The Tennessee Valley Authority continues to expand its network of long-term power distributors with the decision by another municipal power utility to sign a 20-year power purchase agreement with TVA.
The Jackson Energy Authority, the 85-year-old, city-owned utility that serves 35,700 business and residential customers in Jackson, Tennessee, spent nearly two years evaluating potential alternative suppliers to TVA before ultimately deciding to stay in the TVA fold. Jackson Energy directors recently approved a rolling 20-year agreement to buy most of the authority's electricity from TVA for the foreseeable future.
Jackson Energy Authority is the 146th local power company in the Tennessee Valley to agree to the long-term partnership with TVA, although seven other utilities that buy TVA power - including TVA's biggest customer in Memphis - have yet to sign the long-term agreements.
"I know a lot of other local power companies signed the long-term power agreement with TVA fairly quickly," said Monte Cooper Sr., vice president of electric distribution at the Jackson Energy Authority. "But for us to move from our old [termination] notice requirement of five years to a new provision with a 20-year notice requirement [to split with TVA] we wanted to take our time and do our due diligence to make sure this is right for the community."
Jackson Energy sees TVA advantages
Jackson Energy hired the EnerVision consulting firm to evaluate alternative power suppliers to TVA. Although other power suppliers would be cheaper than TVA, the recent ruling by the Federal Energy Regulatory Commission that TVA did not have to wheel such outside power into the Tennessee Valley undermined much of the cost advantage, Cooper said.
"When we compared our current contract and the rate that we pay with some of the other offers, there were pros and cons to any decision," Cooper said. "From a bottom-line cost perspective, there was an opportunity to save on what we pay per kilowatt-hour from some other providers. But when we considered the economic development and community investment part of what TVA provides and when you also consider the reliability of TVA's power delivery and their diverse generation mix, we ultimately decided to sign this 20-year agreement."
TVA has offered a 3.1% discount to utilities that sign the long-term agreements, which will save Jackson Energy about $2 million a year from what it now pays TVA for power. Cooper said sticking with TVA also negates the need to build expensive transmission lines to connect with another wholesale supplier.
Debate over cleaner power
Cooper said TVA also offers power with a lower carbon footprint than other power suppliers. TVA generates more than 60% of its power from nuclear plants, hydroelectric dams and wind and solar with less than 40% of its power from burning fossil fuels.
TVA has committed to lowering its carbon emissions from its 2005 levels by 80% by 2035 and has set an aspirational goal of being carbon-free by 2050. Jackson Energy Authority also is planning to build a 25-megawatt solar farm of its own to help generate a portion of its own power, Cooper said.
But environmental leaders insist the municipalities and cooperatives that buy TVA power could get cleaner and cheaper power from building much more of their own renewable generation.
"We continue to think that these long-term power agreements are a bad deal for local power companies and their customers," said Stephen Smith, executive director of the Southern Alliance for Clean Energy. "With these agreements, the local power companies are giving away their power and leverage to TVA at a time when much of the industry is moving away from central station generation to more distributed generation."
Credits for long-term pacts
Smith labeled the credits TVA is providing to utilities with 20-year contracts as "bribery" by TVA to persuade the utilities to sign with TVA using their own money.
"TVA ran up the rates for 10 years and now they say they will give some of it back, but only if you sign a long-term agreement to buy all your power from TVA," Smith said. "These evergreen agreements don't give local power companies much flexibility and I am 100% confident that staying with TVA leads to less renewable power for these distributors."
Memphis Light, Gas and Water, TVA's biggest customer, continues to evaluate alternative supply options to TVA. In East Tennessee, Volunteer Energy Corp. and Athens Utilities Board also are looking at other options even after TVA President Jeff Lyash recently met with the boards of both utilities.
"We asked Mr. Lyash if he was willing to negotiate anything on their contract proposal and he said no," Volunteer Energy President Rody Blevins said Wednesday. "We'd rather work out a contract arrangement [than split with TVA], but TVA just doesn't seem to want to work with anybody on a different contract. It's still an option [to go to another power supplier], but we're still waiting to see what happens with Memphis and some other things."
But TVA Vice President Buddy Eller said TVA actively works with its local power companies as partners to deliver low-cost power and to help the economic growth of the Tennessee Valley.
"This partnership – with 146 of our 153 Local Power Companies -- not only ensures long-term alignment but also provides direct engagement in TVA's business planning process and decision-making," Eller said. "Today, 95 percent of our local power companies have adopted the long-term partnership plan."
Appealing federal ruling
Gibson Electric Cooperative and Athens Utilities Board, two other local power companies that have yet to agree to the long-term partnership with TVA, are asking the Federal Energy Regulatory Authority to reconsider its decision not to open transmission lines within TVA's service territory for outside power suppliers to serve local power companies.
By a 3-1 vote in October, the federal regulatory authority ruled that TVA is not required to wheel power on its transmission lines to serve those in the Tennessee Valley. The TVA Act provides that TVA is the only utility to deliver electricity within its seven-state service territory.
Richard Glick, the chairman of the federal agency that helps oversee America's power grid, agreed with the Federal Energy Regulatory Authority majority in its decision, but he said it may be time to tear down TVA's territorial fence and deregulate the territorial restrictions in the TVA Act that he called "an anachronism."
"While Congress may have had its reasons for erecting the fence in 1959, there does not appear to be any legitimate rationale for having the fence today," Glick said.
Contact Dave Flessner at email@example.com or at 423-757-6340.