Chattanooga: Electric rates drop 7%

Chattanooga: Electric rates drop 7%

April 1st, 2009 in Business

Electricity prices will drop another 7 percent today across the Tennessee Valley as TVA implements its second rate reduction of the year.

But following last year's record run-up in electricity rates, the monthly light bill for most Chattanoogans will still be higher this spring than it was a year ago.

EPB, one of the 159 distributors of TVA-generated power, announced Tuesday that the average Chattanooga household should save $7 a month in what is paid for electricity under the fuel-cost adjustment, effective today.

TVA President Tom Kilgore, who announced the April rate cut in February, said the change is due to lower costs for coal, natural gas and purchased fuel by TVA, which supplies electricity in its seven-state region.

"In these economically challenging times, we are especially glad to lower fuel costs," Mr. Kilgore said when he announced the rate cut.

The typical Chattanooga household that uses 1,300 kilowatt-hours of electricity in a month should save about $7, according to EPB estimates.

The drop in TVA's fuel cost adjustment today follows a similar 6 percent drop in TVA rates in January because of lower fuel costs.

Despite the two quarterly reductions, however, TVA rates are still up from a year ago. TVA boosted rates by 20 percent last October, following a 7 percent increase in April 2008. Most of last year's rate increases were due to a spike in the price of coal, gas and other fuels.

TVA adjusts its rates every three months to reflect the change in the cost of fuel used to generate or purchase power for the federal utility.

Jack Simmons, the head of the Chattanooga-based trade group for TVA distributors, said today's rate cut "is certainly welcome by all consumers."

"The fuel cost adjustment is designed to work in this way so that when fuel costs go up we pay more but when they go down we pay less," said Mr. Simmons, president of the Tennessee Valley Public Power Association.

The economic slowdown has cut the price of both natural gas and coal from peak levels reached in the spring of 2008.

Chattanooga Gas Co. made a similar reduction of 6.4 percent on March 1.