TVA power rates will decline 3.5%

TVA power rates will decline 3.5%

January 14th, 2012 by Dave Flessner in Business Around the Region

Chattanoogans are shelling out less cold cash to pay their winter heating bills this year.

The typical Chattanooga Gas Co. residential customer paid $21 less to heat his or her home last month than a year ago due to above-average temperatures and falling natural gas prices in December.

Electricity users also are spending less this winter than last year and will enjoy another 3.5 percent rate reduction in February from the Tennessee Valley Authority.

For the fifth time in the past six months, TVA announced Friday it will cut its monthly fuel cost charge to reflect the cheaper cost of generating or buying power.

The fuel cost cut in February should save the typical residential electricity user anywhere from $2 to $4.50 on the monthly light bill, TVA spokesman Scott Brooks said.

"We had a milder December with more rain, which means we had to purchase less power and got more hydro generation," he said.

The power produced at TVA's 29 hydroelectric dams is the cheapest power source for TVA. Power costs also are being cut by the decline in the price of natural gas, which fell this week to the lowest level in more than two years in trading on the New York Mercantile Exchange.

"The beauty of the fuel cost adjustment is that TVA gets more money when it needs it to pay for more expensive fuel, but they don't get it when fuel prices decline," said Donald E. Huffman, executive director for Associated Valley Industries, the Chattanooga-based trade group that represents commercial and industrial customers served by TVA's 156 distributors.

"In the past," he said, "TVA raised its base rates when fuel costs went up but then rates never went down when fuel got cheaper."

Despite a 2 percent base rate increase in October, TVA's fuel-adjusted charges overall are still down by more than 8 percent since September.

The price cut is even more dramatic for natural gas customers. Steve Lindsey, president of Chattanooga Gas, said the average residential gas bill in Chattanooga last month was $74 compared with $95 in December 2010.

"Historically low natural gas prices coupled with this year's mild winter temperatures reduced our customer's bills by an average of 22 percent a month," he said.