FLORENCE, Ala. — Electricity rates in the Tennessee Valley will increase again this summer because of the rising costs of coal and the lingering effects of the drought.
TVA officials said power rates for most consumers will go up about 2 percent on July 1 under the automatic fuel cost adjustment made every three months by the federal utility.
“Fuel costs continue to be a hard spot for us,” TVA President Tom Kilgore told the agency’s directors here Monday. “We got some good rain in April, but our hydro production is still below average and every one of those kilowatt-hours we don’t get from hydro we have to replace with expensive gas generation.”
Ken Breeden, executive vice president of customer relations for TVA, estimates the typical household will pay anywhere from $1 to $3 more a month for electricity this summer under the increased rate. Because of higher coal and natural gas prices, the costs of TVA fuel calculated for this quarter were up 24.7 percent from the previous quarter.
The July rate increase comes three months after TVA raised both its base rates and its fuel-adjusted rates on April 1 by more than 12 percent — the biggest single rate increase in electric prices by TVA in more than two decades.
Eston Glover, president of Pennyrile Electric Cooperative Corp. in Hopkinsville, Ky., and chairman of the Chattanooga-based Tennessee Valley Public Power Association, said distributors don’t like the increase but understand why it is needed.
“The cost of fuel is changing daily and it’s certainly not going down,” he said. “That’s why we put this fuel cost adjustment in, so we could distinguish between fuel costs and other capital and operating expenses.”
TVA is being hit by the same forces as other U.S. electric utilities also raising their rates, Mr. Glover said. Georgia Power Co., for instance, asked the Georgia Public Service Commission last month for permission to raise its rates 2.8 percent in June to offset higher coal and other fuel expenses.
TVA also is being hit by a 3-year-old drought, which has cut production of hydropower from its 29 power-generating dams.
“Our current rainfall valleywide is about 80 percent of normal, but the runoff from those rains (into TVA lakes and reservoirs) is far less than that,” TVA Chief Operating Officer Bill McCollum Jr. said. “While the drought has moderated some, we still need significantly more than normal rainfall to be able to build up our water inventory in our eastern reservoirs.”