XML 59 R26.htm IDEA: XBRL DOCUMENT
v3.19.3

Commitments and Contingencies | 12 Months Ended
--- | ---
Sep. 30, 2019
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Commitments Power Purchase Obligations. TVA has contracted with various independent power producers and LPCs for additional capacity to be made available to TVA. Several of these agreements have contractual minimum payments and are accounted for as either capital or operating leases. In total, these agreements provide 2,230 MW of summer net capability. The remaining terms of the agreements range up to 13 years. Additionally, TVA has contracted with regional transmission organizations to reserve 1,450 MW of transmission service to support purchases from the market and wind power purchase agreements. The remaining terms of these agreements range up to four years. TVA incurred $195 million, $188 million, and $178 million of expense under these power purchase and transmission service agreements during 2019, 2018, and 2017, respectively. Lease-related costs under TVA's power purchase agreements not accounted for as capital leases, as well as certain leases that are accounted for as capital leases, are included in TVA's consolidated statements of operations as purchased power expense and are expensed as incurred. Under federal law, TVA is obligated to purchase power from qualifying facilities (cogenerators and small power producers). As of September 30, 2019, there was a combined qualifying facility capacity of 263 MW from 55 different generation sources, from which TVA purchased power under this law. Membership Interests of VIE Subject to Mandatory Redemption. At September 30, 2019, TVA had outstanding membership interests subject to mandatory redemption (including current portion) of $28 million issued by one of its VIEs of which it is the primary beneficiary. See Note 10 — Variable Interest Entities for additional information. At September 30, 2019, the mandatory redemptions for each of the next five years are shown below:
|  | 2020 |  | 2021 |  | 2022 |  | 2023 |  | 2024
Membership interests of variable interest entity subject to mandatory redemption |  | $ | 3 |  |  | $ | 3 |  |  | $ | 3 |  |  | $ | 2 |  |  | $ | 1 |
Leases. TVA leases certain property, plant, and equipment under agreements with terms ranging from one to 38 years. TVA's rental expense for operating leases, including power purchase agreement operating leases, was $97 million, $92 million, and $90 million in 2019, 2018, and 2017, respectively. At September 30, 2019, the future minimum lease payments under operating leases, including purchased power agreements that are accounted for as operating leases, are shown below.
Operating Leases Minimum payments due in years ending September 30
2020 |  | $ | 76 |
2021 |  | 75 |
2022 |  | 60 |
2023 |  | 12 |
2024 |  | 3 |
Thereafter |  | 2 |
Total |  | $ | 228 |
At September 30, 2019, the future minimum lease payments under capital leases shown below were included in Capital leases and Other long-term liabilities on TVA's Consolidated Balance Sheet.
Capital Leases Minimum payments due in years ending September 30
2020 |  | $ | 53 |
2021 |  | 53 |
2022 |  | 53 |
2023 |  | 55 |
2024 |  | 51 |
Thereafter |  | 418 |
Minimum annual payments |  | 683 |
Less: amount representing interest |  | (495 | )
Total |  | $ | 188 |
Leasebacks. At September 30, 2019 and 2018, the outstanding leaseback obligations related to CTs and QTE were $263 million and $301 million, respectively. See Note 13 — Debt and Other Obligations — Lease/Leasebacks. At September 30, 2019, the future minimum payments under leaseback obligations are shown below.
