Asset Retirement Obligations

9 Months Ended

Jun. 30, 2024

Asset Retirement Obligation Disclosure [Abstract]

During the nine months ended June 30, 2024, TVA's total ARO liability increased $3.3 billion as a result of increases from additional non-nuclear obligations, revisions in estimate to non-nuclear AROs, and periodic accretion, partially offset by revisions in estimate to nuclear AROs and settlements related to retirement projects that were conducted during the period. The nuclear and non-nuclear accretion amounts were deferred as regulatory assets. During the nine months ended June 30, 2024, $141 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 14 — 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 (in millions)
	Nuclear		Non-Nuclear		Total
Balance at September 30, 2023	$	3,808	$	3,681	$	7,489	(1)
Settlements	(4)		(186)		(190)
Revisions in estimate (non-cash)	(161)		297		136
Additional obligations (non-cash)	—		3,136		3,136

Accretion (recorded as regulatory asset)	128		72		200

Balance at June 30, 2024	$	3,771	$	7,000	$	10,771	(1)

Note

(1) Includes $283 million and $272 million at June 30, 2024, and September 30, 2023, respectively, in Current liabilities.

On May 8, 2024, EPA published its 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"). Legacy SIs include inactive surface impoundments at retired generating facilities that were exempt from the 2015 CCR Rule. CCRMUs are a newly defined category that includes previously unregulated areas at CCR facilities where CCR was beneficially reused in an unencapsulated manner, disposed, placed, or managed on land outside of CCR units regulated by the 2015 CCR Rule. TVA records the fair value of a liability for an ARO in the period in which it is incurred if a reasonable estimate of fair value can be made. As a result of the enactment of the final rule, TVA recorded additional estimated AROs and regulatory assets of $3.1 billion during the three months ended June 30, 2024, in order to comply with the requirements related to these two additional classes of CCR units. Key assumptions used to determine this estimate include the preliminary identification of Legacy SIs and CCRMUs at TVA facilities impacted by the rule,

the anticipated number of acres per newly regulated CCR unit, the expected closure method, a cost benchmark per acre based on sites currently being remediated, the potential duration of closure activities, and the escalation and discount factors. There are legal challenges to the Legacy CCR Rule that may impact the number and scope of newly regulated units and the determinations on final closure requirements and performance standards. Revisions to the additional estimated non-nuclear AROs from the Legacy CCR Rule will be made whenever factors indicate that the timing or amounts of estimated cash flows have changed. See also Note 20 — Contingencies and Legal Proceedings — Environmental Matters.

Revisions in other non-nuclear estimates increased the liability balance by $297 million for the nine months ended June 30, 2024. The increase was primarily attributable to a change in closure liabilities of $231 million at Gallatin Fossil Plant based on scope changes, new vendor bids, and updated cost estimates for activities associated with final closure and $76 million at Cumberland based on scope changes to the interim closure plan and updated cost estimates for activities associated with final closure.

Revisions in nuclear estimates decreased the liability balance by $161 million for the nine months ended June 30, 2024. The decrease was primarily attributable to an estimate revision of $164 million following the filing of a subsequent license renewal ("SLR") application with the Nuclear Regulatory Commission ("NRC") for Browns Ferry Nuclear Plant ("Browns Ferry"). If approved, the SLR will allow for an additional 20 years of operations for each of Browns Ferry's three units, resulting in a total operating life of 80 years.