TVA board to examine possibility of boosting power rate

TVA board to examine possibility of boosting power rate
Additional layoffs may also come up
By Jerry Dean
News-Sentinel Business Writer

TVA's board may decide later this month whether it will raise electric rates for the first time in a decade.

If it does, indications are residential electric ratepayers in Tennessee and six other states may shoulder the largest portion of any increase. TVA cost-of-service studies, the basis for rate hikes, consistently reveal it is less costly to serve larger, single-meter, industrial and commercial customers than it is residential users.

The board is expected to meet Wednesday, July 23, in Knoxville. TVA spokesman Gil Francis said July's meeting will start at 9 a.m. — an hour earlier than usual — to ensure that the board can conclude all its business.

The agenda won't be final until Thursday, July 17, but the board traditionally evaluates rates and its budget in July or August in preparation for the new fiscal year starting Oct. 1.

TVA Chairman Craven Crowell has stated that a rate increase may be needed to help defray TVA's debt, now capped near $27.8 billion. TVA also is facing a $190 million shortfall in power revenue projections.

Rate-setting is among several knotty issues likely to appear on the TVA board's agenda. The board may also wrestle with business plans entailing added layoffs among the agency's 15,000 employees. About 300 security guards, 360 "career transition" workers and hundreds in other offices already know some jobs will end by Sept. 30, although TVA denies there will be widespread layoffs.

Directors also may discuss the work of a 19-member committee chaired by TVA Resource Group Executive Vice President Kate Jackson. The panel spent months studying whether TVA should divest itself of Congress' annual $106 million appropriation for TVA's nonpower programs, such as navigation and flood control. However, Crowell last week withdrew a proposal put forth in January that TVA strip itself of such programs.

The board was to have considered task-force findings before forwarding its own nonpower recommendations to the federal Office of Management and the Budget by Sept. 30.

Meanwhile, a Senate subcommittee last week recommended that TVA receive $86 million to support its nonpower programs in fiscal year 1998. However, a House subcommittee recommended that TVA get no federal funding for nonpower programs and that they be funded out of power revenues.

lowed the agency to generate cheap hydropower at levels 32 percent above normal in May and 60 percent above the norm for June.

TVA's board, authorized by the 1933 TVA Act to set power rates, last raised rates 1.8 percent in fiscal year 1988. To avert an increase last year, the board took unusual steps, including deferring its contribution to the employee retirement system. TVA since has cut costs by using rental cars, cutting business travel and asking employees with jobs "at risk" to use up annual leave.

Crowell, calling stable rates "the single most important thing for the economy of the valley," said only the U.S. General Accounting Office, after its 1995 study of TVA, has urged a rate hike. GAO suggested a 10 percent rise.

Michelle Conlon, a Tennessee Valley Energy Reform Coalition spokesperson, said residential ratepayers are "most vulnerable" when it comes to utility rate-setting.

"There's no regulatory oversight of how TVA's board sets rates," she added. "Valley residents have the highest per capita U.S. consumption of electricity. Consumption averages 15,700 kilowatt-hours per household per year."

"There's no guarantee a rate increase will be equitable," Conlon said. "Nor is there any assurance a rate increase will stop 10 percent. TVA does not have make its case before a utility commission nor do its distributors."

TVA spokesmen, however, said that TVA remains the nation's second-lowest cost utility among 50 top U.S. power producers. The $60 average residential bill, for each 1,000 kilowatt-hours used, is 30 percent less than the national average.

A rate hike or adjustment depending on its type, could affect not only residential ratepayers but also 67 industrial agencies, 527,500 commercial-industrial ratepayers and 15,000 outdoor lighting users.