ML18032A553

Forwards TVA Financial Statements for FY86, TVA Power Quarterly Rept, 1-yr Internal Cash Flow Projection & Narrative Statement Re Curtailment of Capital Expenditures If Premiums Paid,Per 10CFR140 & Util 771209 Ltr

ML18032A553
Person / Time
Site:	Browns Ferry, Sequoyah, 05000000
Issue date:	09/09/1987
From:	Gridley R TENNESSEE VALLEY AUTHORITY
To:	NRC OFFICE OF ADMINISTRATION & RESOURCES MANAGEMENT (ARM)
References
NUDOCS 8709140320
Download: ML18032A553 (59)

Text

REGULATORY FORMATION DISTRIBUTION S =M (RIDS)

ACCESSION NPR: 8709140320 DOC. DATE: 87/09/09 NOTARIZED: YES DOCKET 0 FAG IL: 50-259 Browns Ferry Nuclear Power Stationi Unit ii Tennessee 05000259 50-260 Browns Ferry Nuclear Power Stationi Unit 2i Tennessee 05000260 50-296 Browns Ferry Nuclear Power Stationi Unit 3i Tennessee 05000296 50-327 50-328 Sequogah Nuclear P Sequogah Nuclear P lant'nit ii lant'nit Tennessee Valley Auth 2i Tennessee Val leg Auth 05000327 05000328 AUTH. NAME AUTHOR AFFILIATION QRIDLEYI R. L. Tennessee Valley Authority RECIP. NAME RECIPIENT AFFILIATION Document Control Branch (Document Control Desk)

SUBJECT:

Forwards TVA financial statements for FY86. "TVA Power Quarterly Rept' 1-gr internal cash Floe proJection Sc narrative statement re curtailment of- capital expenditures iF premiums paid> per 10CFR140 /'/

5 util 771209 ltr.

DISTRISUTION:

TITLE: 50. 71 )

N 4D COPIES RECEIVED: LTR Annual Financial Report t ENCL J SIZE:

NOTES: Zwolinski 3 cg. 1 cg ea to: Axelradi Ebneteri S. Richardsoni 05000259 Liawi Q. Zec h i OII OIA.

Zwolinski 3 cg. icy ea to: Axelradi Ebneteri S. Richardson> 05000260 Liawi Q. Zechi QIi OIA.

Zwolinski 3 cg. icy ea to: 'Axelradi Ebneteri S. Richardson'Ie 05000296 Liawi G. Zechi OIA.

Zwolinski 3 cg. 1 cg ea to: Axelradi Ebneteri S. 05000327 o h ewe O I i OI A.

Richardson'on Liawi G. Zechi Zwolinski 3 cg. 1 cg ea to: Axelradi Ebneteri S. Richardsoni 05000328 Liawi G. Zec h i Donoh ewI OIi OI*.

RECIPIENT REC IP IENT COPIES ID CODE/NAME LTTR ENCL ID CODE/NAME LTTR ENCL PD 1 1 GEARS' 1 0 ST*NQi J 1 0 ROTELLAs T 0 MCKENNAI E 1 0 NOTES'OPIES INTERNAL: AEOD/DOA NRR/PM*S/PTSB 1 AEOD/DBP/TPAB IL 01 1 1 1

EXTERNAL: LPDR 2 2 NRC PDR 1 1 15 15 TOTAL NUMBER QF COPIES REQUIRED: LTTR 27 ENCL 23

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TENNESSEE VALLEY AVTHORITY CHATTANOOGA. TENNESSEE 37401 5N 1578 Lookout Place SRP 09 1887

.S. Nuclear Regulatory Commission ATTN: Document Control Desk Washington, D.C. 20555 Gentlemen:

In the Matter of the Docket Nos. 50-259 Tennessee Valley Authority 50-260 50-296 50-327 50-328 To satisfy the requirements of 10 CFR Part 140 and as stated in our December 9, 1977 letter to you, TVA has selected alternative five to meet the guarantee requirements of the retrospective premium system. The enclosed statements are submitted to meet this guarantee requirement:

1. TVA financial statements for FY 1986

2. TVA Power quarterly Report

3. A one-year internal cash flow projection for the TVA power system (tabulation A) with an explanation for underlying assumptions

4. A narrative statement regarding the curtailment of capital expenditures if retrospective premiums should be paid Very truly yours, TENNESSEE VALLEY AUTHORITY R. L. Gridley, irector Nuclear Safety nd Licensing Enclosure 87091 +0320 870909 PDR ADOCK 05000259 PDR An Equal Opportunity Employer

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CERTIFICATION OF INTERNAL CASH FLOW PROJECTIONS FOR THE PERIOD SEPTEMBER 1, 1987 TO AUGUST 31, 1988 I, Paul R. Sanderford, Power Financing Officer for the Tenneessee Valley Authority, hereby certify that the one year cash flow, projections for the TVA power system for the period September 1, 1987 to August 31, 1988, attached hereto represents the current projection of the cash flow of the TVA power program.

Paul R. Sander ord Power Financing fficer STATE OF TENNESSEE

'OUNTY OF HAMILTON Subscribed and sworn to before me this day of Au st 1986.

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TENNESSEE VALLEY AUTHORITY (A CORPORATION WHOLLY OWNCO DY THC UNITED STATCS OP AMCRICA)

F I NANC I AL STATEM ENTS FOR TH E FISCAL YEAR ENDED SEPTEMBER 30, 1986

INFORMATION REGARDING THE ADE UACY OF CASH FLOMS RE UIRED TO ASSURE PAYMENT OF RETROSPECTIVE PREMIUMS Tabulation A attached provides a one-year projection of quarterly cash flow for the TVA power system. The period of this projection extends from September 1, 1987 to August 31, 1988. The cash shown is the amount available

,from current revenues after paying all operating expenses and interest charges during the quarters shown. TVA's payments to the U.S. Treasury have been excluded since these payments may be delayed up to two years when, in the judgment of the TVA Board of Directors, such payments cannot feasibly be made because of inadequate funds occasioned by factors beyond the control of the corporation /TVA Act Sec. 15d Subsection (e)/.

With three units at Browns Ferry and two units at Sequoyah Nuclear Plants currently having operating licenses, the maximum quarterly cash flow requirement will be 450 million. The average quarterly cash estimated for the 12-month period exceeds 4133 million. TVA has the option of making rate changes quarterly throughout the period. The actual timing and amount of the rate change to ensure adequate cash flows would be determined by the TVA Board.

Projected TVA power system loads are based on normal weather conditions.

Estimated generation is based on the assumption of normal scheduled and emergency maintenance outage requirements.

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Tabulation A Tennessee Valle Authorit Estimated Sources of Funds Millions of Dollars Total 12-Month Se t. '87-Nov. '87 Dec. '87-Feb. '88 Mar. '88-Ma '88 June '88-Au . '88 Period Net Income 33.814 202.068 105.897 182.875 524.654 Hon-Cash Charges (Credits) to Income 79.592 52.830 52.830 55.830 241.082 Depreciation 6 Depletion 79.074 81.195 81.257 81.302 322.828 Other (Allowance for funds used in construction -133.935 -139.749 -139.749 -139.749 -553.182 Total Funds From Operations 58 'i45. 109 '~~ 18%2.'dk TVA/PFS/8-14-87

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STATEMENT REGARDING THE CURTAILMENT OF CAPITAL EXPENDITURES IF RETROSPECTIVE PREMIUMS SHOULD BE PAID No curtailment in capital expenditures is expected in the event retrospective premiums have to be made available for payment during this 4

period. It is assumed that sufficient short-term and long-term borrowing capacity will continue'o be 'available to provide funds for continuing I

t capital expenditures at the projected level.

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Nuclear rower Program Power Sates oroperty, plant, and equipment includes the following The Department of Energy has announced its Intent to smounts invested in the nuclear power program at June withhold portions of the payments due to TVA each month 10, 1987: under two power contracts. DOE has said it plans to reduce its monthly payments to TVA by around 10 percent a )

(Thousands month until DOE Is paying only about 50 percent of the "ompleted plant amount owed each month. At current rates, DOE would Browns Ferry Nuclear Units 1-3 $ 1,174,964 then be withholding over $ 21,000,000 each month. In ~

Sequoyah Nuclear Units 1-2 1,845,138 such event, TVA would need to raise overall power rates. I Other nuclear plant DOE began its announced withholding in June 1987. TVA Less accumulated depreciation Net completed plant 3,081,047 2 364 has filed suit seeking to have the court require DOE to pay the amounts owed to TVA.

- TVA Construction In progress Watts Bar Nuclear Units 1-2 Bellefonte Nuclear-Unit 1 and 4,469,457 Powver common 3,130,131 Other nuclear construction Defer Total construction in progress suclear unit Bellefonte 78 13 Quarterly Unit Nuclear fuel leased and owned Total property, plant, and equipment (nuclear)

Report Approximately $ 2.26 billion for cancelled nuclear (Unaudited) generating units and other prepaid costs relevant to the nuclear program are Included in deferred charges at June 30, 1987.

Browns Feny has been offline since March 1985 for certain plant modifications and regulatory Improvements.

Sequoyah was taken offline In August 1985 because of questions about the environmental qualification of electrical equipment. Plans are for unit 2 at Sequoyah to be returned to service in 1987.

Fuel lo ing at Watts Bar Unit One has been delayed while empl concerns about the safety o( the plant are being resolv . Minimal levels of construction are being conducted at Bellefonte Unit One, while the construction of Bellefonte Unit Two has been deferred.

lt is TVA's intent to return to service and complete all r(uciear units and to recover the costs through rates charged io customers in the future. If such Intention changes, and abandonment gf any unit takes place, TVA would antici-pate charging future customers for such costs; however, ss in the past, TVA may elect not to recover all such costs Nine Months Ended

'rom customers. Any significant nonrecovery of costs could

.esult in the neCd for increased earnings In subsequent rVh a an c pual oppor(un(((r cmp o(u(, and (s comm(((cd (o en(us(ng (ha( (hc hens/cs June 30, 1987 periods in order to issue bonds under certain provisions o/ programs (eccl(ing rut llnanc(a/ assis(ance arc auai(able (o ar c((gk/c pcrsont of the Power Bond Resolution. rcgarr(( ss ol(acc, color, nat(ona/or(gin, hand(cap. or agc. Tennessee Valley Autltorify rvh/OP/P INFO 86/20

POIUER ASSETS AND LIABILITIES NET POWER INCOME Nine hfonlhs Tivelve hfonlhs Al June 30 Ended June 30 Ended June 30 ~966 (And Retained Earnings Reinvested) ~17 -

~16 f7Wousands)

IPPT IThousancCsf IZZS ASSFTS PROPERTV, PLAIV7; lPPIT fTItousandsf AND EQUIPhfENT OPERA 77NG REVENUES Completed plant; see note $ 11,160,166 $ 10,902,620 Sales of electric energy *

$ 2,807,159 $ 2,512,006 $ 3,782,076 $ 3,385,674 Less accumulated Municipalities and cooperatives Federal agencies 444,070 387,765 573,855 521,344 depreciation ~,6~4,+ill 3 391 534 Industries 373,763 422,498 507,621 570,477 Nel co plated pla I ~~51 265 7 511 OI56 17,323 13,781 21,843 Electric ulililies Interdivlsional Total sales of electric energy 3, 52,197 ~346,338 10,28+ ~124,897,963 6

~4, 16,831 1

oa,f31 05 Construction In progress ~866 89 .

~78072 2 Rents and other miscellaneous revenue 38 751 35 14 50 219 46 53 Total operating revenues ~6~(~I~4 3 14 3 4 4 182 4,F442 Deferred nuclear genetall g 9 ol"cls ~~72 ~2412 TING EXPENSES 'PFRA Capri I I ase assets gtl2374 I ~845472 I uel 832,401 961,578 1,184,262 1,349,312 Nuclear fuel 836,956 676,200 Other production expense 736,075 551,317 986,263 678,630 Payments in lieu of Iaxes 151,523 145,501 201,971 194,229 Less accumulated Depreciation 233,964 227,613 311,676 302,454 amortization ~670 I ~670 I I 4'Lf ~6 Other Total operating expenses 40 468 61 56 Nuclear tuel, nel ~166 6 049 Total property, plant, OTIIER INCOhfE AIVD DEDUCTIONS, NET ~127 5 2 ~26 ~77 ~16 738 ~21~8217 a d equtp anl 19911 242 17 '37 Total.income ~~268 in 1~776 3 ~1615 05 1450255 INUEST4!ENTFUNDS 642 618 483822 llVTEREST CIIARGES CURRENT ASSETS ~12 ZOR2 ~158 773

~ Interest on debt 1,306,297 1,263,493 1,733,622 1,675,146 DEFERRED CHARGES 23104 ~6 2 989 226 Allowance for borrowed funds used ~22327 358 during construction (401,~32) (396,608) (547,419) (543,908) Total assets ~23 921 015 Amortization of debt discount 0 LIABILITJES I 'ROPRIETARY CAPITAL and expense, net Total Interest charges ~II94 704 ~87 8' 6139

~~124923 176 ~132 42 1+9 Appropriation Investment $ 808,303 $ 828,180 Net Income 359,281 209,821 423,729 317,826 Return on appropriation Inveshnent 56 729 64 484 77 224 ~88 62 Less requirement for repayment of appro-Increase in retained earnings 303,552 145,337 346,505 229,205 Retained earnings reinvested al beginning of period Retained earnings relnvested

~2018 4 1 tL33) 46L3 ~28 745 ~76 rrr pilallon Inveslment Retained earnings 15,000 15,000 at end of period ~23EI 296 ~1975 790 ~2365 250 ~1975 790 relnvested In power pfograill Total propiletary NET POWER PROCEEDS capltnl ~~15 5 ~~7( 970 FIIOhf POI VER OPERA 77ONS LONG-TERhf DEBT Net Income $ 359,281 $ 209,821 $ 423,729 $ 317,826 Principal 17,005,000 Depreciation, depletion, and other amortization 416,622 411,518 567,599 563,651 interest on debt 1,306,297 1,263,493 1,733,622 1,675,146 Less una edged dtscounl 3 215 22 Allowance for borrowed fupds used during construction QQ6 60@ ~419J ~543 8 Total long term debt ~1001 785 16 2 478 1,488,224 2,177,531 2,012,715 DTHEII LIAEILIIIES rdt07 ~2 ~962 7 FIIOhf SALE OF POIVER ASSETS 2,29( 8( 239 7 ~3r, 115 CURRENT LIAt'0ILI77ES Total net power proceeds ~90 ~59,065,253, 724 ~18,568 8',7 Short term notes NET POIVER PROCEEDS. USES U.S. Treasury 150,000 150,000

. Interest on debt Return on appropriation Investrnenl 1,306,297 55,729 1,263,493

~lll00 64,484 1,733,622 77,224, 1,675,1i16 88,621 OM Peda I R encl g Oa k ~OMO ~20Nl Repayment of npproprlation Investment 15 NIO 2(bmtg 20 Short. term notes 740,000 442,000 Balance available for Investment In power assets ~34.'34 ~226 486 ~422 893 NIO ~461 MO ~583 878 344 801 Other current llabllttles ~87 8 ~62 156 Net borrowings Invesled in power assets OM 537 000 7 1st cune I tlablgles ~15 5 708 1~04 156 Terai gnbllgles S23 921 015 ~22 327 358 Note:

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TENNESSEE VALLEY AUTHORITY (A CORPORATION WHOLLY OWNEO OY THE VNITEO STATES OF AMERICA)

Fl NANC I AL STATEMENTS FOR TH E FISCAL YEAR ENDED SEPTEMBER 30, 1986

TENNESSEE VALLEY AUTHORITY FINANCIAL STATEMENTS CONTENTS Exhibit or schedule Page Financial Statements Balance Sheets Statements of Power Program Income and Retained Earnings Statements of Nonpower Programs Net Expense and Accumulated Net Expense III Statements of Changes in Financial Position . IV Notes to Financial Statements Report of Independent Certified Public Accountants 14 Schedules containing details of Property, Plant, and Equipment Completed Plant A 17 Construction in Progress, Nuclear Fuel, and Other Deferred Charges B 28 Power Expense ~ ~ ~ ~ ~ ~ ~ ~ ~ 29 Nonpower Net Expense Operating Expenses of Multiple-Use Facilities E'2 38 General and Administrative Expenses 43 Prepared by the Division of the Comptroller Robert L. Yates, Comptroller

