Power bills will rise next week

But increase only half of inflation rate

Power bills will increase next week with the start of the new fiscal year for the Tennessee Valley Authority, but the increase is being moderated by lower fuel costs for America’s biggest government utility.

With near record rainfall so far this year, TVA has boosted power production from its cheapest source of electricity — TVA’s 29 powergenerating hydroelectric dams — by 15 percent above normal, TVA’s river management control director James Everett said Wednesday.

Combined with cheaper natural gas, TVA will cut its fuel cost adjustment next month by 16 percent below the 3-year average for fuel expenses in October.

TVA directors voted in August to adopt a $199 million increase that will boost its wholesale rates nearly 2 percent in the fiscal year that begins Monday. But that base rate increase will be partially offset by the drop in TVA fuel costs next month.

In Chattanooga, the combined impact of the higher base rates and the lower fuel costs mean that the typical residential electric customer will pay 1.4 percent more for electricity next month than a year earlier, or about half of the overall inflation rate in the past year.

In its 10-year financial plan adopted six years ago, TVA planned a series of 1.5 to 2 percent annual base rate increases to help reduce its debt and position the utility for a future with stagnant or declining power sales.

EPB spokesman John Pless said the average household that uses 1,295 kilowatt-hours of electricity a month will pay $139.74 for electricity in October, or $1.94 more a month than a year ago and $2.47 more a month than the current retail rate.

“If you look at the increase from last year to this year, it is going to be very minimal for most customers,” said Doug Peters, president of the Tennessee Valley Public Power Association, the Chattanooga-based trade group that represents the 154 local power companies that distribute TVA-generated power. “But if you look at where TVA rates are after six years of these annual increases — and compare them with investor-owned utilities which are passing along tax rate reductions in their power rates this year, in many instances — then TVA seems to have lost some of its competitive advantage [over other utilities].”

As a federal corporation, TVA does not pay income taxes, although it does allocate 5 percent of its sales to make in-lieu-of-tax payments to local governments. Unlike TVA, investor-owned utilities are being aided this year by the cut in the top corporate tax rates from 35 percent

to 21 percent. In Alabama, as a result, Alabama Power Co. expects to save $257 million and is passing along those savings with a rate cut of about 9 percent.

Peters said most local power companies in the Valley are eager for TVA to call a halt to its annual base rate increases, particularly after the utility is expected this year to report record earnings and to exceed some of its debt reduction targets.

“I believe TVA is in the best financial condition it has been in the 35 years or more that I have worked in this industry,” Peters said. “If TVA goes much further with its wholesale rate increases — and some might say any further — I think most of my members would say that TVA is going to have a negative impact on their competitiveness.”

Environmental and consumer groups have also complained about TVA’s rate realignment and increase in grid access fees adopted this year, which increased the fixed fees to its customers while lowering the variable price of electricity. Environmentalists fear the change will discourage customers from installing their own solar and wind generators to help supplement the power they buy, while consumer groups such as the NAACP argue that the higher fixed fees will disproportionately hurt residential and low-income households while giving an advantage to major industrial customers of TVA.

The rate realignment is revenue neutral for TVA. TVA President Bill Johnson said the change was needed to help reflect the cost of maintaining the grid and power delivery to each customer, regardless of their monthly usage.

In the next year, EPB will not alter its monthly customer fee of $9.36 a month, which is the minimum charge for service even if no electricity is used in a month, Pless said. While the fixed or monthly minimum charge by many local power companies has increased in response to TVA’s rate realignment, EPB is not raising its fixed fee since the increase in TVA’s grid access charges is being offset by lower variable rates on its electricity.

“As a utility with a growing number of customers, we think we will fine and not be impacted greatly by this change,” EPB Chief Financial Officer Greg Eaves said last week.

Among TVA’s major distributors, EPB has the lowest fixed fees, according to a survey conducted earlier this year for the Southern Alliance for Clean Energy which opposed the higher grid access fee.

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