TVA chief says changes in rates to help economy
By JIMMY SETTLE
The Leaf-Chronicle
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ABOUT THE SERIES
This is Part I of a two-day series detailing TVA board member Bill Baxter's views of key issues confronting the wholesale utility and its customers. Tomorrow: Baxter says power lines will follow path of least impact.
Thousands of jobs, many of them in the manufacturing sector, have been lost in the Tennessee Valley over the past year.
So when TVA decided to restructure its electrical rates recently, it did so with an emphasis on making the price of industrial power more competitive with neighboring states served by other wholesale utilities.
TVA board members recently voted to raise electric rates for residential and most business consumption by 7.4 percent, effective Oct. 1. The rate increase is expected to translate into about a 6 percent rate hike for local electricity customers served by the area's two distributors -- Clarksville Department of Electricity and Cumberland Electric Membership Corp.
CDE and CEMC are among the 158 municipal and electric co-op distributors that will pass the rate hike on to consumers. Representatives of distributors systemwide have been openly critical of several features of TVA's decision.
But in Clarksville Wednesday, TVA board member Bill Baxter described the latest rate hike -- the second hike imposed by TVA in 16 years -- as "a fairly modest amount."
"The last rate increase came in 1997 at 5.5 percent, and I think two rate increases in 16 years demonstrates TVA's commitment to keep power affordable for our customers Valley-wide," Baxter said.
Pollution control
TVA says it needs an estimated $365 million annual rate boost to pay for $2.6 billion in required pollution controls for its coal-fired power plants by decade's end.
About $500 million has already been spent for pollution controls at the nearby Cumberland Fossil Plant in Cumberland City.
The latest rate increase will be tagged an "environmental adjustment" and will stay on the books until 2013.
"What has necessitated this is the Clean Air (Act) costs, and our requirement to introduce scrubber systems in the coal-fired plants to reduce 75 to 85 percent of the pollutants that they emit. It's far more expensive to do this than what everybody thought.
"Congress tells us they want clean air, but they don't want to pay for it," Baxter said.
"Every single coal-fired plant throughout the system has to be individually engineered for this purpose."
Without the rate increase, TVA officials said they would have to resort to further borrowing to finance an approved $7.6 billion budget in fiscal 2004.
Industrial break
But the same plan also gives about 1,500 industries in the Tennessee Valley using at least 1 megawatt of power an average 2 percent rate cut -- a savings worth nearly $1 billion over 10 years.
Officials with TVA said they gave certain industries a break from the rate increase to help preserve or attract jobs in the Valley, which has lost 100,000 manufacturing jobs since 2000.
"TVA residential rates are a bargain," Baxter said, "but our industrial rates have gotten out of line with the (Southeast) region. The fact is, the success of large manufacturers has a ripple effect on the entire economy. I think you'll see that targeting the main jobs engine of the Tennessee Valley with rate reductions will have a positive effect."
But officials with the Tennessee Valley Public Power Association -- which represents most of TVA's municipal and electric cooperative distributors -- aren't so sure of the TVA board's logic, and have said more than 100 distributors representing about 75 percent of TVA's power load will refuse to endorse the rate change.
Helping economy?
In a recently-published Tennessee Magazine commentary, Carl Wilson -- who is general manager of CEMC and also serves as chairman of the Clarksville-Montgomery County Industrial Development Board -- disputes TVA's claim that regional job losses are directly related to electric rates:
"TVA says the rate decrease for a favored few customers is needed to boost job growth and the economy in the Valley," Wilson wrote. "Fact: The data TVA used to justify the decrease shows that the loss of jobs in the Valley mirrors national trends based on the economic downturn, not electric power rates.
"According to information from TVA, job recruitment and retention in the Valley has exceeded their goal for three consecutive years," Wilson continued.
He added that less than one-third of the industrial customers in the Valley will actually qualify for the decrease.
"In fact, the state's largest private employer, Federal Express, with 30,000 workers, is not eligible for a decrease under the current proposal," Wilson wrote.
Asked Wednesday about these and other arguments from distributors, Baxter said he's been "disappointed in the reluctance of some distributors to embrace economic development."
"And it's wrong to simply say this is part of a national trend and therefore we shouldn't do something about it.
"We realize that we've let our industrial rates slip up too high," Baxter said.
"What's interesting to me is that, when I first came on board at TVA, almost unanimously, all of our distributors told us our industrial rates were too high," he said.
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