Cleveland Utilities has agreed to a new long-term contract with the Tennessee Valley Authority to help gain rebates from TVA this fall to help hold its rates constant and make more capital investments.
The board of Cleveland Utilities authorized the approval of the 20-year agreement with TVA last week and CU President Tim Henderson said he expects to soon sign the long-term agreement with TVA "to make sure that we don't miss any of the credits that will be available."
"We historically have had a very good relationship with TVA and we want to maintain that for our customers," Henderson said. "I think TVA has put forth a good proposal for the LPCs (local power companies)."
In its 2020 budget adopted last week, TVA directors agreed to offer 3.1% rebates in its power charges to any of the 154 municipalities or power cooperatives that sign new long-term agreements with TVA.
The proposed new contracts would require 20-year notice before a local power company could buy power from any other utility. Most such local power companies, including EPB in Chattanooga, currently have 5-year notice requirements.
TVA spokesman Jim Hopson said Cleveland Utilities is among a number of local power companies that have either approved or indicated they plan to soon sign long-term agreements with TVA and many others, including EPB, are studying the new contract proposal.
"We've had quite a bit of interest from a number of local power companies, but it's difficult to provide specific numbers at this point," Hopson said Tuesday. "We are prepared to sign the official agreements as soon as the local power companies are ready. The partnership credit/rebate will be made on the following month's wholesale power bill, beginning with the September credit on the October bill."
If all 154 distributors accept the rebates, the rebates could reduce power charges to local power companies by $225 million a year. TVA President Jeff Lyash said the optional longer-term agreements with TVA distributors "helps minimize risks, improves planning and provides more flexibility for funding" future power projects.
"It's a good deal for us; it's a good deal for the local power companies, and it's a good deal for the customers in the Valley," Lyash said. "I suspect we're going to have pretty significant percentage of our local power companies make this commitment."
In exchange for the longer term contracts, TVA is offering not only the 3.1% rebates on its charges, but also additional flexibility in how local power companies use their funds and additional input into TVA's power-making process."
The new contract will allow local power companies to serve up to 5% of their power load from their own distributed energy sources.
"The Tennessee Valley public power model is recognized, I think, as the most effective and efficient way to serve the Valley and it is TVA's intent over the next decade to make that even better," Lyash said.
Lyash said the 20-year contracts are similar to the agreements negotiated when the Tennessee Valley Authority was created in 1933.
"With these rebates, we should be able to maintain flat rates also," Henderson said. "It will also allow us and other local utilities to invest in the infrastructure on the electric side of things to make the system more reliable and moving forward in a sound and reliable manner."
Henderson said Cleveland doesn't plan to reduce its rates, but will use the rebates to make capital improvements and to help offset its own cost increases involved in the distribution of the TVA-generated power.
Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.