The Tennessee Valley Authority has ceded practically no ground to local power companies seeking more contract flexibility to manage increased demands for renewable energy from customers, despite requests from the local power companies (LPCs).
The Tennessee Valley Authority (TVA) spent the latter half of 2019 locking LPCs into lopsided evergreen contracts that require a twenty-year termination notice largely in exchange for a 3.1% “wholesale credit” and a small amount of undefined “flexibility”. Huntsville Utilities, TVA’s largest local power company in Alabama, compared the wholesale credit to the biblical story of Jacob and Esau whereby Esau traded his birthright for a bowl of stew.
One hundred and thirty-two local power companies had signed the contract as of October 31, 2019, according to records obtained by the Energy and Policy Institute. Some of the largest local power companies, including Knoxville, Chattanooga, Memphis, and Huntsville, have not signed as of the time of publication, according to a source with direct knowledge of the situation. Memphis Light, Gas, and Water, TVA’s largest single customer, is currently studying the option to leave TVA altogether, which could raise rates by as much as 7.5% on the remaining LPCs.
Wholesale Credit Loses Value in Face of High Power Prices
TVA’s latest version of its long-term partnership proposal further decreased the true value of its so-called 3.1% wholesale credit. EPI previously characterized the wholesale credit as a prisoner’s dilemma, because in the event that all utilities signed the new contract, TVA would have 3.1% less revenue, and would thus be forced to raise revenue elsewhere or to eliminate planned rate decreases to compensate for the newly lost revenue. TVA admitted as much when it disclosed that the wholesale credit payments would increase TVA’s debt by $1.6 billion, based on the signatories as of October 31, 2019.
TVA revised the contract in November, 2019 to exempt “revenue neutral” fees and fuel costs from counting toward the wholesale credit. In other words, TVA could provide LPCs with a wholesale credit but raise fuel or other fees to make up the difference. In May 2019, TVA instituted a flat “grid access charge” it claimed was revenue neutral by lowering the energy rate by an equal amount to the new flat rate. Five clean energy and environmental groups have challenged TVA’s proposal in federal court and the case is currently pending.
TVA acknowledged to LPCs in a November 2019 presentation that its ability to keep rates flat over the next decade was heavily dependent on gas prices. Despite its high exposure to gas price volatility, TVA plans to build 3,700 megawatts of new gas-fired power plants. New gas plants are already more expensive than clean energy portfolios in 90% of cases, according to a 2019 report from the Rocky Mountain Institute.
Financial risks from building new gas plants notwithstanding, TVA’s high power prices devalue the wholesale credit’s attractiveness compared to cost savings potential from neighboring power systems.
Three LPCs – Huntsville Utilities, Cullman Electric Membership Cooperative, and Joe Wheeler Electric Membership Cooperative – retained the consulting firm EnerVision to study wholesale power options outside of TVA. EnerVision found that TVA’s wholesale power prices were significantly higher than all of the utilities it studied. Further, it found that TVA’s wholesale power prices were almost double power prices in the Midcontinent Independent System Operator (MISO).
Because TVA is exempt from federal regulations that require utilities to allow fair access to their transmission systems, LPCs would be forced to construct their own transmission lines to access cheaper power from neighboring utilities or markets like MISO. For some LPCs, the investment in transmission could pay for itself in five to fifteen years, according to a 2019 analysis performed by the Cooperative Finance Corporation (CFC), which provides credit and financial products to customer-owned electric cooperatives.
TVA Deploys “Union-Busting Strategy”
An August 2019 discussion among some local power companies bemoaned TVA’s tactics and the precarious situation in which they found themselves. Greg Fay of Clinton Utilities Board worried that LPCs had “lost the collective ability to shape TVA’s policy on these issues”. Rody Blevins of Volunteer Electric Cooperative said, “We all know how much the power generation business is changing and where will it be ten years from now we don’t know. TVA’s current rates are significantly above the current market rates in the Southeast.”
Huntsville Utilities’ Wes Kelley outlined TVA’s work as a classic “union-busting strategy” that sought to alienate LPCs from the Tennessee Valley Public Power Association, the trade association that historically represented LPCs in negotiations with TVA. Kelley also expressed concern over TVA offer’s prohibition of even the “facilitation” of power consumption from a source other than TVA. It is unclear whether TVA’s definition of facilitation would prohibit LPCs from providing basic electric or customer service to its retail customers who independently choose to install their own generation. Kelley expressed concern that TVA’s offer might prohibit LPCs from selling gas to customers for onsite generation such as a backup generator.
