Inside the fight to keep Memphis in TVA
November 6th Street is easy to miss as it cuts through Downtown Memphis. It is a small alleyway with a long name.
Depending on the outcome of studies and back-room maneuvering over the next several months, the street could represent a tie that no longer binds, or an enduring partnership.
The street gets its name from Nov. 6, 1934, — the day that city-owned Memphis Light Gas and Water joined the Tennessee Valley Authority, the New Deal invention that electrified much of the Tennessee River Valley. That partnership, between MLGW and TVA, has lasted 85 years.
If Memphis City Council decides to, that partnership could end. Memphis could potentially leave TVA and buy power elsewhere.
That prospect brought TVA CEO Jeff
Lyash to town for a sixth time in seven months on the job last week. In the fiscal year just gone by, MLGW represented nine percent of TVA’S revenue, making it a customer the power provider can ill-afford to lose.
His appearance in Memphis underscored the city’s importance and the lengths TVA is willing to go to keep it. Observers wouldn’t go as far to call TVA’S effort a courtship, but described the power provider as building a relationship that didn’t always exist.
Technically, Lyash was in town for a TVA board meeting. In an interview with The Commercial Appeal, he was quick to point out that he was visiting as part of the normal course of business.
However, he packed his schedule with meetings with the Memphis City Council, a reception with Mayor Jim Strickland and the Economic Development Growth Engine Board; a meeting with Memphis Tomorrow, the business advocacy group, and another with the Greater Memphis Chamber, according to interviews and public records.
TVA has also retained Caissa Public Strategy, one of the more prominent public policy firms in Memphis for help retaining MLGW as a customer. It has sponsored some of the city’s bicentennial celebration and taken out billboards across Memphis, touting MLGW and TVA as “Brighter Together.”
TVA wants Memphis to feel like it matters because if TVA can’t keep its largest customer on its western border, it not only loses revenue, but it could signal the cracking of a public power entity that has lasted eight decades.
On Wednesday, as Lyash talked to four current city council members and three incoming representatives, the CEO acknowledged just that fact. He described Memphis through the lens of “keeping the public power model intact with no cracks in the foundation.”
The question becomes: Will TVA’S full-court press keep Memphis or is the charm offensive too little too late?
For Karl Schledwitz, the CEO of Monogram Foods and longtime Memphis political operative, TVA not offering funds for the Memphis Zoo Giant Panda exhibit when it helped fund an aquarium in Chattanooga still sticks in his craw.
“In 2003, I approached TVA to help Memphis raise the money to bring the Pandas from China to the Memphis Zoo after reading that TVA contributed $5 million to the Chattanooga Aquarium and a similar amount to support projects in Knoxville. TVA turned us down,” Schledwitz said in a recent Commercial Appeal editorial. “That’s when Herman Morris, then president of MLGW who supported our request, told me that Memphis and West Tennessee always get the short end of any deal with TVA.”
In that same editorial, Schledwitz said Memphis was losing a $1 million a day by staying in TVA, the same argument U.S. Rep Steve Cohen made in an interview with The CA in October. Both the businessman and congressman are supportive of Memphis leaving TVA.
The $1 million a day they cite is the same figure, Nuclear Development, a company that would benefit from Memphis leaving TVA and heading to the Midcontinent Independent System Operator, MISO, pitched to Memphis in a recent presentation. The company’s owner, Franklin Haney, and Cohen have a longstanding relationship.
The pandas and TVA’S lack of funding for them, to some, is a sign of how little TVA has invested in Memphis compared to the billions of dollars Memphis has paid it for power. When former TVA CEO Bill Johnson warned Memphis not to leave the authority last year, long-simmering frustrations about the TVA workforce in Memphis — and the thousands of high-paying jobs it has elsewhere — showed themselves.
Johnson was forced to defend the corporate base TVA has in Chattanooga and Knoxville, but stopped short of guaranteeing that TVA would add jobs in Memphis.
A former MLGW CEO, Bill Crawford, noted Memphis has seen a lack of corporate investment from TVA throughout its history, but attributed that to geography, not ill-intent on the part of TVA.
“That’s existed for a long long time… A lot of that has to do with geographically we’re on the west end of the whole system. We worked on that and TVA did open an office here…. Their corporate offices were originally in Knoxville… They’ve got a whole city block in Chattanooga. We’re just on the far reaches of their system… We were trying as much as we could to get them to invest in this area.,” said Crawford.
Crawford said, “They’re going to be focused more where their corporate headquarters and control centers are. Other than the Allen Plant, until they bought that, they really didn’t have anything over here, even from a generation perspective.”
The former MLGW CEO noted, however, that if Memphis made a switch, it would be unlikely that the switch would bring a high number of jobs with it.
“I could understand [the business community] would like for them to invest in Memphis, but whoever the hell they go with, if they go with some other outfit, I don’t know if they’re going to be invested in Memphis as far as building plants or putting any kind of corporate offices. What would they put here?” Crawford said.
Worth Morgan, the District 5 City Councilman, noted that in the past year TVA’S presence and engagement in Memphis, at least with local leaders, has grown.
“Over the last year, that they have been more actively engaged with the political process with the City Council,” Morgan said. “I think [MLGW considering its options] has been a big catalyst for it. There’s the also realization that in the past, it was typically TVA that would communicate with MLGW and then MLGW would communicate with the council...
When we had the question of MLGW’S future in terms how we produce or who do we purchase power from, TVA and the council realized that there was no direct relationship,” Morgan said.
During an interview with The Commercial Appeal editorial board, Lyash touted the power provider’s 20year contracts with local power companies, one that promises a 3 percent discount and flat rates for the duration of the contract.
According to TVA’S filings with the Securities and Exchange Commission, 131 of 156 local power companies currently in the TVA footprint have signed up. However, those companies only represent 56 percent of TVA’S revenue. Larger customers, most notably Memphis, haven’t signed on yet.
Lyash, in all of his trips to Memphis, including the most recent one, has said supportive things about the process Memphis is using to evaluate its power options, which will end early next year. He has even offered a carrot — help with infrastructure — that MLGW could use. His predecessor, Johnson, offered a stick, threatening to put the Allen Combined Cycle Gas plant on the back of a truck if Memphis ever left TVA.
Lyash referred to some of the pitches Memphis has received as a “rabbit-hole,” and warned of the public falling down such a trap.
“MLGW, the city and the PSAT [Power Supply Advisory Team] they have a very important and difficult job. It’s very important because you want to make sure that you get a comprehensive analysis, all elements of cost and that you very carefully consider risk,” Lyash said. “My sense is that PSAT is doing a good job… MLGW is being very disciplined about this.”
Whatever MLGW recommends is subject to Memphis City Council approval, and that could be more complicated.
“You’ve been a customer for eight decades. I want nothing more thanto keep Memphis as a customer for another eight decades. I think when you think about cost, reliability, environmental performance and risk, TVA provides the best value, but that’s not my decision,” Lyash said.
TVA isn’t going to lobby Memphis, Lyash said. He acknowledged that TVA had hired Caissa, but said the firm, which was heavily involved in the Memphis elections, won’t be used to lobby.
“They provide us feedback so that we shape our messages so they’re understandable ...to the key decision-makers, but we don’t lobby,” Lyash said. “We do have an obligation to educate.”
“This is a public power model that has been very effective for nearly a century and as I look forward, we think we have the ability outperform our peers over the next decade,” Lyash said.
Of a potential deal, and potential cost-savings Memphis could have elsewhere, Lyash said, “I’m just afraid it’s not money saved by Memphians. It’s money made by somebody else at their expense.”