derivatives are classified as Level 2 valuations based on market approaches which utilize short-term and mid-term market-quoted prices from an external industry brokerage firm.

TVA maintains policies and procedures to value commodity contracts using what is believed to be the best and most relevant data available.

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Commodity Derivatives under the Financial Hedging Program ("FHP") .

In 2022, the FHP was reinstated and hedging activity began.

The TVA Board also approved the elimination of the Value at Risk aggregate transaction limit for the FHP and authorized the use of tolerances and measures that will be reviewed annually by the TVA Board.

Currently, TVA is hedging exposure to the price of natural gas under the FHP.

There is no Value at Risk aggregate transaction limit under the current FHP structure, but the TVA Board reviews and authorizes the use of tolerances and measures.

The commodity derivatives under the FHP are classified as Level 2 valuations based on market approaches which utilize short-term and mid-term market-quoted prices from an external industry brokerage firm.

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In determining the expected long-term rate of return on pension plan assets, TVA uses a process that incorporates actual historical asset class returns and an assessment of expected future performance and takes into consideration external actuarial advice, the current outlook on capital markets, the asset allocation policy, and the anticipated impact of active management.

In September 2023, the TVARS Board approved a new asset allocation policy, but had no changes in 2024 or 2023 to the 6.50 percent expected return on assets assumption adopted in 2022.

In June 2025, the TVARS Board approved a new asset allocation policy, but had no changes to the 6.50 percent expected return on assets assumption adopted in 2022.

TVA recognizes the impact of asset performance on pension expense over a three-year phase-in period through a market-related value of assets ("MRVA") calculation.

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The plan's actual rate of return for 2025 was 4.90 percent compared to the assumption of 6.50 percent.

The difference between the expected and actual return on plan assets resulted in an actuarial gain of $510 million that is recognized as a decrease in the related regulatory asset and a decrease in the pension benefit obligation at September 30, 2024.

The difference between the expected and actual return on plan assets resulted in an actuarial loss of $93 million that is recognized as an increase in the related regulatory asset and an increase in the pension benefit obligation at September 30, 2025.

Discount Rate.

TVA's discount rates are derived by identifying a theoretical settlement portfolio of high quality corporate bonds of Aa quality or higher sufficient to provide for the projected benefit payments.

The model matches the present value of the projected benefit payments to the market value of the theoretical settlement bond portfolio with any resulting excess funds

presumed to be reinvested and used to meet successive year benefit payments.

The model matches the present value of the projected benefit payments to the market value of the theoretical settlement bond portfolio with any resulting excess funds presumed to be reinvested and used to meet successive year benefit payments.

A single equivalent discount rate is determined to align the present value of the required cash flow with the value of the bond portfolio.

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In establishing health care cost trend rates for the post-retirement obligation, TVA reviews actual recent cost trends and projected future trends considering health care inflation, changes in health care utilization, and changes in plan benefits and premium experience.

The pre-Medicare eligible per capita claims costs and per capita contributions trend rates are both 7.25 percent, declining 0.25 percent per year until it reaches the ultimate trend rate of 5.00 percent in 2034.

The pre-Medicare eligible per capita claims costs and per capita contributions trend rates are both reset to the initial rate of 7.75 percent, declining 0.50 percent in 2026 and 0.25 percent per year thereafter until they reach the ultimate trend rate of 5.00 percent in 2036.

The post-Medicare current health care cost trend rate is zero percent for years 2025 through 2028, reaching the ultimate rate of 4.00 percent in 2029.

TVA recognized a $30 million actuarial gain as a result of updating the pre-Medicare health care cost trend rates to reflect observed and anticipated plan experience that is recognized as an increase in the related regulatory liability and a decrease in the post-retirement obligation at September 30, 2024.

TVA recognized a $28 million gain from the change in post-Medicare health care cost trend rate due to the Medicare supplement insurance premiums on the private exchange escalating at a lower rate than previously assumed.

Additionally, TVA recognized an $18 million actuarial gain to reflect changes in the observed and anticipated pre-Medicare per capita claims costs and contributions.

The net actuarial gains from health cost trends and observed and anticipated plan experience are recognized as an increase in the related regulatory liability and a decrease in the post-retirement obligation at September 30, 2025.

Cost of Living Adjustments.

Cost of living adjustments ("COLAs") are an increase in the benefits for eligible retirees to help maintain the purchasing power of benefits as consumer prices increase.

COLAs are an increase in the benefits for eligible retirees to help maintain the purchasing power of benefits as consumer prices increase.

This assumption is based on the long-term expected future rate of inflation, which is based on the capital market outlooks, economic forecasts, and the Federal Reserve policy.