Lease/Leasebacks Minimum payments due in years ending September 30
2020 |  | $ | 50 |
2021 |  | 207 |
2022 |  | 25 |
2023 |  | — |
2024 |  | — |
Thereafter |  | — |
Total |  | $ | 282 |
Unfunded Loan Commitments. At September 30, 2019, TVA's commitments under unfunded loan commitments were $7 million for 2020. TVA has no commitments under unfunded loan commitments for 2021 through 2024. In addition to the commitments above, TVA had contractual obligations in the form of revenue discounts related to energy prepayments. TVA recognized $10 million of prepayment obligations and related interest payments of $4 million in revenue during 2019. The arrangement ceased in 2019. See Note 1 — Summary of Significant Accounting Policies — Energy Prepayment Obligations and Note 17 — Revenue. Contingencies Nuclear Insurance. Section 170 of the Atomic Energy Act, commonly known as the Price-Anderson Act, provides a layered framework of financial protection to compensate for liability claims of members of the public for personal injury and property damages arising from a nuclear incident in the U.S. This financial protection consists of two layers of coverage:
• | The primary level is private insurance underwritten by American Nuclear Insurers ("ANI") and provides public liability insurance coverage of $450 million for each nuclear power plant licensed to operate. If this amount is not sufficient to cover claims arising from a nuclear incident, the second level, Secondary Financial Protection, applies.
• | Within the Secondary Financial Protection level, the licensee of each nuclear reactor has a contingent obligation to pay a retrospective premium, equal to its proportionate share of the loss in excess of the primary level, regardless of proximity to the incident of fault, up to a maximum of approximately $138 million per reactor per incident. With TVA's seven reactors, the maximum total contingent obligation per incident is $963 million. This retrospective premium is payable at a maximum rate currently set at approximately $20 million per year, per incident, per reactor. Currently, 98 reactors are participating in the Secondary Financial Protection program.
In the event that a nuclear incident results in public liability claims, the primary level provided by ANI combined with the Secondary Financial Protection should provide up to approximately $14.0 billion in coverage. Federal law requires that each NRC power reactor licensee obtain property insurance from private sources to cover the cost of stabilizing and decontaminating a reactor and its station site after an accident. TVA carries property, decommissioning liability, and decontamination liability insurance from Nuclear Electric Insurance Limited ("NEIL") with limits up to $2.1 billion available for a loss at any one of TVA's three sites. Some of this insurance may require the payment of retrospective premiums up to a maximum of approximately $139 million. TVA purchases accidental outage (business interruption) insurance for TVA's nuclear sites from NEIL. In the event that an accident covered by this policy takes a nuclear unit offline or keeps a nuclear unit offline, NEIL will pay TVA, after a waiting period, an indemnity (up to a set dollar amount per week) with maximum limits of $490 million per unit. This insurance policy may require the payment of retrospective premiums up to a maximum of approximately $46 million, but only to the extent the retrospective premium is deemed necessary by the NEIL Board of Directors to pay losses unable to be covered by NEIL's surplus. Decommissioning Costs. TVA recognizes legal obligations associated with the future retirement of certain tangible long-lived assets related primarily to nuclear generating plants, coal-fired generating plants, hydroelectric generating plants/dams, transmission structures, and other property-related assets. See Note 12 — Asset Retirement Obligations. Nuclear Decommissioning. Provision for decommissioning costs of nuclear generating units is based on options prescribed by the NRC procedures to dismantle and decontaminate the facilities to meet the NRC criteria for license termination. At September 30, 2019, $3.1 billion, representing the discounted value of future estimated decommissioning costs, was included in AROs. The actual decommissioning costs may vary from the derived estimates because of, among other things, changes in current assumptions, such as the assumed dates of decommissioning, changes in regulatory requirements, changes in technology, and changes in the cost of labor, materials, and equipment. Utilities that own and operate nuclear plants are required to use different procedures in calculating nuclear decommissioning costs under GAAP than those that are used in calculating nuclear decommissioning costs when reporting to the NRC. The two sets of procedures produce different estimates for the costs of decommissioning primarily because of differences in the underlying