TENNESSEE VALLEYAUTHO Y (A CORPORATION WHOLLY OWNED BY THE UNITED STATES OF AMERICA)

BALANCESHEETS SEPTEMBER 30, 1966 AND 1965 ASSETS Power ro ram All rograms 1986 1985 1986 1985 (Thousands of Dollars)

PROPERTY, PLANT, AND EQUIPMENT Completed plant; schedule A Other than nuclear Multipurpose dams; note 2 555,617 $ 551,014 $ 1,433,671 $ 1,423,062 Single-purpose dams 399,780 386,599 399,780 386,599 Steam production plant 4,115,522 3,998,043 4,115,522 3,998,043 Other electric plant 2,978,598 2,880,195 2,978>598 2,880,195 Other plant 421 182 299 241 8,049,517 7,815,851 9,348,753 8,987,140 Less accumulated depreciation and depletion; note 1 2 861 652 2 713 787 3 118 958 2 955'129 5 187 865 5 102 064 6 229 795 6 032 011 Nuclear production plant (nonoperating);

note 3 2,941,918 2,892,435 2,941,918 2,892,435 Less accumulated depreciation; note 1 569,636 478,731 569 636 478 731 2,372,282 2, 13,70 2 372 282 2 413 704 Completed plant, net 7,560,147 7,515,768 8,602,077, 8,445,715 Construction in progress; schedule B and note 4 Nuclear plant construction; note 3 7,'461,946 6,453,972 7,461,946 6,453,972 Other construction 361 765 369 941 462 257 587 179 7 823 711 6,823,913 7 924 203 7 041'151 Deferred nuclear generating unit; note 3 793,072 793,072 793,072 793 072 Capital lease assets; note 5 Nuclear fuel 1,843,198 1,637,200 1,843,198 1,637,200 Other facilities 243 349 60 007 243 349 60 007 2 D86 547 1,697,207 2 086,547 1 697 207 Nuclear fuel; schedule B 67 8,443 671,165 678 >443 671,165 Less accumulated amortization; schedule B and note 1 670 151 652 659 670 151 652 659 Nuclear fuel, net 8 292 18,506 8 292 18 506 Total 18,271,769 16,848,466 19,414,191 17,995 651 INVESTMENT FUNDS at amortized cost; note 7 502 065 328,504 502,065 328 504 CURRENT ASSETS Cash 31,736 . 136,864 125>535 251 >427 Accounts receivable 520,975 '81,285 534,468 496,128 Inventories, principally at average cost 514 383 565 024 529 156 581 553 Total 1 067 094 1,183,173 1,189 159 1,329 108 DEFERRED CHARGES AND OTHER ASSETS Loans and other long-term receivables 27 9,574 287,748 326,514 330,013 Unamortized cost of cancelled nuclear generating units; note 6 2,363,103 2,627,608 2,363,103 2,627,608 Mine a'nd mill development costs, net; schedule B and note 1 154,207 159,948 154,207 159,948 Energy conservation costs, net; schedule B and note 1 76,769 76,403 76,769 76,403 Unamortized debt issue and reacquisition expense; note 1 52,189 5,391 52,189 5,391 Other deferred charges 38 967 15 794 38 967 15 794 Total 2,964 809 3,172,892 3,011,749 3,215,157 Total assets 822 805,737 821 533 035 824 117 164 822 868 42D Notes 1 through 15 following the exhibits are an integral part of the financial statements.

EXHIBIT I CAPITALIZATION AND LIABILITlES Power program All programs 9 19 19 6 1985 (Thousands of Dollars)

PROPRIETARY CAPITAL Appropriation investment; note 8 Congressional appropriations S 1,4199584 S 19419,362 S 4,3929785 $ 432918314 Transfers of property from other Federal agencies, net 23.757 23 773 59 815 59 538 1,443,341 1,443,135 4,452,600 4,350,852 Less repayments to General Fund of the U.S. Treasury; note 10 635 059 615 059 677 018 656 876 Appropriation investment 808,282 828,076 3,775,582 3,693,976 Retained earnings reinvested in the power program,'xhibit II 2,018,744 1,830,454 2,018,744 1,830,454 Accumulated net expense of nonpower programs; exhibit III (1 737 597) (1,611 533)

Total 2,827,026 2,658,530 4 056 729 3,912 897 LONG-TERM DEBT Principal; note ll 1691059000 3 435 1535253000 3 796 1691059000 3 435 1535259000 3 796 Less unamortized discount; note 1 Total 16,101,565 15,521,204 16,101,565 15 521 204 OTHER LIABILITIES Capital lease obligations; note 5 2,084,604 1,695,422 2,084,604 1,695,422 Lease payments; note 5 17,264 17,264 Decommissioning of nuclear plant; note 1 95 8106 66,837 95,106 66,837 Reclamation of coal properties 16,907 16,241 16,907 16,241 Cancellation costs for nuclear generating units; note 6 15,394 56,045 15 394 56 045 Total 2,229,275 1,834,545 2,229,275 1,834 545 CURRENT LIABILITIES Short-term debt; note 11 U. S. Treasury 150,000 150,000 150,000 150,000 Federal Financing Bank 52,000 481,000 52,000 481 000 Short-term debt 202,000 631,000 2023000 631,000 Current maturities of long-term debt; note 11 545,000 100,000 545,000 100,000 Current portion of capital lease obligations; note 5 1,943 1,785 1,943 1,785 Accounts payable 478,663 397,494 534,370 443,214 Employees'ccrued leave 45,348 28,202 67,596 60,546 Payrolls accrued 13,979 12,647 17,748 15,601 Interest accrued 360,938 347,628 360,938 347 628 Total 1,647,871 1,518,756 1,729,595 1,599,774 COMMITMENTS AND CONTINGENCIES; notes 4, 9, 13, and 15 Total capitalization and liabilities 822,805,737 821 533 035 624 117 164 822 868 420

TENNESSEE VALLEYAUTHO[ EXHIBIT POWER PROGRAM STATEMENTS OF INCOME AND RETAINED EARNINGS 11'WH FOR THE YEARS ENDED SEPTEMBER 30, 1986, 1985, AND 1984 1986 1985 1984 Amount kwh Aaount kIIh fiaount (Thousands)

OPERATING REVENUES Sales of electric energy Hunicipalities end cooperatives 84,884,317 $ 3,486,923 82,155,187 $ 3,272,255 80,700,297 $ 3,189,653 Federal agencies; note 14 2,026,732 517,550 5,216,229 565,898 11 >162,287 648,847 Industries 14>982 >758 556,356 15>424>411 628,995 16,455,426 685>249 Electric utilities 426 >043 18,301 391 >205 15 '37 317,950 14,358 Interdivisionel 273>654 12,974 356 >863 15,586 390>224 16,997 Revenue credit due customers (750 000)

Total sales of electric energy 102 593 504 4,592,104 103 543 895 4,498,571 109 026 184 4,405,104 Rents 27,478 25,949 27,847 Discounts and penalties 127 1>265 3,168 Other miscellaneous revenues 19 008 21 701 16 951 Total operating revenues 4 >638,717 4,547 486 4,453 070 OPERATING EXPENSES; schedule C Production; note 9 Fuel 1 >313,439 1 >427,148 1>362>851 Other 801>505 556>950 495>868 Transmission 47,550 43,139 43,210 Customer accounts 69 (11 >242) 24,743 Power consumer services 24,595 18>189 20,262 Demonstration of power use 20,329 24,348 18>027 Research, development, and demonstrations 57,226 52,105 40>918 General and administrative 252>074 215,360 186,104 Payments in lieu of taxes 195,949 188>248 170>172 Amortization of loss on cancelled nuclear generating units; note 6 145,000 Provision for depreciation 305 325 287 566 267 388 Total operating expenses 3 018,061 2 801 811 ~2,774 5 3 Operating incoae 1 620,656 1,745,675 1,678,527 OTHER INCOHE AND DEDUCTIONS Interest income 51,379 33,216 28,946 Abandonment of uranium properties (117 >000)

Charge related to loss on cancelled nuclear generating units; note 6 (226,459) (180,690) (800>000)

Other, net (21 003) (21 595) (15 467)

Total other income and deductions ~396 083) ~286 069) ~786 521)

Incoae before interest charges 1 424 573 1 459 606 892 006 INTEREST CHARGES Interest on long-term debt 1,658,212 1 >547,996 1,508,975 Other interest expense 32,606 61,867 49,483 Allowance for borrowed funds used during construction; note 1 (542,495) (577,645) (532,976)

Amortization of long-term debt discount and expense; note 1 1 981 972 973 Net interest charges 1,150,304 1 >033,190 1,026 455 NET INCOME (LOSS) 274,269 426,416 (134,449)

Return on appropriation investment; note 10 85 979 96 546 93 657 Increase (decrease) in retained earnings reinvested 188>290 329,870 (228,106)

Retained earnings reinvestcd at beginning of period 1 830 454 1 500,584 1 728 690 Retained earnings reinvested at end of period $ 2,018,744 $ 1 >830>454 $ 1,500,584 Notes 1 through 15 following the exhibits are an integral part of the financial statements.

'TENNESSEE VALLEYAUTHO EXHIBIT III NONPOWER8PROGRAMS STATEMENTS OF NET EXPENSE AND ACCUMULATEDNET EXPENSE FOR THE YEARS ENDED SEPTEMBER 309 1986, 1985, ANO 1984 1986 1985 1984 (Thousands of Dollarq)

GENERAL RESOURCES DEVELOPMENT Navigation operations $ 11 >831 11,410 11,097 System flood control operations 9,846 9 >040 10,000 Recreation development 8,405 7,886 15,989 Connnunity preparedness 1,105 2,156 2,529 Regional water quality management 4,578 4,142 2,216 Fisheries and wildlife resources development 1,649 1,638 3,105 Environmental protection of public lands and water 1,015 970 1,049 Environmental education 596 515 927 Valley agricultural development 4,225 5>812 5,817 Renewable fuels research 4,279 5,444 2,635 Forest resources development 1,805 1,951 1,721 Acidic precipitation assessment 397 503 TVA lands planning 707 675 765 Industrial skills development 4>006 3,354 6,202 Economic development and analysis 1,509 4>273 3 >972 Waterway development and engineering assistance 809 1,635 4,571 Tennessee"Tombigbee waterway development 1 >347 874 Special opportunities cities and counties program 3>203 4,264 1,182 Minority economic development 1 >065 1,036 549 Floodplain management 2,410 350 1,109 Regional water and wastewater supply 1 >521 1,568 1,273 Land Between The Lakes operations 8>246 8,422 9>639 Valley mapping and remote sensing 1,080 1>108 1,021 Economic technical assistance 3,956 Other general resources development projects 565 676 688 Net expense of general resources development 80 155 79 199 00 559 FERTILIZER DEVELOPMENT; note 1 Research and development 21,354 26,806 24,380 Fertilizer technology development Fertilizer industry demonstrations 3 >846 4,058 3 >624 Farm test demonstrations outside the Valley 481 1,540 1 >486 Product/process research and testing 5 382 Net expense of fertilizer technology development 9 709 5 590 5 110 Developmental production Cost of products distributed 27,070 30,398 40 >413 General expenses Loss on retirements of manufacturing plant and equipment, net (1,117) 474 126 Removal of obsolete facilities 3,507 General arfd administrative 1,271 1,171 1 >175 Other (3 375) 1 670 1 549 Total general expenses ~3227 > 3 315 6 357 Total production expense 23 849 33 713 46 770 Lees transfers and sales of products Transfers to other TVA programs, at market prices 9,789 16,225 24,426 Direct sales 108 500 434 Total transfers and sales 9 897 16 725 24 860 Net expense of developmental production 13 952 16 908 21 910 Net expense of fertilizer development 45 015 49 392 51 400 NATIONAL ENERGY DEMONSTRATIONS 115 152 ~297)

OTHER EXPENSE, NET 779 635 1 022 NET EXPENSE; schedule D 126,064 129>378 140,684 Accumulated net expense at beginning of period 1 611 533 1 402 155 1 341 471 Accumulated net expense at end of period 81 737 597 $ 1 611 533 $ 1 482 155 Notes 1 through 15 following the exhibits are an integral part of the financial statements.

TENNESSEE VALLEYAUTHO Y EXHIBIT IV>

STATEMENTS OF CHANGES IN FINRiVCIALPOSITION PAGE I FOR THE YEARS ENDED SEPTEMBER 30, 1986, 1985, AND 1984 Power ro ram All rograms (Thousands of Dollars)

SOURCE OP FUNDS Program sources II Net power income (loss); exhibit Items not requiring funds> note a Funds from power operations Sale of pover assets, principally nuclear fuel sales

~29,269 274>269 20 000 115 140

$ 426,416 20 000 6> 16 120 806

$ (134,449) 750 546 616>097 137 399

$ 274,269 2D ODO 294,269 115 140

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$ 426 >416 20 000 120 SD6

$ (134,449) 750 546

,097 137 399 Funds from power program; note b Net expense of nonpover programs> exhibit Add items not requiring funds; note a Funds used in nonpover operations Sale of nonpover facilities III 409 409 567 >222 753 496

~126, 4 9 09

~108,274) 6 17 788 3 069

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567 222

~29,378) 18 641 '8 (110,737) ~122,092) 1 809 753 496 T110,684) 592 975 Funds used in nonpover programs ~(05 207) ~(08 928) ~(2( 117)

Debt sources Long-tern bonds Issues 2,425,000 1,100>000 250>000 2>425>000 1,100,000 250,000 Redemptions (1,300,000) (1>300,000)

Rcclassificati.on of current maturities (545,000) (100 >000) (545>000) (100,000)

Short-term notes Issues 22 >432>000 31>799>000 8,275>000 22>432>000 31 ~ 799>000 83275 000~

Redemptions (22 861 000)(32 003 000) (8 155 000) (22 861 OOD)(32 003 000) (8 155 000)

Total debt sources Other sources

~>>00 ~79 (I>5 r)70001 ~IAODl ~796 0 0 370 ODO Recovery of mine and mill development costs through litigation 56>000 56>000 Recovery of costs of cancelled and deferred nuclear units 24,203 19,970 25,955 24>203 19>970 25,955 Liability for cancellation costs for nuclear generating units> net of adjustments (13>843) (36,831) (214) (13>843) (36,831) (214)

Congressional appropriations 112 234 1,285 101>471 125,107 85>629 Property transfers (16) (22) (110) 277 1>136 (137)

Capital lease obligations 389 182 79 878 135 423 389 >182 79 878 135 423 Total other sources 399 638 ~~22 ~2m> ~(rv>5 ~SAR 5(IS((K Total source of funds 3 960 047 $ 1,426,451 31,341 835 3 956 492 31 443,554 61 305 D35 DISPOSITION OF FUNDS Expended for plant and equipmcnt, excluding allovance for borrowed funds used $ 914>67 3 $ 1>029 > 578 $ 863 >242 $ 932>624 $ 1>056,808 $ 919>586 Less:

Depreciation and depletion allowances charged to construction clearing accounts and other asset categories 13,575 12,355 10>872 15>476 14>407 12>966 Cost of removing retired faci,lities and salvage from retained materials (10 906) (8 282) (7 998) (II 060) (8 794) (9 270) 912 004 I 025 505 860 368 92(l 208 I 051 193 915 890 Capital lease assets Payments to U.S. Treasury; note 10 389 340 80 024 135 546 ~389 3 0 ~80 02 135 346 Return on appropriation investment 85>979 96,546 93,657 85>979 96 >546 '3>657 Repayments of appropriation investment 20 ODO 20 000 20 ODD 20 142 20 091 20 000 105 979 116 546 I(3 657 106 121 111167 ~113 6 I Investment of funds Changes in other assets and liabilities 126 254 ~l55 63 42 691 ~(26 25 ~l55 6 ~2691 Bond issue and reacquisition expense 48>419 48 >419 Loans and other long-term receivables (8,174) (4,943) 32>888 (3>499) (406) 32,641 Spent nuclear fuel disposal costs 172,616 172>616 Nine and mill development cost 9,979 12,543 9,117 9>979 12 >543 9 >117 Energy conservation cost 31>331 31,973 29,976 31>331 31>973 29 '76 Cancellation costs for nuclear generating units, net of adjustments (13>843) (36>831) (214) (13>843) (36,831) (214)

Payment of cancellation costs for nuclear generating units 26>808 34>679 21>324 26,808 34>679 21,324 Other

