Tennessee Valley Authority to raise rates in May

Tennessee Valley Authority to raise rates in May

April 15th, 2012 by Dave Flessner in Business Around the Region

The TVA headquarters building is located in downtown Chattanooga.

The TVA headquarters building is located in downtown...

Photo by Angela Lewis /Times Free Press.

While natural gas is getting cheaper, the price of electricity in the Tennessee Valley is going up.

The Tennessee Valley Authority announced Friday it will raise its wholesale rates by 2.1 percent in May to cover the anticipated higher expenses of buying more power from other utilities as temperatures warm this spring. The increase in TVA's monthly fuel cost adjustment will cost the typical Chattanooga household that uses 1,461 kilowatthours of electricity an extra $2.28 next month, EPB Chief Financial Officer Greg Eaves said.

Despite the monthly increase, TVA said its fuel costs are still 1.5 percent below a year ago. Including the 2 percent base rate increase TVA implemented in October, however, TVA overall rates are still higher than a year ago.

By comparison, natural gas rates across Tennessee are about 15 percent below year-ago levels due to the continuing drop in the price of gas.

"Natural gas prices are the lowest they have been in a decade, and more people are certainly looking to gas," said Randy Nipp, a senior vice president for Jackson Energy Authority and president of the Tennessee Gas Association. "Gas prices are very attractive for home heating and appliances, and there is a big push now to expand gas into the vehicle market."

Natural gas future prices fell last week to the lowest level in more than a decade and less than 20 percent of what they were in 2008. The futures price of natural gas fell to $1.984 per 1,000 cubic feet, its lowest level since January 2002.

Natural gas production has boomed across the country as energy companies employ new drilling techniques to tap previously untouched reserves. Hydraulic fracking has boosted the supplies of gas in the United States, and a mild winter reduced demand for the fuel.

TVA uses gas for some of its power turbines, and natural gas is the primary fuel for much of the power TVA buys from independent power generators. But TVA spokesman Scott Brooks said higher overall demand requires TVA to use more expensive fuels for power supplies in May.

"Lower gas prices certainly help, but the driver for May is mainly based on demand," Brooks said. "The summer peak season usually kicks in around May, meaning demand goes up, which is what we are expecting."