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A higher COLA increases the pension benefit obligation whereas a lower COLA assumption decreases the obligation.

The actual calendar year COLA and the long-term COLA assumption are used to determine the benefit obligation at September 30 and the net periodic benefit costs for the following fiscal year.

The actual CY COLA and the long-term COLA assumption are used to determine the benefit obligation at September 30 and the net periodic benefit costs for the following fiscal year.

TVA's mortality assumptions are based upon actuarial projections in combination with actuarial studies of the actual mortality experience of TVARS's pension and post-retirement benefit plan participants taking into consideration the Society of Actuaries ("SOA") mortality table and projection scales as of September 30, 2025.

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These market risks include risks related to commodity prices, investment prices, interest rates, currency exchange rates, inflation, and counterparty credit and performance risk.

To help manage certain of these risks, TVA has entered into various derivative transactions, including commodity option contracts, forward contracts, swaps, swaptions, futures, and options on futures.

To help manage certain of these risks, TVA has entered into various derivative transactions, including commodity option contracts, forward contracts,

swaps, swaptions, futures, and options on futures.

Other than certain derivative instruments in its trust investment funds, it is TVA's policy to enter into these derivative transactions solely for hedging purposes and not for speculative purposes.

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The Enterprise Risk Council ("ERC") is responsible for the highest level of risk oversight at TVA and is also responsible for communicating enterprise-wide risks with policy implications to the TVA Board or a designated TVA Board committee.

The ERC is comprised of the Senior Management Council and the Chief Risk Officer ("CRO") who acts as Chair.

The ERC is comprised of the Executive Council and the Chief Risk Officer ("CRO"), who acts as Chair.

ERC members may invite additional attendees to meetings as non-voting participants.

The ERC has also established subordinate committees, consisting of business unit leaders, to assist in the oversight of fuel and power procurement, DER programs and products, security, artificial intelligence, privacy, and technology risks, and general risk management.

TVA has a designated Enterprise Risk Management ("ERM") organization within its Financial Services organization responsible for (1) establishing enterprise risk management policies and guidelines, (2) developing an enterprise risk profile aligned with TVA's strategic objectives, (3) performing annual risk assessments across all TVA business units, (4) monitoring and reporting on identified enterprise risks and emerging risks, (5) facilitating enterprise risk discussions with the risk subject matter experts across the organization and at the ERC and TVA Board levels, and (6) developing and improving TVA's risk awareness culture.

TVA has a designated Enterprise Risk Management ("ERM") organization within its Finance organization responsible for (1) establishing enterprise risk management policies and guidelines, (2) developing an enterprise risk profile aligned with TVA's strategic objectives, (3) performing annual risk assessments across all TVA business units, (4) monitoring and reporting on identified enterprise risks and emerging risks, (5) facilitating enterprise risk discussions with the risk subject matter experts across the organization and at the ERC and TVA Board levels, and (6) developing and improving TVA's risk awareness culture.

TVA has cataloged major short-term and long-term enterprise level risks across the organization.

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Commodity Price Risk

TVA is exposed to effects of market fluctuations in the price of commodities that are critical to its operations, including

electricity, coal, and natural gas.

TVA is exposed to effects of market fluctuations in the price of commodities that are critical to its operations, including electricity, coal, and natural gas.

The magnitude of exposure to these risks is influenced by many factors including contract terms and market liquidity.

TVA's commodity price risk is substantially mitigated by its cost-based rates, including its total fuel cost adjustment, and long-term fixed price commodity contracts.

Commodity Derivatives.

TVA manages risk with commodity contracts for natural gas that require physical delivery of the contracted quantity.

An immediate 10 percent decline in the market price of natural gas on September 30, 2024 and 2023, would have resulted in decreases of less than $1 million and $1 million, respectively, in the fair value of TVA's natural gas derivative instruments at these dates.

Commodity Contract Derivatives.

TVA manages risk with commodity contract derivatives for natural gas that require physical delivery of the contracted quantity.

An immediate 10 percent decline in the market price of natural gas on both September 30, 2025 and 2024, would have resulted in decreases of less than $1 million in the fair value of TVA's natural gas derivative instruments at these dates.

Commodity Derivatives under the FHP.

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Investment Price Risk

TVA's investment price risk relates primarily to investments in TVA's NDT, ART, pension fund, SERP, DCP, and RP.

TVA's investment price risk relates primarily to investments in TVA's NDT, ART, pension plan assets, SERP, DCP, and RP.

Nuclear Decommissioning Trust.

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Qualified Pension Plan .

In 2021, a new asset allocation policy was put in place to reduce risk and volatility in the TVARS investment portfolio.

