Tennessee Valley Authority directors today will decide on a staff recommendation to increase TVA's base electric rates another 1.5 percent in the fiscal year that begins Oct. 1, matching the incremental rate hikes TVA adopted in each of the previous two years to help the federal utility keep pace with rising costs and pay down its debt each year.
But ahead of the October rate increase, TVA will be lowering its electricity rates in September by even more due to a drop in its monthly fuel cost adjustment.
TVA is cutting the fuel portion of its electric bills next month to the lowest level in 15 months after a milder summer and drop in gas prices combined to cut TVA fuel expenses. For the typical EPB residential customer who uses 1,292 kilowatthours of electricity a month, the drop in fuel portion of the electric bill will cut the average residential bill by 3.2 percent, or $4.47 per month compared with a year ago, cutting the bill to $135.89, EPB spokesman John Pless said. In August the rate for such usage was $139.73 in Chattanooga.
"This is good news and reflects the milder weather and cheaper natural gas prices we saw this summer," TVA spokesman Jim Hopson said. "Fuel costs are based upon the actual costs of fuel to meet demand in the period two months earlier to allow enough time to calculate the actual costs and we saw a drop in fuel expenses at that time."
The fuel portion of power bills is priced at its lowest rate since May 2016.
TVA adjusts its rates each month based upon its fuel expenses and typically sets its rates for all other expenses once a year at its August board meeting.
At today's board meeting in Knoxville, TVA directors are scheduled to adopt a budget for fiscal 2018 for electricity sales in its 7-state region. The proposed increase would cost the typical Chattanooga residential electric user about $2 more a month, an average, throughout the year.
Despite the economic growth in the Tennessee Valley, power demand has remained relatively flat over the past decade due to improved energy efficiency, more conservation and growing self generation from solar, wind and other forms of distributed power.
While sales have been relatively flat, TVA is trying to shore up its underfunded employee pension plan and pay down its long-term debt obligations, which total more than $26 billion.
TVA completed its $5 billion Unit 2 reactor at its Watts Bar Nuclear Plant last year and has no plans to add more baseload power anytime in the next decade, which should help the utility to pare its debt over the next decade. TVA has already trimmed its annual operating expenses by $600 million through staff and maintenance changes since Bill Johnson was elevated to CEO of TVA in January 2013.
Even with the rate increase the TVA board is expected to adopt today, TVA power rates remain in the bottom quartile of all electric utilities in the country.
TVA also sometimes changes how it bills for power. In a notice last week to the local power companies that distribute TVA-generated power, TVA indicated it may alter its rate structure in October 2018.
Although no specifics have yet been negotiated between TVA and its biggest customers, officials are reportedly discussing how to better price TVA electricity to cover the utility's fixed expenses as more distributed energy is produced through solar, wind or other self generating sources.
Customers with solar, wind or other self generation may generate more of their own power at times, but they are still dependent upon the local power company and TVA, in most instances, to meet most or all of their power demands at some periods. To meet that demand, utilities must still build and maintain a transmission and distribution network for power delivery even if they get less in power sales than in the past.
But solar producers complained last week that TVA is not paying enough for the renewable power it gets from its customers through its small scale solar energy program known as Green Power Providers. The program allows homeowners and businesses to invest, install and interconnect solar energy systems to the grid and be compensated by TVA for the power they generate at the same rate that the customer pays for power.
The Tennessee Solar Energy Industries Association said TVA is reducing what it will pay for Green Power Providers, cutting the amount of solar generation in the Valley below that in many other neighboring states.
"Despite our reasonable proposal, TVA has elected to reject industry stakeholder recommendations that we based the realities of the marketplace," said Matt Beasley, president of the state solar industry group. "We are concerned that this decision indicates a genuine lack of commitment by TVA to its own program."
TVA has backed community solar projects, however, including a 1.4 megawatt solar array by EPB along Holtzclaw Avenue that includes 4,408 solar panels. So far, Pless said EPB customers have signed up for about one third of the power generated by the new solar farm and TVA paid for nearly half the cost of installing the solar panels.
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.