Pop quiz!
1. What utility told us in early August that Mother Nature and cheaper natural gas helped it double its net income this past spring and set it on target for its most profitable year in its 85-year history?
2. What utility told us one week ago that it would boost rates by another 1.5 percent in October, adding about $2 more to the typical monthly power bill in Chattanooga?
3. What utility did we learn on Saturday has been cutting tax payments (actually in-lieu-of-tax payments) almost steadily by nearly $18 million to states and localities since 2015?
The short three-word answer for each question is the Tennessee Valley Authority - TVA to most of us.
But the long answers to why we're about to be paying more and getting less tax help from the utility, even as the utility makes more profit, are not so simple.
TVA said on Aug. 3 that despite a dip in industrial power sales, colder weather in the winter and hotter temperatures in the spring and summer months this year boosted its overall power sales by 6 percent to nearly $2.7 billion in the second quarter. At the same time, TVA benefited by more abundant rain, which boosted low-expense hydroelectric generation from TVA's 30 power-generating dams. Couple that with cheaper natural gas and other TVA cost-cutting programs (like trimming personnel), and TVA's overall fuel and operating expenses declined by 4 percent - even as power sales climbed.
Good job, guys. And who says burning coal - which harms our air and our planet - is cheap power?
TVA's seven nuclear reactors, 30 hydroelectric dams and other purchased wind and solar generation helped the utility get more than half of its power output this past spring from carbon-free production. A generation ago, most of TVA's power came from a fleet of coal-fired plants. About a decade ago, TVA reached a consent agreement with environmental groups fighting dirty air and began closing coal plants or converting them to natural gas. TVA President Bill Johnson said TVA has cut its carbon dioxide emissions in half since 2005 and expects to release another 60 percent fewer C02 emissions by 2020.
So why the rate increase? After all, one of TVA's core missions as delineated by congressional charter in 1933 was to provide cheap electricity for a depressed region.
Right now, TVA's residential power rates are only among the 25 percent lowest in the country. Its industrial rates are better - among the cheapest 10 percent of all utilities.
Even though TVA is expected to achieve record profits this fiscal year, Johnson says the increase is needed to help pay down the utility's long-term debt. TVA doesn't have stockholders, and because it is a federal utility created as part of FDR's New Deal, it has cheaper borrowing rates than private utilities. TVA power production hasn't been paid for by the federal government in decades, and TVA has, in fact, repaid the U.S. Treasury for its initial funding. These days, we ratepayers pay for expenses and improvements.
But TVA's debt shows up as part of the national debt, making it a political football. Presidents and administrations, looking for ways to trim debt, always jump at the chance to sell TVA to some for-profit utility. If we don't like our rates now, we would really not like them if an investor-owned Duke or Southern Company were in charge.
That may be why TVA - with overall stagnant or declining power demand (except when extreme weather created by climate change created in large part by power plant coal and gas emissions) - hopes to trim the agency's long-term debt to $21.8 billion by 2023. TVA already has reduced its debt by $1.6 billion over the past six years.
Questions of TVA's lower tax payments despite higher power sales also require a convoluted answer.
Under the TVA Act, the federal utility is exempt from property taxes. Instead, it pays 5 percent of gross proceeds from its power sales in what's called in-lieu-of-tax payments to states and localities. As we've already established, TVA has had higher power sales this year thanks to the year's weather. So at last Wednesday's board meeting, TVA directors approved nearly $523.7 million for its tax-ish payments. That's up $6.5 million from the previous year but still down more than $11 million from 2016 and down nearly $18 million from what TVA paid in 2015.
But environmental and consumer groups claim much of that is numbers salad, and the bottom line is that power costs for consumers are still too high. Some object to the utility's decision earlier this year to shift more costs of power onto the fixed portion of our bills, rather than charging by how much power we consume. Coupled with the fact that TVA is rigging our future power use by cutting back its support for energy efficiency programs, validates the concern.
About that fact, those consumer advocates are right. TVA spent nearly $9 billion on the still unfinished Bellefonte Nuclear Plant in North Alabama, then sold it for less than $400 million to financier Franklin Haney. If the utility needs to pay down its debt, take it out of the millions in bonuses paid to the top executives who made those poor decisions. Don't pass it on to hostage ratepayers.