BY THE NUMBERS
EPB residential bills
• $130.98 — Current average bill
• $4.97 — Increase in typical July bill from TVA fuel cost increase
• $6.54 — Increase in typical bill from EPB rate increase
• $142.49 — Average July bill
TVA and its Chattanooga-area distributor, EPB, will raise electric rates nearly 9 percent, or $12.49 a month for the average resident, starting on July 1.
Harold DePriest, president and CEO of EPB, said the increase at the local level is necessary to rebuild the utility’s reserves after it spent $34 million so far in 2011 to repair storm damage to the grid.
“Toward the end of the [cleanup from the April 27] storm I realized we were spending money at a rate we had never spent before,” DePriest said at Friday’s board meeting.
EPB directors Friday approved a 5 percent rate increase for its share of power bills, adding $6.54 to the typical residential electric bill.
The Tennessee Valley Authority, which supplies power to EPB and 154 other municipalities and cooperatives in its seven-state region, is adding another 4 percent increase in bills because of an increase in its fuel cost adjustment in July.
A fifth of the EPB share of the increase is a direct result of the storms, DePriest said. The rest arises from rising costs and an expanding grid since EPB last raised its own rates four years ago.
EPB also plans to add about 50 employees in the next year, though DePriest said those salaries are paid for by revenues from EPB’s fiber-optic division.
The utility’s last electric rate increase adopted in 2007 was slated to last between three and five years. New revenues from the rate hike will take four years to refill the utility’s coffers, which would have run dry in September 2012 without an increase.
But EPB’s rates only make up about 20 percent of customers’ electric bills. The rest, 80 percent, stems from TVA.
TVA, a independent federal agency that serves as producer, distributor and regulator of energy in the Tennessee Valley, will raise its wholesale rates 4.5 percent in July, or about $4.97 for the average resident.
Since July 2010, TVA has raised rates about 6.6 percent. Since EPB last raised its rates in 2007, TVA wholesale rates have increased by more than 20 percent since July 2007, when EPB pushed through its previous 4 percent rate increase.
TVA recently suffered $200 million in lost power generation, sales and repair expenses from the 153 tornadoes that spiraled through its region this year, and was forced to buy power on the private market, which is more expensive, to compensate for lost production at Browns Ferry.
The Federal Emergency Management Agency typically pays back 50 percent to 60 percent of the cost of disaster damage to government-owned utilities such as EPB, according to Greg Eaves, EPB’s executive vice president and chief financial officer.
However, that money could take up to two years to filter down through the various levels of bureaucracy to the city utility. In the meantime, another outbreak of storms like those in April could force another rate hike, EPB’s DePriest said.
“We’d have to raise rates 12 percent [up from 5 percent] to take care of another storm like that one,” he said.
If weather patterns return to normal, some of the revenue from the new rates will be used to create a “virtual power plant.”
The idea is that utility officials could reduce the city’s voltage demand during peak hours when power is most expensive, helping reduce costly payments to TVA.
“It’s one of the firstfruits of our smart grid,” DePriest said.
The utility will also continue to finance the rollout of smart meters that automatically reroute power in case of a service disruption, rendering an outage nearly unnoticeable, said David Wade, executive vice president and chief operating officer.
COAL PLANT COSTS AHEAD
But even if all goes well with the weather, TVA runs some of the oldest coal power plants, 10 years older than the U.S. average, DePriest said.
And those will need to be replaced. Even with cost-saving initiatives in place, EPB customers should have realistic expectations about the direction of their rates as TVA begins replacing its aging “fleet” of plants, DePriest said.
Rates will continue to rise as expenses climb, but EPB’s cost-cutting efforts will soften the blow to ratepayers, he told board members.
Board member Vicky Gregg, president and CEO of BlueCross BlueShield, put it more simply:
“So it’s a decrease in the increase,” she said.
Ellis Smith joined the Chattanooga Times Free Press in January 2010 as a business reporter. His beat includes the flooring industry, Chattem, Unum, Krystal, the automobile market, real estate and technology. Ellis is from Marietta, Ga., and has a bachelor’s degree in mass communication at the University of West Georgia. He previously worked at UTV-13 News, Carrollton, Ga., as a producer; at the The West Georgian, Carrollton, Ga., as editor; and at the Times-Georgian, Carrollton, ...