TVA rate changes mean lower charges for MTEMC members come October

The Tennessee Valley Authority approved a base rate increase and a fuel cost adjustment decrease today, but the overall result will be lower per kilowatt-hour charges for ratepayers come October.

“It comes out to about a three-percent reduction,” said MTEMC’s Chris Jones, vice president of communications and member services. “TVA raised its base rate about 8 percent but lowered its fuel cost adjustment by 11 percent overall. Thankfully our members’ rates are back to where they were last October, when TVA enacted a 20 percent increase.”

However, TVA, MTEMC’s power supplier, faces a number of acknowledged challenges. For example, TVA’s Board of Directors today also took action to ease ratepayer impact in the face of a major budget shortfall. Their actions included $1.9 billion in budget cuts and $2.8 billion in additional borrowing primarily to fund capital projects. The shortfall, projected at $7.2 billion for the period 2010 through 2012, is the result of a sales revenue decline, increased contributions to TVA’s employee pension fund, investments to maintain power plants and system assets, the Kingston ash spill recovery effort, the North Carolina Clean Air lawsuit, and TVA’s storage and disposal of coal combustion by-products.

“We have looked internally first, to find ways to hold down our costs,” said TVA President and CEO Tom Kilgore. “Unfortunately, this year has been a very difficult one for us on a number of fronts, and some of those challenges will continue into 2010.”

As a result of the economic downturn, TVA sales declined about 8 percent – the largest drop in sales in TVA’s history.

“Two bright spots during this recession have been the stabilization of fuel prices and easing of the drought,” Kilgore said. “Those factors, combined with the reduced demand on the system, helped reduce our Fuel Cost Adjustment for October.”

The TVA Board also approved the proposal to change the Fuel Cost Adjustment mechanism from a quarterly to a monthly calculation. TVA officials say this should result in more accurate forecasting of fuel and purchased power costs and less dramatic swings in the FCA charge.

Posted on August 20, 2009.

 

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