Furthermore, in September 2023, based on current market conditions and updated capital market assumptions, the asset allocation policy was modified to further progress towards these goals.

In June 2025, based on current market conditions and updated capital market assumptions, the asset allocation policy was modified to progress towards the goal of reducing risk and volatility in the TVARS investment portfolio.

TVARS investments will be reallocated in a prudent manner over time to move toward the new asset allocation targets.

The TVARS asset allocation policy for qualified pension plan assets has targets of 17 percent growth assets, 30 percent defensive growth assets, 33 percent defensive assets, and 20 percent inflation-sensitive assets.

The TVARS asset allocation policy for qualified pension plan assets has targets of 68 percent fixed income assets, 20 percent equity assets, and 12 percent real assets.

Pursuant to the TVARS Rules and Regulations, any proposed changes in asset allocation that would change TVARS's assumed rate of investment return are subject to the review and veto of the TVA Board.

As set forth above, the qualified pension plan assets are invested across growth assets, defensive growth assets, defensive assets, and inflation-sensitive assets.

As set forth above, the qualified pension plan assets are invested across fixed income, equities, and real assets.

The TVARS asset allocation policy includes permissible deviations from target allocations, and action can be taken, as appropriate, to rebalance the plan's assets consistent with the asset allocation policy.

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The SERP plan assets are presently invested to achieve a return in line with overall equity and debt market performance.

At September 30, 2024 and 2023, an immediate 10 percent decrease in the value of the SERP investments would have reduced the value of the investments by $10 million and $8 million, respectively.

At both September 30, 2025 and 2024, an immediate 10 percent decrease in the value of the SERP investments would have reduced the value of the investments by $10 million.

Deferred Compensation Plan.

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Executives may alternatively choose to have their balances adjusted based on the return of certain mutual funds.

At September 30, 2024 and 2023, an immediate 10 percent decrease in the value of the RP accounts would have reduced the value of the accounts by less than $1 million.

At both September 30, 2025 and 2024, an immediate 10 percent decrease in the value of the RP accounts would have reduced the value of the accounts by less than $1 million.

Interest Rate Risk

TVA's interest rate risk is related primarily to its short-term investments, short-term debt, long-term debt, and interest rate derivatives.

At September 30, 2024, TVA had $502 million of cash and cash equivalents, and the average balance of cash and cash equivalents for 2024 was $600 million.

At September 30, 2025, TVA had $1.6 billion of cash and cash equivalents, and the average balance of cash and cash equivalents for 2025 was $898 million.

The average interest rate that TVA received on its short-term investments during 2025 was 4.36 percent.

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If the rates that TVA received on its short-term investments during 2024 were 4.39 percent, TVA would have received approximately $6 million less in interest from its short-term investments.

In addition to affecting the amount of interest that TVA receives from its short-term investments, changes in interest rates could affect the value of the investments in its NDT, ART, pension plan, SERP, DCP, and RP.

See Risk Management Activities — Investment Price Risk above.

Short-Term Debt .

At September 30, 2024, TVA's short-term borrowings were $1.2 billion, and the current maturities of power bonds and debt of variable interest entities were $1.1 billion.

At September 30, 2025, TVA's current maturities of power bonds and debt of variable interest entities were $1.4 billion.

Based on TVA's interest rate exposure at September 30, 2025, an immediate one percentage point increase in interest rates would have resulted in an increase of $14 million in TVA's short-term interest expense.

At September 30, 2023, TVA's short-term borrowings were $432 million, and the current maturities of long-term debt were $1.1 billion.

At September 30, 2024, TVA's short-term borrowings were $1.2 billion, and the current maturities of power bonds and debt of variable interest entities were $1.1 billion.

Based on TVA's interest rate exposure at September 30, 2024, an immediate one percentage point increase in interest rates would have resulted in an increase of $22 million in TVA's short-term interest expense.

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Net unrealized gains and losses on the swaps are reflected on TVA's Consolidated Balance Sheets in a regulatory liability or asset account, and realized gains and losses are reflected in earnings.

Based on TVA's interest rate exposure at September 30, 2024, an immediate one percentage point decrease in interest rates would have increased the interest rate swap liabilities by $293 million.

Based on TVA's interest rate exposure at September 30, 2023, an immediate one percentage point decrease in interest rates would have increased the interest rate swap liabilities by $272 million.

Based on TVA's interest rate exposure at September 30, 2025 and 2024, an immediate one percentage point decrease in interest rates would have increased the interest rate swap liabilities by $253 million and $293 million, respectively.

Currency Exchange Rate Risk

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What changed 10-K

Item 7. Management’s Discussion and Analysis