Frequently Asked Questions about the Potential of MTEMC and MED Coming Together

Frequently Asked Questions about the Potential of MTEMC and MED Coming Together

Why is Middle Tennessee Electric talking about a merger with Murfreesboro Electric?

When the City of Murfreesboro began to analyze its organizational efficiency and revisited the possible merger of our two electric systems, we were happy to reengage discussions because we know there are many potential benefits. This is a conversation of tremendous opportunity – for MTEMC members and consumers of both utilities, for Murfreesboro taxpayers, and for employees. MTEMC completely encircles Murfreesboro Electric (MED), and we are often making investments for the same purposes. From an economics perspective, MTEMC’s economies of scale combined with MED’s consumer density creates a unique recipe for success, but that correspondingly means we need each other to be as good as our potentials. We see long-term efficiencies, rate stability, innovation and service excellence.

Why is the City of Murfreesboro interested in this idea?

There are many potential benefits for the residents of Murfreesboro. Two very good Murfreesboro-based electric companies join forces to build an even better electric provider for the future, customers see no negative impact on rates, jobs are secured, and the City earns proceeds to help pay for much-needed infrastructure to support a fast-growing municipality. There are many opportunities for value creation through the elimination of duplication. For example, both utilities have plans for new headquarters campuses in the City; by coming together, there would only be need for one, saving tens of millions of dollars right off the bat. Moreover, the merger provides the City the ability to make significant investments in other infrastructure that is both critical and in high demand because of the City’s significant growth.

Has Murfreesboro Electric been part of the conversation?

Absolutely. From the start, this has been a collaborative conversation among staff from the City of Murfreesboro, which includes the electric department, and Middle Tennessee Electric.

What is Murfreesboro Electric?

The Murfreesboro Electric Department (MED) is a 90-employee department of the City of Murfreesboro and a municipal electric distributor of TVA power. MED operates as a separate enterprise fund of the City, meaning that it is financial self-sufficient and is fully supported by electric rates. MED serves most of the City of Murfreesboro (with MTEMC serving the remainder). It has about 67,000 residential and commercial accounts, and it features the highest customer density of any electric distributor in the Tennessee Valley – more than 85 customers per mile.

Would I pay more for my electricity because of this merger?

Neither MTEMC members nor MED customers would see any change in rates upon the merger, but among the great long-term benefits of the merger is rate stability for years to come. Rates are extremely similar between MED and MTEMC right now. In fact, an average residential MED customer would pay an identical amount under MTEMC’s rate structure. Though rates are similar, they are packaged a bit differently, so we would be working to streamline rates structure over the coming years.

Will people lose their jobs?

No. Both MTEMC and MED are known in the Tennessee Valley for running tight ships. With this coming together, anyone who wants to be part of the new team will be needed. There is much work to do because of the growth in Murfreesboro and across MTEMC’s service area. We will continue to need dedicated, hard-working employees committed to serving the needs of our communities.

What would change?

There would be no disruptive changes and change in general would be so minimal that most customers will not notice. MED and its customers would earn some immediate benefits that MTEMC members already enjoy, such as 24x7x365 customer service call center and 24x7x365 Systems Control (for outage management). As the teams work together to maximize efficiency and best practices, changes would emerge for the purpose of benefitting all the consumers we serve.

How do the employees feel?

Employees of MED and MTEMC consider each other brothers and sisters in service, sharing a common mission. While we are proud of the heritage of our individual operations, the idea of serving together and building a joint utility for the future is intriguing and exciting. MED and MTEMC employees are often friends and neighbors, as MTEMC has as many employees who live in Murfreesboro, as does MED. We have long shared a common respect.

What has been the process of the conversation?

Since we informed the more than 500 employees of the two utilities of the pending negotiations on May 24, we have spent many hours working to fashion the most advantageous merger of not only minds, but souls. Independent, third-party appraisals were conducted to provide the baseline for the value of MED’s operations and the transaction. Fairness to all involved has been the driving force with all parties. We have worked to be as open and transparent as circumstances – due diligence for a very large transaction – would allow, speaking with employees, elected officials and consumers who inquired.

Who would make this decision on the City of Murfreesboro’s behalf?

Our understanding from the City is that the Murfreesboro City Council would have final approval on the City’s behalf.

Who would make this decision on MTEMC’s behalf?

Should the Murfreesboro City Council approve this potential transaction, it would have to be ratified by our cooperative’s Board of Directors. The cooperative’s board has been elected by the members to represent the collective voice of the membership, and they are accomplished in making multi-million-dollar investment decisions to benefit the cooperative’s members. Recent examples are Advanced Metering Infrastructure and the majority acquisition of United Communications.

What other approvals would be required?

Should the Murfreesboro City Council and the MTEMC Board of Directors approve, the Tennessee Valley Authority would undertake a regulatory review. TVA would have the final approval.

What is the timeline for decision making?

Next steps will be determined by the City of Murfreesboro and its City Council. MTEMC expects the City to hold public meetings in the coming weeks or months toward making its decisions about the merger.

What has been determined as the value of MED?

Two independent, third-party appraisals were conducted to provide the baseline for the value of MED’s operations and the transaction. Both appraisals came to approximately $202 million, excluding non-transferred assets, and this figure was tentatively agreed upon both by the City and MTEMC as the baseline value. The City and MTEMC have also tentatively agreed on an arrangement where the City would be paid this amount over a 15-year term, including an interest component. This arrangement is beneficial to all parties, setting the potential stage for a transaction without borrowing for MTEMC, which is in a strong financial position to accommodate this investment without a negative impact to rates.