City will probably bid out electricity
Move might lead to departure from TVA
It is looking quite likely that Memphis will bid out its electricity supply and eventually reach the crossroads of whether to leave the Tennessee Valley Authority.
The Memphis City Council delayed a vote on approving a contract that it rejected in October.
That contract would bid out Memphis, Light Gas and Water’s electricity supply, a measure it voted down after heavy lobbying from a rival firm and outside interests.
It had been poised to vote on the $520,000 contract with GDS Associates after Memphis Mayor Jim Strickland brokered a compromise between two factions of the council and revived the contract with some edits.
However, on Tuesday, some concerns from council members about following the MLGW Charter prompted the city’s legislative body to delay the vote until MLGW’S board of commissioners can sign off on the compromise.
Strickland’s revival of the GDS contract comes two weeks after MLGW CEO J.T. Young told the MLGW board that he wanted to suspend any decision about leaving TVA and renegotiate the contract between MLGW and the federal power provider.
Strickland brokered compromise
Strickland told The Commercial Appeal last week that he wanted MLGW to bid out its power supply, despite Young’s stated desire to suspend leaving TVA for the time being.
“I don’t know how long he (Young) means [by] indefinitely. I am okay with a short pause because of what’s happened in the energy sector over the last month west of the Mississippi. But I don’t think we ought to do it very long because the [request for proposals] process itself is a long process. We promised citizens that we would get concrete pricing information so that we can make an apples-to-apples comparison and make the best decision,” Strickland said last Thursday.
On Monday, following his comments to The CA, Strickland sent the
“We promised citizens that we would get concrete pricing information.” Memphis Mayor Jim Strickland
City Council and Young an email that proposed the city council reconsider the GDS contract. The reconsidered contract comes with a catch: The city administration will approve the wording of the requests for proposals before they are issued and the bidding will also be open-ended enough to allow bidders that weren’t supplying natural gas or solar power.
On Tuesday, before the council delayed the vote, Strickland said each piece of his proposal was flexible and the measure was being offered as a way to restart the process.
Per his letter to council, Strickland would also like the process to reach what he described as a final stage, a check-in that would determine if it is possible for a Tva-exit to happen.
“The check-in would be to determine if an exit from TVA is feasible, and a majority vote would be required of both boards to move forward. According to the GDS timeline, this phase would occur 7 to 11 months after the ‘Notice to Proceed,’ ” Strickland wrote.
The mayor noted the division the council had over the GDS contract in October and emphasized the need to find common ground.
MISO pitches City Council
On the same day Memphis pretty much reopened its electrical freeagency, it heard from MISO, the electric grid it would join if it left TVA.
MISO explained Tuesday what transpired in mid-february that caused, brief blackouts in Lousiana, Arkansas, Mississippi and Texas.
It detailed what happened to it during the unprecedented cold that gripped the South and Great Plains — it had to mandate a two-hour, 20-minute blackout.
Transmission issues caused further outages in Texas and Louisiana, the grid operator’s executive director told the Memphis City Council on Tuesday.
“We had more customer need than we had generation to meet it,” Melissa Seymour, the executive director of MISO, said.
Seymour also pitched Memphis on the benefits to the region, and MISO, if Memphis, Light, Gas and Water joined MISO. She said Memphis could potentially see financial benefits in terms of lower electric rates by building its own power plants and buying from MISO’S electricity marketplace.
Seymour said MISO would benefit from Memphis building its own power plants, too. She said it could’ve helped parts of Mississippi and Arkansas not lose power during the extreme cold.
“The joint benefit that everybody would get is you would get to participate in the MISO market .... at potentially lower prices then you get power today and everyone else would get a benefit by your participation in the lower administrative rate because there are more megawatts in the pool,” Seymour said.
While MISO sought to clear the air and pitch the savings of leaving TVA, Seymour also made a key point — if Memphis left TVA, it would need its own electricity generation. Seymour complimented the complicated plan MLGW used to project its power future, known as an integrated resource plan.
That plan said Memphis could save about $100 million a year on electricity if it left TVA under three scenarios. All three included MLGW building its own solar and natural gas electric generation, transmission lines and then buying some power from MISO’S marketplace.
“I think your IRP did a very good of identifying what the lowest risk, most reliable thing would be for Memphis, which is a combination of purchasing as well as owning and operating generation,” Seymour said.
“If you have a good supply-demand balance then during an event like [the freezing cold] you’re probably more immune than you would be if you didn’t.”
The original GDS contract is to bid out those three scenarios, but, under the compromise, it would be amended to include alternative power source.
Some critics of MLGW’S process for studying if it should leave TVA have argued that Memphis would not need to build its own electricity and instead could save more money by buying all of its power from MISO’S marketplace.
When studied, that method showed savings, but also the risk of being exposed to market prices.