Volunteer Energy Cooperative is seeking federal intervention to require the Tennessee Valley Authority to allow outside power providers to access the TVA power lines to serve the local power cooperative.
The move comes after the energy cooperative and the power provider have failed to come to an agreement on a new power purchase contract and disputes over rates.
“Because of deregulation, most electric rates have fallen, while TVA rates continue to climb,” said Rody Blevins, president and CEO of VEC. “Should VEC gain unbundled transmission access, the cooperative could pursue multiple power supply options. Based on our [request for proposals] from last summer, the best option would save VEC members approximately $50 million per year.”
That would equal about a 25% reduction in retail power rates, VEC said.
VEC, Athens Utilities Board, Gibson Electric Membership Corporation and Joe Wheeler Electric Membership Corporation filed a joint complaint with the Federal Energy Regulatory Commission requesting unbundled transmission access of the TVA high voltage network.
“Unbundled access is already a national requirement of every other major United States power supplier,” Blevins said. “The only exception to this rule is the TVA transmission network, which remains closed to all outside companies securing TVA’s unregulated monopoly over the Tennessee Valley.”
TVA contends allowing VEC and three other local power companies to use the TVA transmission system to bring in power from other providers would shift costs for the system to the other 149 local power companies TVA serves.
“TVA’s transmission system was built for the benefit of its customers, who all equally bear the cost of its maintenance,” said Malinda Hunter, public/media relations for TVA. “These four companies want to use the TVA transmission system in a way that would shift their costs for using the transmission system to the other 149 local power companies served by TVA. That is fundamentally unfair, and it goes against the foundation of public power.”
The four companies previously requested unbundled access to the transmission lines, which the TVA board denied. The complaint was filed with FERC in January.
TVA is a quasi-governmental agency. It provides electricity for 153 local power companies in seven states. While it was created by Congress in the 1930s, it operates much like a private corporation.
In 2011, an assessment of TVA’s debt warned the $30 billion limit on borrowing — set in 1979 — could be a hindrance on the power provider.
In the most recent VEC newsletter, Powerlines, Blevins said TVA began implementing a base rate increase of 2.5% per year for 10 years as an effort to pay down its corporate debt.
“VEC took issue with the TVA debt reduction plan for one reason: it was too aggressive,” Blevins said.
VEC calculations showed TVA would reach its debt target ahead of schedule. But the increased rates led to record revenues for TVA, Blevins said.
TVA reported $10.2 billion in operating revenues in 2020 and $11.3 billion in 2019.
In November it reported its debt was at the lowest level in 30 years and touted its energy rates.
“The effective rate our customers pay is among the lowest in the country, and has been stable for the past seven years, even while we have reduced debt by $6 billion and invested over $15 billion in the power system — and we remain on target to keep rates stable for this decade,” said John Thomas, TVA’s chief financial officer, in a November press release.
TVA reported a net income of $1.4 billion in 2019, up 27% from the year before. It ended 2020 with $1.3 billion in net income.
TVA touts its power rates as being among the lowest in the industry and the region.
“In fact, TVA’s customers are paying effective wholesale rates in 2021 that are lower than a decade ago, and we project our rates will remain stable for the remainder of the decade,” said Thomas in a press release announcing the company’s second quarter financial results for 2021.
TVA reported $4.9 billion in total operating revenue for the quarter, a slight decrease from the same period the year before despite increased electricity sales. That was due to lower effective base rates and lower fuel cost recovery revenues. They also spent less on fuel and purchased power during that period, with lower coal prices, improved nuclear fleet performance and more hydroelectric generation and volatility in the natural gas and purchased power markets.
According to a fact sheet from TVA, its residential power rates are lower than 70% of the top 100 U.S. utilities and industrial rates lower than 90% of the top 100 U.S. utilities, but VEC says studies have shown those statements to be false.
A 2018 study from Enervision, which partnered with VEC to compare rates against other national energy suppliers, said TVA wholesale rates were about 28% higher than the 11 largest utilities in the Southeast.
In April, VEC announced TVA had increased the fuel cost adjustment rate by 33%. TVA charges this fee to offs costs for fuel and purchased power used to generate electricity. VEC said it represents about 20% of a customer’s total electric bill.
Last summer, VEC issued its request for proposals from power providers as it also began negotiating with TVA on a new contract. It currently has a five-year contract.
In 2019, TVA began offering 20-year contracts. Hunter said approximately 90% of local power companies it contracts with have entered those agreements.
Blevins said TVA has refused to negotiate with them on the power contracts.
“That contract gives TVA complete control over the electric rates with no room for negotiation,” Blevins said. “We hope the action we have taken at FERC will encourage TVA to do what is right for the Valley and lower electric rates. Regardless of the outcome, VEC will continue to fight for the interests of our members.”
VEC has stated it is still willing to negotiate a “fair” contract with TVA.
The 20-year contracts have also drawn a legal challenge, with a suit filed last August by the Southern Environmental Law Center on behalf of Appalachian Voices, Energy Alabama and Protect Our Aquifer. The suit contends the contracts renew automatically and require a 20-year notice to terminate.
Hunter said 11 power companies did not choose the 20-year contract. Those companies have a five-year termination notice with auto-renewing contracts.
“The long-term contract helps us develop better business plans and keep costs low while providing incentives to those who sign on,” Hunter told the Chronicle.
In addition to power production, TVA also provides economic development support. VEC says it would assume those responsibilities in its service area.