editorial (2006-07)

God Willed It?

TVA electric rates are headed toward the sky

God Willed It?

The Tennessee Valley Authority has announced that its wholesale rates for electric power are going up, this time by a whopping 9.95 percent, to offset cost increases it incurred this year with fuel prices soaring to record highs. It blames the prices it has to pay for coal, natural gas and power it buys from other utilities on “acts of God,” such as the summer and fall hurricanes that disrupted fuel supplies.

The TVA board also put in place, effective next year, a fuel-cost adjustment program that will allow the utility’s staff flexibility to raise or lower rates, depending on fuel costs at the time, without seeking board approval for each increment. Neighboring electric utilities maintain similar flexibility, according to the TVA measure’s justifying explanation. Since natural-gas prices have fallen in this mild winter, we should wish that the cost-adjustment feature were effective immediately. No such luck.

Still, TVA’s position is that its residential electric rates will remain competitive, generally, with those of surrounding utilities, including Duke Power, and lower than those of Georgia Power Co. and Carolina Power & Light. There’s little solace in that, because those utilities are operating for profit, not for the public good, as TVA is supposed to be doing.

TVA chairman Bill Baxter says the agency is cutting costs at the same time it is raising rates and is using some of its cash reserve to keep the increase lower than 10 percent...by five hundredths of a percentage point. That should make us all feel better. It’s still the greatest single rate increase TVA has advanced in memory. Recent annual increases have run in the five-to-eight-percent range. This is the big one, adopted by the two remaining members of the three-member board that is being replaced by a larger board as soon as its members can be confirmed. Baxter will remain chairman.

The new electric rates go up in April across the board then, as if God mandated it through those “acts.” It may be understandable, but it’s hardly palatable, even though the timing of the measure for mid-Spring would mean a relatively low dollar increase, because neither heating nor cooling costs ordinarily drive the total bill up in that mild period. By midsummer, it will be felt more dramatically, especially by those on fixed incomes who are trying to stay cool.

TVA is trying hard to defend its published estimate that “average wholesale rate increases on monthly residential customers’ bills will range from $4.75 for low-energy users to $8.75 for high-energy users.” KUB also estimated that its residential customers’ bill will go up about $5 to $6 a month, even as it concedes the wholesale rate hike will be passed along directly to customers. How an increase of almost 10 percent can be translated into such low increases in electric bills would seem predicated on monthly electric charges of less than $70 to a little less than $100 a month. How many residential electricity users’ bills are really that low?

The TVA position is confusing, in that it suggests that it really has no control over residential retail rates that are set by its distributors. Yet it sent out the estimates above and stands by them, with a spokesperson saying that if a homeowner doesn’t have electric heat or air conditioning, and uses electricity just for lights, a refrigerator, maybe a cookstove and a TV, the bill could be less than $50. If that’s any kind of average, we’ll eat a live 220-volt wire.

But the upshot of the large increase is that, because it is attributed to the rising costs to TVA of fossil fuels such as coal and natural gas, the nuclear option continues to look better every day.

That’s not just because its costs of nuclear power generation appear more stable, with the proposition of some federal subsidy coming its way, but because the costs of reducing the air pollution caused by fossil fuel burning are also more than significant, both to the utility and to the general public breathing the polluted air.

We’ll have to absorb this bite into our monthly household budgets, because we have no regulatory authority riding herd over TVA. Getting rates back in line with the idea that TVA is to serve as a model of public-power production, part of the reason it was created, will take a lot of imagination on the part of the new, part-time nine-member board that should be seated sometime this year. Six of those members have already been named, and a seventh seems likely to come from Memphis, TVA’s largest power-consuming area. They’ll have their work cut out for them, especially since the reason for the board’s enlargement from three full-time members was to make the utility function more like a business and less like a public-power model. They will also inherit the TVA total debt load of more than $25 billion, the bulk of which was incurred through poor planning and bad power demand projections from 40 years ago.

If the new directors come into the TVA thinking that expanded nuclear-power capacity and the continued exploration of renewable energy sources is where the utility should be concentrating its efforts, maybe the outcome will benefit consumers, rather than just the for-profit business community they are being asked to emulate.