Tennessee Valley Authority in August adopted a budget plan to help reverse rising electricity prices, but it's a complicated hope. And depending on who you ask, perhaps an unlikely one.
A new study by Synapse Energy Economics done for the Friends of the Earth indicates TVA may have to raise its rates by as much as 36% over the next 15 years because of higher costs for coal ash storage, fuel and other expenses.
But TVA President Jeff Lyash, though he doesn't dispute the main message of that study, told Times Free Press Business Editor Dave Flessner that he thinks TVA likely will avoid electricity rate increases for the next decade — through 2028. He thinks that's possible in part because of the August budget vote by TVA directors that includes a plan to keep base rates unchanged and offer a 3.1% rebate to local power companies that sign long-term contracts with TVA. Among the 154 local power companies that buy TVA power, 134 have signed the 20-year agreements and are now getting cheaper power from TVA than they did a year ago.
But in addition to that leaving us with the next five years to worry about future hikes (eventually that expected 36% rate increase is bound to surface), there are tradeoffs — especially in the area of the growing renewable energy in the South.
"Southern Cities' Renewable Energy Push Could Be Stifled as Utility Locks Them Into Longer Contracts," reads the headline of a story by James Bruggers in Inside Climate News.
TVA has only a modest plan — and modest may be an overstatement — for carbon emission cuts over the next 20 years. TVA's plan, combined with its move to lengthen customer utility contracts, could well set the South back decades in exploration of renewable energy and leave the region relying on fossil fuels for years, Bruggers posits.
TVA, owned by the federal government — taxpayers — serves a population of 10 million in seven Southeastern states through a distribution network of local power companies such as EPB. Since that August vote, TVA has persuaded more than 80% of those power companies to agree to 20-year contracts — 10-15 years longer than previous agreements. Bruggers notes that conspicuously absent from the list are some of the largest ones, including those that serve Memphis, Knoxville, Chattanooga, and Huntsville, Alabama. Together, those hold-outs account for nearly half of TVA's operating revenues.
At issue, say long-term contract critics, are agreements that lock the local power companies to TVA for decades at a time and limit their bargaining power over everything from electricity rates to significantly boosting renewable energy, which some customers — especially in urban areas — are demanding. Companies that buy TVA electricity are further limited by the fact that TVA controls the transmission lines and has resisted calls to share those lines.
TVA's contract changes came after Memphis, which is on the western edge of the TVA service area, began to look west for cheaper, cleaner power. Memphis Light, Gas & Water is studying whether it can hook onto transmission lines just across the Mississippi River and cash in on power from Texas and Oklahoma wind farms — something TVA itself once considered and decided against. The Memphis study is expected to be completed in May.
It's true that TVA already has a lower carbon footprint than many utilities. Its total carbon dioxide emissions tally 48 million tons (down from 108 million tons in 2007) from coal-fired and gas-fired plants. But the utility expects only to marginally lower it more — to 46 million tons by 2028. Similarly, TVA plans to expand wind and solar energy generation only from 3% to 5%. Hydro power will remain static at 10% and nuclear power generation is expected to grow from 41% to 43 percent.
But TVA's slow shift to alternative energy sources could create economic problems for the region if we fall behind other regions' abilities to attract employers like Volkswagen, that built its own solar farm, and Facebook, which negotiated with TVA to provide it with a 377 megawatt solar farm for its data center in Huntsville.
Michael Vandenbergh, a Vanderbilt University law professor, whose research includes energy and the law, told Inside Climate News: "Large corporate, municipal and institutional customers of TVA are making commitments that appear to require more renewable power over the next two decades than TVA has committed to produce."
Vandenbergh says the holdout cities — with their still-intact negotiating power — may hold the key.
We hope so.
Something needs to rock TVA out of its silo. It's not enough for the nation's biggest public utility to rest on the laurels of being dragged by lawsuit, kicking and screaming, out of dirty coal power.
TVA should be the leader it was created to be. And it should ensure the future economy of the 21st century South, just as it once ensured the region's entry to the 20th century.