Six months after initially rejecting the idea, the Memphis City Council has approved a plan to solicit energy proposals to potentially replace the Tennessee Valley Authority with another power source.
The move could ultimately cost TVA its biggest customer in six years and cut more than $1 billion in annual revenues for America's biggest government utility. But backers of the move claim it could end up cutting electricity bills for nearly 430,000 customers while potentially supplying greener energy in the Memphis area.
At the urging of the city-owned utility Memphis, Light, Gas and Water (MLGW), the city council in Memphis this week unanimously approved a $520,000 contract with GDS Associates in Atlanta to prepare plans to solicit power supply offers from other utilities and independent power producers outside of the Tennessee Valley. The council had previously balked at the cost and time needed to do the consulting report, but council members ultimately agreed to a new plan that should prepare the bidding process for requesting proposals by this fall and could allow Memphis to decide if it wants to split from TVA early next year.
Under its current power purchase agreement with TVA, MLGW is required to give TVA a 5-year notice before leaving the TVA fold once any decision is made.
Previous studies conducted for MLGW's integrated resource plan and by Friends of the Earth have indicated Memphis could save anywhere from $120 million up to $450 million a year to turning to other power suppliers rather than TVA, including generating some of its own power from solar and wind in Memphis.
"Are we disappointed that this has now taken nearly three years to get to this point? Absolutely," said Karl Schledwitz, the co-chair of a group urging MLGW to split with TVA known as "$450 million for Memphis." "But we are thrilled that the mayor has now brought the parties together to drive a solution to getting open and transparent bids and getting the facts. And we obviously believe that when the bids come in they will be similar to what four different studies have now shown that Memphis can significantly lower its power costs by leaving TVA."
Other local power companies in the Tennessee Valley, including Volunteer Energy Cooperative, Athens Utilities Board, North Georgia Electric Membership Cooperative and the Joe Wheeler electric membership corporations, are also considering leaving the TVA fold after getting offers from other suppliers to provide power at lower rates than TVA. But for most of the smaller utilities to get power from other cheaper sources would require transmitting the electricity over TVA power lines, which TVA is resisting.
With energy demand already projected to remain stable or even decline in the future, the loss of Memphis and other distributors in the Tennessee Valley could require TVA's power operations to shrink in size.
TVA insists when all of the proposals are submitted and analyzed, Memphis will still be best served by sticking with TVA. Last year, TVA estimated MLGW would have to spend up to 20% more than what it would pay TVA to maintain the same reliable electricity service and other TVA benefits from other power suppliers.
"TVA has been respectful and supportive of MLGW's process to evaluate their long-term power options – and we will continue to do so," TVA spokesman Scott Brooks said. "However, we firmly believe that TVA's partnership with MLGW provides the best overall value for the people of Memphis. That value includes low cost, reliable energy; economic development; environmental stewardship; and community support."
Although several consulting groups have tested the energy market for cheaper power in the past, GDS Associates will prepare requests for proposals to test the energy market in real-world economics for the first time to see what is the least-cost option for future power in Memphis.
Herman Morris Jr., a former president of MLGW who is now a consultant for Friends of the Earth, said MLGW's own studies 20 years ago indicated that Memphis could get cheaper power than TVA and other studies since have only shown bigger savings.
"We've been urging for years to take this step to find out what is out there and then we can make our decision whether or not to drop TVA and go with some other providers after we have all of the cards of the table," Morris said Thursday. "We have a lot of people in Memphis facing a high energy burden with the current rates charged by TVA. The consulting study we did by the Brattle Group and other studies done by Siemens and other consultants have consistently shown that TVA is charging more than other power suppliers."
The Friends of the Earth and other environmental groups contend that solar and wind generation could be cheaper than TVA power. The Southern Alliance for Clean Energy (SACE) is urging Memphis to consider splitting with TVA and turning to greener, and often cheaper, energy sources.
"With the information gained from a request for proposal, Memphis could control its own destiny specific to utility costs and become one of the cleanest, greenest cities in the country," said Dr. Stephen A. Smith, executive director of Knoxville-based SACE.
But TVA insists that it is both cheaper and greener than most U.S. utilities and is more reliable as one of the nation's biggest power utilities with two decades of delivering power more than 99.999% of the time
Since 2005, TVA also has reduced its carbon output by nearly 60%, while the utility industry as a whole has cut carbon emissions by about 38% over the past decade and a half, according to the Energy Information Administration.
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.