The Florida Supreme Court ruled on January 9 to keep the “Energy Choice” initiative off the Florida ballot in the upcoming general election, siding with investor-owned utilities and quashing an effort to break up their electric monopolies.
Florida’s investor-owned utilities were joined by a number of independent-seeming groups in their effort to keep the measure off the ballot, but those groups have close ties to the utilities and previously have supported attempts to block renewable energy growth in Florida. Some of Florida’s cities also joined the utilities’ effort, but public records now indicate that the cities’ opposition to the ballot initiative had been organized and ghostwritten by the utilities themselves.
“Energy Choice” was an attempted Constitutional amendment aimed at breaking up the current monopoly structure of Florida’s investor-owned utilities, such as Florida Power & Light (FPL) and Duke Energy. The initiative, run by a political committee called “Citizens for Energy Choices,” would have restructured the Florida energy market to allow customers to choose their energy provider. The initiative backers said that breaking up the utility monopoly and allowing customer choice would result in lower prices and more renewable energy.
FPL organized and ghostwrote support from Florida cities
FPL Corporate External Affairs Director Juliet Roulhac coordinated closely with South Florida cities throughout the campaign. Roulhac coordinated press statements, met with local elected officials, and provided form letters to cities outlining opposition to the initiative using language directly from the investor-owned utilities, according to emails obtained by the Energy and Policy Institute via public record requests.
The FPL-drafted briefs submitted by the cities highlighted franchise fees as a crucial source of revenue for the cities and a reason to oppose the initiative. Many cities function with a franchise agreement with their investor-owned utilities that sell electricity to their residents; the fee is essentially a pass-through tax added to customers’ monthly power bills and paid to the municipality in exchange for blanket use of city right-of-ways and other services. However, franchise fees are not guaranteed revenue for cities. In fact, depending on how city charters are written, utilities can in some cases walk away from them. In 2018, amid talks about renewing the soon-to-expire franchise agreement for their unincorporated Miami Dade county service territory, FPL decided simply not to renew the agreement. This decision dealt a loss of almost $30 million in revenue for the county.
Opposition organized by front groups with close ties to FPL
The long list of coalition members who opposed the Energy Choice initiative included many organizations that receive direct financial support from investor-owned utilities, such as Urban League chapters, the Florida Chamber of Commerce, and Associated Industries of Florida (AIF). Dark money groups such as American Senior Alliance and EnergyFairness (formerly known as Partnership for Affordable Clean Energy), defended the utilities’ position. EnergyFairness is an advocacy group with a history of backing fossil fuel and utility interests. The Huffington Post reported that Mike Nasi, a lawyer representing EnergyFairness, is a “critic of EPA regulations who represents coal and mining interests” and is the “head of the Texas Public Policy Foundation’s Life: Powered PR campaign, which promotes fossil fuels and downplays renewable energy.”
Despite the fact that Florida voters cannot “retract” their signatures from signed petitions, a political committee sent out thousands of letters to petition signers telling them to do just that – “retract” their signatures from the Energy Choice petition that they had previously signed, as reported in the Miami Herald. The letters were paid for by a group called “Floridians for Truth”, which traces its funding back to Florida Power & Light. “Floridians for Truth” is funded by “Building a Brighter Future for Florida.” “Building a Brighter Future for Florida” is funded by the “Citizens Alliance for Florida’s Economy,” which received a $10,500 in-kind donation from Florida Power & Light in August of 2019. “Citizens Alliance for Florida’s Economy denied any connection to the letters in response to questions from the Miami Herald.
Florida Power & Light’s new “Solar Together” program originally included a clause blocking Energy Choice petition signers from participating, as reported by the Miami Herald in July, 2019. An original draft of the Solar Together program included a “Limitation of Service” section which stated that it was only open to customers who support “continuity of the program.” FPL staff admitted that they would look to “credible evidence” including whether customers had signed petitions such as the Energy Choice initiative, to identify customers who would not be eligible to participate in the program. FPL staff explicitly described (timestamp 1:14) this clause as a way to disincentivize participation in efforts such as the Energy Choice Initiative. After continued questioning from both the Florida Public Service Commission and the media, the clause was removed.
When the Florida Supreme Court ruled to keep the “Energy Choice” initiative off the ballot, FARE did not publish a statement, but it did share the resulting news coverage on social media. Long-time Democratic consultant and FARE board member Scott Arceneaux praised the utility’s victory, calling it “The right ruling.”
Header image source: Wikimedia Commons Public Service Commission image source: Screenshot of video on Miami Herald site Scott Arceneaux tweet source: Twitter
