Four Tennessee Valley Authority power companies have filed a complaint with FERC, charging the agency is violating federal energy policy by denying them access to alternative power suppliers through its transmission grid.
The non-profit municipal and cooperative utilities recently argued that TVA cannot deny them transmission system access to purchase power from suppliers other than TVA. The utilities — Athens Utilities Board, Volunteer Energy Cooperative, Gibson Electric Membership Corp., and Joe Wheeler Electric Membership Corp. — said they “seek unbundled transmission service from the only transmission provider that can feasibly serve them, in accordance with [FERC’s] longstanding open access principles” (EL21-40).
Utilities on the TVA system use 20-year bundled power supply contracts that include both power and delivery service. However, the utilities filing the complaint are governed by an older version of the contract that allows for contract termination with five years’ notice. Newer versions of the contract permit termination only upon 20 years’ notice to TVA. The four utilities say they operate under the older version of the contract and are not eager to sign off on new versions.
The utilities also emphasized that the contract’s bundled rates “have steadily risen in past years.” In an affidavit, Gibson Electric CEO Daniel Rodamaker said TVA’s power costs “do not reflect rates that are reasonable and reflective of other power supply opportunities in the wholesale bulk power market.” Rodamaker said that after his co-op recently solicited supply bids, it became clear that TVA “cannot keep pace with the cost of alternative power supply.”
TVA spokesperson Malinda Hunter said it wouldn’t be fair to TVA’s nearly 150 other power companies were it compelled to let munis and co-ops deliver power from other suppliers using TVA’s system.
“This request would use the TVA transmission system in a way that would shift their costs for using the transmission system to the other 149 local power companies served by TVA,” Hunter said in a statement to RTO Insider. “That is fundamentally unfair, and it goes against the foundation of public power.”
Hunter confirmed that TVA denied the four companies’ request for unbundled transmission service “consistent with the TVA Board’s longstanding policy on use of the transmission system.” She said TVA’s contracts are “partnerships in which the benefits of public power and the related costs are shared” and pointed out that revenues from power sales provide other benefits to the region, including “river operations, flood protection and public lands management, as well as economic development programs that bring good jobs to the region and keep them here.”
Atlanta-based consulting firm EnerVision estimated that the four utilities could save $25 million to $480 million over 10 years if they were able to pair unbundled transmission service from TVA with alternate wholesale providers. The utilities, spread out across Kentucky, Tennessee and Alabama, said the savings would be significant to their ratepayers who, by TVA’s admission, inhabit some of “the most economically challenged areas of the country.”
“Dissatisfied with the excessive bundled rates paid under the power contracts and unwilling to submit to the draconian provisions of the new power contracts, petitioners have actively sought alternatives to their source of power supply for the sole purpose of lowering electric costs to their members/consumers,” the utilities wrote to FERC. “At every step, TVA has stymied their efforts and prevented any discussions regarding unbundled transmission service.”
Memphis Light, Gas and Water has also voiced discontent with what it deems a comparatively high TVA rate. Last year, it pursued its first-ever request for proposals for new energy sources, including MISO. (See Memphis Moves Closer to Breaking from TVA.)
The four utilities told FERC that TVA owns all nearby transmission facilities that can serve their loads.
“Petitioners are scattered throughout the TVA area, and none is particularly close to TVA’s interface with another transmission system. Short of taking the very expensive and duplicative step of constructing its own transmission lines, no [local power company] can feasibly reach an external supplier without service across TVA lines,” they said.
“Nevertheless, TVA made clear, in its transmission service guidelines, in a newly restated TVA Board policy and in letters directly to petitioners, that it would not provide unbundled service across TVA transmission facilities to enable alternative power suppliers to serve [local power companies’] loads under any circumstances.”
The utilities said TVA has created a “supply monopoly within its considerable footprint that stifles all competition.”
“TVA has taken advantage of this arrangement to charge unreasonably high bundled rates, with no incentive to efficiently manage the costs it imposes on its captive wholesale customers,” they argued.
They explained that even though their current power contracts allow for termination, without open access to the TVA system, they “would have no choice but to duplicate the local existing transmission system” or sign the new power contracts, which “perpetuate” TVA’s monopoly on 20-year evergreen terms.
The utilities pointed out that “avoidance of duplicating bulk transmission systems” is fundamental to FERC’s open access policies. Further, they claimed that TVA members thwarted Warren Rural Electric Cooperative’s attempt 15 years ago to build transmission facilities that connected with external supplier East Kentucky Power Cooperative.
