TVA suffers blow, loses biggest customer

TVA suffers blow, loses biggest customer

May 31st, 2013 by Dave Flessner in Business Around the Region

Bill Johnson

Photo by John Rawlston/Times Free Press.

VIDEO

This story is featured in today's TimesFreePress newscast.

OAK RIDGE, Tenn. - The Tennessee Valley Authority is losing its biggest customer today amid growing concerns about rising industrial power rates.

USEC Inc. is shutting down its Paducah, Ky., gaseous diffusion plant, ending uranium enrichment at the 61-year-old plant and idling 1,000 employees over the next year.

"While we have pursued possible opportunities for continuing enrichment, (the U.S. Department of Energy) has concluded that there were not sufficient benefits to the taxpayers to extend enrichment," USEC Senior Vice President Robert Van Namen said in announcing the closing last week.

USEC, which has enriched uranium for TVA and other utilities since 1952, accounted for about 5 percent, or nearly $600 million, of TVA power sales last year. But demand for USEC's enriched uranium has plunged as plans for new nuclear plants were scrapped and a global surplus of uranium developed.

"This is a big blow to employment and blow to us as a provider," TVA President Bill Johnson said here Thursday.

Johnson said TVA had budgeted for such a closing this year, but the USEC shutdown and other industrial sales declines still pushed down sales to TVA's biggest manufacturing firms by a bigger-than-expected drop of more than $100 million in the first half of the current fiscal year. The closing of the USEC plant will further erode TVA's industrial sales.

"Unfortunately, TVA is not as competitive as it once was and some industrial customers have indicated that production may move to plants elsewhere where power is cheaper," said EPB President Harold DePriest, chairman of the Tennessee Valley Public Power Association which represents the 155 distributors.

U.S. Sen. Bob Corker, R-Tenn., said TVA industrial rates have risen more than other utilities in the past decade even though TVA's overall electricity prices remain below the U.S. average. Corker noted that TVA directors can raise power rates without any outside regulatory review, unlike most U.S. utilities.

"We want and need TVA to be successful and competitive with its rates," Corker said.

TVA spokesman Duncan Mansfield said TVA ranked 38th lowest among the top 100 utilities in America in the average price of electricity. The federal utility has set a goal of regaining its top quartile ranking for electricity prices.

Johnson, who became TVA CEO in January, said he is giving "high-level focus" on finding ways to improve TVA's competitiveness.

"Our data shows that our rates on a national and regional basis are fairly competitive, but I think the real question is what do you need to sustain existing industry and expand it and what you need to help attract industry to our region?" Johnson said in an interview after addressing the Tennessee Valley Corridor Summit meeting here. "One of the things we're looking at now is a pricing strategy effort to see, along with our distributors and other stakeholders, if there is more we can do."

Johnson conceded that TVA costs have gone up in recent years. Expenses were pushed higher by unexpected costs to clean up a coal ash spill at Kingston, replenish part of an underfunded pension program, upgrade operations at the troubled Browns Ferry Nuclear Plant and finish a second reactor at the Watts Bar Nuclear Plant. Watts Bar is expected to end up costing TVA nearly $1.5 billion more than what was forecast five years ago.

"It's time for us to really hone in on cost management and efficiency," Johnson said. "In the TVA model, our objective is to keep our rates as low as we can."

Johnson sought to deflect criticism of TVA from those pushing to privatize the government utility, noting that the federal utility actively promotes the growth and quality of life in its seven-state region.

TVA's multipurpose, public ownership has been challenged by Obama administration budget planners, who proposed a strategic review of TVA to see if selling the agency might help lower the federal debt and "put the nation on a more sustainable" fiscal path.

Johnson said in the past five years TVA helped recruit $25 billion of new investment through its economic development programs while protecting billions of dollars of property through its dams and other flood control measures.

"What we're doing is working," Johnson said. "We like to say that for 80 years we've kept the lights glowing, the river flowing and the jobs growing."

Contact Dave Flessner at dflessner@timesfreepress.com.