Memphis electricity customers are likely to see their power bills rise by more than 20% if the city’s municipal utility splits from the Tennessee Valley Authority, according to an analysis released Tuesday by TVA.
TVA disputed studies suggesting that Memphis Light Gas & Water could cut its energy costs by buildings its own solar and gas-fired generation and replacing TVA’s wholesale power supply with electricity purchases through a power consortium. TVA President Jeff Lyash said that the draft integrated resource plan suggesting that MLGW could cut costs if it split with TVA underestimated the risks and costs of building new generation and transmission required to make such a change.
Rather than save $122 million a year as the energy consulting firm Siemens projected, TVA estimates MLGW would end up spending $261 million a year more if it leaves the TVA fold, boosting rates by over 20%.
“We believe that critical assumptions, such as construction costs and schedules, capital recovery costs and ongoing operating expenses are understated in the IRP (integrated resource plan) prepared by Siemens,” Lyash said. “The study used costs and schedules that are very aggressive and should have used more realistic estimates.”
In a 75-page study released last month, Siemens analysts estimated that the Memphis utility could save $1.9 billion over the next two decades, or at least $120 million a year in 2018 dollars, by replacing TVA with a combination of self-generated power by MLGW and purchased power from the Midcontinent Independent System Operator (MISO).