Independent power providers resisting
proposed TVA rate hike
By Thomas Wilson
STAR STAFF
twilson@starhq.com
BLOUNTVILLE -- A proposed rate hike by the Tennessee Valley
Authority to fund federal clean air regulations is drawing
fire from the 157 independent power providers that purchase
wholesale electricity from TVA.
Representatives of the Tennessee Valley Public Power Association,
Inc., spoke in opposition to the structure of the rate increase
at a press conference held at the Tri-Cities Regional Airport
on Monday.
"We think everybody ought to pay when it comes to clean air,"
said Harold DePriest, TVPPA chairman of the board and executive
director of the Chattanooga Utilities Board. "They are saving
a small group of industrial customers that don't have to pay."
TVA has proposed a rate increase to fund the estimated $365
million to fund compliance with federal air quality standards.
The agency's modified rate actions would result in a 7.4 percent
average wholesale increase to residential and commercial customers
and a 2 percent decrease to about 2,500 manufacturing industries.
"We feel like by trying to make those rates more competitive,
we will help them retain jobs and create jobs," John Moulton,
TVA spokesman, said Monday afternoon.
DePriest and other TVPPA brass said while they do not oppose
a rate increase, the rate structure should be established
as an across-the-board for all electricity consumers to fund
environmental compliance.
"We believe that any rate reduction offered to a specific
number of manufacturers inappropriately shifts the industries'
portion of the environmental cost to all other businesses
and residential customers," he said.
For a residential customer using 1,000 kwh per month, TVA's
revised proposal would be an increase of $3.76 per month.
The effect of TVPPA's proposal on a typical residential customer's
bill would be an increase of $2.54 per month. TVA reports
the average residential consumer's bill today (for 1,000 kilowatt
hour's monthly usage) is $67 per month.
In its original proposal, TVA suggested a fixed rate increase
of 8.1 percent. Following debate with TVPPA members, TVA revised
the proposal, lessening the number of manufacturers receiving
the two percent rate cut, and reduced the rate increase to
7.4 percent.
"Residential rates currently are 11 percent below the average
of neighboring utilities, while industrial prices are 12 percent
above the average of neighboring utilities," TVA Executive
Vice President Mark Medford said in a statement last week
about the rate increase. The proposal would be the second
rate increase of firm power rates in 16 years, according to
TVA.
"It will probably be a pass through at the residential level,"
said Doyle Walters, executive director of the Johnson City
Power Board and member of the TVPPA board of directors.
While touting the low residential rate, TVA reports that power
rates for manufacturing customers are higher in the Tennessee
Valley than in the neighboring areas. The 2 percent cut back
is designed to make TVA more competitive in drawing industrial
citizens to the Valley.
"Our manufacturing industries and in industry as a whole,
the firm power rates they pay to have electricity are much
higher than the region," said Moulton. "That is why we are
making a 2 percent reduction in those rates."
A TVA report submitted to the Government Accounting Office
(GA)) in May 2002 indicated the agency's industrial rates
were substantially lower than the national average and the
average of competitors in 10 of the 12 surrounding utilities.
"We trust TVA," said DePriest. "We just don't know which set
of TVA numbers to trust."
Moulton said industrial customers receive two types of electricity:
firm power, which guarantees energy at all times at a higher
rate; and interruptible power. With interruptible power, large
industries are willing to pay a lower rate knowing that on
a high use period such as a hot summer day, their power supply
may be interrupted by TVA to augment firm power demands.
"In the GAO, we included both distributor served industrial
customers with a combination of firm and interruptible power,"
Moulton said. "That would drag the number down because our
directly served customers use interruptible power." The proposed
rate increase would affect firm power rates only.
The proposed decrease in industrial rates will help retain
manufacturing jobs in the Tennessee Valley. The agency cites
a report issued by the Bureau of Labor Statistics finding
a decline of 100,000 manufacturing jobs (12.5 percent) in
the TVA region from 2000 to 2002.
TVPPA contends that more than two-thirds of industrial customers
in the Valley would not qualify for TVA's proposed two percent
industrial rate reduction. They also believe the increase
puts an undue burden on residential and non-qualifying industries
to fund environmental upgrades, but leaves the largest power
users free from funding pollution control.
"We think everybody should pay for cleaning the air," said
Mike Browder, executive director of Bristol Tennessee Electric
System. Approximately 56 industries are served directly by
TVA, most of those companies operated with purely interruptible
power.
TVPPA is the nonprofit company that represents the interests
of consumer-owned electric utilities operating within the
TVA service area. Association members include both municipal
and electric cooperatives, and they serve more than 8.5 million
customers in Alabama, Georgia, Tennessee, Mississippi, Kentucky,
North Carolina and Virginia.
Moulton said TVA did not dispute the company's industrial
power rates were lower than the national average, but added
industrial rates were 12 percent higher than that of neighboring
utilities. He said TVA opposed an across-the-board increase
because the agency had raised interruptible rates on several
occasions over the past several years.
TVA's Board of Directors are scheduled to vote on the rate
increase at their August meeting. If approved, the rate increase
would take effect on October 1.