Asset Retirement Obligations

3 Months Ended

Dec. 31, 2021

Asset Retirement Obligation Disclosure [Abstract]

During the three months ended December 31, 2021, TVA's total asset retirement obligations ("ARO") liability increased $157 million as a result of periodic accretion and revisions in estimate, partially offset by settlement projects that were conducted during the period. The nuclear and non-nuclear accretion amounts were deferred as regulatory assets. During the three months ended December 31, 2021, $34 million of the related regulatory assets were amortized into expense as these amounts were collected in rates. See Note 8 — Regulatory Assets and Liabilities. TVA maintains investment trusts to help fund its decommissioning obligations. See Note 15 — Fair Value Measurements — Investment Funds and Note 20 — Contingencies and Legal Proceedings — Contingencies — Decommissioning Costs for a discussion of the trusts' objectives and the current balances of the trusts.


Asset Retirement Obligation Activity
	Nuclear		Non-Nuclear		Total
Balance at September 30, 2021	$	3,428	$	3,574	$	7,002	(1)
Settlements	—		(61)		(61)
Revisions in estimate	—		163		163


Accretion (recorded as regulatory asset)	38		17		55

Balance at December 31, 2021	$	3,466	$	3,693	$	7,159	(1)

Note

(1) Includes $301 million and $266 million at December 31, 2021, and September 30, 2021, respectively, recorded in Current liabilities.

The revisions in non-nuclear estimates increased the liability balance by $163 million for the three months ended December 31, 2021. TVA implemented revised depreciation rates during the first quarter of 2022 applicable to its completed plant as a result of the completion of a new depreciation study. The study includes a decline in the service life estimates of TVA’s coal-fired plants based on current planning assumptions to potentially retire the remainder of the coal-fired fleet by 2035. As a result of the change in the service life estimates reflected in the depreciation study, TVA performed an assessment of the assumptions used in the timing of cash flows related to its non-nuclear AROs. Based on the assessment, TVA identified changes to its projections of timing of certain asset retirement activities, resulting in an increase of $47 million to the asset retirement obligation. In addition, TVA completed an engineering review of its cost estimates for closure of certain areas containing coal

fines at Paradise Fossil Plant, resulting in an increase of $119 million due to expected cost increases for necessary changes in activities associated with proper completion of the closure.