Nuclear deal can power Memphis ahead
In the past year, I’ve learned much about Memphis, its people and its leadership. When I am here, I can feel the momentum of Memphis as it works to become an even greater and more prosperous place to live.
During my 44-year career in the field of energy, I’ve spent a lot of time working with communities throughout the South. I learned firsthand that a city grows and prospers because of the vision and courage of its officials to make bold decisions that spur growth and expand its economy.
For over 32 years I served in many roles with Duke Energy, most recently as chief operating officer of TVA. Now I am CEO of Nuclear Development LLC, the company that has offered Memphis Light, Gas and Water Division a proposal that could change the way the utility buys its energy.
Better yet, this proposal could dramatically decrease what residents and businesses pay for that energy, while leaving MLGW with enough additional revenue to repair its aging infrastructure without raising rates.
MLGW’s customers consume about 13 million megawatts of energy annually, for which it pays TVA $75 per megawatt hour. MLGW buys all this energy from TVA, which means it pays close to $1 billion each year to TVA.
Nuclear Development is in the process of buying TVA’s Bellefonte Nuclear Power Plant in north Alabama for $112 million. The project’s investors hope to close on that purchase by mid-November.
To finance a full upgrade and renovation of the plant in accordance with modern-day standards, Nuclear Development has applied for a $8.6 billion loan from the U.S. Department of Energy (DOE). Unit One of the Bellefonte plant is earmarked to supply Memphis with 80 percent of its electrical energy within five years (2024).
The investors behind the Bellefonte plant have created a business model to provide Memphis with up to 80 percent of its basic power needs at a rate of $39 per megawatt hour – almost half of what MLGW now pays TVA.
This proposal offers MLGW a savings of about $487 million a year – perhaps the greatest financial opportunity in Memphis history and a unique way for MLGW to finance its infrastructure without sticking its customers with the bill.
Imagine what $487 million a year – or $14 billion over 30 years – could do for Memphis.
For starters, it could repair MLGW’s aging infrastructure so that a rainstorm won’t randomly and regularly darken neighborhoods. Or it could finance a new downtown convention center or help to fund the revitalization of the riverfront or build new community centers. The list is endless.
Imagine what cutting this city’s residential and business power costs could do. A large segment of Memphis that currently struggles to pay its monthly power bills could keep the heat on in the winter.
And imagine how this could affect economic development, especially recruiting new businesses to Memphis. New businesses mean more jobs.
Memphis was selected by Nuclear Development as the best city to purchase power from Bellefonte mostly for two reasons. Memphis sits on the western edge of TVA’s network, giving Memphis two ways to get power.
The largest electric transmission system in the U.S. lies across the river and can be linked to Memphis, also providing safe and cost-effective delivery of electric power. This could meet all of Memphis’ remaining energy needs at a rate much less than what MLGW currently is paying TVA.
The second reason is because Memphis can cancel its contract with TVA with only a five-year notice, unlike other TVA customers that must give TVA a 10year notice.
Since Nuclear Development officials, including myself, first met with MLGW about this offer, the biggest problem we’ve encountered is persuading MLGW that the offer not only is doable, but that Nuclear Development is committed to sign a 30-year agreement with MLGW that would legally bind us to that agreement.
To date, MLGW President J.T. Young has declined to update a letter of intent originally signed in January by former MLGW president Jerry Collins. To secure that critical federal loan, Nuclear Development must provide the DOE with this updated letter plus a nonbinding power purchase agreement.
MLGW, however, will not talk with Nuclear Development about possible terms of such an agreement, saying they are waiting for the results of a study on this future power source. The study, which was ordered by MLGW in September, about six months after we started meeting, is not due until December.
Without those documents on or before mid-November, this offer to Memphis could go away.
While Nuclear Development already has given TVA $22 million in earnest money for the Bellefonte plant, Nuclear Development may walk away from the deal if the DOE’s loan requirements aren’t satisfied by that time.
Change is often difficult, and rewards don’t come without risks. Yet we are certain this proposal, while detailed and complex, can be done.
Bill McCollum is CEO of Nuclear Development, LLC.