TVA rate increase will cost average customer about $1.50 extra a month

3:23 PM, Aug 22, 2013   |    comments
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By Mike Donila, WBIR
The Tennessee Valley Authority Board of Directors on Thursday unanimously signed off on its proposed budget for the upcoming fiscal year, a $10.5 billion spending plan that includes a retail electric rate increase and a couple of ambitious capital projects officials hope to complete in the next year or so.

In addition, the board extended the so-called "environmental adjustment" that it initially approved 10 years ago to cover a number of environmental enhancements and to meet Environmental Protection Agency regulations, which officials say continue to tighten each year.

At the time, the adjustment amounted to a 6 percent rate increase. The extension is good for another five years.

Revenues from it, in part, will cover two major projects: a $1 billion initiative to create clean air controls at the Gallatin Fossil Plan near Nashville, and wrapping up work at the Watt Bar Unit 2 nuclear power plant in Springs City, something officials say will cost between $4 billion and $4.5 billion and should be done by December 2015.

The budget also includes a 1.5 percent rate increase, which translates to about $1.50 extra per month for the average residential customer who uses about 1,000 kilowatt hours per month. It takes effect Oct. 1, the start of the upcoming fiscal year, and is expected to generate $190 million in revenue.

Officials said three factors play a key role in the rate increase, the first in two years.

The TVA lost its best customer in May when the U.S. Enrichment Corporation closed. The operation accounted for 5 percent of TVA's power sales.

Additionally, the mild weather reduced customer demand while the recent rain helped TVA produce more hydropower from its dams.

Also, officials noted a decline in overall electricity sales, something they say is a longer trending issue tied to a still-sluggish economy and changes in how customers manage energy use.

"I think it's a good budget and a good budget in a time when there's no growth, and it's a tough budget," said Bill Sansom, chairman of the TVA Board of Directors.

TVA President and CEO Bill Johnson agreed.

"We don't ever like to raise rates - we're working very hard to keep rates low," he said, adding that the new increase is about half the rate of inflation since October 2011.

He said the "small adjustment" was necessary to meet "revenue requirements and operate our system safely and reliably."

But, Johnson also suggested that officials will eventually revisit the rate increase and possibly reduce it.

"There could be some rate impact over the next couple of years as the big projects start coming into service," he said.

The budget, approved 8-0, Thursday is about 6 percent, or roughly $700 million, less than the one for the current fiscal year, and it anticipates 4.6 percent lower sales than the current year.

Johnson also told reporters that the nation's largest public utility reduced operations and maintenance by $150 million this year, and is working to cut another $350 million by 2015.

He said the organization still has "a lot of options and a lot of alternatives," adding that everyone - including him - will "have to do things differently."

He said officials also are "in the midst of an organization redesign," but declined to elaborate further.

TVA officials also noted a number of priorities for the upcoming year.

Officials said they would evaluate the coal fleet, preserve the Bellefonte nuclear plan to potentially use for future power generation and continue to explore Small Modular Reactor nuclear technology.


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