assumptions. TVA maintains a NDT to provide funding for the ultimate decommissioning of its nuclear power plants. See Note 16 — Fair Value Measurements. TVA monitors the value of its NDT and believes that, over the long term and before cessation of nuclear plant operations and commencement of decommissioning activities, adequate funds from investments and additional contributions, if necessary, will be available to support decommissioning. TVA's operating nuclear power units are licensed through 2033 - 2055, depending on the unit. It may be possible to extend the operating life of some of the units with approval from the NRC. See Note 8 — Regulatory Assets and Liabilities — Nuclear Decommissioning Costs and Note 12 — Asset Retirement Obligations. Non-Nuclear Decommissioning. At September 30, 2019, $2.5 billion, representing the discounted value of future estimated decommissioning costs, was included in AROs. This decommissioning cost estimate involves estimating the amount and timing of future expenditures and making judgments concerning whether or not such costs are considered a legal obligation. 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 how costs will escalate with inflation. The actual decommissioning costs may vary from the derived estimates because of changes in current assumptions, such as the assumed dates of decommissioning, changes in regulatory requirements, changes in technology, and changes in the cost of labor, materials, and equipment. TVA maintains an ART to help fund the ultimate decommissioning of its non-nuclear power assets. See Note 16 — Fair Value Measurements. Estimates involved in determining if additional funding will be made to the ART include inflation rate, rate of return projections on the fund investments, and the planned use of other sources to fund decommissioning costs. See Note 8 — Regulatory Assets and Liabilities — Non-Nuclear Decommissioning Costs and Note 12 — Asset Retirement Obligations. Environmental Matters. TVA's power generation activities, like those across the utility industry and in other industrial sectors, are subject to federal, state, and local environmental laws and regulations. Major areas of regulation affecting TVA's activities include air quality control, water quality control, and management and disposal of solid and hazardous wastes. In the future, regulations in all of these areas are expected to become more stringent. Regulations are also expected to apply to new emissions and sources, with a particular emphasis on climate change, renewable generation, and energy efficiency. TVA has incurred, and expects to continue to incur, substantial capital and operating and maintenance costs to comply with evolving environmental requirements primarily associated with, but not limited to, the operation of TVA's coal-fired generating units. Environmental requirements placed on the operation of TVA's coal-fired and other generating units will likely continue to become more restrictive over time. Litigation over emissions or discharges from coal-fired generating units is also occurring. Failure to comply with environmental and safety laws can result in TVA being subject to enforcement actions, which can lead to the imposition of significant civil liability, including fines and penalties, criminal sanctions, and/or the shutting down of non-compliant facilities. From 1970 to 2019, TVA spent approximately $6.8 billion to reduce emissions from its power plants, including $17 million, $62 million, and $206 million in 2019, 2018, and 2017, respectively, on clean air controls. TVA estimates that compliance with existing and future Clean Air Act ("CAA") requirements (excluding greenhouse gas ("GHG") requirements) could lead to costs of $142 million from 2020 to 2024, which include existing controls capital projects and air operations and maintenance projects. TVA also estimates additional expenditures of approximately $1.2 billion from 2020 to 2024 relating to TVA's CCR conversion program, not including costs related to the Gallatin lawsuits, as well as expenditures of approximately $278 million from 2020 to 2024 relating to compliance with Clean Water Act requirements. Future costs could differ from these estimates if new environmental laws or regulations become applicable to TVA or the facilities it operates, or if existing environmental laws or regulations are revised or reinterpreted. There could also be costs that cannot reasonably be predicted at this time, due to uncertainty of actions, that could increase these estimates. Liability for releases and cleanup of hazardous substances is primarily regulated by the federal Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), and other federal and parallel state statutes. In a manner similar to many other industries and power systems, TVA has generated or used hazardous substances over the years. TVA operations at some facilities have resulted in contamination that TVA is addressing. At