EPB holds line on rates, but monthly fuel rates edge higher

EPB holds line on rates, but monthly fuel rates edge higher

June 1st, 2017 by Dave Flessner in Business Around the Region

The EPB building, center, the Krystal Building, right, and part of the TVA Office Complex are seen from an upper floor of the Cornerstone Bank building in downtown Chattanooga.

Photo by John Rawlston /Times Free Press.

Aided by the continuing growth of its fiber optics business, EPB plans to hold both its own power and telecom rates constant in the next fiscal year.

Electric rates will still vary each month according to changing fuel expenses, which will edge electricity rates up a fraction this month over May's level. The Tennessee Valley Authority, which supplies all of the power sold by EPB, also is expected to nudge its base rates slightly higher in the fiscal year that begins in October, similar to the 1.5 percent rate hike adopted last year, and EPB will pass along those higher wholesale rates.

But EPB plans no increase in its own portion of its video, internet electric rates in the 2017-2018 budget year. EPB Chairman Joe Ferguson said Wednesday a lot of the credit for not having to raise rates goes to the utility's Fiber Optics network, which not only provides a smart meter system for the electric system but also allows EPB to offer internet, telephone and video services.

"The amount of increased revenue coming in from fiber optics as a result of now more than 90,000 subscribers has been a huge benefit to us and we estimate has helped to keep our electricity rates about 7 percent below what we otherwise would have to charge if we didn't have the money flowing from our fiber optics side of the business to our electric system," Ferguson said. "We've been extraordinarily pleased by the acceptance of our fiber optic services."

EPB projects the video, internet and telephone services that its fiber optic network provides along its electricity lines across Chattanooga will generate $159.9 million in revenues next year, providing just over $39 million to the electric system for lease payments and other income for sharing the fiber optic lines.

EPB spokesman J. Ed. Marston said EPB will consider rate changes for its video services next January, depending upon what content providers may charge for cable TV services offered by EPB. Marston said it is too early to tell what, if any, rate changes could be made in video rates for calendar 2018. The EPB board will consider if any increase in video rates will be made next year later this fall.

EPB directors are scheduled to vote on next year's EPB budget plan at their June 16thmeeting.

EPB projects electricity sales to its 180,000 customers should total $584.3 million in the next year, which is expected to generate net income of $7.8 million, barring expensive storms or unexpected expenses in the power delivery system.

EPB began offering the telecommunications services to residential customers nearly a decade ago with the aid of a $111.7 million federal stimulus grant to help EPB build out its smart grid network. The fiber optic lines allow the utility to not only communicate with meters and transformers across its entire 600-square-mile service territory for power delivery; such fiber optic lines also gave EPB a communications network to offer the nation's first gigabit-per-second internet connection to every home in its service territory.

EPB initially projected that 35,000 households and businesses would subscribe to at least one of EPB's fiber optic services (internet, phone or cable TV), but the response has turned out to nearly triple the original forecast.

As a result, EPB paid off all of the debt on its telecommunications system this spring. EPB had borrowed $55.8 million in September 2012 for the fiber optic upgrade as part of a $60 million line of credit EPB's fiber optics network maintains.

"We are still maintaining that line of credit, but we have no existing debt assigned to our fiber optics system," EPB spokesman John Pless said.

More than 80 cents of every dollar paid to EPB for electricity flows through to TVA, which supplies all of the electricity to EPB and 154 other municipalities and power cooperatives across its seven-state region. TVA votes on its annual base rate changes at the board's August meeting and it adjusts the fuel portion of its power generating costs every month.

Effective today, the typical Chattanooga residential EPB customer who uses 1,295 kilowatthours of power will pay an extra 12 cents on their June power bill compared with May and an extra $4.46 compared with a year ago due to changes in fuel cost adjustments and other rates.

TVA spokesman Scott Brooks said TVA's average fuel rate is down 8 percent from the three-year average for June. Natural gas prices have come down from the highs reached several years ago, helping to cut fuel costs for TVA, but TVA has been hurt by the loss of its newest nuclear reactor for the past couple of months.

"April was warmer than expected, which led to higher-than-forecast power sales," Brooks said. "Increased hydro generation helped lower costs, but fuel expenses in April as a whole were higher than expected, in part, because of the loss of Watts Bar Unit 2. That generation had to be replaced with more expensive generating sources."

In late March, the structural supports to a condenser on the Unit 2 reactor at Watts Bar failed, causing the 1,210-megawatt reactor to shut down and remain offline while workers repair the damaged condenser. TVA President Bill Johnson estimated last month it will likely be in July sometime before the unit is reactivated.

Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.

This story was updated June 1 at 1:40 p.m. with minor changes.