TVA’S struggle to keep Memphis
TVA feared Memphis would be lured away by promise of unfinished nuclear plant
Sometime in 2018, it became clear to the Tennessee Valley Authority that it faced an existential threat — the departure of Memphis from its seven-state footprint.
Memphis represented one-tenth of the federally owned utility’s revenue, $1 billion a year. If that city and Shelby County, the largest single population base the utility served, left, it would be a gigantic financial crack in TVA’S foundation.
On the far west side of TVA’S footprint, Memphis, a largely poor, majority Black city, had long felt neglected by TVA. The billions and billions it paid the Knoxville-based federal power provider did not come back to Memphis in the form of jobs or office towers like it did in Knoxville and Chattanooga.
TVA declined to pitch in for the Memphis Zoo’s two pandas, but paid for improvements to the Chattanooga aquarium, a move that still rankled Memphis’ business elite. And, in 2018, the city was ripe for the taking. TVA had even supplied a competitor a means of luring Memphis away — it agreed to sell the unfinished Bellefonte Nuclear Plant in Alabama.
Franklin Haney, a Chattanooga businessman, spent 2018 pushing Memphis closer and closer to the edge of leaving TVA — first in private, then in public. His company, Nuclear Development, promised the city savings of about $450 million a year if it left TVA and bought power from Bellefonte. His pitch, and Memphis’ interest, alarmed TVA, documents show.
Recently unredacted documents revealed TVA was worried about Memphis leaving and knew the city felt mistreated. TVA’S fear about losing Memphis was conveyed to TVA employees days ahead of a deadline for the power provider to sell Bellefonte to Haney and Nuclear Development. The deal never closed.
TVA’S alarm about Memphis’ departure is now in the public space after The Commercial Appeal intervened in the lawsuit between TVA and Nuclear Development and is reflected among the hundreds of pages of documents unsealed two weeks ago. The CA is reviewing the documents and will post its findings as they become available.
Early in the stay-or-leave debate
On Nov. 6, 2018, Bill Johnson, thenceo of TVA, stood along one wall in the Memphis City Council’s committee room. Johnson, tall and imposing, did not work the room like a politician. Instead, he remained largely apart, waiting his turn and dodging a reporter’s questions while politicians, residents, zoning attorneys and lobbyists milled about, shaking hands and backslapping.
Minutes later, in front of council members, Johnson would soon further display his irascible nature and deliver a fiery retort to Nuclear Development’s pursuit of Memphis, calling it relying on nuclear construction, “the riskiest thing you can do in the power business,” Johnson said.
The council asked Johnson what would happen to the Allen Combined Cycle Plant, a new $987 million investment that had replaced the old Allen Fossil Plant, if Memphis left TVA.
“I wouldn’t think about it at all until someone made the mistake of giving us notice,” Johnson said, his voice defiant. For a man on the verge of losing his largest customer, his demeanor offered more of a stick than a carrot.
But Johnson held a trump card. He and the TVA Board of Directors, a body appointed by the president and confirmed by Congress, could decide whether TVA sold the Bellefonte plant to Haney. When Johnson spoke to council on Nov. 6, 2018, Haney had eight days to close on the plant.
Johnson would extend the deadline to Nov. 30, 2018, but, citing Nuclear Development’s inability to get building permits for the nuclear plant, would refuse to close the deal. The parties have been in court ever since.
‘Memphis, which has got him all upset...’
Haney and Johnson offer dueling perspectives of why TVA and Nuclear Development didn’t close the deal in their respective depositions. Haney, and his attorneys, focused on the competitive pressure Nuclear Development put on TVA. A deposition also outlined how Haney felt his relationship with Johnson degenerated as his firm got closer and closer to getting Memphis to leave TVA.
Under questioning from Matt Lembke, a TVA attorney, Haney discussed his decision to bid $111 million for Bellefonte, which came as he worked to secure a significant subsidy for the plant from then-alabama Gov. Robert Bentley.
Q: And what research did you do before deciding that Nuclear Development would make a bid on the Bellefonte property?
A: Well, I consulted with Bill (Johnson) and I consulted with Johnson and the others — and I had great relationships at that time with Mr. Johnson, thought highly of him, and I just figured that something could be worked out, because we had already gotten and spent a fortune getting the construction tax credits. We had two and a half billion of (production) tax credits and the Governor (Bentley) was talking about — and we still do — the Governor was talking about the probability that the State might do $800 (million) to a billion dollars of subsidy if we did Bellefonte.
Lembke then asked Haney about his pitches to cities across the South, including Chattanooga and Memphis. The businessman’s answers appear to hint at Johnson’s anger over Memphis.
Q: .... What customers of TVA have you met with about Bellefonte?
A: Well, Mr. Johnson told me that you can meet with distributors, you know, that kind of competition. So of course I met with different distributors like Chattanooga or --...
Q: What other --...
A: Of course Memphis, which has got him all upset.
Q: So you met — you personally met with officials in Memphis?
A: Yes.
Q: And you personally met with officials in Chattanooga?
