Yesterday, Memphis Light, Gas & Water (MLGW) staff made a recommendation to its Board of Commissioners to issue a request for proposals to explore new energy supply sources as an alternative to their current supplier of 80 years, the Tennessee Valley Authority (TVA). The request for proposals (RFP) would solicit bids from potential suppliers of energy and allow Memphis to truly shop around in a competitive market to ensure it is able to get the best deal for customers.
The recommendation comes after the utility conducted a year-long review of its energy options, some of which are estimated to save billions of dollars over the next twenty years, while also creating local clean energy jobs and gaining billions of dollars in local investment. For example, switching to one of MLGW’s preferred portfolios of energy resources that was analyzed in their recent long-term resource plan study would mean MLGW would save perhaps 12-15% per year on costs, — a portion or all of which is expected to be passed on to customers — gain nearly $3 billion in local capital investment, and cut harmful carbon emissions by nearly 40% compared to TVA’s energy supply.
These significant savings are critically important in Memphis, where the costs of customers’ utility bills, driven by high-cost power from the TVA, takes up a larger percentage of their income than in any other large metropolitan area in the US. Put another way, the Memphis metro area has the most unaffordable energy of any metro area in the country. In fact, a quarter of low-income households in Memphis spend more than 25% of their income on their energy bills. Saving hundreds of millions of dollars each year that would be passed along as savings to customers is especially critical to help ease the energy burden of the thousands of households for whom energy is unaffordable.
In order to help the savings go even further, SACE is advocating that at least 10% of any savings from switching to an alternative energy supply should be committed to energy efficiency programs, with a particular focus on customers with lower incomes, and other programs to reduce energy use at the times of day when it is most expensive.
Cheaper electricity is not the only benefit for Memphians from switching energy supplies; MLGW’s study shows that further economic benefits of switching energy supplies would be nearly $3 billion in local capital investment and much-needed, good-paying jobs. The portfolio of energy resources that MLGW is eyeing is comprised of 75% renewable energy–mostly solar–which means less pollution in the area, and the ability for Shelby County to become a leader in solar energy production, and solar energy jobs.
So, what comes next in the process?
MLGW’s announcement yesterday identified the utility will be working over the next month or two to find a consultant to handle receiving bids from potential power suppliers and assembling them into portfolios so that MLGW and city officials can see just how much Memphians could save by breaking free from TVA.
After the consultant to manage the bids is selected, the MLGW Board and City Council will have to vote to authorize moving forward with the actual request for proposals (RFP) process itself, before it officially kicks off in October.
As SACE’s Executive Director, Stephen Smith said yesterday, “This historic decision sets up MLGW to provide more value to customers in Memphis and be a national leader on clean energy. By seeking bids on alternative power supplies, the people of Memphis and Shelby County will lock in lower-cost and cleaner, more efficient energy – giving Memphis more control of its own future. This also serves as a significant ‘shot across the bow’ to TVA that MLGW is setting the stage to break loose from TVA’s dictatorial long term contract arrangements.”
SACE is calling on MLGW and the City Council to issue two RFPs as part of this process: one, for an ambitious energy efficiency program that could be implemented expeditiously and would run for the five-year period during which Memphis would prepare to leave the TVA. Through an immediate, large-scale energy efficiency program, Memphis could drive down peoples’ bills and reduce the amount of energy the city would have to buy in the future.
We are also calling for MLGW and the City Council to expediently issue an unrestricted RFP for bids to provide alternative power supply well beyond the next five-year period. This RFP would cover the efficiency, distributed energy, energy storage, power generation, and transmission components needed for Memphis to assume control of its own power supply. We have provided additional recommendations in our comment letter to MLGW about how to ensure the RFP is done according to industry best practices.
While there are still details to be worked out, this much is clear from today’s news: MLGW is moving forward with saving customers money, creating local jobs, attracting billions of dollars of local investment, and dramatically reducing the environmental impact of power generation for Memphians. We’ve said it once before, and we’ll say it again: Memphis Has The Power to pursue a better energy future!