TVA Board Meeting - FY24 Financial plan and budget- Reso-Memo
Attachment 5
FY 2024 Allowance for Funds Used During Construction, Regulatory Assets and Liabilities, and Regulatory Accounting Policies
TVA may capitalize interest on eligible projects as allowance for funds used during construction (AFUDC), based on the average interest rate of TVA’s outstanding debt. Eligible projects have (1) an expected total project cost of $1.5 billion or more and (2) an estimated construction period of at least 3 years in duration. For fiscal year 2024, TVA will not apply AFUDC to any projects, and such interest expense that would have been capitalized will be collected currently in rates. Recurring regulatory assets and liabilities shall be recognized related to the following amounts for which the timing of recognition under accounting principles generally accepted in the United States (U.S. GAAP) differs from recognition of such amounts in TVA’s rates: ∑ Retirement Benefit Plans Deferred Costs/(Credits) – Pension and post-retirement amounts related to unrecognized service costs/(credits), unrecognized net actuarial losses/(gains), and adjustments to the pension funded status are deferred and recognized as regulatory assets or liabilities. Deferred amounts are recovered and amortized into future rates over the remaining service period of the plans’ active participants. ∑ Nuclear decommissioning costs – Deferred charges related to the legal obligations recorded for future decommissioning of nuclear long-lived assets are probable of recovery through future nuclear decommissioning trust investment earnings, recovery in rates of debt-financed expenditures made for nuclear decommissioning obligations, or recovery in rates of contributions made into the nuclear decommissioning trust, if necessary. TVA recovers in rates an amount determined by the average life of debt financed to fund nuclear decommissioning expenditures. ∑ Non-nuclear decommissioning costs – Deferred charges related to the legal obligations recorded for future decommissioning of non-nuclear long-lived assets are probable of recovery through future asset retirement trust investment earnings, recovery in rates of debt-financed expenditures made for non-nuclear decommissioning obligations, and recovery in rates of contributions made into the asset retirement trust. TVA recovers in rates an amount determined by the average life of debt financed to fund non-nuclear decommissioning expenditures, and contributions to the asset retirement trust intended to fund the cost of non-nuclear decommissioning expenditures. ∑ Unrealized gains or losses on interest rate derivatives – Unrealized gains or losses on interest rate derivatives are deferred, and realized gains or losses are included in rates when the contracts settle. A portion of certain unrealized gains and losses will be amortized into earnings over the remaining lives of the contracts. ∑ Unrealized gains and losses on commodity derivatives – Unrealized gains or losses on commodity derivatives are deferred, and realized gains or losses are included in rates as the contracts settle and the actual fuel costs are recognized in fuel expense.
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