EPB signs 20-year power contract with TVA

Chattanooga utility joins 134 other local power companies to get 3.1% rebate in exchange for long-term contract

Photo by Dave Flessner / EPB President David Wade, right, signs new 20-year purchase agreement with TVA President Jeff Lyash

EPB agreed Friday to a new 20-year agreement with the Tennessee Valley Authority which will help save the local utility about $750,000 a month but largely lock the Chattanooga utility to TVA as its power supplier for decades regardless of how the power market may change.

EPB directors voted unanimously to approve the new long-term contract with TVA, bringing to 135 the number of municipalities and power cooperatives across TVA's 7-state region that have signed 20-year purchase agreements with TVA since the new option began last fall.

Under the long-term pact, TVA will provide a 3.1% rebate to EPB in exchange for the extended contract. EPB Chief Financial Officer Greg Eaves estimates that should save EPB about $750,000 a month and help EPB avoid a local rate increase, which it has not had in five years despite rising costs for distributing TVA power across its 600-square-mile service territory.

TVA has been EPB's exclusive power supplier since the city-owned utility was established in Chattanooga in 1939, but the previous contract with TVA allowed EPB to split with TVA with a 10-year notice.

"We look forward to another 80 years with TVA," EPB President David Wade said Friday as he signed the new contract with TVA. "We are particularly encouraged by the conversations we've had with TVA about their approach to partnering with us on having greater flexibility for local power generation."

photo Photo by Dave Flessner / EPB President David Wade signs new 20-year power purchase agreement with the Tennessee Valley Authority as TVA President Jeff Lyash looks on.

TVA President Jeff Lyash said the long-term agreements he is seeking with TVA distributors help ensure the financial stability for both TVA and the local power companies and "strengthens the public power model " to foster more innovation and investment in the region.

But environmental groups who want TVA and its distributors to do more to promote energy efficiency and renewable power worry that the longer term contracts will limit the development of local solar and other renewable power programs by local power companies since such utilities will be required to buy most of their power from TVA.

"We had hoped that EPB would not sign this 20-year agreement because it locks EPB into TVA and keeps local utilities that sign these long-term contracts from expanding as much with solar power that we believe would be better for the future," said Sandy Kurtz of the Cherokee chapter of the Sierra Club.

The Southern Alliance for Clean Energy and Friends of the Earth are urging Memphis, Knoxville, Huntsville, Alabama and other municipalities which have not yet signed the long-term TVA agreements to avoid such long-term agreements and seek more of the increasingly cheaper solar and wind energy from other sources.

Lyash said each local power company is given the option and is free to decide, but he said he hopes that Memphis Light Gas and Electric, which is considering leaving TVA altogether, will recognize the reliability and cost advantages from TVA and maintain its 80-year service arrangement with TVA.

Lyash said the longer-term contract was developed as an option for local power companies last year as part of TVA's strategic planning for the future after the federal utility succeeded in meeting the debt- and pollution-reduction goals of the previous 10-year plan in six years.

"We now see a decade of flat rates and continued carbon reduction," Lyash said. "As we look at that, we wanted to offer our local companies a deeper, longer term contract that is good for both TVA and our LPCs (local power companies)."

Lyash said the new agreement, while longer in term, still allows EPB the flexibility to self generate or turn to other renewable sources for up to 5% of its power load and that local share could increase in the future.

In Chattanooga, Lyash said the pact with EPB underscores the key role TVA plays in the city where more than 3,000 TVA employees and contractors now work. EPB Chairman Warren Logan thanked TVA for its power headquarters in Chattaooga and said TVA's diverse power generation mix "helps insulate EPB from market volatility in fuel costs which helps keep our customers' electric rates more stable over time."

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.