TVA to freeze power rates for a decade
Tennessee Valley Authority plans no base rate increases for the next decade, according to a financial plan the agency’s board adopted – and that means canceling four power rate hikes planned for the next four years.
TVA has raised its base rate 1.5% a year for six years, under a financial plan adopted in 2013, TVA President and CEO Jeff Lyash said. The hikes paid for a series of system improvements and paid down the agency’s debt. But TVA’s targets were reached in six years, Lyash said. That includes cutting debt from a high of $28.5 billion to $23 billion by the end of this year. Aided by a $1 billion drop in annual fuel costs, TVA plans to keep cutting its debt to the $18 billion to $20 billion range.
TVA had planned further 1.5% rate hikes in each of the coming four years. But the new 10-year financial plan “fundamentally sets aside” that intention as unnecessary, Lyash said. The new plan proposes no base rate increases over the next decade. Lyash estimated TVA has a 75% chance of keeping that promise or even lowering rates; unforeseen events could always force a change, he said.
Near the quarterly board meeting’s start, Chairman Skip Thompson welcomed new member Bill Kilbride. The U.S. Senate confirmed Kilbride Aug. 1 as President Donald Trump’s fifth appointee to TVA’s nine-member board.
Kilbride said he would recuse himself from all votes at his first board meeting because he wasn’t yet sufficiently familiar with the “incredibly complex” issues being decided.
The board ratified a $10.59 billion budget for fiscal 2020, which starts Oct. 1. That’s down $461 million from the current annual budget, according to board documents.
Demand for power is expected to remain flat for several years, with the only major additions being previously-announced data centers for Google and Facebook, which will be served by large solar farms.
TVA’s pension plan is underfunded, but the new budget sets in motion a 20year plan to fully fund pension obligations, CFO John Thomas said.
The agency expects to issue up to $2 billion in bonds for capital projects, he said.
That’s mostly for maintaining grid infrastructure and replacing aging turbines, but also includes a $200 million system operations center as part of the “Grid 2023” project to make the transmission system more flexible and resilient, Lyash said.
The board approved its revised Integrated Resource Plan, charting how TVA expects to generate power over the next 20 years. It projects adding up to 14 gigawatts of solar generation by 2038. For comparison, TVA’s six coal-burning plants now generate about 8 GW, which will drop to 6 GW with the retirement of the Paradise and Bull Run plants in 2020 and 2023, respectively.
The IRP recommends retiring up to another 2.2 GW in coal generating capacity over the next two decades, while adding up to 5.3 GW in energy storage capacity, and anywhere from 2 GW to 17 GW of natural gas generation, all by 2038.
Coal ash deal
Though it wasn’t an item requiring board action, members heard that a state lawsuit against TVA over coal ash disposal at the Gallatin Fossil Plant has finally been settled. The power provider accepted a Tennessee consent order to close the ash ponds and remove the toxic ash – 14 million cubic yards of it – pending environmental review. The ash will be moved to a lined landfill, which is also on the Gallatin site. Other litigation involving the Gallatin ash site may still be underway, but TVA will proceed with cleanup based on the state settlement, TVA spokesman Scott Brooks said.
Coal ash can be laden with arsenic, mercury, lead, radium and other highly toxic chemicals. Lyash characterized the waste from coal-burning plants as a deferred cost from the last century’s industrialization and electrification; dealing with it could take 20 years, he said. TVA estimates cleanup may cost $640 million over that period.
In his opening report, Lyash noted that nuclear power makes up an everlarger portion of TVA’s base generating capacity, as coal plants have shut down. Now he considers natural gas to be “transitional” as renewable carbon-free sources of power develop. But TVA also expects energy storage to become more important in handling spikes in power demand, he said.
TVA is getting an early site permit for a small modular reactor on the Clinch River, but its power isn’t really needed, Lyash said. The agency wants to preserve the option, but a small modular reactor – if built at all – is such new technology that TVA would seek to have it federally funded as a demonstration program rather than having Tennessee Valley ratepayers shoulder the cost, he said.
TVA will now offer 20-year agreements to its 154 local power company customers, offering them long-term fixed rates and giving them “more engagement” in TVA’s planning and decision making, treating them as partners rather than customers, Lyash said.
“I expect we’re going to have pretty significant uptake on it,” he said. Some utilities are likely to make such agreements immediately, Lyash said, though he wouldn’t estimate how many may sign on.
If all 154 local utilities sign such agreements, they’ll save a total of $225 million annually, Thomas said.
That will come from a 3.1% reduction in TVA’s wholesale power rate, while letting local utilities fill up to 5% of their own demand with locally-generated “distributed energy,” Lyash said.
“Because it lowers their risk, we’re able to lower their rate,” he said.
Until now, local electric utilities have been unable to pledge their electric system assets toward funding for creating local broadband internet services, Lyash said.
But an amendment approved Thursday to TVA’s guidelines for power company revenue use will change that.
Broadband internet access is becoming a practical necessity for education, economic development and health, and local power providers can become a mechanism for offering that access, especially in rural areas, Lyash said.
“TVA recognizes that we should be a promoter of innovation across the Tennessee Valley,” he said.
Under the new rules local electric utilities will be able to make loans to specially- created subsidiaries for building broadband networks, including for home service, Lyash said.
Source: Knoxville News Sentinel
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Published August 30, 2019