September 30, 2019 and 2018, TVA's estimated liability for cleanup and similar environmental work for those sites for which sufficient information is available to develop a cost estimate was approximately $15 million and $12 million, respectively, on a non-discounted basis, and was included in Accounts payable and accrued liabilities and Other long-term liabilities on the Consolidated Balance Sheets. Potential Liability Associated with Workers' Exposure to CCR Materials. In response to the 2008 ash spill at Kingston, TVA hired Jacobs Engineering Group, Inc. ("Jacobs") to oversee certain aspects of the cleanup. After the cleanup was completed, Jacobs was sued in the United States District Court for the Eastern District of Tennessee ("Eastern District") by employees of a contractor involved in the cleanup and family members of some of the employees. The plaintiffs alleged that Jacobs had failed to take or provide proper health precautions and misled workers about the health risks associated with exposure to coal fly ash, which is a CCR material. The plaintiffs alleged that exposure to the fly ash caused a variety of significant health issues and illnesses, including in some cases death. The case was split into two phases, with the first phase considering, among other issues, general causation and the second determining specific causation and damages. On November 7, 2018, a jury hearing the first phase returned a verdict in favor of the plaintiffs, including determinations that Jacobs failed to adhere to its contract with TVA or the Site Wide Safety and Health Plan in place; Jacobs failed to provide reasonable care to the plaintiffs; and Jacobs's failures were capable of causing a list of medical conditions, ranging from hypertension to cancer. On January 11, 2019, the district court referred the parties to mediation. Depending on the outcome of mediation, the litigation will proceed to the second phase on the question of whether Jacobs's failures did in fact cause the plaintiffs' alleged injuries and damages. On May 13, 2019, an additional group of contractor employees and family members filed suit against Jacobs in the Circuit Court for Roane County, Tennessee. These plaintiffs have raised similar claims to those litigated in the case referenced above. While TVA is not a party to either of these lawsuits, TVA could be contractually obligated to reimburse Jacobs for some amounts that Jacobs is required to pay. Further, TVA will continue monitoring the litigation to determine whether these or similar cases could have broader implications for the utility industry. Legal Proceedings From time to time, TVA is party to or otherwise involved in lawsuits, claims, proceedings, investigations, and other legal matters ("Legal Proceedings") that have arisen in the ordinary course of conducting TVA's activities, as a result of a catastrophic event or otherwise. General. At September 30, 2019, TVA had accrued $14 million with respect to Legal Proceedings. Of the accrued amount, $12 million is included in Other long-term liabilities and $2 million is included in Accounts payable and accrued liabilities. No assurance can be given that TVA will not be subject to significant additional claims and liabilities. If actual liabilities significantly exceed the estimates made, TVA's results of operations, liquidity, and financial condition could be materially adversely affected. Environmental Agreements. In April 2011, TVA entered into two substantively similar agreements, one with the EPA and the other with Alabama, Kentucky, North Carolina, Tennessee, and three environmental advocacy groups: the Sierra Club, the National Parks Conservation Association, and Our Children's Earth Foundation (collectively, the "Environmental Agreements"). They became effective in June 2011. Under the Environmental Agreements, TVA committed to (1) retire on a phased schedule 18 coal-fired units with a combined summer net dependable capability of 2,200 MW, (2) control, convert, or retire additional coal-fired units with a combined summer net dependable capability of 3,500 MW, (3) comply with annual, declining emission caps for SO 2 and NO x, (4) invest $290 million in certain TVA environmental projects (of which TVA had spent approximately $279 million as of September 30, 2019), (5) provide $60 million to Alabama, Kentucky, North Carolina, and Tennessee to fund environmental projects, and (6) pay civil penalties of $10 million. In exchange for these commitments, most past claims against TVA based on alleged New Source Review ("NSR") and associated violations were waived and cannot be brought against TVA. Future claims, including those for sulfuric acid mist and GHG emissions, can still be brought against TVA, and claims for increases in particulates can also be pursued at many of TVA's coal-fired units. Additionally, the Environmental Agreements do not address compliance with new laws and regulations or the cost associated with such