How will TVA's proposed rate change affect you?

Nathan Baker • Mar 17, 2018 at 11:04 PM

The Tennessee Valley Authority is now taking public comments on proposed changes to its wholesale rate structure, but it’s unclear how the new rates will affect residential electricity customers’ bills.

Hoping to cover fixed costs associated with delivering electricity, like the expense of maintaining power lines, while energy efficient appliances and practices drive down revenue from metered sales, the TVA board is considering adding a “grid access charge” for local utilities that buy electricity wholesale.

The new flat fee would be accompanied by a corresponding reduction in usage rates to make the change revenue neutral for the agency.

In one proposal submitted to local utilities served by the TVA in August, the wholesale cost of electricity would drop by one cent per kilowatt hour with the fixed charge added to recover an equivalent amount of revenue. The full list of alternatives to be considered by the board on May 10 includes usage rate changes from between a quarter-cent per kWh to 2.5 cents per kWh, each with corresponding additions of the grid access charge.

According to the document submitted to the board explaining the scenarios, the one-cent rate proposal would mean a $1 monthly increase for the average retail customer and a maximum increase of “generally no more than $2”

TVA spokesperson Scott Brooks said customers seeing increases on their monthly bills would be rare.

“I think the part people are most concerned with, is if their power company chooses to pass on or implement a similar change that would pass on to them, then the most that could go up would be $1 to $2,” Brooks said. “That would be the most, and it would be a pretty rare case. It’s designed to be revenue neutral.”

When demand is high, like in the coldest months of winter and the hottest months of summer, Brooks said the fixed charge will help to reduce customers’ bills by smoothing out the peaks in electricity usage.

Exactly how the new rate translates to residential customers will be up to the individual power companies, though.

On a local level

BrightRidge CEO Jeff Dykes won’t go into specifics about how the grid access charge will affect local customers until after the TVA board decides how much it will charge utilities for wholesale power.

The Johnson City-based power company has been working with rate consultants to discuss how any rate changes will be passed along to customers, he said.

“In the past, you’ve seen a lot of utilities moving costs into the fixed category,” Dykes said. “We have followed suit there too, and I think you’re going to see more and more utilities matching up to where the TVA’s going.”

BrightRidge already has a fixed monthly fee for service it calls an “availability fee.”

From April 2015 to March 2018, the availability fee increased from $14.51 to $20.87, a 43.8 percent rise.

BrightRidge spokesperson Tim Whaley pointed out that with the fixed charge, average customers’ bills were lower in January and February this year compared to the same months last year.

That’s true, but it’s attributable to a lower TVA fuel charge passed down directly from the federal utility in those months. Without the fuel charge factored in, both the availability charge and BrightRidge’s rate per kilowatt-hour are higher in those months in 2018 compared to 2017.

In November 2016, BrightRidge, then the Johnson City Power Board, instituted a “demand cost recovery adjustment” to help level out expenses from a new peak billing structure put in place by TVA the year before.

The recovery adjustment on customers’ bills varies from a charge in some months to a credit in others based on how efficiently, based on the proportion of electricity used during high peak times, the utility consumed power.

Both Whaley and Dykes touted BrightRidge’s efforts to combat passing rising costs in the power delivery industry on to customers.

Since 2009, Whaley said the TVA’s retail price for electricity increased 18.7 percent and the consumer price index increased 16.1 percent, but BrightRidge’s rates have only increased 5.8 percent.

“We’re working steadily to see where we can become more efficient, to operate better and look at the things that are being impacted,” Dykes said. “Our costs are continually going up, and it’s a balancing act for us to be more efficient and keep operational costs low. Every manufacturing industry faces what we are facing right now.”

Unfair to fixed incomes?

But at least one group believes instituting and increasing fixed rates for electricity unfairly places cost burdens on those who are trying to save on utility expenses.

Jennifer Rennicks, a spokesperson for the Southern Alliance for Clean Energy, said mandatory fees take away the control electric customers have over their bills.

“If you have a customer with a huge house that uses an inordinate amount of electricity, this fee is not going to register to them when it shows up on their bill, but if you have someone with a small home on a fixed income, and they’ve done everything they can to lower their usage, they get hit with this high charge, and their bills will go up,” she said. “It’s disingenuous to say bills will be lower.”

Customers with small-scale power generators at their homes, like an array of solar panels, who may have very low or no electricity usage, will have to pay more to be connected to the electric grid with higher mandatory fees, she said.

It’s because of those customers and other efficiency efforts that fixed fees are needed, said Dykes.

Costs to maintain the grid’s infrastructure are not going down, but utilities’ revenues are, he said.

Rennicks said representatives from the Alliance for Clean Energy will be filing comments with the agency opposing the proposed grid access charge.

Public comments about the proposal may be submitted by email or mail no later than April 9. Send comments to [email protected] or Matthew Higdon, NEPA Compliance, 400 W. Summit Hill Drive., WT 11D, Knoxville, TN 37902. For more information about the rate proposal, visit tva.gov.

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