TVA director expects battle with proposed rate hike

By Thomas Wilson
STAR STAFF
twilson@starhq.com

Skila Harris understands pressure.
As the first woman named to the Tennessee Valley Authority's board of directors, the former chief of staff to Tipper Gore also understands the agency's proposed rate increase is generating a substantial amount of heat across the Valley.
"It's not an easy process," said Harris. "I'm not going to win Miss Congeniality this year."
Harris spoke at the Elizabethton Rotary Club on Wednesday discussing the issues driving TVA's proposed rate hike proposal.
The agency's modified plan would raise average wholesale power rates to residential and commercial customers by 7.4 percent and implement a 2 percent decrease to about 2,500 manufacturing industries that purchase over 5 megawatts of electricity from TVA each month.
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 (Tennessee Valley Public Power Association) 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 hours monthly usage) is $67 per month.
"No one likes to raise rates," said Harris. "We have come to the conclusion that this is something we should consider."
Hanging over TVA is a $1 million per-day cost to meet federal air quality standards relating to clean air set down by the U.S. Environmental Protection Agency. Harris said the proposed rate increase serves two purposes -- funding pollution control equipment buys to adhere to EPA and retaining large industries by making industrial power rates more competitive.
Coal-fired plants generate 60 percent of the electricity produced by TVA. Federal regulators have ordered reduction in oxide emissions created by burning coal. Harris said TVA plans an 85 percent reduction in sulfur oxide emissions and a 75 percent cut in nitrogen oxide emissions by the end of the decade. Both chemical compounds are released due to the burning of fossil fuels, primarily coal and petroleum products.
She also said TVA had spent approximately $3 billion since 1997 adding pollution control equipment to fossil-fuel plants with plans to spend another $2 billion by 2010.
A potential plan to raise revenues and lower the reliance on fossil-fuels comes with the agency's mission to restart Browns Ferry, Unit I nuclear reactor in north Alabama by 2007. The restart is estimated to cost $1.8 billion and generate 1200 megawatts of energy. "The revenues generated by that will back the $1.8 billion we spent by 2015," Harris said. "In 8 years, that plant will pay for itself." Harris declined to speculate on TVA's long-term nuclear future, but felt the Browns Ferry start up could herald a new era of nuclear power production in the valley.
She also told the audience, primarily business people, that TVA had pared down long term debt by $2.3 billion since 1997 and expects to reduce the agency's $25 billion existing debt by an additional $200 million this year. "We are doing what I hope every smart businessperson does," she said.
The Tennessee Valley Public Power Association -- which represents TVA's 158 public power providers -- opposes TVA's proposal because they believe the increase is weighted too heavily on residential and small business customers. Phil Isaacs, general manager of Elizabethton Electric System, echoed the sentiments of his colleagues in TVPPA.
"I think there are two issues that need to be done separately," said Isaacs. "I'm not for a rate increase period, but all rate payers should foot the bill for the environmental regulations required of TVA."
TVA argues that while residential rates are 11 percent below the average of neighboring utilities, industrial power prices are 12 percent above the average of neighboring utilities. Isaacs said he was unaware whether the proposed 2 percent cut would affect any industries in the EES service area. The rate increase would affect practically all of the more than 25,000 customers including 21,108 residential customers on the EES.
Negotiations between TVA and TVPPA are ongoing regarding the proposal. TVA revised the proposal lessening the number of manufacturers receiving the 2 percent rate cut, and reducing their initial rate increase proposal from 8.1 percent to 7.4 percent.
The rate increase applies only to residential and commercial customers receiving "firm power", which guarantees energy at all times. TVA also provides large industries with "interruptible power" -- electricity sold at a lower rate but subject to interruption during peak service times. TVA has increased interruptible power rates on several occasions during the past two decades.
The TVA board of directors is scheduled to vote on the rate increase in late August. If approved, the rate increase would take effect on October 1.
Harris was appointed by President Bill Clinton to a 9-year term in 1999. Harris spent 17 years as an energy industry consultant and also served as chief of staff to Tipper Gore from 1993 to 1997 while Al Gore was vice president.