The volatile rates and power interruptions that left millions of Texans without power or with higher electricity bills during last week’s winter storms underscore the value of Chattanooga’s decision last year to stay with America’s biggest public utility rather than shop the marketplace for power, according to EPB President David Wade.
Wade, who signed a 20-year contract last year for EPB to get the vast majority of its power from the Tennessee Valley Authority, said the integrated public power model in the Tennessee Valley ensures greater reliability and rate stability than the competitive power market relied upon by many in Texas.
“Certainly it’s a devastating event in Texas, and our thoughts and prayers go out to those who lost their power or had to pay sky-high bills,” Wade told EPB directors last week. “But we’re a different model than Texas and one that I think will work out better for us as a community in the future. The events of the past week tend to confirm the validity of that decision.”
EPB is among 142 municipalities and power cooperatives that have signed long-term power agreements to get their power from TVA, which not only generates and delivers the power to EPB and other local power companies but also regulates the local utilities within TVA’s 7-state service territory in the Southeast.
But other local power companies in the Tennessee Valley insist they can do better with another wholesale power supplier than TVA, and they are threatening to break up part of the Tennessee Valley energy model created in 1933 as part of Franklin Roosevelt’s New Deal.
“We think we can actually improve the reliability of our service and reduce our power costs,” said Rody Blevins, president of Volunteer Energy Cooperative in Decatur, Tennessee.
Volunteer Energy, which serves parts of 17 counties in East and Middle Tennessee, is among a half dozen or more local power companies now served by TVA that have sought proposals from other wholesale power suppliers and generally found cheaper rates than the electricity prices now charged by TVA. But for Volunteer Energy and most of TVA’s local power customers to realize most of the advantages of another power supplier, they will still need TVA to transmit that less-expensive power to the local power company.
TVA has declined such transmission requests, claiming that would violate the “anti-cherry picking provisions” of a 1992 energy law and break down the TVA fence Congress established in 1959 to contain TVA power sales within its service territory and to block outside power suppliers from coming into the Tennessee Valley. In a filing Monday with [the Federal Energy Regulatory Commission], TVA attorneys argued that the request for TVA to bring power into the valley on its transmission lines would both violate federal laws and be contrary to the public interest.
Volunteer Energy has joined with three other TVA distributors — Athens Utilities Board in East Tennessee and the Gibson and Joe Wheeler electric membership corporations in West Tennessee — to ask the regulatory commission to order TVA to transmit the outside electricity to them on TVA lines.
“We’re just asking for what the rest of the country already has to have open access to transmission,” Blevins said. “What’s good for the rest of the country is also good for Tennessee.”
Blevins declined to specify what other utilities and power suppliers Volunteer Energy is negotiating with, but in its commission filings the utility said there are 320 miles of TVA transmission lines that it would have to duplicate to bring in power everywhere in its service territory, which stretches from Georgia to Kentucky in East and Middle Tennessee.
TVA President Jeff Lyash said Monday that having TVA as both a supplier and transmitter of power has helped ensure that the agency maintains 99.999% reliability every year for more than 20 years while keeping TVA industrial rates among the lowest 10% of U.S. utilities and residential power rates among the cheapest 30% of U.S. utilities.
EPB, TVA officials say integrated public power avoids blackouts seen elsewhere
“At TVA, we’re not focused on the shareholder and the market like investor-owned utilities,” he said. “We’re focused on ensuring that we deliver power reliably and cost effectively to 10 million people.”
TVA charges its local power companies about $65 per megawatt hour, but utilities such as MISO are buying power on the open market and paying the market rate. In Texas, market prices rose to as high as $9,000 a megawatt hour last week, Wade said.
Unlike most businesses, electricity service requires that the instantaneous demand meet the instantaneous supply and service can’t just be easily slowed, stored or deferred.
“You have to have enough generation to meet the demand all of the time,” Wade said. “If you don’t, then the whole grid is in danger of collapsing. That’s why we saw these balancing authorities having to have rotating blackouts when they don’t have enough generation to meet the demand.”
TVA focuses on meeting the energy and other needs of its 7-state region and maintains adequate reserves to serve the 153 local power companies such as EPB that distribute its power, Lyash said.
