A rate proposal...
TVA, TVPPA discuss differences on change for industrial customers
If approved by the Board, the rate increase TVA staff members are expected to propose for fiscal year 2004 would be only the second such hike in 16 years.
But its proposed structure has resulted in strong opposition from the Tennessee Valley Public Power Association, which represents 157 distributors of TVA power.
TVPPA isn’t questioning the need for an increase. Like other utilities around the nation, TVA is paying millions of dollars for emission-control equipment at its coal-fired plants. In TVA’s case, the cost is about $1 million a day.
However, TVPPA is disputing TVA’s rate-change proposal, which would result in a net decrease of 2 percent for large industrial customers.
TVPPA stated its case to the media at a press conference July 7 in Chattanooga. In a prepared statement, TVPPA said, “While … TVPPA members share TVA’s commitment to the environment, they believe that the responsibility for generating the revenue to meet these standards should be shared equally among all customers.”
That would include residential, commercial and industrial customers.
However, Customer Service & Marketing Executive Vice President Mark Medford says TVA needs to decrease rates for large industrial customers as part of its commitment to future economic prosperity in the Tennessee Valley.
“ In today’s economy, the Tennessee Valley is losing manufacturing jobs,” Medford says. “None of us wants to increase anyone’s power rates, but everyone benefits when there are jobs in the Valley.”
Industrial rates 12-percent higher than neighbors’
Medford says a driving statistic is that TVA’s residential rates currently are 11-percent below the average of neighboring utilities, while industrial prices are 12-percent above the average of neighboring utilities.
“ We feel strongly that a 2-percent reduction in rates for the Valley’s largest 2,500 manufacturing customers demonstrates TVA’s commitment to help retain manufacturing jobs in the region,” Medford says.
TVA’s original rate proposal in January called for an 8.1-percent average wholesale increase for residential and commercial customers and a 2-percent wholesale decrease in firm prices for large industrial customers.
Medford says TVA has had numerous discussions with TVPPA and individual distributors since then and has modified the original proposal in response to distributor requests.
“ The revised proposal would result in a 7.4-percent average wholesale increase to residential and commercial customers,” Medford says. “The 2-percent wholesale decrease in firm prices would remain in place but would be limited to industrial customers with firm loads greater than 1 megawatt.”
TVPPA has proposed an increase on all Valley electricity sales, including interruptibles. This would translate into an increase of more than 7 percent on a substantial portion of the industrial load.
“ This increase would have a crippling effect on Valley industries and jobs,” Medford says.
He adds that the difference between TVA’s rate plan and the one proposed by TVPPA would cost the typical Valley homeowner an average of about four cents a day.
Further details on TVA’s position on the rate actions are scheduled to be available online this week at www.tva.com.
— JIM ANDREWS
Comparing rates across the region |
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| 2-percent cut ‘step in the right direction’ | John Bradley, Senior Vice President of Economic Development, says TVA’s proposed rate change for 2004 is designed to help retain industry — and that’s vital to the future economic health of the Tennessee Valley. “ If we want to help keep industries and jobs in the Valley, we must make our industrial rates more competitive,” Bradley says. “Since 1989, we have seen numerous cases across the nation in which pricing actions are implemented to favor industrial customers. Our proposed 2-percent decrease isn’t enough, but it’s a step in the right direction.” Citing Bureau of Labor Statistics figures, Bradley says TVA’s power service area lost 100,000 manufacturing jobs from the end of 2000 to the end of 2002, making it more important than ever that TVA lower its industrial rates. “ TVA feels strongly that the 2-percent reduction in rates is crucial in retaining manufacturing jobs already here, as well as suppliers’ jobs. At the same time, TVA would be demonstrating to prospective manufacturers and economic developers that its electric rates can be competitive with those of other utilities in the region.” — JIM ANDREWS |
| Proposed rate actions follow timetable | The path to the rate adjustment and rate change proposed by TVA for fiscal year 2004 has followed a prescribed course. TVA first notified distributors of staff proposals — for a 5.9-percent increase in average wholesale rates and a change that would decrease firm industrial prices — at the Jan. 22 meeting this year of the Tennessee Valley Public Power Association’s Rates & Contracts Committee. On Feb. 20, TVA mailed a letter to distributors detailing the rate-change proposal. That letter officially started a 180-day clock required by TVA’s power contracts with distributors. Only 30 days’ notice is required for a rate adjustment. At its Aug. 27 meeting, the TVA Board will vote on the rate adjustment and the rate change. After that vote, if the actions are approved by the Board, TVA must mail an official letter notifying distributors of TVA power of the rate adjustment and rate change. That letter must be mailed before Sept. 1 for the new rates to go into effect Oct. 1. |
July 2003
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