Utility board officials respond to TVA rate increase

Author: Brandon L. Jones, News Herald

Local utility officials are gearing up for Tennessee Valley Authority’s (TVA’s) 20-percent rate increase beginning Oct. 1. 

“It’s going to have a major impact on our customers," Loudon Utilities Manager Lynn Mills said.
"Anytime you add 20 percent to the cost of the product they’re using, it’s going to impact it, and people will look to ways to reduce their usage. . . .”

Mills noted Loudon Utility Board (LUB) will also be affected by customers reducing usage.  “That will have an impact on us,” he said, “because our margins are based on the volume of sales.”

The LUB Manager said TVA has yet to distribute the actual figures regarding the increase to LUB, but he said its rates, like those of the Knoxville Utility Board (KUB), will raise somewhere between $12 and $15 per 1,000 kilowatt-hours. 

Lenoir City Utility Board General Manager Freddie Nelson said his customers should expect the same increase in their monthly bills, noting about a $14 to $17 rise is anticipated. 

“I think TVA’s doing everything they could,” Nelson said. “I just would like to have seen them maybe try to make more of a sacrifice among themselves before they pass such an increase onto the utilities.” 

In way of sacrifice, he said he would have liked to have seen TVA perhaps freeze wages temporarily or, perhaps, hold bonuses for a year throughout its system before rationing out higher rates to the 159 power distributors.

“And we have no choice, just like the other utilities, but to let it pass on through to the customers," Nelson said. "I’m disappointed in it.  But, you know, I’ve got to pay it too.”

“We’re disappointed they had to raise rates again,” Mills said.  In April, TVA implemented a 7 percent rise in base rates.  This is the third increase this year and the highest since 1974, according to TVA.  
The increase, driven upward by rising coal and natural gas costs, comes in way of a 17 percent quarterly Fuel Cost Adjustment (FCA) that is adjusted by TVA to compensate for such increases.  The other 3 percent is its base rate increase. 

Some have questioned why an FCA is needed.  After hurricanes Katrina and Rita, TVA experienced a considerable hike in fuel costs in October 2006 and established the FCA to help “better match its revenues to expenses,” according to TVA's Web site.     

“We must generate and deliver the electricity that our customers depend on, and we must maintain our generating and transmission equipment so we can continue to provide a reliable power supply,” said Tom Kilgore, TVA’s president and CEO, in a recent news release.  “Unfortunately, the cost of providing fuel to operate the power system reliably has increased sharply.”

TVA representatives said purchased power, such as coal and natural gas, have pushed its fiscal year budget up by $2-billion in comparison to last year’s budget.  Drought conditions, too, haven’t made matters easier.  Due to these conditions, TVA has not been able to effectively produce hydropower, forcing the agency to purchase power elsewhere at market prices, which are “averaging 63 percent higher than last summer,” according to TVA.  
“Everything right now in the economy is bad,” Nelson remarked. “Coal prices, fuel prices — and it’s just . . . you know, somewhere down the road, something’s going to have to change. . . . I know they’re in a tight spot, just like we are, with fuel, but we’ve just got to come up with alternative fuels to offset some of this or our country’s going to be in dire need.”

TVA officials said the agency is striving to “slow the current rate of growth in the region’s power demand by providing opportunities for residential, business and industrial consumer groups to use energy more effectively.”  By 2012, TVA hopes to have reduced peak-demand growth by roughly 1,400 megawatts, “more than the amount generated by one nuclear power unit,” the news release stated. 

Both Mills and Nelson said LUB and LCUB encourage people to use their energy more efficiently.  There are a number of ways to help bring utility bills down.  Lights and other electronics can be turned off when not in use.  Adjusting the thermostat down 2 degrees on hot days will also help.  Compact fluorescent light bulbs, which use 75 percent less energy and are said to last longer, can be used to replace incandescent light bulbs. Also, by washing dishes and doing laundry after 8 p.m. — when it costs less for TVA to produce electricity — consumers will realize savings.