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Tennessee: Electric rates outpace inflation, wages

By: Dave Flessner
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By: Jason Reynolds
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Harold DePriest

With four children in their East Lake house, John Dennis and his wife had to get an extension this week on their $250 monthly electric bill until Mr. Dennis gets paid today.

The 34-year-old mill worker isn’t sure how he is going to be able to pay even-higher power bills after the third rate increase in the past six months from the Tennessee Valley Authority takes effect.

“It seems like prices are going up on everything from gas to food to electricity,” Mr. Dennis said. “But my wages aren’t going up any. We’re living paycheck to paycheck, but sometimes even that is hard.”

TVA and its distributors are raising electric rates today by nearly 20 percent, adding an extra $20 to the typical monthly residential light bill. Combined with previous rate hikes in April and July, electricity prices are up by more than one-third from a year ago, or nearly 10 times more than the average wage rate increase in Chattanooga in the past year.

Soaring coal and natural gas prices, combined with a three-year-old drought that has dried up more than half of TVA’s low-cost hydroelectric generation, have produced the biggest yearly increase in TVA electric rates in the agency’s 75-year history.

Today’s TVA rate increase, if sustained for the next year, will drain more than $1.4 billion out of Tennessee to pay for coal, natural gas, nuclear fuel and purchased power from other states, officials have said. That’s equal to more than twice the expected economic benefit for Tennessee from the Volkswagen plant planned for Chattanooga, according to estimates by the University of Tennessee.

Area school systems and governments are facing higher-than-budgeted increases in electricity costs this fall at a time of lagging tax collections.

“We were caught off guard, frankly, and it’s probably going to cost us another $100,000 this year,” said Johnny Cordell, director of Sequatchie County Schools. “I wish TVA would give us a heads-up to let us know what was coming.”

Tommy Krantz, chief financial officer for Hamilton County Schools, said TVA’s rate hike will cost the system an extra $1.2 million above the $6.6 million spent a year ago.

“We had projected a 10 percent increase, so this is double,” he said. “It’s tough to absorb, especially with this economy in a very precarious situation, but I think we’ll be fine.”

Higher electricity rates are projected to cost Bradley County schools another $300,000 and Walker County schools another $230,000 this year, officials said.

The city of Chattanooga has a little more than $9 million budgeted for electricity use, including street lights and traffic lights, said Daisy Madison, the city’s chief financial officer.

“We’re in the same position anyone else is,” she said. “You have to make adjustments to other areas ... to help hold down costs.”

For Tennessee’s state government, the TVA rate increase is projected to boost its electric costs by at least $4 million in the next year, according to preliminary estimates.

“Energy isn’t a huge cost when you look at the state’s overall budget,” said David Goetz, commissioner of finance and administration for the state. “But in a year where we’re seeing revenues dip and the national economy tank, every dollar is important.”

Chattanooga consumers must absorb rate increases not only from TVA, but also from Tennessee-American Water Co., which is raising residential rates by an average of 73 cents a month, and by the city of Chattanooga’s sewer department, which is adding another 65 cents, on average, to residential sewer bills.

Leta Davis, a single mother of three, on Monday managed to close the purchase of a home off Bonny Oaks Drive. But as she signed up for electric service, she worried about this week’s increase in power rates.

“I’m having a hard enough time as it is already, and I sure don’t need to be paying even higher rates,” she said.

While TVA passed the rate hike, most customers will see the increase on their bills from local electric companies.

TVA produces electricity and sells it to distributors across the Tennessee Valley, including EPB in Chattanooga, which deliver power to homes and businesses.

Every year, EPB disconnects about 15,000 customers for nonpayment, including 3,000 customers who are disconnected multiple times, said EPB President Harold DePriest.

EPB works with customers on giving extensions on their power bill, but some cases reach the point where the customer cannot pay and EPB must shut off their power, he said.

“It’s one of the tougher parts of the business,” he said. “We have the responsibility to cut people off.”

EPB in July gave many of its 345 electric workers an average raise of 3.5 percent based on productivity, Mr. DePriest said. Managers received an average raise of 4 percent, he said.

The annual raise was set in the spring, before TVA’s announced rate hike. Mr. DePriest said he would rather reduce the work force than freeze salaries.

EPB has reduced its electric work force by about 127 jobs in the 12 years he has headed the company.

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