compliance. The liabilities related to the Environmental Agreements are included in Accounts payable and accrued liabilities and Other long-term liabilities on the September 30, 2019 Consolidated Balance Sheet. In conjunction with the approval of the Environmental Agreements, the TVA Board determined that it was appropriate to record TVA's obligations under the Environmental Agreements as regulatory assets, and they are included as such on the September 30, 2019 Consolidated Balance Sheet and will be recovered in rates in future periods. TVA has substantially completed the requirements in the Environmental Agreements related to retiring coal-fired units or installing controls on such units. Case Involving Kingston Fossil Plant. On May 7, 2019, Roane County and the Cities of Kingston and Harriman ("local governments") filed a lawsuit in the Circuit Court for Roane County, Tennessee, against TVA and Jacobs for monetary damages and unspecified injunctive relief relating to TVA's cleanup response to the 2008 ash spill at Kingston. The local governments allege that TVA and Jacobs failed to take proper measures to mitigate environmental and health risks during the cleanup response and misled the local governments and their citizens about health and environmental risks associated with exposure to coal fly ash. The local governments seek to recover monetary damages on behalf of their citizens for personal injury and property loss claims, damages for lost tax revenue, damages for increased emergency and medical response costs claims, punitive damages, and unspecified injunctive relief. On June 6, 2019, TVA removed the lawsuit to the Eastern District. TVA has filed a motion to dismiss the case. Trial has been scheduled for March 23, 2021. Class Action Lawsuit Involving Kingston Fossil Plant. On November 7, 2019, a resident of Roane County, Tennessee, filed a proposed class action lawsuit against Jacobs and TVA in the United States District Court for the Eastern District of Tennessee. The complaint alleges that the class representative and all other members of the proposed class were damaged as a result of the 2008 ash spill at Kingston and the resulting cleanup activities. The complaint alleges, among other things, that 1) TVA was negligent in its construction and operation of the Kingston CCR facility, 2) TVA and Jacobs failed to take proper measures to mitigate environmental and health risks during the cleanup response, and 3) TVA and Jacobs misled the community about health and environmental risks associated with exposure to coal fly ash. The complaint seeks monetary damages and injunctive relief in the form of an order requiring that the defendants establish a blood testing program and medical monitoring protocol, and to remediate damage to the proposed class’ properties. Lawsuit Brought by TDEC Involving Gallatin Fossil Plant CCR Facilities. In January 2015, the Tennessee Department of Environment and Conservation ("TDEC") filed a lawsuit against TVA in the Chancery Court for Davidson County, Tennessee, alleging that pollutants from Gallatin have been discharged in violation of the Tennessee Water Quality Control Act and the Tennessee Solid Waste Disposal Act. The Tennessee Scenic Rivers Association ("TSRA") and Tennessee Clean Water Network ("TCWN") were also plaintiffs. On June 13, 2019, the parties filed a consent decree with the court to resolve this matter, which the court approved and entered on July 24, 2019. Under the consent decree, TVA agreed to close the existing wet ash disposal impoundments by removal, either to an onsite landfill or to an offsite facility, which will be determined after appropriate environmental reviews. TVA may also submit a plan that allows for beneficial reuse of the CCR material. Under the consent decree, TVA must submit a removal and closure plan to TDEC and must remove the CCR material within 20 years of TDEC's approval of the plan. The consent decree does not contain penalties or any admission of fault or liability. In addition to the consent decree, TDEC entered an administrative order providing for ongoing investigation and monitoring related to a closed legacy impoundment at the site. After a five-year study period, TDEC and TVA will determine whether any additional corrective action and/or closure activities are necessary for the legacy impoundment. Lawsuit Brought by TSRA and TCWN Involving Gallatin Fossil Plant CCR Facilities. In April 2015, TSRA and TCWN filed a lawsuit against TVA in the U.S. District Court for the Middle District of Tennessee alleging that pollutants have been discharged into the Cumberland River from CCR facilities at Gallatin in violation of the Clean Water Act ("CWA"). The plaintiffs sought injunctive relief, including an order requiring TVA to relocate the CCR facilities, civil penalties of up to $37,500 per violation per day, and attorneys' fees. On August 4, 2017, the court issued a decision (the "August 2017 Order") that found