Federal regulators missed an opportunity to poke holes in the TVA fence, leaving customers without options for lower cost, cleaner power.

Yesterday, October 21, the Federal Energy Regulatory Commission (FERC) “exercise[d] our discretion under section 211A and decline[d] to order unbundled transmission service to [Local Power Companies]” that petitioned for access to Tennessee Valley Authority’s (TVA) transmission service without having to purchase all their electricity from TVA.

In other words, in a 3-1 vote, the FERC punted to ask Congress to address competition issues within the Tennessee Valley. Unfortunately, with Congress unlikely to act on this anytime soon, this means TVA customers remain locked behind a prehistoric fence where TVA will continue to use its monopolistic tactics to be unresponsive to customer needs and slow-walk clean energy.

Background

Four LPCs (Athens Utilities Board, Gibson Electric, Volunteer Energy Cooperative, and Joe Wheeler EMC) filed a complaint at FERC in January 2021 in response to their power supply, TVA, who had blocked them from using TVA’s transmission system unless they remain TVA electric customers. The LPCs have found lower-cost energy suppliers, and have asked to switch their energy supply while remaining a TVA transmission customer. Those savings range in the tens to hundreds of millions of dollars over ten years. Since the original filing, Joe Wheeler EMC dropped from the case.

Customers that purchase all electricity and transmission services from a single entity are called “full requirements” customers. In this FERC case, TVA argued that federal law requires its customers to be full requirements customers.

TVA has locked most of its LPC customers into 20-year, self-renewing contracts that limit the LPC to self-generate only 3-5% of its load. If LPCs are no longer full requirements customers of TVA but remain transmission customers, they would be able to control their own power supply through self-generation projects, distributed generation, energy efficiency programs without the influence of TVA’s grid access charge, and of course contracts with other wholesale power providers.

The LPCs argued that federal law does not exempt TVA from the requirement that utilities provide access to their transmission systems at the cost that they themselves pay. This concept that the LPCs were arguing under applies across the rest of the country.

To go into more background and detail on the case, read the original filing and our response.

Fence vs. Anti-Cherrypicking

It is also helpful to review terminology thrown around about TVA that isn’t always clearly understood.

As parts of the TVA Act that came after its founding, there are two concepts that determine how or whether TVA is subject to competition: the fence and the anti-cherrypicking clause.

The fence was drawn up in the late 1950s to keep TVA from expanding and taking customers away from private utilities in the area. It states that TVA cannot sell to customers beyond those it was selling to in 1957.

The anti-cherrypicking clause came about in response to deregulation happening in states across the country. The concern was that deregulated utilities could lure away industrial customers from TVA and its LPC customers.

Commissioner Statements on the Vote

In these types of decisions, each Commissioner has the option of writing their own statement explaining the reasoning behind their vote. In this case, each of the four Commissioners released a separate statement.

FERC Chair Richard Glick cites in his statement on the order that the Fence is, “a vestige of a bygone era in the region, and particularly its ratepayers, would be far better served by having access to alternative power supplies on a competitive and non-discriminatory basis.”

He urges Congress to eliminate both the fence and the anti-cherry-picking amendment so that, “utilities in the region [may] access alternative sources of supply and… allow TVA to make wholesale sales to new customers.”

He uses the fence as the reason he supported the use of FERC’s discretion under section 211A in the decision. “Simply put, I do not believe that Congress intended to give this Commission the authority to ignore the “TVA Fence”—the non-physical boundary Congress placed around TVA’s service territory in 1959—when it enacted the Energy Policy Act of 2005.” (All quotes from page 38 of the order.)

Commissioners Danly and Christie also voted to deny the LPCs access to TVA’s transmission system. Danly states, “the Commission probably does not have the authority under [Federal Power Act] section 211A to issue such an order.” Christie agrees when he says, “changing the basic statutes governing [TVA] is the prerogative of Congress, not this Commission.” (Danly quote from page 40, Christie quote from page 49 of order.)

Commissioner Clements, the sole dissenter in this case, expressed the LPCs should be granted access to TVA’s transmission system stating, “I dissent because the Commission has the authority to grant the Petitioners’ request… and because granting their request would be in the public interest.”

Clements points out that the Anti-Cherry-picking amendment only applies to section 824j of the Federal Power Act, and when Congress passed section 211A–the basis for this case–they amended other provisions to exempt TVA but chose not to do so with section 211A. She provides a few helpful visuals: “Far from the impenetrable barrier that TVA suggests, section 212(j) is more akin to a cattle fence that lets wildlife enter and exit unimpeded” and, “understanding that the TVA Fence only blocks section 211 orders and nothing more, Congress chose not to build a new fence, or strengthen the existing one, to block section 211A orders as well.”

Clements states that TVA’s argument that open transmission access under section 211A is in direct conflict with the authorization of the TVA Board to fulfill TVA’s mission would give TVA “carte blanche authority” to do what it wants regardless of federal laws and regulations beyond the TVA Act. However, that could mean TVA is exempt from abiding by EPA regulations under the Clean Air Act and Clean Water Act.

Finally, Clements acknowledges that TVA being subject to competition is in the public interest because it “could benefit customers beyond those of the local power cooperatives who filed the Petition by providing impetus for TVA to more efficiently serve customers.” (Clements quotes from pages 42-48 of the order.)

Accusations of Retaliation

Chairman Glick mentioned a claim made by the three LPCs in an additional filing with FERC last week that described TVA CEO, Jeff Lyash, reportedly telling officials affiliated with one of the LPCs that TVA was holding off on updating substandard transmission infrastructure until TVA knew if the LPC would remain with TVA. Glick said he took the allegations seriously and is asking FERC’s enforcement arm whether the claims should be investigated.

Outcome and next steps

The decision reached by FERC this week does not change the status quo among TVA’s LPCs. However, this is not a final decision. Chair Glick does not outright say that FERC does not have the authority to grant this petition, instead stating that it is using its discretion not to do so.

Next, the petitioning LPCs could file for a rehearing at FERC. If the same decision is reached, that decision can be appealed to the DC Circuit Court. Whichever way that court would decide, it could then be appealed to the US Supreme Court for an ultimate decision.

One LPC not directly involved in the case but obviously watching closely is Memphis’ utility, Memphis Light, Gas, and Water (MLGW). Because Memphis is located on the western edge of TVA’s footprint, it can more easily connect to outside energy suppliers without the use of TVA’s transmission lines. In fact, MLGW has a Request for Proposals (RFP) out to build its own transmission connection across the Mississippi River into the Midcontinent Independent System Operator (MISO) market. Several studies have shown that MLGW could save hundreds of millions of dollars a year by switching to self-generation and non-TVA supply–even if it has to build this duplicative transmission.

Since this is a monumental decision, we expect it will continue to be litigated. We will continue to track this issue and intervene on behalf of customers and in the interest of greater access to clean energy and affordable energy bills in the TVA region.