Over the last two years, several expert studies have shown that Memphis could save hundreds of millions of dollars each year on its energy costs if the city were to switch to a new supplier of energy and away from its current supplier, the Tennessee Valley Authority (TVA). Two weeks ago, the board of Memphis Light, Gas, and Water (MLGW) voted unanimously to move from the theoretical savings that the studies showed to actual savings that alternative energy suppliers could provide through soliciting bids from the open market in a request for proposals (RFP) process. To make the board’s RFP process “official,” the contract for the consultant to carry out the RFP had to additionally be approved by Memphis City Council. The contract was brought up at this week’s City Council meeting on October 6, and the Council rejected the contract in an 8-5 vote.
SACE has been in support of issuing the RFP, and in our op-ed in the Commercial Appeal on September 25, we called for City Council to approve the contract so that Memphians can learn exactly how much they might save by leaving TVA. The prospect of saving hundreds of millions of dollars, while transitioning to perhaps 75% renewable energy, is too great an opportunity to leave by the wayside or kick the can too far down the road.
So, we are naturally disappointed that City Council did not approve of MLGW issuing the RFP, and are concerned that efforts by some council members to achieve what they perceive to be an ideal RFP contract could end up completely derailing the process of getting an RFP issued at all. In this case, no one would win except TVA, and Memphians would continue to be burdened by the most unaffordable energy bills of any major metro area in the country.
The reasons for Councilmembers’ votes against the contract are no doubt varied, but one of the concerns we heard voiced by Councilmembers at the October 6 meeting was that they want to know within a matter of the next few months whether or not MLGW can get power cheaper than TVA’s, rather than waiting the roughly one-year timeline that would have come from the contract that was in front of City Council this week. SACE understands that the RFP process requires careful study, caution, and risk avoidance because the stakes are high. We also understand that there could be large value in giving notice of departure to TVA sooner than 2022 (given there is a minimum five-year exit period) and setting the expectation that Memphis will be charting its own energy future, thus giving a clean break from the status quo of TVA power.
Given where we are after City Council’s vote this week, we see some value in the MLGW Board reassessing the RFP process and seeking to expedite their decision on whether not to leave TVA, while still ensuring the RFP process is carried out carefully and thoroughly.
Bridge the Divide: Give TVA Notice and Then Take Time to Prepare
We propose that to bridge the divide between parties who want to have a decision in hand as soon as possible on whether or not to leave TVA and those who want to take a slow, deliberate approach, the MLGW Board and City Council should ask MLGW staff for a recommendation on whether or not to issue notice to leave TVA within six months of approval of an RFP contract. That decision should be based on the information that has been gathered through the bid process and market assessment at the six-month point, which should include all bids, though not necessarily all of the detailed transmission analysis that will be an essential part of planning an eventual departure from TVA.
With the decision to give TVA notice clearly made, MLGW staff should then be given the latitude to decide how long of an “off ramp” they need, whether it be the five years mandated by the current MLGW contract with TVA, or perhaps six years or longer to allow enough time for a thoughtful assembling of energy portfolios and construction of any necessary transmission and generation assets, as well as implementation of demand-side load reduction strategies such as energy efficiency and demand response. The five-year notice is a minimum – MLGW can take longer if needed. Giving clear notice on the intent to depart TVA begins to open the door for locking in the savings while using the flexibility of timing the departure to minimize risks.
It is imperative that MLGW is not unnecessarily rushed to have generation and transmission assets in place to a point where customers would bear the burden of decreased reliability or increased cost. However, allowing ample time to plan and prepare for these assets does not depend on delaying giving TVA notice.
We also think that the RFP process should have transmission analysis happening in parallel with the energy generation analysis – as was presented in the contract to City Council yesterday – so as to avoid lengthy delays that would be caused by sequencing one RFP segment to be completely finished before starting the next.
We are supportive of a faster process and shorter timeline as long as the analysis is thorough, and there is no hidden intent by stakeholders choosing the RFP contractor. MLGW staff should be given the flexibility to work with the contractor that they feel most comfortable with – if their chosen contractor can meet the six-month timeline. But, City Council essentially forcing MLGW to use a contractor preferred by some Councilmembers is inappropriate and undermines confidence in the process.
The bottom line is that the impact on Memphians from breaking free of TVA is far too important to let the RFP process stall. We must keep it moving forward so that Memphians can reap the benefits from more affordable, equitable, and clean energy as soon as possible.