The Tennessee Valley Authority’s recently proposed 20-year contract is causing a little distress among local power companies.
Bowling Green Municipal Utilities approved the evergreen contract in September. There was some debate, but ultimately, due to TVA owning all transmission lines within BGMU’s service territory, the utility decided the contract was its best option.
But other area utilities are undecided. The Glasgow Electric Plant Board did not elect to change its contract with TVA during a board meeting Wednesday.
And Warren Rural Electric Cooperative Corp., which serves about 165,000 across eight southcentral Kentucky counties and 5,700 miles of transmission and distribution electrical lines, is still mulling over the contract.
“It’s a big decision,” said Kim Phelps, spokeswoman for WRECC. “We’re analyzing for the long term for the best interest of our customers. We’re running scenarios.
“I do think TVA has been a good partner, and we also try to be a good partner.”
For any utility that signs the rolling 20-year contract, TVA is offering a 3.1 percent “partnership credit” by the first full month after signing the contract. This adds pressure to local power companies to sign quickly without due diligence, according to Daniel Tait, a research and communication manager for the Energy and Policy Institute.
“The new contract is frankly just TVA cementing its monopoly power over these local power companies,” Tait said. “TVA is dangling this 3.1 percent monthly rebate to get them to sign these contracts.”
But the utilities that do not sign will be responsible for paying the lost revenue into the system. Or if all of the utilities sign, then TVA would have to raise rates as compensation, according to Tait.
“It’s a Faustian bargain,” he said.
TVA’s five largest lower power companies are municipal utilities in Memphis, Nashville, Chattanooga, Knoxville and Huntsville, Ala.
Part of the hesitation felt by some utilities is the possibility that Memphis Light Gas and Water might end its contract with TVA – thus raising rates by 7-7.5 percent, according to a study on TVA power supply contracts by the Cooperative Finance Corporation.
There’s also the question of renewable energy. Despite growing demand for renewables from average citizens and corporate customers, the utility’s energy mix is estimated at about 3 percent wind and solar – and TVA currently prevents local power companies from buying electricity from other sources or generating their own energy.
The new contract places a 3 to 5 percent cap on generating renewable energy or storage. Before, local power companies could create a contract with TVA to procure renewables (meaning TVA still owned the generation) for a corporate customer like Google, which purchases 100 percent renewable energy to match its annual energy consumption.
Now, local power companies can still do that, but with a cap at 3 to 5 percent and by 2021. And the local power companies would have to elect to pay extra dollars for the renewable load, according to Tait.
“It’s a step back from where we currently are,” Tait said. “It’s a false statement that it’s flexibility.”
The WRECC board has not decided when they will vote on the TVA contract, according to Phelps.