TVA had discharged pollutants into the Cumberland River in the past and that the discharge was likely ongoing. On October 2, 2017, TVA appealed the August 2017 Order to the United States Court of Appeals for the Sixth Circuit ("Sixth Circuit"). On September 24, 2018, a panel of the Sixth Circuit reversed the district court decision and held that the district court erred by imposing CWA liability against TVA and that, therefore, the imposition of injunctive relief was an abuse of discretion. On April 15, 2019, the plaintiffs filed a petition with the U.S. Supreme Court ("Supreme Court") requesting that the Supreme Court accept an appeal of the Sixth Circuit's decision. The plaintiffs subsequently filed a motion requesting that the petition be dismissed. The Supreme Court granted this request on September 23, 2019, effectively ending this lawsuit. Consent Decree Involving Colbert Fossil Plant. In May 2013, the Alabama Department of Environmental Management ("ADEM") and TVA entered into a consent decree concerning alleged violations of the Alabama Water Pollution Control Act. The consent decree required, among other things, that TVA continue remediation efforts TVA had begun prior to the suit being filed and stop using an unlined landfill after a lined landfill is approved and constructed. In August 2018, the parties agreed to amend the consent decree to deal with groundwater issues identified after TVA published groundwater monitoring reports in accordance with the CCR rule. The amended consent decree requires TVA to investigate the nature and extent of any groundwater contamination, develop and implement a remedy, provide semiannual status reports to ADEM, and remedy any seeps identified during inspections. TVA also paid $100,000 to Alabama under the amended consent decree. In accordance with the amended consent decree, TVA submitted to ADEM a Comprehensive Groundwater Investigation Report on May 17, 2019, and an Assessment of Corrective Measures on July 17, 2019. Case Involving Tennessee River Boat Accident. On July 23, 2015, plaintiffs filed suit in the United States District Court for the Northern District of Alabama, seeking recovery for personal injuries sustained when the plaintiffs' boat struck a TVA transmission line which was being raised from the Tennessee River during a repair operation. The district court dismissed the case, finding that TVA's exercise of its discretion as a governmental entity in deciding how to carry out the operation barred any liability for negligence. In August 2017, the United States Court of Appeals for the Eleventh Circuit ("Eleventh Circuit") affirmed the decision. The plaintiffs petitioned the Supreme Court for review of the decision, arguing that the provision of the TVA Act which allows suit to be brought against TVA does not allow TVA to claim immunity for discretionary actions. On April 29, 2019, the Supreme Court issued its opinion reversing the judgment of the Eleventh Circuit and remanding the case to the Eleventh Circuit. On July 17, 2019, the Eleventh Circuit remanded the case to the district court for further proceedings consistent with the Supreme Court's opinion. The district court has issued a scheduling order setting the trial for February 16, 2021. Case Involving Bellefonte Nuclear Plant. On November 30, 2018, Nuclear Development, LLC, filed suit against TVA in the United States District Court for the Northern District of Alabama. The plaintiff alleges that TVA breached its agreement to sell Bellefonte to the plaintiff. The plaintiff seeks, among other things, (1) an injunction requiring TVA to maintain Bellefonte and the associated NRC permits until the case is concluded, (2) an order compelling TVA to complete the sale of Bellefonte to the plaintiff, and (3) if the court does not order TVA to complete the sale, monetary damages in excess of $30 million. On December 26, 2018, Nuclear Development, LLC, and TVA filed a joint stipulation with the court. Under the stipulation, Nuclear Development, LLC, withdrew its request for an expedited hearing on its injunction in exchange for TVA's agreement to continue to maintain Bellefonte in accordance with the NRC permits and to give Nuclear Development, LLC, and the court five days prior notice of any filing by TVA to terminate the permits or sell the site. TVA filed a motion to dismiss the case on February 4, 2019. On May 15, 2019, the court denied TVA's motion. Trial is currently scheduled for May 2020.

X
- References No definition available. + Details
Name: | us-gaap_CommitmentsAndContingenciesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for commitments and contingencies. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 450 -URI http://asc.fasb.org/topic&trid=2127136 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 440 -URI http://asc.fasb.org/topic&trid=2144648 + Details
Name: | us-gaap_CommitmentsAndContingenciesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration