For the first time in its 85-year history, the Tennessee Valley Authority is proposing to add a grid access fee to what it charges the local power companies that distribute its power in a controversial rate realignment scheduled to gain TVA board approval today.
In response to concerns from its distributors, TVA cut in half its original grid access charge and agreed to consider allowing local power companies some new flexibility in generating their own renewable power, especially to keep or recruit the growing number of businesses wanting to buy clean and green energy.
TVA plans to add a half-cent-per-kilowatt-hour access charge for its sales to local power companies like EPB, effective Oct. 1. If approved by TVA directors today, the federal utility will offset the grid access fee with a comparable drop in the variable energy charge for electricity so that most customers would see little, if any, difference in their power bills over the course on an entire year.
The half-cent per kilowatt-hour grid access fee is expected to generate about $600 million for TVA. Originally, TVA had proposed a penny per kilowatt-hour grid access fee and had studied as much as a 2.5 cents per kilowatt-hour fee, which could have generated as much as $3 billion a year for TVA in more fixed costs, offset by lower prices for the amount of energy consumed.
"This is major structural change in our wholesale rates that we will probably live with for some time so a slower approach is certainly what we thought was in our best interest," said Doug Peters, president of the Tennessee Valley Public Power Association, which represents the 154 municipalities and power coops that sell TVA power. "Let's see how this works and make sure there are not any unintended consequences before we consider ramping this up (with higher grid access fees)."
Peters praised TVA for working with the rates and contracts committee for TVPPA to negotiate the new rate schedule.
After nearly two years of negotiations, TVPPA's board agreed to endorse the half-cent grid access fee and TVA agreed to consider ways to allow at least a limited amount of flexibility in its all-purchase requirements of its municipal and coop customers.
TVA contends that the rate structure will better aligns its charges with actual costs since most of TVA's expenses are incurred regardless of how much power is actually sold.
"This won't generate any more net revenue for TVA, but it is a fairer method of pricing and should help level consumer rates," TVA Chief Financial Officer John Thomas said last week.
Most people probably won't notice much of a difference in their power bill if the rate restructuring is approved as expected today. In response to an environmental assessment that attracted nearly 1,750 public comments, TVA concluded that the change would have no significant impact on the environment.
But consumer groups charge that TVA is shifting more of the fixed costs from its power generation on to its customers in a manner that could hit poor people and low energy users the hardest and continue to shift costs from major industrial users on to homeowners and small buisnesses.
"TVA's own materials admit that the rate shift will increase bills for those who use less energy," said Elder Jimmie Garland, vice president of the Tennessee Conference of the NAACP. "What they don't show is the faces of those low energy users: our lower- and fixed-income brothers and sisters, and studies show some of them are already being forced to make life-threatening trade-offs when faced with high energy bills."
Garland said that 40 percent of households on TVA's system have an income at or below 80 percent of Area Median Income. These low-income customers use 10 percent less electricity than the general population.
Contact Dave Flessner at email@example.com or at 757-6340.