TVA fuel cost pushing rates up

TVA fuel cost pushing rates up

August 16th, 2012 by Dave Flessner in Business Around the Region

Tennessee Valley Authority headquarters and TVA logo

Photo by Miranda Harple

The fuel-cost portion of electric bills will increase again next month in the Tennessee Valley.

But TVA directors are expected to vote today to keep a lid on the size of any base rate increase over the next year.

The Tennessee Valley Authority is raising its monthly fuel cost adjustment in September by 5.9 percent. The increase is the fifth in the past six months. But TVA rates still will be 7 percent below the level of a year ago because of fuel costs reductions during late 2011.

"We continue to benefit by cheaper natural gas and purchased power costs we've seen over the past year, but typically fuel costs increase during the summer months due to warmer temperatures increasing the demand for electricity," TVA spokesman Scott Brooks said. "Higher than forecasted sales in July increased the deferred account amount, which will be reflected in the September fuel cost adjustment."

TVA automatically adjusts its prices each month to reflect monthly fuel cost changes, which trended down in 2011 after jumping higher in previous years.

TVA directors must approve any change in TVA's base rates.

The TVA board will vote today in Knoxville on a new budget for the fiscal year that begins Oct. 1. Last year, the TVA board approved a 2 percent base rate increase. But that was more than offset by fuel cost cuts during the past year from the falling price of natural gas and other fuels.

TVA directors are expected today to keep any base rate increase for next year at or below the 2 percent increase adopted a year ago. TVA officials declined Wednesday to discuss the budget in advance of today's board meeting.

Milder winter temperatures and economic activity have cut TVA sales in the past year, and the utility now expects to report a net loss for all of fiscal 2012. Through the first nine months of the current fiscal year, TVA lost $290 million.

In response to such losses, TVA has cut staff and delayed capital improvements to shore up its finances.

TVA directors are reluctant to raise rates since TVA power prices are above the top quartile goal set by the agency. Among the nation's 100 largest electric utilities, TVA rates averaged the 39th lowest overall, TVA spokesman Duncan Mansfield said.

Industrial rates for TVA are about average and above many neighboring utilities in the Southeast, according to rate studies conducted for the Tennessee Valley Industrial Committee, which represents TVA's biggest manufacturers.

TVA has set a goal of being among the 25 cheapest utilities for electricity prices. For most of its 79-year history, TVA rates have been among the cheapest in the United States.

"For the first time in my memory, TVA has acknowledged that its industrial rates are out of kilter," said John Van Mol, a former TVA manager who now serves as executive director for the Tennessee Valley Industrial Committee. "There does seem to be a focus on improving TVA's competitiveness."