.Changes in working capital (increase or

~AS 3 068

~aTH7 3,068 r)&1 2P. n>

decrease)

. Cash (105>128) 5,379 71>504 (1Z5>892) (9>883) (9>159)

Accounts receivable 39>690 (125,144) 155>887 38>340 (124,742) 154>127 Inventories (50 641) (128 773) <74 034) <52 397) (127 907) (74 320)

~I(6,079) ~248,538) 153>357 ~139,949) ~262,532) 70,648 Less other current liabilities (excluding short-term debt, including, current maturities of long-term debt) 558 115 (256 791) 229 491 ~558 821 ~(257 570) ~238 857

~674 194) 8 253 ~76 134) 698 770) 962) 168 209 Total disposition of funds 3 960 047 31 426,451 81 341 835 3 956 492 31,443.554 91.305,035

'TENNESSEE VALLEYAUTHO EXHIBIT IV STATEMEN I>S OF CHANGES IN FINANCIALPOSITION PAGE 2 FDR THE YEARs ENclED sEPTEMBER 30 19864 1985 AND 1984

~

NOTES:

a. Items not requiring funds:

Power Non ower 1986 1985 1984 1986 1985 1984 (Thousands of Dollars)

Provision for depreciation $ 305,325 $ 287,566 $ 267,388 $ 17,484 $ 17>813 $ 16,216 Amortization of loss on cancelled nuclear unit8 226,459 180,690 145,000 Charge related to loss on cancelled nuclear generating units 800,000 Net loss (gain) on retirements and disposals of property, plant, and equipment 181 3,152 2,636 304 828 5,066 Loss (gain) on sale of investments 8,593 Abandonment of uranium properties 117,000 Amortization of energy conservation cos't 30,965 29,231 24,418 Provision for lease payments 18,645 619 Provision for writeoff of'ranium properties 15,720 16,500 20,850 Provision for reclamation and other costs of coal properties 2,8) 0 3,830 11,792 Provision for decommissioning nuclear plants 28,269 25,535 9,550 Provision for recoverable long-term advances (2,690)

Recla88ification of prior years'osts (28,364)

Allowance for recovery of operating expense (20>553) (11,340)

Amortization of long-term debt discount and expense 1,981 972 973 Amortization of discount on decommissioning fund investments (20,822) (18,443) (7,678)

Amortization of discount on bond retirement fund investments (26,485) (9,303)

Allowance for borrowed funds used during construction (542 495) (577 645) (532 976)

$ 20 000 $ 20 000 $ 750 546 $ 17 788 $ 18 641 $ 18 592

b. Net power proceeds (see note 10) may be derived as follows:

Year ended Se tember 30 1986 1985 1984 (Thousands of Dollars)

Funds from power program $ 409>409 $ 567,222 $ 753,496 Add interest 1 690 818 1 609 863 1 558 458 Net power proceeds $ 2,100,227 $ 2,177,085 $ 2,311,954 Notes 1 through 15 following the exhibits are an integral part of the financial statements.

TENNESSEE VALLEYAUTHO Y NOTES'TO FINANCIALSTATEMENTW

1. Summer of significant accountiag policies Pover accounts are kept in accordance vzth the untcorm system ot accounts prescrzbed y the Fe era nergy egu story ommissioa.

Plant additions snd retirements-Additions to plant are recorded at cost, vhich includes material, labor, overhead, and allovance for funds used. The costs of generation during preliminary operations prior to commercial acceptance, includiag amortization of nuclear fuel lese credit for the fair value of energy generated> are also included in the recorded costs of steam and nuclear generating plants. Except for chemical plant, plant retirements (including original cost and rcaoval cost less salvage) are charged against appropriate accumulated depreciation accounts.

Depreciation and depletion-Straight-line depreciation is provided for substantially on a composite basis. Rates of depreciation are derived from engineering studies of useful life and are revieved each year. Depletion of coal land and landrights and phosphate land and mineral rights is provided on a unit of production basis.

Decozssissioning Provision for decommissioning costs of nuclear generating units is derived through engineering studies of useful life and estimated costs based on the dismantling/removal method. The cost estimates for decommissioning ss provided in fiscal year 1986 vere based on a current dollar value amounting to $ 95 million and $ 100 million per uait, respectively, for pressurized vster and boiling vater for reactors'llovance funds used The practice of capitalizing an allovsnce for funds used during construction is folloved in the pover program. Ia accordance vith the 'IVA Board of Directors'riteria for establishing vholesale pover rates, the allovance is applicable to construction in progress excluding generating facilities in a deferred status. The amount of interest capitalized is limited to the amount of depreciation and other noacash charges lese the amount of the repayment of the appropriation investment to the U.S. Treasury. The method used provides for the monthly calculation of interest on debt equivalent to the average balance of construction vork in progress. The interest is calculated on the most recent debt issues except for those representing refunding of existing debt> ia vhich case the maturity date of che original issue is used.

Repairs aad maintenance The cost of current repairs and minor replacements is charged to appropriate operating expense aad clearing accounts, and the cost of reaevals and betterments is capitalized.

Nuclear fuel-The cost of nuclear fuel is charged to operations on a uni.t of production basis in amounts equal to lease payments (the coze of fuel burned plus finance charges) and a provision for spent nuclear fuel disposal.

Valuation of iavestmencs Investments are recorded sc amortized cost. Discounts are axortized at the yield rate over the life of each instrument.

Eaergy conservation costs Certain energy conservation program costs are deferred and charged to operations over a five-year period.

Nine and mill development costs-Deferred mine and mill development costs are assigned to coal inventory and nuclear fuel on a unit of production basis determined ia relation to estimated ore reserves. Each year the investment in uranium properties is evaluated to determine if aay costs related to these properties may noc be recovered from future operations.

The balance of the estimated costs not recoverable from operatioas at September 30 '986 'pproximately $ 46 millioa> vill be amortized over the remaining three years of a four-year amortization period vhich began in fiscal year 1986.

Operating revenues Revenues from the sale of electric onergy are recorded only vhcn billed. Revenue credits due customers sre recorded in accordance vith authorization of the Board of Directors.

Borroving expenses Issue and reacquisition expenses and discounts on pover borrovings from the public are amortized oa a straight-line basis over the term of the related securities. Issue expenses on pover borrovings from the Federal Financing Bank are amortized over a five-year period except that amounts under six thousand dollars are expeased as incurred.

Reacquisition expense of recalled debt is amortized over the remaining term of the recalled issues.

Sales of fertilizer Sales of fertilirer materials are not made on a commercial basis, but are made co organizations collaborating in aa experimental and educational program aimed at improving the manufacture> distribution, and use of fertilizers.

2. Allocation of cost of multi ur se ro ects-Section 14 of the TVA hct requires TVA's Board of Directors to allocate, subject to che approval of thc preszdent of the Uai.ted States, the cost of coapleted multipurpose projects. The cost of facilities installed exclusively for a single purpose is assigned directly co that purpose; tho <<ost of mulciple-use facilities is allocated among the various purposes served.

Thc total investment of $ 1>433>671>000 in completed multipurpose dans at September 30 '986 's classified as follovs:

Investment 4 ~Mlal 3 Total (Thousands)

Pover $ 342 >041 $ 213>577 $ 555,618 Navigation 291 >709 166>814 458,523 Flood control 65,364 188,924 254>288 Recreation 6,498 114>692 121,190 Local economic development 144 43 908 44 052 Total >7>3 lee >727 913 >1 437 677

3. Nuclear er The nuclear pover program includes nina generating units five completed> three under construction, and one n e erre rogram construction status at four plant sites.

None erative nuclear reduction lant<<-Nonoperative nuclear production plant consists of three units (1,152 megavatts each at Brovns Ferry Alabama aad tvo uaits (1,221 megavatts each) at Sequoyah (Tennessee).

. TENNESSEE VALLEYAUTHO Y NOTES TO FINANCIALSTATEMENTW~ONTINUED Browne Ferry vas taken offline in Match 1985 for certain plant modifications and regulatory improvements. At September 30, 1985, the projected dates for returning each unit to service were: Unit Two

- 1986, Unit Three - 1987, and Unit One - 1989. Unit Two did not return to service in 1986 and Units Two and Three will not return to service in 1987.

Estimated capital expenditures of approximately $ 200 million will be required to return Unit Two to service; estimates for the other units sre not available. The undepreciated cost of Browne Ferry at September 30, 1986, is $ 846 million. Aggregate annual depreciation charges of $ 16 million and annual interest charges on fuel in the reactor in the amount of $ 5 million for Units One snd Two are effectively being deferred until future periods; annual depreciation charges of $ 25 million for Unit Three and cozmon plant and related interest charges on fuel are being charged to operations.

Sequoyah is a two-unit plant which wss taken offline in August 1985 when questions were raised about the adequacy of documentation for qualifying certain equipment for operations under emergency conditions. At September 30> 1985, both Scquoyah units were planned to return to service in 1986; however, neither unit'eturned -to-service during the year. Unit One is now expected to return to service in 1987.

Estimated capital expenditures of approximately $ 100 million will be required to return both units at Sequoysh to service. The undepreciated cost of Sequoyah at September 30, 1986, is $ 1.5 billionl depreciation charges for fiscal year 1986 approximated $ 59 million.

Complete <<ost estimates and scheduled dates for the return to service of all the units above are planned to bc available in the middle of 1987.

Construction in ro ress-"Nuclear plant construction in progress consists of two units (1,270 megawatts each) at Watts Bar (Tennessee and one untt ,332 megawatts) at Bellefonte (Alabama).

Construction at Watts Bar Unit One is substantially complete and Unit Two is approximately 85 percent complete; however, certain safety issues regarding the plant raised by construction and other TVA employees are being examined. At September 30 the planned fuel loading date was mid-1986 for Unit One and 1987 for Unit Two. Because of questions about the safety '985, issues, fuel loading for Unit One did not occur in 1986 and will not occur for either unit in 1987. Before the Nuclear Regulatory Commission will authorize TVA to load fuel snd to begin low power testing for Unit One> these issues must be resolved. It is likely that capital expenditures will be required to resolve these issues; hovever> the amount of such expendituies and the scheduled date of operations cannot be determined at this time.

TVA continues to capitalize interest on both units at Watts Bar, the investment in which was $ 4.0 billion at September 30, 1986. Construction budgets, including capitalized interest, for fiscal years 1987 and 1988 are $ 631 million and $ 229 million, respectively. While the total project cost estimate is not available at this time due to the uncertainty of the inservice dates, it probably will exceed $ 5 billion.

Construction at Bellefonte Unit One is approximately 87 percent complete at September 30, 1986, with accumulated costs, including common plant, of $ 2.91 billion. The costs being incurred for Unit One are to maintain systems already in place and for certain minimum levels of construction. Construction budgets, including capitalized interest, for fiscal years 1987 and 1988 arc $ 305 million and $ 295 million, respectively.

Complete cost estimates and scheduled dates for fuel loading at each unit under construction are planned to be available in the middle of 1987, Deferred nuclear eneratin unit Construction at Bellefonte Unit Two (1,332 megawatts) ceased on or about October 1, 1985. The construction of this unit was deferred due to a reduction in the forecasted growth in demand for electric energy in the region. The costs being incurred for Unit Two are for the preservation of the current investment which is approximately

$ 793 million. TVA ceased capitalizing interest on Unit Two costs as of October 1, 1985. At a later date> TVA expects to resume construction of this unit with a completion date presently scheduled for 1995.

Nuclear fuel The fuel for the nonoperative nuclear plant and those units in construction in progress is included on the balance sheet under capital lease assets. This cost of $ 1,843,198,000 is associated with each of the nuclear plant sites as follows:

In In Stock/

Reactor In Process (Thousands)

Scquoysh Units One and Two $ 135>259 $ 189>418 Brovns Ferry Units One, Two, snd Three 177,516 207 >745 Watts Bar Units One and Two 210,137 Bellefonte Units One and Two 287 >522 Raw materials 635,601 In addition to the amounts presented above, approximately $ 750 million has been committed under such contracts as of September 30, 1986, for uranium snd enrichment services. Such contracts expire no later than 2014.

The recovery of the costs associated with nuclear fuel is primarily dependent upon the completion and return to service of the nuclear generating units. At the present time> interest on fuel under the lease> including that in the reactors of the nonoperative nuclear unite, is being capitalixed. If the nuclear fuel> as presently fabricated, is not used in thc units intended> TVA will incur additional costs to enable this fuel to be used in other units or to, preparo the fuel for sale.

Com letion of nuclear er ro ram-The timely return to service or completion of these nine nuclear generating units is subject to changes rn uture demand for electricity and is dependent upon receiving approvals from the Nuclear Regulatory Commission'VA intends to return to service and to complete these nine nuclear generating unite and to recover the costs associated with these plants through rates charged to customers in the future. If such intention changes, and abandonment of any of these units takes place, TVA would anticipate charging future custcc>ers for such costs; however, as in the past, TVA may elect not to recover sll such costs frcm customers. Any significant nonrecovery of costs could result in the need for increased earnings in subsequent periods in order to issue bonds under certain provisions of the Power Bond Resolution.

TENNESSEE VALLEYAUTHO NOTES TO FINANCIALSTATEMENTS~ONTINUED The aggregate net assets at September 30, 19N>, associated vith the nuclear pover program sre summariaed as follovs:

Completed Construction Asset Plant ~9 '282 (Hillions)

Sequoyah Uni.ts One and Tvo $ 1,526 $ 155 $ 1>681 Browne I'erry Units One, Tao, and Three 846 366 1>212 Natts Bar Units One and Tvo 4>032 4,032 Bellefonte Unit One snd common plant ~2909 ~290 9

~$ 2 372 ~$ 7 462 9,834 Nuclear fuel-leased and ovned 1,851 Unamortixed cost of cancelled nuclear generating units (note 6) 2,363 Deferred generating unit Bellefonte Unit Tvo 793 Other ~12

~$ 14 970

4. Construction ro ects-The construction budgets, including nuclear, for fiscal years 1987, 1988, and 1989 are $ 1.5 billron> ~ rllron, and $ 1.0 billion, respectively. These budget estimates are revieved and revised periodically to reflect changes in economic conditions and other factors considered in their determination. Substantial commitments have been incurred for these projects.

The construction required to complete the Columbia Dam and Reservoir, a multipurpose project financed by congressional appropriations, has been suspended due to budget restrictions and environmental concerns. Studies are being conducted to consider alternative uses of the land and facilities should the project not be completed.

The costs of tho North Alabama coal gasification project> approximately $ 114 million, vere closed from construction in progress to completed plant status during 1986. The project is in a Defense energy reserve status subject to an annual evaluation of the project's viability until 1991 '

. Leases-Nuclear fuel is obtained directly from vendors and through contractual arrangements providing for mining, milling, and fabrication of raw materials obtained from land leased by TVA. Under an agreement entered into in 1980, TVA sells and leases back all nuclear fuel on hand except for that prior to the milling stage or in s spent condition. TVA leases property, plant> snd equipment under lease agreements vith terms ranging from one to thirty years. Under most of the agreements, TVA pays the property taxes, maintenance costs, and other costs of operation. Hany of the agreements are thc result of sale-leaseback arrangements. Host of the agreements include purchase options and/or reneval options vhich cover substantially all the economic lives of the properties.

Capital leases have been reported on the balance sheet and statements of changes in financial position vhile related rental expenses continue to be recorded in accordance with the ratemaking process as provided by Pinancial Accounting Standards No. 71, Accounting for thc Effects of Certain Types of Regulation. The folloving analyses pertain to capital and noncancelable lease agreements in effect at September 30, 1986 snd 1985:

CAPITAL LEASES Sc camber 30 9

Property (Thousands)

Nuclear fuel $ 1,843,198 $ 1,637 >200 Ceneral plant 254,806 69>678 Total properties under capital leases 2 090 004 6 706 870 Accumulated provision for smorti sation of capital leases Net properties under capital leases 11 457

>2.044 347

~9672 1>697,207 Obligations under capital leases FUTURE HINIHUH LEASE PAVHENTS b Noncance lable Fiscal Period Capital Leases Operating Leases 1987 $ 31 >479 $ 5>170 1988 37 >655 4 ~ 525 1989 38,157 4>201 1990 38,157 3,305 1991 38,157 3>220 Thereafter ~676 013 ~13 003 Total future minimum lease payments 859,618 ~$ 33 424 Less interest element included ~616 269 Present value of future minimum lease payments 8243 349

a. Includes payments due in 1987 of $ 1.943 million, excluding nuclear fuel.

b. Excludes payments under nuclear fuel lease, vhich are based on the cost of nuclear fuel burned and financial charge.

