TVA to extend pandemic relief credits for a third year

Higher fuel prices still push up power costs this summer

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

MARTIN, Tennessee -- The Tennessee Valley Authority is extending its pandemic relief program for another year to provide local power companies with about $230 million of rate relief in the next year.

Despite higher inflation and fuel costs, TVA board members voted during their quarterly meeting at the University of Tennessee at Martin to extend the pandemic relief program for a third year while keeping the utility's base electric rates flat for the fourth consecutive year.

TVA began offering the relief credits during the pandemic and initially said it expected to trim the 2.5% credits for local power companies to 1.5% in fiscal 2023. But TVA President Jeff Lyash said TVA's performance in the past year allowed the utility to keep the rebates provided to its distributors, along with other community assistance programs.

"Our fleet has performed well, and our organization has been strong, so we've been able to continue to hold our costs down even with more inflationary pressure," Lyash said in an interview with the Chattanooga Times Free Press. "It's a performance dividend for our customers based upon TVA outperforming expectations. It comes at a time when fuel prices are up and our customers are feeling that pinch, so we're really glad to be able to do this."

TVA electricity prices still rose to record highs in August due to increases in the monthly fuel cost adjustment TVA includes with its energy charges to reflect the cost of natural gas, coal, purchased power and other fuel used to generate its power. Lyash said the price for coal mined in the eastern half of the U.S. is up 300% from a year ago, while natural gas prices are up 250% over the past year.

As a result of the higher fuel costs, EPB electricity prices in August were up nearly 27% from a year ago in Chattanooga. Although the fuel price adjustment will cut rates in September from the record-high prices reached in August, EPB rates next month will still be up by more than 12% from what rates were a year ago, EPB officials said.

TVA directors voted Wednesday to extend the freeze on base rates that the utility began in 2019. While TVA adjusts its prices based on fuel costs, the federal utility has pledged to keep its base rates constant for the next decade.

  photo  From left, TVA directors A.D. Frazier, Jeff Smith, Bill Kilbride, Beth Harwell and Brian Noland talk with TVA President Jeff Lyash, right, during a board meeting Wednesday at the University of Tennessee at Martin on Wednesday.

Over the past decade, TVA's effective wholesale power rate has maintained an average of about 7 cents per kilowatt-hour, and Lyash said the utility is working to keep its base rates flat in the future.

"We're in the middle of a 10-year plan where we promised to hold rates constant, so that is what we are doing," Lyash said. "If we outperform that plan as we did in the past year, we've established this credit to help our communities."

Lyash said higher interest rates and inflationary pressures on equipment costs and labor expenses are creating challenges for the long-term rate freeze.

"But our team is performing well, and we continue to see strong growth in the valley," Lyash said

TVA estimates more than 70,000 people have moved into the Tennessee Valley in the past year, boosting energy consumption again after several years of flat or declining demand.

TVA also is extending its COVID-19 Community Care Fund for a third year to match local contributions by local power companies and others to fund nonprofit groups aiding those hit by the ongoing pandemic. TVA has provided $5 million each year, helping to fund such programs as Chattanooga United Way's Bridge Fund for rent and utility assistance.

"This gives our local power companies the ability to put funds directly into their communities in programs they determine can best serve their customers," Lyash said. "This is a great thing about public power."

Lyash said the pandemic credit, Community Care fund payments and long-term contract credits provided to most local power companies will total $1.4 billion of payments made by TVA to its distributors over the three-year period ending Sept. 30, 2022.

TVA Chief Financial Officer John Thomas said during Wednesday's meeting the utility is benefiting from its diverse portfolio of power generation, helping keep TVA residential rates below 80% of other U.S. utilities even with this year's higher fuel expenses.

"TVA has one of the nation's cleanest, lowest-cost, most reliable grids, and it's fueling our region's economic growth," Thomas said.

But at Wednesday's meeting, students from Knoxville involved in the SunRise Movement shouted at the TVA board to "buy solar, pass on gas."

The protesters from the Sunrise Movement were removed from the meeting, but TVA Chairman Bill Kilbride said TVA staff will reach out to the students to get their views.

Although TVA is soliciting proposals for up to 5,000 megawatts of more solar and other renewable energy, TVA is also replacing some of its coal-fired power plants with natural gas-fired combined cycle plants. The gas plants are cleaner and produce less carbon than the coal units they replace, but they still emit greenhouse gases that environmentalists say are causing global warming.

In fiscal 2023, TVA projects 29% of its electricity will be generated by natural gas and 16% will come from coal-fired plants.

Sandra Kurtz, a Chattanooga environmental leader who addressed the TVA board during a pubic listening session, said TVA is lagging other Southern utilities in adopting solar energy, which she said studies show would be cheaper than fossil fuels.

"Climate change calls for rapid change over to electric generation that does not continue to produce greenhouse gas emissions that heat up our planet," Kurtz said.

TVA Chief Operating Officer Don Moul told directors during the meeting some gas generation is needed to generate power when the sun doesn't shine or the wind doesn't blow and TVA faces power peaks on cold winter mornings or hot summertime days.

TVA's fiscal year will begin Oct. 1 with a fiscal budget forecasting $12.4 billion in electricity sales, up from the $10.3 billion revenue total forecast a year ago. Most of the increase is due to higher fuel costs.

Contact Dave Flessner at or at 423-757-6340. Follow him on Twitter @dflessner1.