New Report: Memphis Electric Rates Likely to Increase Despite TVA Claims

MEMPHIS, TN – Memphis consumers are likely to see their electric rates rise over the next decade if Memphis Light, Gas, and Water continues to get its power from the Tennessee Valley Authority, despite claims to the opposite by TVA, according to a new report released today.

“The TVA is almost certain to see increases in their costs for fossil fuels, coal ash clean up, repairs to 40 year old power plants and many more financial liabilities over the next decade,” said Dave Freeman, former TVA Chairman and advisor to Friends of the Earth.  “If the TVA cannot keep its rate level it will pass on those increased costs to consumers by driving up their electric bills by as much as a third.”

The new research estimates TVA rates could increase between 8 and 22 percent by 2026.  The report estimates possible rate increases between 13 percent and 36 percent by 2031.

According to the report, “TVA has indicated its intent to keep rates stable for ten years, with contract terms that would cap rate increases Despite this stated intent, TVA could still increase rates at any time, particularly if costs rise unexpectedly. TVA has not made any firm guarantees that it will keep rates stable, and it is mandated by congressional charter to set rates sufficient to cover its costs. Furthermore, fuel costs are automatically passed through to customers in the monthly fuel cost adjustments, which are not included in any rate stability provisions. Thus, any cost increases will be passed on to its customers sooner or later.”

The TVA’s electricity prices for MLGW increased by 30 percent between 2006 and 2018.

“The TVA’s rates have increased substantially over the last decade and this new report illustrates they are likely to increase substantially over the next decade, even if the TVA claims they won’t,” said Herman Morris, former President of MLGW and advisor to FOE.  “The TVA will pay the price for its outdated, dirty power and pass that cost on to Memphis families and small businesses if we don’t make a change to alternative power sources.”

The report, sponsored by Friends of the Earth, was produced by Synapse Energy Economics, a research and consulting firm specializing in energy, economic, and environmental topics. The report, available online, investigates five risk factors that could have an adverse effect on TVA’s costs and increase rates in the next 10 years: coal ash remediation, load departures, fossil fuel price increase, carbon prices, and early plant retirement.  The report also identifies a large number of additional items that may cause substantial rate increases that the report did not have time to analyze in depth.  For example, the unknown price tag for the additional production and ongoing storage of highly radioactive nuclear waste at TVA nuclear reactors.

Currently, MLGW is engaged in an Integrated Resource Plan (IRP) process to determine whether to continue taking wholesale power from TVA or to procure electricity from elsewhere. During the IRP process, MLGW is comparing various alternative supply options against the cost of continuing to purchase power from TVA.  Multiple reports and studies, including two sponsored by FOE, have revealed significant cost savings to MLGW and consumers if Memphis leaves the TVA.  Those reports also reveal that the price of renewable energy is likely to continue to decrease in contrast to the projected increases in the cost of TVA’s fossil fuel and decades old nuclear plants.

Expert contact: Damon Moglen, (202) 352-4223, dmoglen@foe.org
Communications contact: Erin Jensen, (202) 222-0722, ejensen@foe.org

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