The Tennessee Valley Authority will impose a grid access charge for the first time this fall as an initial step toward pricing electricity more on a fixed monthly basis and less on how much energy is actually consumed.
The rate restructuring approved by TVA directors Thursday takes only a small step toward imposing more fixed costs on power bills, imposing only a half-cent-per-kilowatthour grid access charge on the municipalities and power cooperatives that sell TVA-generated power across TVA's 7-state region. The higher fixed charges for local power companies will be offset by a drop in the variable price of power.
Tennessee Valley Authority president and CEO Bill Johnson speaks during an editorial board meeting Thursday, Feb. 8, 2018, at the Chattanooga Times Free Press. TVA President Bill Johnson said the change "will move a small amount of cost out of the variable category in each bill and put the same amount in the category for fixed costs so this is not a rate increase."
But consumer and environmental groups claim the change will disproportionately hurt low-income persons and discourage more distributed energy generation from windmills and solar panels on homes and businesses.
Nashville Mayor David Briley said the change will hurt low-income residents and undermine Nashville's efforts to become "the greenest city in the South."
"Google, Ikea, UBS, Bank of America, Phillips, Schneider Electric, and Mars Petcare are all companies with a significant presence in Nashville that have joined hundreds of companies across the globe in committing to 100 percent renewable energy," Briley wrote in a letter to TVA board members. "Instead of maintaining a welcoming business environment, TVA's proposed rate structure would actively discourage visionary companies like these from locating here. This contradicts TVA's stated goals of encouraging economic development that creates opportunities and improves quality of life."
The initial charge, which will begin in October for distributors that opt into the new pricing plan, is equal to about 6 percent of TVA's wholesale power sales, or more than $600 million a year for the 9 million persons served by the federal utility. It is only half of what TVA first proposed due to concerns voiced by local power companies that buy TVA electricity.
But TVA is still one of the first wholesale electricity providers in the country to impose such a grid access charge, which utility officials said will become more important over time for TVA to recover its costs as per capita energy usage stagnates or declines.
Johnson said he expects over time that grid access charges will become more common place and critical as consumers opt to use more self generation but still want TVA and its distributors to maintain power service to meet whatever supplemental electric demands they may have.
TVA is proposing the change in pricing as energy-efficient technology like LED lights bulbs and self-generated power from solar panels are already reducing consumption of TVA electricity. But while power sales decline, the utility must still maintain more than 16,000 miles of transmission lines and generating capacity to meet power demand when the sun doesn't shine or the wind doesn't blow.
"Some consumers, particularly the more able ones, can invest some solar panels or other resources, but they still rely on the valley-wide transmission system for backup power," Johnson said. "The result is how we bill for electricity can be out of sync with the actual costs of getting electricity to some consumers."
Johnson said it is similar to cell phone companies charging customers to access wireless networks.
But Sandra Upchurch, co-chair of NAACP Tennessee State Conference of Environmental Justice Committee, said the pricing change is unfair and, unlike cell phones, TVA isn't giving away free minutes of electricity.
"TVA gives big industries a break on their energy usage - the more they use, the more they save - while imposing fixed fees and a mandatory grid access fee on to the local power companies who will then pass those charges on to struggling people and families to pay more," she said in a statement. "Where is the equity here?
Chattanooga environmentalist Sandra Kurtz said the change "feels like a hidden, regressive tax" that could limit the incentives for distributed energy generation. Alex Dunn of Knoxville said "TVA is acting like a reverse Robin Hood - taking from the poor to give to the rich."
The change will cost the typical TVA distributor less than $30 a year for each of their residential customers and the new access charge will be offset by a comparable drop in the variable energy charge from TVA.
In Chattanooga, EPB has no immediate plans to change its rate structure. EPB already has the lowest fixed prices for power among the major TVA distributors.
"Although TVA is changing the way it bills EPB, the shift will not impact how we bill our customers," said David Wade, president and CEO of EPB.
EPB spokesman J. Ed. Marston said the drop in variable rates should offset the new grid access charge.
"We expect the end-result to be neutral in terms of additional cost to EPB," he said.
Distributors like EPB will have the option to delay the change in their wholesale power contracts until October 2019, if they choose. Major industries that buy power directly from TVA also are not immediately included in the change.
The Chattanooga-based Tennessee Valley Public Power Association, the trade group that represents the 154 municipalities and power coops that buy and distribute TVA power, also secured a commitment from TVA to negotiate the option of having local power companies supply their own renewable power when customers want such power from self generation, renewable sources not tied to TVA.
Such a change, which must still be hammered out, would mark the first time the TVA distributors won't have to buy buy all of their power from TVA.
"We are committed to embarking on additional negotiations with TVA that acknowledge the interdependence between the wholesale rate structure change and local power company flexibility to respond to marketplace demands and customer expectations," TVPPA said in a statement Thursday. "We also recognize the importance of local control when it comes to retail rate solutions."
Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.