Survey: TVA industrial rates higher than those in neighboring areas

photo Tennessee Valley Authority headquarters and TVA logo

EXTRA CHARGESFor the typical Chattanooga household that uses 1,441 kilowatthours of electricity each month, EPB will charge 2.1 percent more next month than the current rate and 3.8 percent more than a year ago:• $148.43: Average power bill for October, 2014• $145.35: Average power bill for September, 2014• $143.03: Average power bill for October 2013Source: EPB

photo Deborah Blount visually inspects finished flooring slats at the Shaw Industries hardwood flooring plant in South Pittsburg, Tenn.

Over the past decade, Shaw Industries has cut its energy use by 25 percent -- and its peak electricity demand by more than 40 percent -- through both production changes and cutbacks.

But even with such savings, the Dalton, Ga.-based carpetmaker still chose during the recent recession to relocate one of its North Georgia plants to access a cheaper energy source.

By moving one of its production sites a mere three miles down the road in Eton, Ga, Shaw cut its power bills nearly in half by shifting from the Tennessee Valley Authority to the Southern Co.'s Georgia Power.

"In the neighborhood where we mostly operate, TVA costs tend to be higher," Shaw Energy Manager Charles Chapman told the TVA board last month. "TVA has gotten better in the past couple of years, but there is still a real difference."

Next month, TVA electricity charges will go up again across its seven-state region when the federal utility implements both a wholesale rate increase of nearly 2 percent and another monthly fuel cost adjustment from September's level.

The combined increase is likely to be similar to what other electric utilities are imposing this year as environmental regulations push most power producers away from aging, but inexpensive coal-fired generation to newer and often more expensive sources of power. TVA is replacing 18 of its oldest coal-fired units with new natural gas, nuclear power and renewable energy sources.

Despite the monthly increase in fuel costs from the current rate to October's level, TVA spokesman Scott Brooks said October's fuel-portion of TVA's electric bill will still be 5 percent below the average for October fuel costs over the past three years.

But TVA power rates -- once among the lowest in the country -- are no longer the cheapest for many power users.

"We think (TVA President) Bill Johnson is doing a tremendous job to try to hold the line on TVA's costs, but our surveys indicate that TVA industrial rates for many of our members are higher than they are in neighboring areas," said Donald Huffman, executive director for Associated Valley Industries, a trade group for more than 40 of the biggest industrial customers served by TVA.

With the incentives offered over the past couple of years, TVA estimates its average industrial rates dropped by 6.8 percent in the past year.

Brooks said TVA's average retail rate ranked the 35th lowest among the top 100 utilities for residential rates and the 16th lowest among the top 100 utilites for industrial rates, according to data compiled by the U.S. Energy Information Administration.

"TVA is working with its customers and their associations on a strategic pricing plan in 2015 that improves fixed cost recovery and pricing signals and focuses on simplification and ensuring fair and competitive rates," Brooks said.

But Chapman said from Shaw's actual plant experience, the electricity rates from the local TVA power distributors were in the lowest-cost quartile in only one of Shaw's plants and TVA rates were in the most expensive quartile of utilities at three other locations.

Arkansas-St. John's Live Blog

"We don't expect TVA to necessarily be the lowest, but we do expect there to be some parity," Chapman said. "We appreciate the Valley Investment and other incentive programs from TVA that we've been able to take advantage of to hold down costs. But those are only pacifiers and temporary relief measures."

Johnson, who was hired as TVA's CEO two years ago, pushed TVA to cut out $500 million of annual operating expenses to better align its rates with neighboring utilities.

"It's my job to continue to try to be more efficient," Johnson said last month. "But I think our rates are competitive."

Nonetheless, some industry users insist that their electricity bills are still higher in the TVA region than in other areas where they operate similar plants.

"Comparing TVA rates to other utilities in the country showed that TVA rates were above the midpoint," said Terry Ledford, director of utility services for the University of Tennessee and chairman of the Associated Valley Industries.

AVI conducted a survey of its members earlier this year to compare TVA rates with other power suppliers.

TVA directors have approved rate increases in each of the past two years that were lower than the overall inflation rate. At the retail level, TVA will boost rates by 1.5 percent in the fiscal year that starts Oct. 1. The monthly fuel cost adjustment fluctuates according to monthly usage and fuel expenses, but the fuel-portion of TVA bills is lower today than two years ago, Brooks said.

TVA electricity rates for homeowners, who benefit by a residential preference from the cheaper hydro power, are generally below the national average.

But the combination of a base rate increase and higher fuel costs next month will push up the average EPB residential electricity bill in October by about 2.1 percent over the September rate and 3.8 percent above the year-ago rate, according to figures provided by EPB for a typical homeowner who uses 1,441 kilowatthours of power a month.

"We realize that TVA must maintain a delicate balance between keeping rates as low as possible while maintaining very high reliability," Ledford said. "We definitely are encouraged by TVA's current direction and leadership, but they need to do more."

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.

Upcoming Events