EES to prepare for TVA rate hike

By Abby Morris
Star Staff
amorris@starhq.com

Members of the Elizabethton Electric System Board are scheduled to meet today at noon at the EES office to discuss, among other things, a possible rate increase by the Tennessee Valley Authority.
   At a workshop held by the board last week, members discussed the pending rate hike and options available to the system. "Our recommendation to the board will be to make this up on the retail side in order to meet our day-to-day margins," EES General Manager, Phil Isaacs, said to the board during the workshop.
   According to Isaacs, the rate changes proposed by TVA, which include a 7.4 percent rate increase on wholesale energy as well as the discontinuance of some credits offered by TVA, would raise the cost of operation of the EES by $1.7 million a year.
   One option the EES board has is to increase the rate which the system charges for energy. Another option would be to raise the charge levied on customers to cover the cost of having an electrical meter at the location as well as the costs for labor and maintenance on the meter.
   Currently, the customer charge is $8.73 per month; however, customers have only been charged $6.25 a month due to a credit which is offered to local distributors of energy by the TVA.
   TVA gives a $2.48 credit to EES for each customer it services. Under the proposed rate revision, the credit would drop to $1.71, which would raise the cost of the customer to $7.02. Isaacs suggested to the board that the system should increase that cost to $7.25 and use the extra 23 cents per customer to generate additional funds, offsetting the impact of the pending rate increase by the TVA.
   According to estimates quoted by Isaacs, the additional 23 cents per customer would generate approximately $20,000 a year for the system. According to TVA officials, the increase in rates will be used to offset the costs of complying with federal clean air regulations.
   "We're spending roughly $1 million a day which translates into $365 million a year, which is how much revenue we're going to generate with the rate increase," said TVA spokesperson Lucha Ramey.
   According to financial reports from the TVA, the company drew $6.83 billion dollars in revenue during the 2002 fiscal year while paying out $5.18 billion in operating expenses, leaving the authority with an operating income of approximately $1.65 billion.
   At the end of the 2002 fiscal year, TVA had outstanding bonds and notes, increasing debt to $25.3 billion. According to the Bush administration, "That amount, however, gives an incomplete picture of TVA's debt position because it excludes $865 million in lease/leaseback arrangements."
   The Bush administration has said it is committed to identifying a debt-reduction target for the TVA within the "healthy" range, and having a plan by Sept. 30, the end of TVA's current fiscal year, to reach that number in a reasonable period of time.
   During the 2002 fiscal year, TVA had a net expense on interest from debt of approximately $1.43 billion, according to financial statements from the authority.