North Alabama power company gives up fight to break up TVA power fence

Electric co-op signs long-term contract with TVA, abandons its FERC appeal

The Tennessee Valley Authority building in downtown Chattanooga is shown in 2016. / Staff file photo

One of the four local power companies seeking to break apart the 7-state fence that limits power exchanges in and out of the Tennessee Valley is abandoning its fight for transmission access to buy power from other wholesale suppliers and is sticking with the Tennessee Valley Authority.

The Joe Wheeler Electric Membership Cooperative, the fourth largest electric co-op in Alabama with more than 43,000 electric customers in Morgan and Lawrence counties, will begin a new 20-year agreement Wednesday to buy nearly all of its power from TVA in exchange for getting a 3.1% credit that is expected to save the utility about $2 million in the next year.

Joe Wheeler has distributed electricity generated by TVA since it was created in 1937, but the co-op initially balked at signing another long-term contract with TVA last year when other wholesale power suppliers were offering the prospect of cheaper electricity.

"We were weighing our options to see what else was available, but the board decided last Tuesday to go ahead and join with the others and sign a long-term contract," said Michael Cornelison, communications director for Joe Wheeler EMC.

Among the 153 municipalities and power cooperatives that distribute TVA power in its 7-state region, 145 have now signed 20-year power purchase agreements to buy nearly all of their power from TVA.

The Joe Wheeler EMC gave notice Tuesday to the Federal Energy Regulatory Commission that it is withdrawing from a petition filed by four TVA distributors in January seeking a regulatory order that TVA be required to grant open access to outside power suppliers within TVA's 7-state region. In their initial 55-page filing, the local power companies claim such access is needed to bring cheaper power to the region and help reduce power rates for their customers.

Volunteer Energy Corp., and Athens Utilities Board in East Tennessee and the Gibson Electric Membership Corp., in West Tennessee are still seeking a FERC order that TVA open up transmission within its service territory so local power companies can get access to the cheapest power available.

Under the 1959 amendments to the TVA act, a so-called fence was erected around the TVA service territory to block most non-emergency or supplemental power sales by TVA outside of the Tennessee Valley or by other wholesale power producers into the TVA region. Congress adopted the fence at the urging of private power companies in the South that feared TVA would try to undermine their prices and service regions by expanding power delivery outside of the Tennessee Valley.

Rody Blevins, president of Volunteer Energy Corp., and a long-time critic of what he says are inflated TVA electric rates, said Tuesday he was "disappointed" by the decision of Joe Wheeler. But Blevins said their decision won't alter the justification for FERC to open up competition among wholesale suppliers in the Tennessee Valley.

"We're simply asking that FERC grant us the same transmission access to power that exists everywhere else in the country," Blevins said. "TVA likes to brag about their recent pandemic credit and their outlook for rate stability, but our studies show TVA charges are still at least 25 to 30% higher than what we could get from other wholesale suppliers."

Blevins said Volunteer continues to pursue the option of splitting with TVA, which has supplied Volunteer Energy's electricity since the utility co-op began in Decatur, Tennessee in 1936. Blevins said TVA has been earning two to three times its normal operating profit in recent years and has lowered its debt to a point it could further reduce the price it charges local power companies for its electricity.

"We think if we get a positive FERC ruling (ordering TVA to open up access to its transmission lines to outside power suppliers) it will actually help the Valley by opening up more competition," Blevins said. "Without it, we don't think there is any reason for TVA to get their rates in line."

TVA insists it is committed to keeping rates low, noting that its power prices have actually dropped in the past decade due to cheaper fuel, less debt and streamlined operations. TVA has granted credits for pandemic relief and recovery and for long-term partners to help lower its power prices to below about 70% of all utilities for residential customers and below about 90% of utilities in its industrial rates.

TVA welcomed the addition of another local power company signing the 20-year power purchase contracts, which TVA officials say helps make TVA and the local power companies "partners" capable of making longer-term decisions.

"We're very pleased to have Joe Wheeler EMC as the 145th long-term partner," said Buddy Eller, vice president of communications for TVA. "This demonstrates the ongoing value of the long-term partnership and the strength of the public power model."

Eight local power companies in the Tennessee Valley, including TVA's biggest at Memphis Light Gas & Water, continue to study their options for turning to other power suppliers to replace TVA. Transmission line access is key for many of the local power companies since it would be costly for them to have to build their own transmission lines to wheel power into their territories from other wholesale power suppliers outside of the Tennessee Valley which might offer cheaper electricity.

Unlike most of the country, TVA both produces and delivers wholesale power to cities, co-ops and major industries at rates set by its own board.

The Federal Energy Regulatory Commission oversees and regulates the rates and terms of power transfers in most of the country. But FERC has not previously ruled on ordering TVA, which is another federal agency established by Congress in 1933, to be required to deliver power in its service territory.

The 5-member FERC board currently has a vacancy for President Biden to fill and the panel is scheduled to next meet in late September. There is no indication when a decision will be made about the request to order TVA to transmit outside power to local power companies.

Contact Dave Flessner at or at 423-757-6340.