The Tennessee Valley Authority begins a new fiscal year Tuesday by cutting the price of its power for the first time in 13 years for the municipalities and power cooperatives that have agreed to new longer-term contracts with TVA.
Encouraged by the offer of a 3.1% rebate on their electric bills, TVA said Monday that more than 80% of the local power companies that distribute its electricity have already signed 20-year purchase power agreements with TVA.
"We've gotten tremendously positive response with more than 125 (of the 154 local power companies) already signed up and many more somewhere in their review or governance process," TVA President Jeff Lyash said Monday. "I think we'll continue to see more interest and have more that will sign up - and we'll probably have some that determine that it is not right for them and that's OK too."
TVA's budget for the next year suspends the base rate increases that TVA had implemented in each of the past six years to pay down the agency's debt. Lyash has pledged to try to avoid any base rate increases in TVA's 7-state region for the next 10 years.
"We're confident we have a plan that, unless a significant risks materialize, will deliver flat electric rates for a decade," he said.
With a healthier balance sheet and no immediate plans to build any more nuclear, coal or base-load natural gas generation, TVA directors in August adopted a $10.6 billion spending plan for fiscal 2020 without a base rate hike and the offer of ongoing 3.1% rebates to any distributor that signs a 20-year contract to buy 95% or more of its power from TVA. The longer-term contracts replace existing agreements between TVA and its distributors which now have an average tenure of 6.8 years.
The rebates for those distributors signing up the longer term contracts will collectively reduce TVA charges by more than $150 million this year. But Lyash said the 20-year pacts help TVA align its long-term borrowings and power plans with its customer base and help ensure TVA can repay its debt, which still totals nearly $23 billion. TVA plans to cut its debt to the $18-$20 billion range in the next three years.
Despite the rebate offer, TVA has yet to sign up the distributor in its power headquarters in Chattanooga or its biggest power customer in Memphis.
At the last board meeting of the Electric Power Board in Chattanooga, EPB President David Wade said directors and staff are still studying the merits of signing a long-term contract with TVA to gain the rebate savings.
'We want to carefully study the merits and potential concerns about obligating ourselves for such a long-term contract before signing any agreement, so we are still studying it at this point," said Wade, who is also chairman of the Tennessee Valley Public Power Association, the Chattanooga-based trade group which represents TVA distributors.
TVPPA President Doug Peters said Monday the association "supports local decisions and we believe the governing bodies of our 154 members utilities are ideally equipped to determine" whether or not to sign the long-term agreements with TVA.
"We are pleased that TVA has created a wholesale power contract amendment that offers our members benefits they value while also allowing TVA to meet its long-term financial obligations," Peters said.
At Memphis Light Gas & Water - TVA's single biggest customer - the municipal utility has launched a study to determine if it could get cheaper power by generating its own electricity or buying power on the grid.
Environmental groups eager for MLGW to buy or generate new wind, solar or other renewable power are urging Memphis to split with TVA and do more than TVA to promote energy conservation and efficiency.
"With the cost of renewable power going down and new wind generation easily available for Memphis from the west, there are other cleaner and lower cost options for MLGW and they can focus more on people's actual electric bills, not just their power rates," said Stephen Smith, executive director for the Southern Alliance for Clean Energy.
Friends of the Earth also are urging Memphis to split from TVA and turn to the sun and wind, along with backup power from the Midcontinential Independent System Operator (MISO), for power supplies to replace TVA.
Lyash said the new long-term contracts with TVA offer more flexibility for distributors, including a provision to allow 3-5% of their power to come from their own solar or other renewable sources when customers want such power. TVA also has promised to include distributors more in future rate making decisions, including decisions on fiber optic spending and variable pricing schedules.
Lyash said it is up to the city of Memphis to decide its energy future. But the TVA president said he believes the federal utility offers the best overall value for Memphis with the prospect of stable and reliable power, an award-winning economic development program and payments in-lieu-of-taxes equal to about 5% percent of utility sales.
If MLGW produces its own power or buys on the grid, it could lost such tax equivalent payments and development assistance from TVA and may not be able to maintain the same power reliability, which TVA has maintained above 99.999% for the past 18 years.
"We want to keep Memphis as a customer, but most importantly we want to keep Memphis as a key member of this Tennessee Valley public power model because I think that is in the best interests of everyone in the long run," Lyash said. "But I understand this is a decision they need to make."
Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.