A: Yeah, made no bones, because he said I had the right to do that.
Further along in the deposition, Haney said the continued pursuit of Memphis seemed to stick in Johnson’s craw. The then-tva chief seemed upset about Nuclear Development CEO Bill Mccollum’s statements to the Memphis City Council in October 2018.
About a month before Johnson went to the Memphis City Council, Mccollum had done the same and told the body that Memphis had a historic opportunity to cut its electricity costs in half by leaving TVA and signing with Nuclear Development. Haney said Mccollum’s statements appeared to be the root of Johnson’s discontent.
A: But he kept telling me too, though, “You’ve got the right to call on anybody you want to too,” because I think the real problem here is Memphis. But anyway -
Q: What do you mean, “the real problem here is Memphis”?
A: Well, I just think that he got upset over Memphis.
Q: Well, why do you think he got upset over Memphis?
A: Because he thought they were going to leave TVA.
Q: Did you have discussions with him about Memphis?
A: Yes.
Q: What do you remember him saying?
A: I don’t remember being too concerned about it, because it didn’t seem like he was. But he always said, “You’ve got the right to call on anybody you want to.” He just got peed off at Bill Mccollum, you know. It’s public information. Because I mean, he — the day before this — the closing, he called me and told me — he called me the day before the next one and surprised me the next night, said he wasn’t going to close.
Q: Well, let me go back and I’m going to work through several things you just said there. You said he got angry at Bill Mccollum?
A: That’s what I was told, but I don’t know whether it’s true or not.
Q: Were you told by him, by Bill Johnson?
A: No, no.
Q: You were not?
A: Somebody told me that. I don’t know.
Q: So you never had a meeting with Bill Johnson at which he expressed to you displeasure with things Bill Mccollum said in Memphis?
A: No, I had a meeting with him — we had a meeting where he was very upset with what Bill — I think Bill — or he called me once and was very upset about what Bill had said in Memphis at a City Council meeting.
Larry Blust, a longtime Haney attorney, met with Johnson and TVA general counsel Sherry Quirk, in the days before the deadline, to discuss an extension to Nuclear Development’s deadline to close on the plant.
According to Haney’s deposition, that discussion included inducements intended to alleviate TVA’S concerns about losing Memphis. In a deposition, Quirk was asked about Johnson’s apprehension over losing Memphis and whether such inducements were talked about.
Q: Do you recall a phone call involving the four of you from TVA and Mr. Blust where he said that — that the Atomic Energy Act did not bar the transaction from going forward on November 30, 2018?
A: This was a conversation with Mr. Blust where he said that?
Q: Yes.
A: I recall him stating — making that argument, yes. I don’t know whether it was that phone call or another phone call.
Q: Do you recall in that phone call or another phone call advising Mr. Blust that Mr. Johnson was not inclined to grant the six-month extension because of the presentation made by Nuclear Development to the city of Memphis?
A: I don’t recall that, but I do recall that Mr. Johnson was upset with Nuclear Development because of statements made negative to TVA that he felt were untrue.
Q: But you don’t recall making a statement to Mr. Blust linking Mr. Johnson’s disinclination to extend the closing because of the comments made by Nuclear Development at the Memphis meeting?
A: I don’t recall, no.
Judge notes Memphis’ role in dispute
Memphis’ apparent role in TVA’S failure to sell the Bellefonte plant did not escape U.S. District Judge Liles Burke’s notice. Burke issued an order on March 31 that dismissed both parties’ motions for summary judgment and set the stage for trial.
His order mentioned Memphis 13 times. He singled out comments Johnson made to TVA employees in a staff meeting about Memphis and Nuclear Development just days ahead of that November 2018 deadline to sell Bellefonte.
Johnson was asked: “Do you think there’s a real chance we could lose (Memphis) as a customer as a result of all this?”
He replied: I don’t think they’ll go to Bellefonte . . . . but they have other options . . . . And the point here is you should treat every customer every day like they could leave you tomorrow. You know, we slipped a little bit in Memphis over the last couple years. I was part of that. But we’ve come back in a pretty big way, and I think we’re making progress down there. But every day just assume every customer can leave you, and that’d probably inform your decision-making a little bit ....
.... And we’ll see where we are at the close of business Friday, but there’s no more extension. I do think a lot of people have been misled about this. The idea that you can finish that plant, what they’re really saying, if you (sic) listening carefully, is they can finish it for three and a half billion. Be a pretty good trick . . . .
It just seemed undoable. So but it’s time to call the question. So we’d be calling it on Friday. I’ve already been to the legal department today for two reasons. One, that’s where my bathroom is on the sixth floor; but the more important but less pressing question, to alert the litigators that I’m sure we’ll be a defendant by Monday. So I’m sure we’ll be sued about this. If you study the players —well, we’ll be defendants on Monday.
Burke ruled Wednesday that TVA acted within the bounds of the law when it failed to close on the deal because Nuclear Development had not gotten the appropriate nuclear building permits, but that did not finish the case, but, instead, likely guaranteed that it will go to trial this spring.