Southern Alliance for Clean Energy
An environmental group says TVA has been increasing costs to its smaller customers and lowering costs for its larger, industrial customers.
Over the past five years, the Tennessee Valley Authority (TVA) has charged its residential and small business customers more while charging its industrial customers less, according to a new report
issued Tuesday from the Southern Alliance for Clean Energy (SACE).
The shift has added more than $1.4 billion to TVA’s smaller customers over the last five years, according to the report prepared by Synapse Energy, a Massachusetts energy economics research firm. With this, the average TVA household is paying $110 more now than it did in 2011, according to the report.
But TVA spokesman Scott Brooks said his agency gave SACE summaries of service studies to SACE, but was not asked by them to verify any numbers in their report. TVA is mandated by the TVA Act to provide electricity at the least-cost feasible, Brooks said.
"In the last five years, TVA has increased overall wholesale rates in small, measured increments to avoid putting an undue burden on our consumers," Brooks said. "Those increases have generally been below the rate of inflation."
Brooks said industrial customers have a slightly lower "fuel cost rate because their usage is steady and predictable." Also, he said, they use less energy at peak times.
Memphis has been affected the least by this shift, researchers said, but that may soon change pending a decision on a 7 percent electricity rate increase now before the Memphis City Council.
Members of SACE, which is a collection of many diverse groups, said in a news conference Tuesday that the shift in costs are “theft.” Some said the TVA makes its decisions behind closed doors and that the organization refuses to release information on those decisions. The TVA is holing its residential customers “hostage,” some said. Also, future changes may move the TVA from “theft to grand larceny.”
Jimmie Garland, vice president of the Tennessee State Conference of the National Association for the Advancement of Colored People (NAACP) said his group finds the report “troubling.”
“It’s a fact that many citizens, in particular citizens of color, in cities and rural areas across Tennessee are having to choose between paying utilities bills rather than acquiring necessary food and medicines,” Garland said. “It is wrong for any organization to have total autonomy on how residents are assessed, especially when the assessor is acting as the chief oversight authority over both the formulation of their policies and its execution.”
Garland’s last assertion is a reference to a claim oft-repeated during the SACE news conference Tuesday. The TVA is a self-regulated federal monopoly corporation, said SACE executive director Stephen Smith, that has no independent body to review rate changes like other energy providers in other regions.
TVA is a federally owned corporation created by Congress in 1933. One of its initial missions was to bring electricity to (and, thus, help modernize) the Tennessee Valley. Its service area now covers the entire state of Tennessee and parts of six other states —Alabama, Mississippi, Kentucky, Georgia, North Carolina, and Virginia.
No one with SACE was precisely sure why TVA board have decided to add more costs to its smaller customers and charge its largest customers less over the years. And, again, they said, no one at TVA is answering questions, noting that even Freedom of Information Act (FOIA) requests are going unanswered.
However, S. David Freeman, former TVA board chair and senior advisor to Friends of the Earth, said it was possible that industrial companies could switch from TVA power to generate their own power with solar installations and do it more cheaply.
Freeman was, perhaps the loudest critic of the TVA’s current moves during Tuesday's conference. He said the shift to benefit industry was “socking it to the poor.” The TVA “by law is required" to give preferential treatment to energy co-ops and to local utilities like Memphis Light Gas & Water, he said, not industrial customers.
“What’s happening now would make Franklin D Roosevelt turn over in his grave and scream and holler,” said Freeman, who was appointed to the TVA board by then-President Jimmy Carter.
Back in August, TVA said it was planning
to change the way it charges customers for its power. Among other things, the changes would lower standard energy charges across the TVA network by $1.2 billion per year and impose a a new 12 percent “fixed-cost recovery charge.”
Smith called this a “grid access fee” or a “cover charge” to use TVA equipment. Fixed fees like these are “exploding” across the Tennessee Valley right now, he said.
“These are mandatory fees that customers ave to pay before they flip on the first light bulb in the house,” Smith said. "This will create heavier burdens on residential customers while benefiting the industrial class.”
This change is likely to be debated and possibly voted upon by the TVA board in May, SACE members said.
Last year, TVA also announced a new plan
that would charge customers more if they generated their own electricity or used energy efficient appliances.
“If we look at those who are pursuing energy efficiency and solar technology, they are the companies and people who can most afford it — and current electricity pricing is providing too large an incentive for them to do so,” said Cass Larson, TVA’s vice president of pricing and contracts said in a blog post last year. “Those who cannot afford to invest in cutting-edge technology are the ones left to make up the difference.”
In his blog post last year, Cass said pricing changes are needed because people are using less energy. At the same time, TVA has to maintain its massive grid to supply power. TVA has cut about $800 million in annual costs and invested in new technology (like the Allen Combined Cycle plant in Memphis), which “will help continue to lower costs.” But it’s not enough, he said.
“Even with these actions, however, when technological advancements progress to the point where more homes and businesses use less and less electricity, our current pricing structure—based mainly on usage—would not cover the costs of maintaining the grid. We need to recognize how important grid services are for those using new technology and ensure our pricing model protects the reliability and resilience the grid offers.
But Freeman, the former TVA board chair, said the agency has “huge debt,” thanks, in part at least, to decision to bet on nuclear power (and its costly power plants) in the past that didn’t pay off. Now, Freeman said TVA is saddled with those costs and is trying to pass them off to small consumers.
Also, Freeman said, when he was at the TVA in the 1970s, he and others at his level of responsibility made about $150,000 a year. Now, even on falling sales and declining profits, the TVA board approved a 3.3 percent pay increase last year for TVA CEO Bill Johnson for a total package worth more than $6.6 million annually.
Bill Johnson was in Memphis last week to speak to the the Memphis City Council about some of TVA's proposed changes.
One reporter on the news conference call, asked if TVA’s move to charge industrial customers less made sense as a tool for economic development. Cheaper energy costs have been one reason automobile makers and and others have said they chose to locate their plants in Tennessee.
Freeman said he and the TVA helped bring a Nissan plant to Smyrna in Middle Tennessee and “game them a rate but not at the expense of residential customers.”
“Nobody on this call is against economic development,” Smith said. “What we’re concerned about is that the TVA is shifting more of its costs onto the backs of residential customers.
“I’ve never read anything that requires hitting residential customers with these charges is necessary to accelerate economic development.”
TVA CEO Bill Johnson's visit to Memphis last week was met with protests outside Memphis City Hall.