10

~ TENNESSEE VALLEYAUTHO NOTES TO FINANCIALSTATEMENTS~ONTINUED Amortization of capital leases, including nuclear fuel, Eor the years ended September 30, 1986, 1985> and 1984 vas

$ 1 ~ 7 86 0000 > $ 107 >730 >000 > and $ 124 ~ 857,000 ~ respectively . Opera cing expenses for the same re spec cive years included finaace charges for capital leases ia the amounts ot'27,678,000> $ 36,531,000, and $ 35,700,000.

Annual rents for one capital lease range from $ 2.7 million to $ 49.4 millioa under the lease terms aov in effect. TVA is providing foz che levelization of these rentals in ics operating expenses over the tventy-five year term oE the lease. The accumulated balance of the provision for these lease payments is $ 17,264,000 at September 30, 1986.

Rentals for sll operating leases have been charged to clearing accounts> portions of which are charged to operations, for the years ended September 30> 1986, 1985> and 1984, ia the amounts of $ 80383 000> 8'01 000 'nd $ 7>318>000 'espectively.

6. cancelled nuclear eneratia unite In August 1982, the TVA Board of Directors approved cancellation of coastructioa of four nuclear generac ng, unzts> and, zn August 1984, approved the cancellation of four additional units. These units vere at the Phipps Bend, Rartsville, and Yellov Creek sites. In accordance vith the August 1984 Board action, the balance of the costs of the eight units, after a charge of $ 800 million to fiscal year 1984 expense, is being, amortized over an ll-year period begiaaing vith fiscal year 1985. The amortization schedule provides for a minimum of 6 percenc co be applied co che

$ 2.8 billion unamortized balance ac September 30, 19840 and increases by 1 percent each year until the fifth year ac which time it would be 10 percent, vhich vill be the rate over che final seven years. The unamortized balance of these costs is being recovered through rates from customers and therefore is recorded as a deferred charge on the balance sheet.

7. Investment funds"-TVA has made investments of pover funds beginning in 1982 to provide for the accumulatioa of fuads required Eor retirement of bonds and decommissioning of nuclear plants. Deposits into the funds have been made based upon annual calculations of the fund requirements considering rates of return, inflation, and projections of decommissioning costs. As of September 30, 1984, the existing portfolio of investments, including amounts previously invested in che bond retirement fund, vas dedicated to the decommissioning fund as a prudent financial management decision based upon projected decommissioning fund needs aad the ability of the portfolio to meet them.'dditional investments for the decommissioning, fund will be determined in accordance with the factors above for existiag and new generating units. The fund balance ac September 30, 1986> is $ 184,484,000.

The bond retirement investment fund, beginning ia October 1984, is being fuaded through deposits calculated to yield adequate funds to retire $ 4.6 billion of debt in 2002. The deposits are beiag made over a period of ll years coinciding vith the amorcization schedule for cancelled plant costs. Tho fund balance at September 30, 1986, is $ 317,581,000.

8. h ro riation investment Changes in the appropriation 'investment during the years ended September 30, 1986 and 1985 vere as fol ovs:

Pover ro rsm hll ro rams (Thousands)

Congressional appropriations and cransfors of property from other Federal agencies (nec) $ 206 $ (86) $ 101 >748 $ 126 >243 Less repayments to General Fund of the U.S. Treasury ~20 000 ~20 000 20,142 20,091 Increase or decrease for the period (19,794) (20>086) 81,606 106>152 Balance, beginning of period ~828 076 ~848 162 3 693 976 3 587 024 Balance, end of period $ 200 202 $ 820 076 $3 775 502 $3 693 976

9. Power roductioa-Purchased and interchange power costs increased from approximately $ 72 million in 1985 to $ 242 million in 1 due to the lov rainfall experienced in the second year of a prolonged drought vhile fuel costs decreased due to the continued shutdown oE the nuclear generating units during 1986. Approximately $ 3.7 billion in long-term commitments have been entered into for the purchase of coal to provide for che fuel requirements of the steam generating plants.

10. Pa ments to the U.S. Treasur -"Section 15d of the TVA hct requires the payment friz net pover procoeds of a return on The thc net approprzatzon nvestment zn pover facilities plus repayments of such investment, beginning vith fiscal year 1961.

amount of return payable during each year is based oa the appropriation investment as of the beginning, of that year and the computed average interest rate payable by the U.S. Treasury on its total marketable public obligations as of the same date.

The repayment schedule calls for payment of noc less than $ 10 million for each of the first five years (1961-1965)> $

15 million for each of the next five years (1966-1970), and $ 20 millioa for each year thereafter until a total oE $ 1 billioa shall have been repaid. The payments required by Section 15d may be deferred under certain circumstances for noc more than tvo years.

Required payments have been made as follovs:

R 2 ~Rt (Thousands)

Total Total to September 30, 1985 $ 1,604,849 $ 4300000 $ 2>034>849 Year ended September 30, 1986 851979 20,0>D 105 979

$ 1 690 820 $ 45D 000 $ 2 140 820 For fiscal year 1987 the required payments vill be $ 74,305,000 as a return on the appropriation investment at the compuced average interest rate of 9.193 percent, and $ 20,000,000 as a repayment, a total of $ 94,305,000

'n addition to the payments Erccs nec pover proceeds, certain nonpower proceeds are paid to the U.S. Treasury under the provisions of Section 26 of the TVA hct. During fiscal year 1986, payments of $ 142,000 vere made, bringing the total paymencs from nonpower proceeds to $ 41,959,000.

Prior to 1961, undec then existing legislation> TVA paid to the Treasury $ 185,059,000 of power proceeds. Corporation In addition co the repayments indicated ia Exhibit I, $ 65,072,000 of bonds sold to the Treasury and Reconstructioa Finance in fiscal years 1939-1941 have been fully repaid Eras power proceeds. Section 26 of the TVA hct provides for annual paymeats to the Treasury of any power or nonpower proceeds not needed for che operation of dsms and reservoirs, the conduce oE the pover program, aad the manufacture and distribution of fertilizers.

TENNESSEE VALLEYAUTHOR NOTES TO FINANCIALSTATEMENTS~ONTINUED ll. Borrovin authorit "-Section 15d of the TVA Act authorixes TVA to issue bonds, notes, and other evidences of indebtedness billion outstanding at any one time to assist in financing its pover program. Debt service on these up to a total of 3 obligations, vhich is payable solely from TVA's net pover proceeds, has precedence over the payment. to the U.S. Treasury described in note 10. Issues outstanding on September 30, 1986, consist of the folloving:

Long-term debt (Thousands)

Held by the public 5.70X 1967 Series A, due YOsy 15, 1992 70,000 6-3/BX 1967 Series B, due November 1, 1992 600000 8-1/4X 1969 Series B, due October 15, 1994 1001000 7.30Z 1971 Series B, due October 1, 1996 150,000 7X 1972 Series A, due January 1> 1997 150>000 7.35X 1972 Series B, due May 1, 1997 150,000 7.35X 1972 Series C, due July 1, 1997 1501000 7.40X 1972 Series D, due October 1 > 1997 150 >000 7.35Z 1973 Series A, due January 1, 1998 1000000 7.35X 1973 Series B, due April 1, 1998 150>000 7-3/4X 1973 Series C> due July 1, 1998 150>000 7 .70Z 1973 Series D, due October 1> 1998 100>000 8.05Z 1974 Series A> due January 1, 1999 IOO DOD I 5IO DOD Federal Financing Bank 7.97Z 1976 Series B> due November 30, 2001 400>000 7.625Z 1976 Series C, due January 31, 2002 200>000 7 '75Z 1977 Series A, duc February 28> 2002 300>000 7 .9352 1977 Series B, due YOay 31, 2002 400>000 BX 1977 Series C, due October 31, 2002 400>000 8.375Z 1978 Series A, due January 31> 2003 400>000 9.296Z 1979 Series A, due February 28, 1989 500>000 9.19SX 1979 Series C, due August 31> 2004 500,000 10.545I 1979 Series D> duo October 31, 2004 400,000 11.225Z 1980 Series A, due January 31, 2005 500,000 12.955Z 1980 Series B, due March 31, 2005 500,000 10.475I 1980 Series C> due June 30, 2005 500,000 10.890X 1980 Series D> due August 31, 2005 500>000 12.425X 1980 Series E> due November 30, 2005 500 >000 12.735Z 1981 Series A, due March 31, 2011 500>000 12.925X 1981 Series B, due April 30, 2011 500>000 13.255X 1981 Series C, due Juno 30, 2011 500>000 14.905Z 1981 Series D, due September 30, 2011 300,000 13.035X 1981 Series E, due December 31, 2011 650,000 13.565X 1982 Series A, due April 30, 2012 700,000 13.575I 1982 Series B, due May 31, 2012 300>000 14.125Z 1982 Series C, due July 31, 2012 350 >000 11.945X 1982 Series D, due September 30> 2012 100,000 10.725I 1982 Series E> due November 30, 2012 200>000 10.575X 1983 Series A, due January 31, 2013 150,000 10.575X 1983 Series B, due March 31> 2013 1500000 10.425Z 1983 Series C, due May 31, 2013 100>000 11.685X 1983 Series D, due August 31> 2013 250,000 11.905I 1983 Series E, due January 31, 2014 150>000 12.055Z 1984 Series A, due January 31, 2014 100>000 ll .695X 1985 Series A, due January 31, 2015 100>000 12.095X 1985 Series B, due March 31, 2015 1500000 10.945X 1985 Series C, duc May 31, 2015 150,000 10.725I 1985 Series D, due July 31, 2015 500,000 10.705X 1985 Series E, due September 30, 2015 200,000 9.685I 1986 Series A, due February 29, 2016 150,000 7.285X 1986 Series B, due April 30, 2016 600>000 7.825X 1986 Series C, due June 30, 2016 600>000 7.315Z 1986 Series D, due August 31, 2016 900>000 7.765X 1986 Series E, due September 30, 2016 175 000

~2525 DDD Total long-tera debt I6 205 DOD Short-term debt U.S. Treasury 150,000 Federal Financing Bank 52 000 Total short term debt 202 ODO Current maturities of long-term debt 545 000 OI6 &52 0>D

'The interest rate on short-term debt oved to U.S. Treasury as of September 1986, vas 6.63 percent and the average rate on short-term debt outstanding vith Federal Financing Bank as of September 30> 1986, vas 5.53 percent.

During fiscal years 1986, 1985, and 1984> the maximum amounts of short-term borrovings outstanding vere $ 930>0000000>

$ 1,155>000>000, and $ 835,000,000> respectively> and the average amounts (and voighted average interest rates) of such borrovings vere approximately $ 628>000>000 (7.0 percent)> $ 944>000,000 (8.4 percent), and $ 628>000>000 (10.0 percent)>

respectively.

12

'ENNESSEE VALLEYAUTHO NOTES TO IrINANCI'ALSTATEMENTS-CONTINUED 52.R~tl a

-tybh tlbt y t ~ pl bib bt t'lly ll 1 t 2 d ply.yh

~ 'rior cost of currently accruing benefits is funded cux'rently. The cost of the plan to TVA, including amortixation of unfunded servico costs over the average future careers of active members, was $ 78,178,000 in 1986, $ 76,437,000 in 1985, and

$ 75,348,000 in 1984. These costs are charged to all TVA activities in relation to direct labor charges.

The valuation information as of September 30, 1985 and 1984, the latest actuarial valuation dates, Eollovsx

~l8 ~l84 Assumed race of return used in determining actuarial present value of accumulated plan benefits 8 'Z 8.52 Actuarial present value of accumulated plan benefits (thousands)

Vested $ 1,050 >893 $ 913,661 Konvested 57,026 54,423

$1 101 919 $ 968 084 Net assets at market value available Eor benef ics (thousands) $1 561 016 $ 1 241 655

13. Nuclear insurance Under the Price-Anderson Acc of 1954> as aaended (the Act)> TVA maintains for each operating nuclear plane a tvo-layer combination of private insurance and industry-vide self-insurance which protects TVA up to thc hcc's currenc maximum aggregate liability oE $ 670 million per nuclear incidenc. This proteccion covers liability fox bodily injury, death>

and lose of or damage to property located oEE- the plant site. The first layer is private insurance, with a currenc maximum mount available of $ 160 million. The second layer, presently $ 510 million, is a program of self-insurance in vhich each nuclear reactor ovner could be retrospectively assessed, for each of its operational nuclear units, sn amount not to exceed $ 5 million per each nuclear incident, snd not to exceed $ 10 aillion per year in the event of aors than one nuclear incident in a year. Any amount in excess of $ 10 aillion in any year vould be carried forvsrd until fully paid. Based on the number of operating nuclear units presently in service, TVA would be subject to a maximum assessment of $ 25 million in the event of a single incident and $ 50 million in any calendar year.

TVA is s member of Nuclear Hutual Limited (NHL) vhich provides nuclear property insurance Eor the Brovns Perry Nuclear Plant for losses up to $ 500 million. This insurance may require thc payment of a retrospective premium of up to approximately

$ 37 million in the event that losses by hHL members exceed its available funds. Property insurance up to $ 500 million is also asincained for the Sequoyah Nuclear Plant, buc is not subject to retrospective assessmencs.

TVA is also a aember of Nuclear Electric Insurance Limited (NEIL), which provides nuclear property insurance for property damage to member nuclear plants in excess of $ 500 million. TVA presently insures all of its operating nuclear plants with NEIL for $ 575 million and is subject to a maximum assessment of approximately $ 18 million in the event losses by NEIL members exceed its available funds.

14. Y~'or custcmers In fiscal years 1986, 1985, and 1984, sales of electric pover to one yederal agency principally in thc fora of emend charges amounted co 10 percent, 11 percent, and 14 percent, respectively, of total operating revenues. This customer in accordance vith contract provisions has exercised its right, through notices eight years in advance, to reduce the aaounc of electric pover to bc purchased. These reductions, amounting to 1>000 megavatts each in December 1989, 1990, 1991>

and 1992, reduce the concracc demand to 485 megavatts to be supplied from December 1992 until the contract expiration in 55.6~81'-4 it'fld'0th 1994. TVA hss taken the reductions into account in its fucure pover supply plans.

1981 'h 8'tdDtt ~ D t'tt tf lb 8'ddl D' challenging TVA's charging of rates to produce revenues to pay interest costs on funds borrowed for construction of nev facilities. plaintiffs sought a declaratory judgment that TVA's action is unlavful and interest t't fy an injunction requiring TVA to "refund" to consuners about $ 1 billion in alleged "overcharges," representing current charges collected Eroa ratepayers. TVA moved to dismiss or for summary judgment. The case has nov been dismissed vith the consent of sll parties.

TVA hss been sued, along vith the United States and the Olin Corporation, by a group of plaintiffs numbering almost 10,000, who claim to have been injured by the release of DDT manufactured by Olin vhich overfloved property titled co the United States and collected in a tributary of the Tennosscc River. The original lavsuits vere filed in September and October 1983, and several others have been filed since. The plant site where the DDT vss manufactured vas never under Che custody or control of TVA; custody and control oE the area through which DDT is alleged to have overflovcd vas transferred by TVA to the Army in 1941 for inclusion in the Redstone Arsenal. TVA sought to persuade the responsible parcies to correct any iaproper release of DDT befoxe these suits were instituted, but TVA hsd no responsibility or liability for the discharges. The complaints seek $ 1.2 billion in compensatory and punitive damages from the defendants and an injunccion requiring the removal of all DDT contamination in speciEied areas. The court granted TVA's motion for summary judgment. Olin Corporation and the plaintiffs have reached a tentative settlement under vhich Olin will pay plaintiffs approximately $ 18 million and perform vill other corrective vork. The courc has noc yoc approved the settlement buc it is anticipated that ic do so. TVA will not contribute to the settlement.

TVA employees are specifically subject to the Pederal Employees'oapensation hct. vith respect, to on-the-job injuries.

