KNOXVILLE - The Tennessee Valley Authority could avoid a scheduled rate increase next month and cut industrial rates by 30 percent if it scraps its oldest and dirtiest coal plants and finishes its incomplete nuclear plans using outside financing, according to a proposal presented today by former TVA Chairman Dennis Bottorff and energy consultants from Credit Suisse.
"We have a unique opportunity in time with these half-finished nuclear plants and the potential of alternative financing to better meet the goals we established of having clean, reliable and low-cost power," Bottorff said. "This direction is very different from the one that was laid out at the August board meeting (when TVA adopted its fiscal 2014 budget)."
Bottorff is leading a group that is proposing that TVA phase out all but its Cumberland and Kingston coal plants, idling 29 of its remaining fossil plants that are yet to have coal scrubbers and other pollution controls. That would free up more than $8 billion that TVA would otherwise have to spend on cleaning up and maintaining those plants. Those savings could be used to help cut rates and, along with outside investors, fund completion of both the Watts Bar Unit 2 reactor and two incomplete reactors at the Bellefonte Nuclear Plant in Hollywood.
Steven Greenwald, senior adviser of global project finance at Credit Suisse, said investors are ready to put up to $1 billion of equity investment as part of a $10 billion "take-or-pay" financing scheme that could finance the nuclear units and keep TVA beneath its debt ceiling. TVA would guarantee repayment of the debt, but the outside financiers would quality for production tax credits, which TVA does not as a government utility, and such debt would not count against TVA's $30billion debt cap, which limits how much TVA can borrow for future projects.
The plans "would dramatically reduce TVA's carbon footprint and would provide a low-cost source of power and money to keep rates lower," Greenwald said.
The group presented its proposal before a hearing here before U.S. Sens. Bob Corker and Lamar Alexander, and U.S. Rep. Jimmy Duncan, all Tennessee Republicans. The congressional representatives said any decision must be made by TVA's 9-member board, whose members attended today's meeting just a month after adopting a much different $10.3 billion budget. The TVA budget boosts TVA rates by 1.5 percent in October, calls for adding scrubbers at some coal plants and suspends work on the Bellefonte nuclear plant for at least a couple more years.
Alexander, who chaired today's meeting, said his chief concern is not where the power or money comes from, but what keeps rates the lowest.
"Nothing has been more important to the rising economic health of the Tennessee Valley in the past 80 years than the Tennessee Valley Authority," Alexander said. "As a former governor who spent a lot of my time recruiting new businesses to Tennessee, I know how important keeping electricity rates low is to helping businesses get our economy moving again."
TVA President Bill Johnson said TVA studies show natural gas and coal plants, even with scrubbers, would be cheaper than nuclear. He also questioned the need to finish Bellefonte, saying TVA won't get back to the 2007 peak demand until 2023 and peak power demand is projected to grow just 0.4 percent, or only only half the pace of the previous decade and only a fraction of TVA's long-term growth.
"That will allow us to reduce our debt over time," Johnson said.
Read more in Saturday's Times Free Press