Jack Simmons

TVA opened the way Friday for consumers in the Tennessee Valley to own some of the power plants that produce their electricity.

A Chattanooga-based consortium of TVA distributors is offering to buy into part of new gas-fired power plants to be built or bought by the Tennessee Valley Authority. TVA directors voted Friday to authorize its staff to negotiate a deal with the newly formed Seven States Power Corp., to jointly own generating assets operated by TVA.

Jack Simmons, the executive director of the Tennessee Valley Public Power Association and head of Seven States, said 147 municipalities and power cooperatives in the TVA service region have committed more than $1 million to start the new venture. Within the next 90 days, Mr. Simmons said TVA and Seven States could consider joint arrangements for more natural gas-powered plants in the Valley.

“We think this partnership is a win for all of us,” he said. “It will put equity in the hands of the Valley stakeholders, rather than keeping that equity in the hands of the U.S. Treasury which is where all of the TVA assets lie today. It will also provide voice and choice for our distributors and, most importantly if structured properly, could reduce the cost of delivered power.”

Initially, TVA would guarantee any loans made by Seven States for new power plants, TVA Director Dennis Bottorff said. But after two years, the arrangement would allow TVA and its distributors to share the financing and ownership of new or purchased generating assets. Seven States could use its distributors’ borrowing power to raise money and help TVA reduce its own need for borrowing.

Mr. Simmons said consumers in the Valley will own generating assets, not just the federally owned TVA.

TVA directors applauded the move, which should help TVA gain more power generation without having to spend its own money or bump up against its own $30 billion borrowing ceiling. Ultimately, Seven States plans to use the borrowing power of its member distributors, including EPB, North Georgia Electric Power Cooperative Corp., and Volunteer Energy Corp., to raise money to buy into power plants operated by TVA.

“Since the very first orientation day I had at TVA, I felt this was a good idea,” said Mike Duncan, the chairman of the Republican National Committee who was appointed to the TVA board two years ago. “It’s inclusive of our customers and helps with the cost of our capital.”

For every $100 million that Seven States raises to help finance more generation, TVA could avoid about 1 percent of future rate increases, Mr. Simmons said. To help control its debt, TVA is financing most of its short-term generating additions through both current rate increases and additional borrowing.

TVA is trying to limit its future generation needs by encouraging conservation, but the agency still estimates it will need three more major baseload power plants and several more peaking power plants by 2020. Seven States could help finance a portion of some, or all, of those new plants, officials said.

“Energy conservation is not going to offset all of the thousands of extra megawatts of electricity we see being needed on our system over the next 20 years,” said Ken Breeden, executive vice president of customer resources.