That statute has an exclusive remedy provision, vhich injured employees often attempt. to avoid by bringing suic against a covorker for allegedly negligently causing the injury. Since TVA hss an administrative policy of defending ics employees, ac TVA's ovn cost> against suits brought against them for actions or oaissions taken in the course of employment, snd paying any resulting judgments> such suits csn lead to double recovery against TVA> a result vhich the statute prohibits. h growing number of such suits have been brought in'recent years. TVA has tried to limit their impact in a number of ways, including tho vaiver of such suits ss a condition for TVA's defense of work-related suits> and the aggressive defense of sued employees on various legal grounds. The courts have been reaching differing conclusions on the different issues raised, and no single definitive decision has been issued. In most of the cases vhich have gone to final judgment, TVA has prevailed either on the lav or the facts, and TVA ancicipates that t i vill be successful in similar cases of this type in the future.

13

certded puphc occounlants Coopers 8 Lybrancl To the Boavd of Divectors of Tennessee Valley Authovity Ne have examined the balance sheets (powev progvam and all pvogvams) of Tennessee Valley Authority as of Septembev 30, 1986 and 1985, and the velated statements of income and retained earnings (powev pvogram), net expense and accumulated net expense (nonpowev programs), and changes in financial position (power pvogvam and all programs) fov each of Che three years in Che peviod ended September 30, 1986 (Exhibits I Chr'ough IV).

weve made in accordance with genevally acceptedOut'xaminations auditing standavds and, accordingly, included such tests of the accounting records and such othev auditing pvoceduves as we consideved necessary in the circumstances.

As discussed in Note 3 Co the financial statements, developments duving 1986 1nd1cate that the nucleav power program of Tennessee Valley Authority will not be completed within the time fvame indicated in 1985. The completed nuclear production plant is pvesently not 1n opevation due Co continuing effovts to comply with vequirements the Nuclear Regulatory Commission mandates for the industry and Che desive to complete additional testing vequived by internal pvoceduves of Tennessee Valley Authovity. Certain nucleav production plant included in constvuction in progvess is consideved substantially complete by Tennessee Valley Authority but has not undevgone fuel loading and low powev testing due to cevtain unresolved safety 1ssues.

Additional nuclear production plant is undev constvuct1on or constvuction has been defevved. The present plan of Tennessee.

Valley Authovity 1s to vetuvn to sevvice all completed nucleav pvoduction plant and to complete constvuction of and to place in service all vemaining nucleav plants. However, there is no cevtainty that the Nuclear Regulatovy Commission will appvove the vetuvn Co service of all plant. Also, theve is no cevtainty .Chat the demand for electvicity will be sufficient to Justify the vetuvn to sevvice ov the complet1on of all nuclear pvoduction plant. Under such circumstances, the Board of Directovs may elect not Co vecovev fvom the vatepayevs all costs associated w1th nuclear pvoduction plant. The ultimate outcome of these mattevs cannot be detevmined at this C1me.

In ouv opin1on, subJect to the effects on the 1986 financial statements of such adjustments, if any, as might have been vequired had the outcome of the uncevtainties discussed 1n the preceding pavagvaph been known, the financial statements refevved to'above pvesent fairly the financial pos1tion of the powev

program and all programs of Tennessee Valley Authority as of September 30, 1986 and 1985, and the results of operations of the power program and nonpower programs and t;he changes in financial position of the power program and all programs for each of the three years in t;he period ended Sept;ember 30, 1986, in conformity with generally accepted account;ing principles applied on a consistent; basis.

Our exam1nat;1ons wer e made for t;he purpose of forming an opinion on the basic financial stat;ements taken as a whole. The supplement;al Schedules A through F are present;ed for purposes of additional analysis and are not a required part of the basic financial statement;s. Such informat;ion has been subJected to the auditing procedures applied in t;he examinat1on of the basic financial st;atements, and, in our opinion, subJect to the effects on the 1986 financial st;atements of such adJustments, if any, as might have been required had the outcome of the uncert;ainties discussed in t;he second preceding paragraph been known, is fairly stated in all material respects in relation to t;he basic financial statements t;aken as a whole.

Knoxville, Tennessee February 27, 1987 15

TY SCHEDULE A TENNESSEE VALLEYAUTH PAGE 1 COMPLETED PLAjVT SEPTEMBER 30, 1986 Accumula ted depreciation Assets and depletion Power Multipurpose dams System allocation; page 21 $ 466,553,732 221,230,992, Project allocations; page 23 89,063 860

$ 17$ 874$ 429 Single-purpose dams; page 25 399,779,694 78,657,799 Steam production plants; page 25 4$ 115,521,905 1,594,349,063 Nuclear production plants; page 26 2,941,917,902 569 $ 635 $ 761 Other electric plant; page 26 2,978 597 994 949 539 918.

Total power 10 991,435 087 3 431 287 962 Nav iga t ion Multipurpose dams System allocation; page 21 372,989,368 79,383,574 Project allocations; page 23 85 533 567 12 044 108 Total navigation 458 522,935 91 427 682 Flood control Multipurpose dams System allocation; page 21 186,3 57, 963 50,060,442 Project allocations; page 23 67,929,777 3,993,117 Single-purpose flood control plant; page 27 2 065 257 284 683 Total flood control 256 352 997 '54 338 242 Recreation and environmental education Multipurpose dams Project allocations; page 23 121, 1 90,342 7,250,911 Land Between The Lakes; page 27 80,571,053 11,109,205 Other recreation .plant; page 27 8,171,161 1,374 857 Total recreation and environmental education 209,932,556 19,734,973 Local economic development Multipurpose dame Project allocations; page 23 44,052,556 3,712 267 Chemical; page 27 158,384,000 60,097,083 General; page 27 171,990,749 27, 996,041 Total $ 12,290,670,880 $ 3,688,594,250 Total completed plant Multipurpose dams System allocation $ 1,025,901,063 350,675,008 Project allocations 407 770 102 44 874 832 1,433 $ 671,165 395,549,840 Single-purpose dams 399,779,694 78,657,799 Steam production plants 4,115,521,905 1,594,349,063 Nuclear production plants 2,941$ 917,902 569,635,761 Other electric plant 2,978,597,994 949,539,918 Other plant 421, 182,220 100,861,869.

Total $ 12,290,670 880 $ 3,688,594,250 17

TENNESSEE VALLEYAUTHORI MULTIPURPOSE DAMS SYSTEM ALLOCATION SEPTEMBER 30, 1986 Assets Multiple-use facilities

~KI 8 Pic kvfck Nilson M>acier Reservoir land and landrights S 14>634>975 S 2>792>005 S 684 >166 S 4,328,508 Highway, railroad, and other relocations and removals 27,434>261 2,631,526 136,355 2,113,711 Reservoir clearing 6,915>483 1,509>836 951,436 3>613,759 Dam structure, excluding power intake section 27,595,304 10>010>763 16,620>753 8,384>889 Roadways 276>832 500>361 2>116 >796 901>410 Village and reservoir facilities 2>498,734 479,783 486>154 1,562,637 Other structures and improvements I 616 232 3 285 538 I 312 330 650 370 Total 80>971>821 21>209,812 ~

22>307,990 21>555,284 Deduct direct flood control investment, contra belov 16,532,000 788>000 Add nonoverilov sections to replace other sections, contra belov Power intake section 2>890>000 550>000 3,900>000 830>000 Lock section 210 000 380 000 125 000 200 000 Total multiple-use facilities, allocated below; note 2, page 8 67 539 821 21 351 812 26 332 990 22 585 2II4 Navigation facilitics Lock and appurtenances 10,108 >810 124,257 >562 28,673,405 21 >727 >975 Channel improvements Deduct nonoverflow section to replace lock section, contra above 210 000 380 000 125 000 200 000 Total before allocation of multiple-usc facilities 9 898 810 123 877 562 28 548 405 21 527 975 Add allocation of total multiple-use facilities shown above; note 2, page 8 Total navigation facilities after allocation Plood control facilities Reservoir land and landrights Add direct flood control investment, contra above 16 532 000 788 000 Total before allocation of multiple-use facilities 16 532 000 788 000 Add allocation of total multiple-use facilities shovn above; nota 2, page 8 Total flood control facilities after allocation Power facilitfes Powerhouse, including intake section 10>768,195 9,494,312 21>912,433 18,061,712 Turbines and generators 10>555>148 12,845,585 30,477,969 Accessory electric equipment 23,750,093 1,249>141 1>778,809 6,180,570 2,789,156 Other power plant equipment 988 534 562 507 2 157 617 684 311 Total 23,561 >018 24,681 >213 60,728 589 45,285,272 Deduct nonoverflow section to replace power intake >

section, contra above 2 890 000 SSO 000 3 900 000 830 000 Total before allocation of multiple-use facilities 20 671 018 24 131 213 56 828 5II9 44 455 272 Add allocation of total multiple-use facilities shovn above; note 2, page 8 Total pover facilities after allocation Total 8114 641 649 8170 148 587 8111,709 984 888,568 531 Accumulated depreciation 36 252 968 26 317 245 8 8 5 54 292 691 835 581 214

Port 0 4 ill 0~hi ka Watts Bar Loudoun S 3,655,377 S 4,427,949 S 4,884,788 S 3,951,317 3>867>303 2,704,136 4,97 I,205 5,111,630 2>436,597 971 >651 953,785 560,341 5>146>272 R>242>856 4>03S>158 8>876>601 366,02o 165>767 70>281 259,733 1,376>486 530,'799 329>495 412 '90 923 568 I 125 103 I 066 094 851 363 17,771>632 18>168>261 16,316,806 20,023,575 1>107>000 1>952>000 786>000 780>000 1,470>000 614,000 1,610,000 440 000 790 000 565 000 940 000 18 991 632 19 321 261 15 543 806 21 787 575 17,747,559 5,298,610 3,161,200 5,709,247 440 000 790 IIOO 565 000 940 000 17 307 559 4 508 610 2 596 200 4 769 247 1 107 000 1 952 000 786 000 1,107,000 1 952,000 7$ 6 000 5,696>982 6,384 >183 4 >991>201 6,257,916 7>801,426 7>889,619 8,052,837 6>887>367 916,021 1>772,527 2,073,714 1>558>947 319 666 592 269 II27 844 5II1 849 14>734>095 16>638>598 15,945>596 15>286>079 780 000 1 470 000 614 000 1 610 000 13 454 09S 15 16II 598 15 331 596 13 676 079

$ 50 253 286 $ 40,105.469 $ 35 423 602 $ 41,01I1,901 319 359 235 818 314 312 $ 15 820 930 $ 17 735 798 19

Norris 812>assoc CD 9 ~08 4

$ 6>796>200 $ 1,678,482 $ 4>494,115 $ 953,908 4,308,463 1,191,433 5 > 519>525 2>801 '96 1,561,459 394,601 575>359 194>329 11,498>748 9>391>491 13>597>164 4,523>438 266,690 246>236 31>728 38>233 254>635 181>775 209>512 12>862 598 156 245 428 951 537 463 432 25>284 >351 139329>446 25>378>940 8,987,698 5,506,000 1 >356,000 3>467 >000 '37,000 19 778 351 ll 973 446 21 911 940 8 450 698 1,318,284 5 506 000 1 356 000 3 467 000 537 000

~6,82 ,28 1 356 000 3 467 000 537 DDD 2>304>628 2>574>032 3>207>819 511>137 2>122>440 5,333>470 6,512,598 1>049>966 3>075,033 787,735 2>067,476 188,325 300 156 542 378 568 054 135 470 7,802,257 ~9,237,61 12,355,947 1,884,898

~Illa'>7 ~~~4. ~42 355 9 7 ~488 898

$ 34 404 892 $ 22 567 061 $ 37 734 887 ~10 872 596

$ 11 228 644 $ 11 520 341 $ 43 685 373 $ 2 835 909 20

SCHEDULE A PAGE 2 Assets Total system allocation Fontana South Holston ~WC ~D1 0** I~r*e Channel dams ~df tl Accumulated S 413>407 S 1,625>350 S 2,424,289 S 4,598,632 S 6>786,681 S 2,117,030 S 71>247>179 1>344>854 9>017,018 3,745>948 6,369>316 8>107,311 2>724,632 94,106>123 232>107 1,033,436 892,864 3>5>808 574,899 575,423 24>333>173 3>205,913 45,779,373 17 >411 >137 11,396>183 17>057,691 7,771 >491 230>545>225 104>768>838 197,851 606,244 211>319 341>593 82,469 24,164 6,703>736 3,580,928 13,185 117 >710 95>069 231,336 317>352 118,425 9,228,539 3,949,077 112 908 3 334 155 I 007 203 926 542 I 037 185 380 587 19 887 731 10 231 436 5,520,225 61 > 513>286 25,787,829 24 >249 >410 33,963,588 13>711>752 456>051>706 122>530>279 623>000 7>623>000 4,9SO,OOO 3,045>000 7>057>000 110>000 55,439>000 13,657,457 1, 160 >000 13,804>000 6,824>702 3 650 00fl I 731 458 4 897 225 53 II90 286 20 837 829 21 204 410 26 906 588 14 761 752 S 418 066 706 8117 428 982 S 216,684>368 S 40,748,991 47,076,989 47,076,989 8,660,216 3 650 000 I 731 458 47 076 909 260,1 11,357 47,677,749 112 878 011 31 705 825 372 989 368 79 3I13 574 1,318,284 623 000 7 623 000 4 950 000 3 045 000 7 057 000 110 000 623 000 7 623 000 4 950 000 3 045 000 7 057 000 110 OIIO 56>757,28 13> 5 , 5 12II 600 679 36 402 485 186 357 963 50 060 442 605,926 5,684,649 2,793>345 4,933,907 4>769,550 4,742,967 115,694>894 55>616,526 1>283,429 6,997>739 1>945,181 2,600,466 6,393,017 5,151>132 147>649>482 97,738,242 209>451 1>257>671 446,821 957,020 2>154,659 1,116,973 30>580,049 17>780>471 131 143 607 477 264 972 424 453 560 604 595 987 10 845 291 7 600 283 2,229,949 14,547,536 5>450>319 8,915,846 13>877,830 11>607,059 304,769,716 178,735,522 1 160 000 13 804 000 6 024 702

~2229 9 9 14'547 536 5 45fl 319 8 915 046 13 877 II30 101170$ 9 290,965>716 171,910,820 175 588 016 49 320,172 466 553 732 221 230 992 S7 750 174 876 06ll 822 031 238 140 533 165 256 S47 841 418 S25 318 fill S47 076 989 Sl 02S 901 063 92 974 910 830 869 053 3 9 959 335 6 9 947 378 016 257 494 3 9 061 962 6 8 660 216 8350 675,000 21

TENNESSEE VALLEYAUTHORI MULTIPURPOSE DAMS PROJECT ALLOCATIONS SEPTEMBER 30> 1966 Melton Hill Nickajack Multiple-use facilities Reservoir land and landrights; note S 2,788,242 S 3,274,631 Highway, railroad, and other relocations and removals 2,667,366 9,106,970 Reservoir clearing 904,169 736,361 Dam structure, excluding power intake section 3,304,667 9>998>80e Roadways 419,617 499,660 Village and reservoir facilities 208,363 402,875 Other structures and improvements 1,229,436 1 228 611 Total 11,521,860 25,247,917 Deduct direct power investment, contra below 2,138,725 Deduct direct flood control investment, contra below Add nonoverflow sections to replace other sections, contra below Power intake section 1,120,000 700>000 Lock section 480,000 950,000 Add sluiceway to replace power intake and water conductor, contra below Total multiple-use facilities, allocated below; note 2, page 8 $ 10 983 135 $ 26 897 917 Navigation facilities Lock and appurtenances $ 9,458,833 S21,423 >792 Channel improvements Deduct nonoverflow section to replace lock section, contra a bove 480 000 950,000 Total before allocation of multiple-use facilities 8,978,833 20,473,792 Add allocation of total multiple-use facilities shown above; note 2, page 8 7 139 037 22 1177,789 Total navigation facilities after allocation 16,117>870 43,351,581 Flood control facilities Reservoir land and landrights Structures and improvements Dam structures and waterways Reservoir facilities Channel improvements Total Add direct flood control investment, contra above Total before allocation of multiple-use facilities Add allocation of total multiple-use facilities shown above; note 2, page 8 402 684 Total flood control facilities after allocation 402 684 Local economic development facilities Water supply Add allocation of total multiple-use facilities shown above; note 2, page 8 Less reimbursement by local agencies Total local economic development facilities after alloca tion and reimbursements Recreation facilities Land and landrights Other recreation plant Add allocation of total multiple-use facilities shown above; note 2, page 8 Total recreation facilities after allocation Power facilities Land and landrights Powerhouse, including intake section 6,275,274 11,978,693 Turbines and generators 6,715>326 13>017,372 Accessory electrical equipment 851>797 1,581,615 Other power plant equipment 567 461 798 577 Total 14,409,858 27,376,257 Add direct power investment, contra above 2,138,725 Deduct nonoverflow section to replace power intake section, contra above 1>120,000 700,000 Deduct sluiceway to replace power intake and water conductor , contra above Total before allocation of multiple-use facilities 15,428>583 26,676,257 Add allocation of total multiple-use facilities shown above; note 2, page 8 3 844 098 3 617 444 Total power facilities after allocation 19,272,681 30 293 701 Total $ 35 390 551 $ 74 047 966 Accumulated depreciation $ 9 346 488 $ 16 077 725 Note:

Nicks)ack includes land and landrights in the amount of $ 1,298,981 acquired for retired Hales IIar pro)ect which is allocated on system basis.

