The agency's board of directors approved the hike and a $10.5 billion fiscal year 2014 budget at its meeting on Thursday. The new fiscal year begins Oct. 1.
The rate adjustment will add about a $1.50 to the monthly power bill of a customer using 1,000 kilowatt-hours of electricity.
TVA's budget for the upcoming year anticipates 4.6 percent lower sales year over year and is about 6 percent less than 2013.
TVA provides power to about 9 million people in Alabama, Georgia, Kentucky, Mississippi, North Carolina, Tennessee and Virginia.