The Tennessee Valley Authority is raising the cost of electricity this fall for the second year in a row.
The public utility raised rates by 4.5% last year and approved an additional rate increase of 5.25% this year.
Over the next year, TVA will collect an additional $500 million from its 10 million customers with the new rate. TVA provided little public information about recent or future spending while announcing the rate increase, sparking critiques about the lack of transparency and public oversight.
“That’s a significant chunk of money and those 10 million people deserve a say in how it gets spent,” said Maggie Shober, the research director for the Southern Alliance for Clean Energy.
TVA faces less financial scrutiny than other utilities in the U.S.
When most electric utilities raise rates, they must show their math with ample documentation to a public service commission, a group of state regulators. These regulators can examine how the utility has spent money and how they propose to spend money in the future to determine whether a rate increase is prudent.
“That system is set up because these electric utilities have a monopoly, and there needs to be some sort of checks in place so they can’t just charge whatever they want,” said Shober.
But TVA is different. It is owned by the federal government and regulated by the TVA Board. TVA rarely gives detailed receipts for their spending — such as how exactly the 2023 rate increase revenue was spent — and gave little information about this latest rate hike.
TVA provided a slide during a presentation to the TVA board last month about planned uses of the additional revenue. One line item, “Power Operations Reliability Investment,” is “part of the $15 billion TVA is investing in our power system to maintain reliability, including a new System Operations Center,” TVA spokesperson Scott Brooks said in an email.
Details about this investment have been limited.
“From what we know of how they’re spending these additional funds, it’s just focused on this fossil fuel bonanza,” Shober said.
TVA provided two board resolutions after the Aug. 22 meeting with documents on the “budget” and “rate increase.” (That’s a new process, following a WPLN investigation into how information about board decisions is provided to the public.)
In the budget, TVA provides a breakdown of capital expenditures for the next fiscal year. Roughly 90% of that spending, or about $3 billion, will go toward methane gas projects.
The gas buildout is the largest of any utility in the nation this decade and further solidifies gas as the dominant source of TVA-operated generation capacity. Gas comprised about 40% of TVA’s own capacity last year, and that figure could climb to 50% or more in the next few years as TVA builds more gas plants.
Gas use has serious consequences for public health and the climate. Burning gas for electricity causes harmful air pollution at each level of the system and releases methane and carbon dioxide into the atmosphere, heating up the planet.
The heavy gas portfolio also makes TVA less resilient to cold weather and threatens ratepayers with higher costs, Shober said.
How the rate increase affects contracts with local power companies
In 2019, TVA introduced 20-year, rolling contracts to local power companies like the Nashville Electric Service. Most companies, minus Memphis, Light Gas and Water and a few others, signed the contract, which essentially locked funding onto the federal utility’s system.
TVA made two stipulations in these contracts. One was agreeing not to raise rates by more than 5% in the first five years, and the second was to not raise rates by more than 10% in any five-year rolling period. TVA narrowly avoided opening up contract renegotiations with its two latest rate hikes: TVA raised rates by 4.5% last year, with the five-year period ending this Sept. 30. On Oct. 1, TVA’s rates will increase by another 5.25%, bringing the total to 9.75% for a five-year period — making it unlikely that TVA will be raising rates for at least a few years.