22

SCHEDULE A PACK 3 Assets Total pro)ect Channel allocations Accunulated Tellico Tins Ford Bear Creek Duck River Beech River ~lro e core dans d~erecfse1on e

S 23>705,941 S 8>1311142 $ 13,026,219 S 5,561>053 $ 2,089,256 S 58,576,484 51,348>904 12,363,625 7,880,886 11,148,941 222,931 44,739,623 5,357,147 3,057>250 4 >237,323 512,541 953>368 15,758,159 30,084,731 14,244,947 38>318,358 18>541,607 2,943,715 117,436>834 14,058,800 9,705,490 352,346 1>731>810 80,600 12,789,523 1,563,885 10>726,432 84,141 575,709 645,412 243,166 12,886,098 1,571,013 I 954 965 I 192 083 I 042 164 170 016 66 595 6 883 870 1,625 355 132,883,610 39,425,534 66,812,469 36,579,570 6,599,631 319>070,591 18,819,053 2,138,725 223,899 5,707,000 5>707,000 213,892 1,820,000 379>282 1,430,000 283,342 4 273 000 4 273 000 751,058

$ 132 883 61D $ 43 698 534 $ 61 105 469 8'36 579 570 86 599 631 8 - 8318,747,866 $ 19,794,944 S S 30,882,625 $ 7,308,056 2>145,066 2,145>066 543>864 1,430>000 283,342

~2,1 5,066 1,59 , 1 ~568, 23 919 050 53,935,876 4,475,530 23 919 050 2,145,066 8'5,533,567 12,04 ,108 386,655 386,655 10,022 10,022 5,265 114,479 114 >479 24,540 1,839 1,839 390 2 386 478 2 386 478 506 046 2,899,473 2,899,473 536,241 5 707 000 5 707 000 213 892 5,707,000 2,899,473 ~8,606, 73 750 13 26 576 722 6 991 765 20 775 860 2 926 366 I 649 907 59 323 304 3,242,984 26 576 722 6 991 765 26 482 860 2 926 366 4 549 380 67 929 777 ~993 ll 124,660 19,445 144>105 17,965 6,644,180 9>613,678 8 ~ 554>765 23>045> 129 4,949>724 52,807,476 3,694,302 000 000 5 700 000 199 025 8 899 025 6 644 180 6 613 678 8 679 425 17 345 129 4 770 144 44 052 556 3,712,267 12,175 1,031,094 1,043,269 2>880,810 282,761 1>138,134 1,153,170 5,454>875 861,540 47 838 100 24 471 179 31 774 844 10 608 075 114 692 198 6 389 371 50,718,910 24,766,115 33,944,072 11>761,245 121,190,342 7,250,911 971,562 971;562 7>233>822 25>487,789 5>705,846 3,501,721 23,234,419 9,156,976 794,183 3,227,595 1>136,843 741 720 2 107 758 788,398 13>243>008 55,029>123 16,788,113 2>138,725 223,899 1,820,000 379>282 4 273 000 4 273 000 751,058 8,970>008 51 '74>848 15,881,672 27 905 558 2 621 912 37 9II9 012 I 992 757 27 905 55II 11 591 920 89 063 86D 17 II74 429 S135 764 420 849 963 478 869 106 357 S32 032 740 $ 9 319 524 82 145 066 8407 770 102 8 4 398 431 8 5 667 863 8 4 791 573 8 2 762 852 $ 1 286 II16 S 543 864 $ 44 874 832 23

TENNESSEE VALLEYAUTHORI SINGLE-PURPOSE POWER DAMS AND STEAM PRODUCTION PLANTS SEPTEMBER 30, 1966 Raccoon Fort Patrick Mountain ~Alaehla ~Hear Great Polls Ctoee No. 3 Single-purpose power dams Assets Reservoir land and landrights, including relocations $ 2>457,772 $ 775,306 $ 1,197,243 $ 702,114 $ 237,226 Reservoir clearing 1,463,481 729152 126,855 216,056 28>701 Structures and improvements 70,037,050 1,316 >070 1,899,609 371,416 695,678 Dams and waterways 121 <<151 <<756 17<<151 <<526 4>565 ~ 200 2<<386<<338 5>615>904 Turbines and generators 63,484,702 2,700,097 3,052,738 749,700 1,026,760 Accessory electric equipment 18,382,458 649,102 644,185 436,154 321,998 Other power plant equipment 5,322,262 296,956 275,701 140,928 189,979 Roads, railroads, and bridges 2,096,216 371,808 20,462 22,431 377,029 Village and reservoir facilities 2 633 391 35 169 5 877 009 Total single-purpose power dams 8287 029 088 8 23 333 017 8 11 817 162 8 10 902 146 8 8 493 275 Accumulated depreciation 8 42,883,752 8 11,564 111 8 5 380 633 8 4 899 028 8 4 434 259 Cn karla d paradise Wide s Creek Shannon ~Kin,eton Steam production plants Assets Land and landrights $ 1,829,568 $ 2,599,996 $ 996,934 $ 504,507 $ 2,330,813 Structures and improvements 92 ~ 792<<215 83>142<<591 47<<551 <<722 51 ~ 960>237 40<<347<<678 Boiler plant equipment 446>693 <<335 609 <<686<<831 296<<450<<188 187 <<991 ~ 184 173 >632<<264 Turbogenerators 72<<174<<227 124 >261 ~ 723 77<<180<<770 80<<100>333 68> 217<<927 Accessory electric equipment 49,332,584 37 <<301 <<196 33<<620>784 20<<198 676

~ 15 <<405<<670 Other power plant equipment 11 454 047 13,589 032 9 811 388 7 557 198 6 171 880 Total steam production plants 8674,275 976 8870 581 369 $ 465 611 786 8348 312 135 $ 306 106 232 Accumulated depreciation $ 173,549,992 $ 181 812 358 8195 707 554 8194 509 324 8172 797 652

SCHEDULE A PAGE 4 Ocoee Wo ~ 2 Blue Ridge Ocoee No. 1 Wilbur Total

$ 20,252 $ 1,572,134 S 230,409 $ 33,717 $ 7,226,173 125,636 29,686 2%610 2,065,177 333,499 1,613,243 243>337 401,997 76,911,899 26,262,213 12,564,467 7,991,181 1,008,485 198,697,070 452,352 542,534 330,295 74'0,191 73,079,369 163,606 512,783 207,748 184>257 21,502>291 185,167 1,300,023 136,688 84,437 7,932,141 13,387 851,894 6,550 1,913 3,761,690 40 802 10 897 6 616 8,603,884 S 27 430,476 S 19 123 516 6 9 186 791 8 2 464 223 S 399,779,694

$ 1,970,585 $ 3,116,762 $ 2,945,203 S 1,463,466 $ 78,657,799 Johnsonville Colhert Gallatin Hull Run John Sevier Watts Bar Thomas HE Allen Total S 108,467 S 279,029 S 690,082 S 2,218,461 $ 1,491,572 S 11,997 $ 142,024 $ 13,203,450 43,082,142 35,375,580 31,383,639 29,883>794 23,423,705 4,847,638 34,958,424 518,749,365 185,930,950 170,127,719 157,750>216 144,879,704 75,309,869 10,526,863 74,226,088 2,533,205,211 57 ~ 056 ~ 907 71 > 240> 523 49 > 278 > 277 29 > 733 >872 33 ~ 465 > 524 6 > 289 > 636 53,003,502 722,003,221 23,411,293 24,214,920 12>320,177 13,101,123 8,615,840 1,805 '02 7,394,243 246,721,708 5 526 941 5 237 192 6 205 977 4,605 809 4 217 726 834 444 6,427,316 81,638,950

$ 315 116 700 6306 474 963 $ 257 62II 368 $ 224 422 763 $ 146 524 236 $ 24,315 780 $ 176,151,597 $ 4,115,521%905

$ 142 688,801 $ 120 143 707 8 95 115 340 6 79 723 573 8 78 570 202 823 811 135 $ 135 919 425 $ 1,594,349,063 25

SCHEOULE A TENNESSEE VALLEYAUTHORI $

PAGE 5 NUCLEAR PRODUCTION AND OTHERWLECTRIC PLANT SEPTEM8ER 30, 1956 Browns Perr Sequoyah Total Nuclear production plants Assets Land and landrights 940,631 $ 3,184,030 4,124,661 Structures and improvements 250,576,352 450,882,558 701,458,910 Rea'ctor plant equipment 466,324,159 761,451,388 1,227 $ 775 $ 547 Turbogenerators 258,527,892 290,753,931 549,281,823 Accessory electric equipment 135,215,313 220,091,554 355,306$ 867 Other power plant equipment 35,131,031 68,839,063 103, 97 0,094 Total nuclear production plants $ 1,146,715,378 $ 1,795,202,524 $ 2,941,917,902 Accumulated depreciation $ 300,306,055 $ 269,329,706 $ 569,635,761 Accumulated depreciation Assets and depletion Dther electric plant Other production plant Gallatin gas turbines 30 $ 433,789 Thomas H. Allen gas turbines 53,024,972 Colbert gas turbines 43,614,023 Johnsonville gas turbines 86 813 327 213,886,111 $ 99,943,071 System control and training center 49 508 589 11 730 945 Total other production plant 263 394 700 111 674 016 Transmission plant, including substations serving wholesale and industrial customers Land and landrights 86,918,640 Structures and improvements 176,27 0,046 Station equipment 745,912,208 Towers and fixtures 328,765,000 Poles and fixtures 89,617,979 Overhead conductors and devices 407,675,621 Roads and trails 6 772 Total transmission plant 1,835,166,266 602,588,682 General plant Communication equipment 88,903,823 31,105,177 Coal land and landrights and mining equipment 212,434,182 3,471,660 Office and transportation equipment 169,386,981 46,641,734 Other, including land and landrights of $ 1,368,711 108 519 450 46 468 808 To'tal general plant 57 9,244,436 127 687 379 Plant leased to others, including land and landrights of $ 12,151,955 203 525 827 97 999 004 Plant held for future use Uranium land and landrights 60,944,596 Coal land and landrights 159 $ 219 Other, including land and landrights of $ 26,906,894 31 758 563 Total plant held for future use 92,862,378 6,422,890 Other physical property, including land and landrights of $ 1,236,440 4,404,387 3,167,947 Total other electric plant $ 2,978 597 994 $ 949 539 918 26

~

TENNESSEE VALLEYAUTHO Y SCHEDULE A OTHER PLANT PAGE 6 SEPTEMBER 30, 1986 Accumulated depreciation Assets and depletion Single-purpose flood control plant, including land of $ 726,828 $ 2,065,257 $ 284$ 683 Recreation and environmental education plant Land Between The Lakes plant, including land of $ 33,888,959 80,571,053 11,109,205 Other recreation plant, including land of $ 723,963 8,171,161 1,374 857 Total recreation and environmental education plant 88,742,214 12,484,062 Chemical plant Land Phosphate land and mineral rights 819$ 772 Other land and landrights 2,120 Total land 821,892 63 060 Buildings and equipment Manufacturing plant and equipment Nitrogen facilities 68,777,657 Ammonia from coal facilities 51,868 653 120,646,310 41,206,36 5 General service facilities Utility systems 22,805$ 249 Other general facilities 14 110,549 36 915 798 18 827 658 Total buildings and equipment 157 562 108 60 034 023 Total chemical plant 158,384,000 60,097,083 General plant Land and landrights 591,715 Land improvements 2,262,512 North Alabama Coal Synthetic Fuels Reserve 1 1 4 $ 236 $ 053 Structures 24,404,144 General utility systems 1,738,251 Data processing equipment 499,292 Engineering equipment 956,224 Photographic and reproduction equipment 1,749,768 Medical equipment 1 $

646,734',300,224 Office furniture and equipment Transportation equipment 11,651 534 $

Alterations to leased plant 1,260,279 Environmental quality equipment 1,893,321 Miscellaneous equipment 6,800,698 Total general plant 171,990,749 27,996,041 Total other plant $ 421,182,220 $ 100,861 869 27

TENNESSEE VALLEYAUTHO SCHEDULE B CONSTRUCTION IN PROGRESS, NUCLEAR FUEL, AND OTHER DEFERRED CHARGES Jg C

SEPTEMBER 30, 1986 Power program All programs CONSTRUCTION IN PROGRESS Construction in progress Generating facilities Watts Bar Nuclear Plant $ 4,031,583,260 $ 4,031,583,260 Bellefonte Nuclear Plant Unit One and common costs 2 909 165 788 2 909 165 788 Total generating facilities 6,940,749 048 6 940 749 048 Additions and modifications to nuclear facilities 521,196,710 521,196 710 Transmission lines, substations, and other additions to power facilities 331 010 987 331 010 987 Other navigation facilities 2,216,033 Multipurpose facilities Columbia Dam and Reservoir 80, 941,258 Other 1,825 789 5 003 130 Total multipurpose facilities 1,825,789 85 944 388 Chemical plant 4,306,289 Recreation and environmental education facilities Land Between The Lakes 332 $ 967 Other recreation facilities 990,431 Total recreation and environmental education facilities 1,323 398 General plant General construction equipment and materials 2, 149,284 Other additions to general plant 28,928,827 35 306 885 Total general plant 28,928,827 37,456,169 Total construction in progress $ 7,823,711,361 $ 7,924,203,022 DEFERRED NUCLEAR GENERATING UNIT Bellefonte Nuclear Plant Unit Two 793,072,000 $ 793,072,000 NUCLEAR FUEL Nuclear fuel in process $ 371,140 $ 371, 140 Nuclear fuel in stock 7$ 920$ 914 7 $ 920,914 Nuclear fuel in reactor 380,735,463 380 $ 735,463 Spent nuclear fuel in cooling 289 415 560 289 415 560 678,443,077 678,443,077 Less accumulated amortization 670,151,023 670,151,023 Nuclear fuel, net $ 8,292,054 $ 8,292,054 OTHER DEFERRED CHARGES Energy conservation costs $ 76,769,351 $ '76 769 351 Recoverable operating costs and other deferred charges 38,966,677 38,966 677 Mine and mill development costs Coal mine development and leases 91,963,832 91,963,832 Uranium mine and mill development and preoperations 62,242,686 62 242 686 Total mine and mill development costs 154,206,518 154,206,518 Total other deferred charges 269,942,546 $ 269,942 546 28

o TENNESSEE VALLEYAUTHO SCHEDULE C DETAILS OF POWER EXPENSE PAGE 1 FOR THE YiEAR ENDED SEPTEMBER 300 1986 d~

~ ~

Provisioa Total before for depreciation 0 ration SVY8hRY 2 1 ( *hlh'l) rue 1 Other Haintenance Other Production Yhultipurpose dame Direct; page 30 $ 21 ~ S94>036 $ 5>995 ~ 781 $ 15 ~ 59802SS $ $ 8>857>963 $ 6,740>292 $

Yc)ltipie-uce; schedule E 9,464>941 I >602 >615 7 >862,326 5>959>577 1>902>749 Single-purpoce dans aod pumped storage; page 32 16>258>495 7>488>701 8,769 '94 4,048>401 4,721>393 Cuaberland Basin projects; note a 12 >114,689 12>114>689 12,114,689 Steam picots; page 34 I >629 ~ 941 >691 119>475>082 1,510,4660609 I 0290>963, 579 89>427,768 130>075>262 Nuclear plants; page 36 385>875>488 100,505,978 285,3690510 20,086>776 153,523,407 111>759>327 Cas turbine plants; page 36 11 826 057 8 538 729 3 287 328 2 388 767 177 378 721 101 Total generation 220)275 97 l3M4IVII TTIIVIIIII 33 3 9 122 261 994 49I 255 920 206 22 244 689 Purchased pover 22> ~09 7 2 - ~0~0907 24>809>142 Interchange pover received 247,129,104 247>129 ~ 104 247>129,104 Interchange pover delivered (29 466 257) (29 466 257) (29 466 257)