“We actually increased our power reserve margins last winter from 20% to 26% to help ensure that we maintain the most reliable service we can,” Lyash said.
In the Tennessee Valley, TVA’s power demand last week rose to the highest winter peak in more than three years amid the frigid weather, but the agency’s power peak of 28,511 megawatts was far below the utility’s capacity of 36,937 megawatts from a variety of nuclear, gas, coal, hydroelectric, solar and wind generation sources.
“We work to balance cost and high reliability and ensure a diverse fleet so that we have the ability to shift power sources if need be,” said Aaron Melda, transmission and power supply senior vice president for TVA. “We have an underlying philosophy of not putting all our eggs in one basket.”
Although last week’s winter weather was worse in Texas than in the Tennessee Valley, Wade said a polar vortex in 2014 that pushed TVA’s power demand to a record winter peak of 33,345 megawatts was comparable to what Texas faced last week, but TVA had no trouble then meeting the demand.
“In TVA’s history, they have never had any rolling blackouts,” Wade said. “So while there is never 100% no risk, we are positioned with much less risk than most of the country because of the work that TVA has done in building and maintaining a robust and diverse portfolio.”
Memphis Light, Gas & Water, TVA’s biggest customer, is studying the option of replacing TVA wholesale power with electricity supplied by the Midcontinent Independent System Operator, Inc. to help reduce its power bills. But last week, MISO-served power customers across the Mississippi River in Arkansas and Mississippi had power interruptions that MLGW did not.
Chip Estes, an energy consultant who has worked for MISO and Entergy, said last week’s winter storm “highlighted the challenges that MISO has in keeping the lights on in the South.”
Alonzo Weaver, chief operations officer at MLGW, said the contrast in power service last week between TVA on one side of the river and MISO on the other side of the river “certainly gives us pause.
“We’ve had very reliable, stable supplies for TVA,” Weaver said in an interview last week with Memphis television station WMC.
But critics of TVA insist that no power system is immune from outages, noting that tornadoes cut off TVA power deliveries in North Alabama for nearly a week in 2011.
Jim Gilliland, a principal for Diversified Trust and co-founder of a nonprofit group urging MLGW to split with TVA to lower its energy costs, insists that Memphis can get reliable service from other power suppliers and can save money by either building its own generation or buying from other suppliers.
“These events in the Southwest were severe weather events of which TVA is also familiar,” Gilliland said. “All utilities are subject to extreme weather, and unfortunately there are uncontrollable events of nature that utilities can’t control.”
But Gilliland said Memphis could help control what it pays for electricity by shopping the market and finding a cheaper alternative to TVA.
“We believe that MLGW could save several hundred million dollars a year,” he said. “TVA’s cost structure is exorbitantly high.”
Environmental groups also are urging FERC to allow local power companies to shop around to encourage more distributed energy and renewable energy use.
“TVA’s unregulated monopoly has enabled the corporation to prioritize large business and industrial customers over the families and small businesses across the Tennessee Valley and slow-walk a transition to efficient low-cost clean energy,” said Stephen Smith, executive director for the Southern Alliance for Clean Energy. “TVA continues to run some of the oldest coal power plants in the country while generating far less solar than other utilities in the Southeast.”
Maggie Shober, director of utility reform at the alliance, said solar and energy efficiency are low-cost alternatives to TVA’s power plants. But she said “TVA is leveraging its monopoly power to stifle the growth of clean energy.”
Lyash said TVA has reduced its carbon emissions by more than 60% since 2005 and plans to make further reductions in carbon emissions and more investments in solar and other renewable energy sources.
TVA’s resistance to wheeling power for the local power companies wanting to leave the TVA fold is being supported in the regulatory commission case by 40 local power companies as well as the board of the Tennessee Valley Public Power Association, the Chattanooga-based trade group that represents the 153 municipalities and power coops that distribute TVA power.
Lyash said the limits on power transmissions in and out of the Tennessee Valley were set by Congress in 1959 and have worked to help the valley to grow, helping to attract nearly $48 billion in investment and more than 400,000 jobs in the past five years.
Contact Dave Flessner at [email protected]