Pover purchased and interchanged, 242 472 589 472 242 472 589 System net control aod load dispatching

~22 8 256 813 2 2 202 777 366 ~720 242 22 589 282 202 7 6 720 447 22 282 202 Other Total production 2>360 0087>001 2 5>1 3,252 2211 293,749 ~7,373, 39,122 261,994>494 255>920>206 283>589>921 Transmission; page 36 94>276>826 46>727 >303 41,549,523 25 >804>601 21,744>922 Customer accounts> page 37 68>920 68>920 68,920 Pover concuaer cervices; page 37 24,594,834 24>594>834 24>594,834 Demonstration of pover uce; page 37 20,328,868 20>328>868 20,3280868 Research> development, snd dcaonctrationc; page 37 57,226,373 57 >226>373 57>226>373 Payments in lieu of taxes; note b 195>948>760 195,948>760 195,948,760 hdainistrative and general; page 37 Direct 265,377>800 13,454,779 251>923>021 250>894>932 1>028,089 Hultiple-use 151 443 151 443 151 443 Total operating expence Irv((( 0 Irni >305 325 334 >2 722 735 491 I( 323 439 122 (641 064 465 )278 693 217 8479 538 607 Production expense Iastalled Ratio of average kWh generated includin de reciation capacity at gross generation less station uce Per kWh September 30, 19S6 to inctalled SYSTEH STATISTICS (thousands) Total (mills) (kilovatts) ca acit ( ercent)

Generation Hultipurpose dans Direct; pago 30 7>345>687 $ 21 >594>036 2.940 3>075>690 27.50 Hultiple-ucc> schedule E 9 464 941 1.288 Total multipurpose dans ~734 687 r7705 7.997777 ~22 ~OT>,690 27.50 Single-purpose dame; page 32 668,559 6>329,790 9.468 249>160 30.19 Pumped storage Raccoon Hountain; page 33 (379>114) 9 ~ 928>705 7.253 1,530>000 10.32 Cuaberland Basin projects; note a 11349>915 121114>688 8.974 853>000 18.37 TAPOCO; note c 787 664 326 500 27.63 Total hydro generation 9 ~ 772>711 ~6,03,350 22.00 Steam plants; page 34 85>050,433 I >629 ~ 941 >692 19.164 17,647,360 58.60 Nuclear plants; page 36 (237>561) 385>875>488 5,897,160 Css turbine plants> page 36 20 870 11,826,057 566.653 2 5(D DDD .16 Total generation 94>6061453 32 080 870 36.37 Purchased pover 668,657 24>809,742 Interchange pover received 23,214>712 247,129>104 System control and load dispatching 8,256>813 Wheeling received; note d 865,373 Other 22,282,202 Total system input ~l19,3,19 Delivered under hlcoa Agreement (I >620>600)

Interchange pover delivered (10,859>231) (29,466,257)

Wheeling delivered; aote d 843 942)

Net energy supply &00031 00>22 2,:K6iiV>5 22.452 Shop and internal uses (12,532)

Transmission and transformation losses (3 425 386)

Total kWh sales and production expence 102 593 504 >2 360 087 DDl 23.205 ho!ca:

e. TVA purchases substantially all of the output of eight hydro plants in the Cuaberlaod River .Basin. In accordance vith meaorandumc of understanding vith the corps of Engineers> Department of the Aray, the cuaberland Basin projects are operated for optiaulc productioa of pover in conjunction vith TVA's pover system> subject to flood control, navigation, and other operating requirements of the Atay.

b. Payaeots aade to states and counties ia vhich pover operations are carried out. The basic aaount is 5 percent of gross revenues frccc the cele of pover to other than Pederal agencies during the preceding year> vith the provision of minimum paymenta under certaia circumstances.

c. Operation of tvelve hydro plants of thc hluainua Company of America is coordinated vith the operation of TVA's pover plants under aa arrangeacot vhercby the storage and release of voter Eras the Altos plants is carried out by the company under TVA'e direction. Voder contract effective January I, 1983, only four TAPOCO plants provide generation vith eight Nantahala plants excluded.

d. TVA transmits (vheel ~ ) pover and energy through itc system for transactions froci Big Rivers RECC, and Southeastera Paver Authority to Hicsissippi Pover and Light frees Southeastern Pover Authority to Big Rivers RECC, East Kentucky Pover Cooperative, Southern Illinois Pover Cooperative, and Carolina Pover and Light Company. Wheeled losses for fiscal year 1986 totaled 2104310000 kilovatthours.

29

TENNESSEE VALLEYAUTHOR DETAILS OF POWER EXPENSE FOR THE VEAR ENDED SEPTEMBER 30, 1986 iiI ~KI k >1k 1k Nll Ilk I Cunters-lll ~Nl2 k~Chicka-Direct hydraulic production-multipurposo dame Operation Supervision and engineering $ 1>699>719 $ 127>304 $ 117>944 $ 275>858 $ 182>273 $ 117>638 $ 57>953 $ 70>712 Hydraulic 22,055 6,281 1,374 1>198 12,911 Electric 4,304,728 268,165 272,671 716,033 388,089 276,051 164,311 244,046 Miscellaneous 2 831 461 1111 227 185 935 530 051 222 II59 148 212 76 299 161 063 Total operation 8 857 963 576 696 582 831 I 523 316 794 419 554 812 298 563 475 821 Maintenance Supervision and engineering 470,575 39,905 33>193 95,225 38>299 50>051 21>252 20>284 Structures 607>318 84>696 19>205 133,236 26>389 14 >708 3>746 121551 Reservoirs, dans, and uaterways 398>804 51662 38 >771 131>332 14>030 6>176 6>076 17,770 Electric plant 3,687,793 46,487 119,719 669,570 400,108 145,560 208,706 40,066 Miscellaneous plant I 575 802 100 153 168 319 297 305 186 lill 54 833 48 343 60 529 Total maintcnancc 6 740 292 276 903 379 207 I 326 668 664 964 271 328 28II 123 151 200 provision for depreciation 5 995 781 353 494 420 382 I 012 997 757 486 247 839 447 683 276 728 Total S21 594 036 Sl 207 093 Sl 382 420 83 862 981 52 216 869 Sl 073 979 Sl 034 369 S903 749 kWh generated less station use (thousands) 7>345,687 743,491 763,734 1,315,933 654>596 455>595 388>038 442>190 Total production expense including depreciation per kMh (mills) 2.940 1.624 1.810 2.936 3.387 2N357 2.666 2.044 Installed capacity at September 30, 1986 (kilovatts) 3,075>690 175>000 224,080 629>840 375>300 115>200 103>950 120>000 Ratio of average gross generation to installed capacity (percent) ~

27 950 48 966 39.08 24.02 20.09 45.38 42 ~ 76 42.37 30

SCHEDULE C PAGE 2 Fort South Molten Ntt 0 I 4 N I ill Ck k Cktt ~ctl 9 t SIC ~WC 0 Nl Boone Hill Tfns Ford S 128,482 8 64,720 8 55,393 8 79>158 8 70>784 S 9>530 8 11>574 8 99>378 8 22>022 8 33,726'S 59>216 8 58>200 S 33>846 8 24>008 262 27 7 >384 215 ~ 319 172 >028 108 0 566 140 ~ 388 32 > 191 32 9549 159 > 104 81 > 521 210 ~ 578 143>625 201 >709 109 >858 90 ~ 542 146 252 175 927 106 439 116 952 230 295 10 761 22 327 94 560 27 241 116 230 128 107 43 900 55 460 43 268 552 147 455 966 333 II60 304 676 441 467 60 482 66 650 353 042 130 784 360 542 330 940 304 151 199 172 157,010 22,384 19,987 19,524 4,127 14,848 3,241 3,417 19,089 8,632 10,553 14,488 13,407 12,985 5>684 32,818 19,546 280915 10,359 52>539 534 310 105,723 7,384 100803 24,461 15,799 1,170 20426 16,797 14,927 4,269 9,934 3n,975 14,404 2,453 8,964 2,228 36,927 24,439 4,292 5,007 3,371 1,202,663 98,251 113,183 154,699 86,158 7,439 8,099 106,810 (4,566) 32,373 91,231 44,315 65,278 51,644 163 73II 63 dill 44 040 47 918 77 150 3 232 2 617 61 960'2 679 30377 59 653 49 745 20 701 7,363 I 430 400 215 712 209 931 227 037 261 67II 2II II50 16 896 302 554 26 357 129 033 214.272 127.550 113,141 70,488 289 671 240 390 144 71II 169 982 229 308 33 953 40 616 250 450 91 966 143 745 244 616 107.970 239.522 156.257

$2 2ltll 218 $ 920 076 $ 68ll 509 4701 695 ~932 445 4123 205 0123 *62 $ 914 0!6 S249 107 $ 633 320 5709 836 S619 679 $ 551 835 $ 384 563 524 ~ 369 466 ~ 331 231 >813 1 17 >824 2000400 13 ~ 251 16 ~ 742 435>258 93 ~ 649 79>660 180>507 1 12>883 83 0442 25 981 4.348 1.973 2.970 5.955 4.653 9.304 7 ~ 404 2.100 2.660 7.950 4.376 5.490 6 ~ 613 14.802 166>500 1390140 100>800 117>100 13S>180 10>000 15>000 238>500 38>500 570600 120>600 76>400 720000 45>000 36 17 38 44 26 42 13 19 17 16 15 ~ 37 12 98 20 92 28 01 15 97 17 33 17 14 13 38 6.74 31

TENNESSEE VALLEYAUTHOR!

DETAILS OF POWER EXPENSE FOR THE YEAR ENDED SEPTEMBER 30, 1986 Fort Patrick Total ~Aalaahfa Hydraulic production single-purpose dams and pumped storage Operation Supervision and engineering $ 234,194 $ 609399 $ 22,860 Hydraulic 29,488 32 1,366 Electric 1,173,364 107,877 97,992 Miscellaneous 586,672 48,806 176,939 Total operation 2,023,718 217,114 299,157 Maintenance Supervision and engineering 86,073 4,022 14,044 Structures 82,060 6,660 23031 Reservoirs, dams, and waterways 1,004,221 329,262 189,723 Electric plant 1,056,608 713,764 108,383 Miscellaneous plant 254,053 82,254 28, 861 Total maintenance 2,483,015 1,135,962 343,042 Provision for depreciation 1 823 037 284 490 163,242 Total $ 6,329,790 $ 1,637,566 $ 805,441 kWh generated less station use (thousands) 668%559 260,377 71,139 Total production expense including depreciation per kWh (mills) 9.468 6.289 11.322 Installed capacity at September 30, 1986 (kilowa t t s) 249, 160 82,800 369000 Ratio of average gross generation to installed capacity (percent) 27.75 35.98 22.81 a ~ Excludes kWh used in pumping.

32

SCHEDULE C PAGE 3 Sin le-Pur ose Dams Raccoon Great Falls Ocoee No ~ 3 Ocoee No ~ 2 Blue Ridge Ocoee No ~ 1 Wilbur Mountain S 40,011 $ 27,731 S 21,674 S 11,898 S 38,921 S 10,700 S 599,800 7,538 676 14,365 627 4,884 520 338,974 69,900 149,443 43,022 333,489 32,667 560,591 48,069 40,086 85,410 42,480 129,146 15,"736 863,772 434,592 138,393 270,892 97,400 502, 183 63,987 2,024,.683 11,057 10, 119 19,362 8,779 9,929 8,761 .117, 191 10,588 17629 48,623 3,531 4,896 4,102 77,525 50,681 56, 349 210,701 150,729 14,257 2>519 63,106 75,498 30,994 23,340 17,123 45,234 42,272 1,752,859 23,915 25,167 50,138 12,841 20,951 9,926 227,697 171,739 124,258 352,164 193,003 95,267 67,580 2,238,378 180, 993 110,056 539,934 296,215 207,968 40,159 5,665,644

$ 787,324 $ 372,707 $ 1,162,990 $ 586,618 $ 805,418 $ 171,726 $ 9,928,705 103,472 105, 025 61,389 19,356 34,083 13,718 (379,114) 7.609 3.549 18.945 30.307 23.631 12.518. 7 177a 31,860 28,800 21,000 20,000 18,000 10,700 1,530,000 37.28 41.83 33.52 11.16 21.80 14.85 10.32 33

TENNESSEE VALLEYAUTHORI DETAILS OF POWER EXPENSE FOR THE YEAR ENOEO SEPTEM8ER 30, 1966 Total Cumberland Paradise Widows Creek Shawnee Steam production Operation Supervision and engineering $ 20,244,463 $ 2,651,598 $ 2,668,547 $ 2>133,213 S 1,936,232 Fuel 1,290,963,579 212,935>547 170>432,652 90,279,909 109,065,391 Steam 31,664,839 2>575,224 5,795,411 5,286,110 3,302,321 Electric 11,716,895 812 >687 1,192,657 1,307,906 1,396,219 Miscellaneous 25,801,571 3 931 060 3 440 282 2,934 341 2 017 424 Total operation 1,380,391 347 222,906 116 183,529 549 101 941 479 117 717 587 Maintenance Supervision and engineering 7,626,523 1,284,394 1,155,100 726>864 649,934 Structures 7,148,168 810,818 933,682 960,754 576>143 Boiler plant 79,846,105 7 ~ 998 ~ 324 15>314>232 11>421>935 5,751,914 Electric plant 25,066>395 2,443>313 3,400,405 1,692,109 3,804,179 Miscellaneous plant 10 388 071 I 372 740 1 682 642 1 308 014 7II3 876 Total maintenance 130 075 262 13 909 589 22 486 061 16 109 676 11 566 046 Provision for depreciation 119 475 082 19 080 212 24 190 299 14 11II 571 9 920 542 Total $ 1,629,941 691 $ 255,895 917 $ 230,205 909 $ 132 169 726 $ 139 204,175 kWh generated less station use (thousands) 85,050,433 14;857,313 11>968,314 5,642,564 6,373,996 Total production expense including depreciation per kWh (mills) 19.164 17.224 19.235 23.424 21.839 Installed capacity at September 30, 1986 (kilowatts) 17,647,360 2,600,000 2,558,200 1,968,760 1,750,000 Ratio of average gross generation to installed capacity (percent) 58.60 68.29 57.26 35.06 45.01 34

SCHEDULE C PAOE 4 Kingston Johnsonvil le Colbert Gallatin Bull Run John Sevier Watts Bar Thomas H. Allen S 1,918,943 S 1,642,441 S 1,597,620 S 1,543,892 S 1,385,610 S 1,386,570 $ 10,210 S 1,369,587 140,600,026 91,778,791 142,292,184 92>161,401 114,48o,511 69>550,354 455 57>377,358 2,889,114 3,094,468 2,697,572 1,900,537 1,297,807 1,524,014 (376) 1,302,637 1,431,421 1,447,167 1,261,345 913>402 693,017 737,246 14,520 509,308 2 084,255 2 012 893 I 977 755 2 176 690 I 731 549 I 478,476 80,185 1,936,661 148 923 759 99 975 760 149,826 476 9II 695 922 119,597 494 74 676 '660 104 994 62,495 551 662,693 597>092 421,698 674,752 541,183 535,229 12,641 364,943 474,184 702,258 842,501 4ns>053 467>439 512,478 9,003 453,855 7,326>724 5,631,354 6,946>869 6,137,535 4,067,509 4,145,654 12,468 5>091,587 2,503>770 791,402 2,711,535 3,941,334 347,286 1,450,329 7,730 1,973,003 862 559 71!I 094 865 202 865 587 729 949 530,245 8 722 660,441 II 829 930 II 440 200 ll 787 8tl5 12 024 261 6 153 366 7 173 935 50 564 II 543 829 8'682 195 10 691 086 9 520 392 7 230 451 6 337 125 4 033 166 694 019 4,977,024

$ 169,435 884'119,107,046 S171,134,673 $ 117,950,634 6132,0II7,985 S85,883,761 S849,577 S76,016,404 9,658,246 6,430,2 6 7,918,664 6,637,072 6,346,163 5,223,613 (1,279) 3,995,531 17.543 18.523 21.612 17.771 20.814 16.441 19.025 1,7OO,nnO 1,485>200 1,350,000 1,255,200 950,000 800,000 240,000 990,000 69.39 54.05 70.75 64.34 79.00 78.89 50.07 35

TENNESSEE VALLEYAUTHOR SCHEDULE C DETAILS OF POWER EXPENSE ~

PAGE 5 FOR THE YEAR ENDED SEPTEMBER 304 1986 Allen Colbert Gallatin Johnsonville Total Gas turbine production Fuel expense 874,181 $ 729>656 272,698 $ 512,232 $ 2,388,767 Other operating expense 83 977 49 766 11 319 32 316 177 378 958,158 779>422 2282,017 544>548 2,566,145 Maintenance 179>417 154,343 127,058 260,365 721,183 Provision for depreciation 2 113 671 1,744,491 1 217 352 3,463 215 8 538 729 Total $ 3>251 9246 $ 2>678>256 $ 1>628>427 $ 4>268>128 $ 11 >826>057 kWh generated less station use (thousands) 9,730 4,311 3,473 3,356 20,870 Total production expense including depreciation per kWh (mills) 334.147 621.261 468.882 1 >271.790 566.653 Installed capacity at September 30, 1986 (kilowatts) 620,800. 476,000 325,200 1,088>000 2,510,000 Ratio of average gross generation to installed capacity (percent) .23 .16 .21 .10 .16 9~rower >err ~Se wo oh Total Nuclear production Operation Supervision and engineering $ 62,519>381 $ 42,532,101 $ 105,051,482 Fuel 11,725,714 8,361,062 20,086,776 Coolants and water 473,104 1,655,640 2,128,744 Steam 7,456,939 2,715,204 10,172,143 Electric 3,515,498 867>102 4,382,600 Miscellaneous 10 028 960 21 759 478 31 788'438 Total operation 95 719 596 77 890 587 173 610 183 Maintenance Supervision and engineering 29,863,561 25,647,113 55,510,674 Structures 6,250,760 3,896,912 10,147,672 Reactor plant 13,351,775 '6,785,756 30,137,531 Electric plant 5,367,205 3 >950,623 9,317,828 Miscellaneous plant 4 440 879 2 204 743 6 645 622 Total maintenance 59 274 180 52 485 147 111 759 327 Provision for depreciation 41 097 137 59 408 841 100 505 978 Total $ 196,090,913 $ 189,784,575 $ 385 875 488 kWh generated less station use (thousands) (146,954) (90,607) (237,561)

Installed capacity at September 30, 1986 (kilowatts) 3,456,000 2>441>160 5,897,160 Transmission Operation Supervision and engineering $ 11,849,672 Load dispatching 2,352,950 Stations 4,100>569 Overhead lines 913,594 Transmission of electricity by others 76>951 Miscellaneous 2,896,585 Rents 3 '614 280 Total operation 25,804 601 Maintenance Supervision and engineering 1,237,126 Structures 550,907 Station equipment 10,634,108 Overhead lines 8,318,711 Miscellaneous plant 1,004,070 Total maintenance 21 744 922 Total $ 47,549,523 36

Y SCHEOVLE C TENNESSEE VALLEYAUTH PAGE 6 DETAILS OF POWER EXPENSE FOR THEOVEAR Et)m3ED SEPTEMBER 30, 19d6 Customer accounts Meter reading $ 334>016 Customer records and collections 732,265 Uncollectible accounts 1,371,138 Miscellaneous customer accounts expenses (2 360 499) 0 68 920 Total Power consumer services Amortization - deferred conservation costs $ 20,906,954 Cycle and save participation payments 2,162,820 Supervision and general 277,017 Loan loss expense 1 248 043 Total 0 24 594 034 Demonstration of power use Amortization - deferred conservation costs $ 10 >057 >7 83 3 >302>831 Supervision and general Commercial and industrial 1,623,971 Residential conservation/demonstration 1,765,301 Engineering and computer services 2,107,556 Solar and energy demonstrations 1,133,125 Industrial marketing 990 103 20,980,750 Less reimbursements from power distributors for technical advisory services (651 002)

Total 6 20,328 860 Research, development, and demonstrations Transmission 3,467,374 Demonstration of power use 1,865,298 Administrative and general 9,240,471 Other 42 653 230 Total $ 57,226,373 Administrative and general Direct Operation Salaries $ 15,857,126 Office supplies and expenses 8,775,015 $ 24,632,141 Less transfers to construction and other accounts (5 219 662) 19,412,479 Outside services employed 237,215 Property insurance 10>123,792 Injuries and damages 510,984 Employee pensions, benefits, and PICA 108,416,395 Miscellaneous 45,335,583 Rents 25,001,331 Electricity used by shops and laboratories (526 001)

Total operation 208,511,698 Maintenance General property 1 028 089 Total direct 209,539,787 Allocation from nonpower divisions TVA general offices Direct; schedule P 42,383,234 Multiple-use; schedule E 151,443 42,534,677 Total administrative and general charged to power operations 6252 0)4 464

SCHEOULE O TENNESSEE VALLEYAUTHORI Di 6<<g, PAGE 1 0 DETAILS OF NONPOWER NET EXPENSE FOR THE YEAR ENDED SEPTEMBER 30>> 1966 Multiple"use Direct (schedule E) Total GENERAL RESOURCES DEVELOPMENT Navigation operations Studies and investigations Navigation engineering and investigations 487 >216 $ $ 487,216, General and administrative expenses 31 603 31 603 518,819 518,819 Operation and maintenance of facilities Operation 2I47 >214 4,355,075 4,602,289 Maintenance 496,118 1,370,349 1,866,467 General and administrative expenses 110,670 110,670 Provision for depreciation 3,497 511 1 235 059 4 732 570 Total expense of navigation operations $ 4,?59,662 $ 7,071,153 11 830 015 System flood control operations Studies and investigations System studies and investigations $ 480,548 $ 480,548 General and administrative expenses 8 423 8 423 488>971 488,971 Operation and maintenance of facilities Operation 5,959,577 5,959,577 Maintenance 1,474,779 1,474>779 General and administrative expenses 151,442 151 >442 Provision for depreciation 380 409 1 390 502 1 770 911 Total expense of system flood control operations 869 38D $0 976,300 9 845 600 Recreation development Recreation development 777,869 777,869 General and administrative expenses 17 911 17 911 795 9780 7 95,780 Operation and maintenance of facilities Operation and maintenance 6,391,549 6,391,549 General and administrative expenses 157,267 157 >267 Provision for depreciation 357 061 702 201 1 060 062 Total expense of recreation development $ 1,153 641 $ 7,251,017 8,404,658 Community preparedness Connnunity preparedness $ 100,224 $ 100,224 Operation and maintenance of facilities Operation and maintenance 655 J 743 655,743 General and administrative expenses 11,649 11,649 Provision for depreciation 1 853 335 396 337 249 Total expense of community preparedness $ 102,D77 $ 1,002,780 1,104 065 Regional water quality management Regional water quality management 4,465,238 Provision for depreciation 29,564 General and administrative expenses 83,206 Total expense of regional water quality management 4,578,008 Fisheries and wildlife resources development Fisheries resources development 592,581 Wildlife resources development 959,428 Provision for depreciation 69>777 General and administrative expenses 27 305 Total expense of fisheries and wildlife resources development 1,649 171 38

TENNESSEE VALLEYAUTHO Y SCHEDULE D DETAILS QF NONPOWER NET EXPE SE PAGE 2 FOR THE Il'EAlP7EbÃ)ED SEPTEMBER 30, 1986 GENERAL RESOURCES DEVELOPMENT - continued Environmental protection of public lands and water Environmental protection of public lande and water $ 995 0708

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General and administrative expenses 18 962 Total expense of environmental protection of public lands and water 1 014 670 Environmental education Environmental education 573,482 Provision for depreciation 11,232 General and administrative expenses 11 590 Total expense of environmental education 596 304 Valley agricultural development Innovative research 1,764,495 Preserving farmland productivity 1,302,328 Market development 951>748 Provision for depreciation General and administrative expenses 206 497 Net'xpense of Valley agricultural development 4 225 068 Renewable fuels research Renewable fuels research 4,141,474 General and administrative expenses 137 670 Total expense of renewable fuels research 4 279.144 Forest resources development Forest resources development 1,753,848 Provision for depreciation 17,313 General and administrative expenses 33 706 Total expense of forest resources development 1,804,867 Acidic precipitation assessment Acidic precipitation assessment 389,621 General and administrative expenses 7 372 Total expense of acidic precipitation assessment 396,993 TVA lands planning TVA lands planning 706 739 Industrial skills development Industrial skills development 3,967,551 General and administrative expenses 38 975 Total expense of industrial skills development 4 006 526 Economic development and analysis Economic development and analysis 1,470,271 Townlift 100500 General and administrative expenses 28 436 Total expense of economic development and analysis 1 509 207 Waterway development and engineering assistance Waterway development and engineering assistance 787,905 General and administrative expenses 21 064 Total expense of waterway development and engineering assistance 008 969 39

SCHEDULE D TENNESSEE VALLEYAUTHOR PAGE 3 DETAILS OF NONPOWER NET EXPENSE > 1 07 FOR THE YEAR ENDED SEPTEMBER 30;1986

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GENERAL RESOURCES DEVELOPMENT - continued

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Tennessee-Tombigbee waterway development Tennessee-Tombigbee waterway development $ 1,324,726 General and administrative expenses 22 115 Total expense of Tennessee"Tombigbee waterway development 1 346 841 Special opportunities cities and counties program Special opportunities cities and counties program 3,147,873 General and administrative expenses 54 770 Total expense of special opportunities cities and counties program 3 202 643 Minority economic development Minority economic development 1,049,992 General and administrative expenses 14 744 Total expense of minority economic development 1 064 736 Floodplain management Floodplain management 2,362,007 Provision for depreciation 13,496 General and administrative expenses 34 757 Total expense of floodplain management 2 410 260 Regional water and wastewater supply Regional water and wastewater supply 1,486,296 General and administrative expenses 34 757 Total expense of regional water and wastewater supply 1,521,053 Land Between The Lakes operations Land Between The Lakes operations 6,909,395 Provision for depreciation 1,187,480 General and administrative expenses 149,566 Total expense of Land Between The Lakes operations 8,246,441 Valley mapping and remote sensing Valley mhpping and remote sensing 1,036,005 Provision for depreciation 23,749 General and administrative expenses 20 013 Total expense of Valley mapping and remote sensing 1 079 767 Economic technical assistance Economic technical assistance 3,837 >037 Provision for depreciation '40,494 General and administrative expenses 78 988 Total expense of economic technical assistance 3 956 519 Other general resources development projects Regional air quality management 723 >572 Bristol, Tennessee water project (171>823)

General and administrative expenses 13 693 Total expense of other general resources development projects 565 442 Total expense of general resources development $ 80 155 386

9 TENNESSEE VALLEYAUTHO Y SCHEDVL.E D DETAlLS 06'ONPSWER NET EXPENSE PAGE 4 FoR THE YfAR ENDED sEPTEMBER 3o9 1986 PERTILIZER DEVELOPMENT Research and development Chemical fertilizer xesearch and development $ 11,375,649 Soils and fertilizer research 3,589,656 Development and operation of coal gasification 82>736 Provision for depreciation 5 >572,092 General and administrative expenses 733 855 Total expense of research and development 21 353 988 Fertilizer technology development Fertilizer industry demonstrations 3,658,794 Farm test demonstrations outside the Valley 444>859 Product/process research testing 5,382,000 General and administrative expenses 223 442 Net expense of fertilizer introduction 9 709.095 Developmental production Cost of products distributed Materials used 7,655,521 Direct manufacturing and shipping expense 12,782,459 Indirect manufacturing and shipping expense 3,517,635 Provision for depreciation and depletion 3,158,454 Finished inventory changes (44 319)

Total cost of products distributed 27,069 750 General expenses Other general expenses General and administrative expenses 1,270,757 Provision fox depreciation of idle manufacturing plant and equipment 571,502 Retirement of manufacturing plant and equipment (1,118,028)

Reseaxch program allowance (5,382,000)

Other, including depreciation of $ 4,293 1 436 502 Total general expenses ~3221 267)

Total production expense 23 848 483 Lese transfexs and sales of products Transfers to TVA programs, at market prices 9>788,860 Direct sales 107 947 Total transfers and sales 9 896 807 Net expense of developmental production 13 951,676 Net expense of fertilizer development $ 45,014,759 NATIONAL ENERGY DEMONSTRATIONS Solar energy demonstrations $ 115,096 OTHER EXPENSE OR INCOME Regional management training and other miscellaneous expenses $ 117,791 Maintenance of bridges financed by others on TVA dsms 718,857 Emergency preparedness 48>603 Interest income from receivables (106,847)

Other expense, net 778 404 NET EXPENSE $ 126,063,645

SCHEDULE E TENNESSEE VALLEYAUTHOR OPERATING EXPENSES OF MULTIPLE-USE FACILITIES FOR THE VEAR ENDED SEPTEMBER 30, 1986 Expenses Operation Water control operations $ 2,913,054 Water control investigations 1,991,687 Investigations and control of reservoir ecology 3,056,186 Reservoir release improvements 1,308,728 Plant protection and services to visitors 4,061,674 Operation and upkeep of dam reservations 3,405,590 Operation of reservoir lands 5,686,133 Management services expenses 498 398 Total operation 22,921,450 Corporate management expenses 582,471 Maintenance 5,147,948 Provision for depreciation 5 265 773 Total $ 33,917,642 General and Operation administrative Maintenance Depreciation Total Distributed to Power operations $ 5,959,577 $ 151,443 $ 1,902~749 $ 1,602,615 $ 9,616,384 Navigation operations 4,355,075 110,670 1,370,349 1,235,059 7,071,153 Flood control operations 5,959,577 151,442 1,474,779 1,390,502 8,976,300 Recreation development 6,188,792 157,267 202,757 702,201 7,251,017 Community preparedness 458 429 11 649 197 31Ii 335 396 1 002 788 Total $ 22,921,450 $ 582,471 $ 5,147,948 $ 5,265,773 $ 33,917,642 42

TENNESSEE VALLEYAUTHO ScHEDBLE F GENERAL AND ADMINISTRATIVEEXPENSES FOR THE Y/AR PNC$ ED SEPTEMBER 30, 1986 Expenses Board of directors $ 562,061

~ Office of the general manager 2,596,203 Planning and budget staffs 1,490,316 Washington office 842,095 Information office 4,111,956 District offices 1,008, 934 Citizen action office 1 $ 635 $ 991 Equal employment opportunity staff 2,680,397 Office of audit and evaluation 4,623,394 Division of personnel 9,872,334 Labor relations staff 1,397,546 Division of the comptroller 18,532,042 Office of the general counsel 8,669,460 Environmental quality staff 2,239 $ 433 Other general and administrative 1 429 456 Total $ 61,691,618 Percent Amount of total Distributed to Construction in progress $ 14$ 664$ 410 23.77 Recovered thxough services billed to others 737,246 1.20 Expense of programs Power 42,383,234 68.70 Navigation 31,603 .05 System flood control 8,423 .01 Environmental protection of public lands and waters 18,962 .03 Regional water quality management 83,206 .14 Fisheries resources development 11,590 .02 Wildlife resources development 15,795 .03 Acidic precipitation 7 $ 372 .01 Recreation development 17,911 .03 Environmental education 11,590 .02 Valley agricultural development 206,497 .34 Forest resources development 33,706 .05 Industrial skills development 38,975 .06 Economic development and analysis 28,436 .05 Economic technical assistance 78,988 .13 Renewable fuels research 137,670 .22 Tennessee-Tombigbee waterway development 22,115 .04 Waterway development and engineering assistance 21,064 .03 Minority economic development 14,744 .02 Regional air quality management 13,693 .02 Special opportunities cities and counties 54,770 .09 Floodplain management 34,757 .06 Regional waste and water supply 34,757 .06 Land Between The Lakes operations 149,566 .24 Valley mapping and remote sensing 20,013 .03 Multipurpose reservoir operations 582,471 .94 Fertilizer development Developmental production 1,270$ 757 2.06 Research and development 678,790 1.10 Ammonia from coal 55,065 .09 Fertilizer technology development Farm test demonstrations 36,005 .06 Fertilizer industry demonstrations 187 $ 437 .30 Total $ 61,691,618 100.00 43

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