TVA rate hike OK'd

TVA rate hike OK'd
Board gives 2% cut
to industrial users,
7.4% boost to others
BY REBECCA FERRAR
ferrar@knews.com

Despite objections from citizens, distributors and special-interest groups, the TVA board of directors Wednesday approved a 7.4 percent rate increase for residential and commercial customers and a 2 percent rate decrease for 1,500 industrial customers.

"It will hit our customers' pockets, and that is never easy, no matter the amount," Fleming said. "But as a utility professional who has watched TVA for many years, I can say honestly that I believe your action today is in the best interests of your system and the communities you serve. It is clear to me that the environmental improvements that will be funded by this increase will be of great benefit to all of us."

Ed Brednik, president of CC Metals & Alloys of Calvert City, Ky, and chairman of the Tennessee Valley Industrial Committee, which represents TVA's large, directly served customers, called the rate increase a "courageous proposal."

"Approval of the proposed rate action will take the first steps toward correcting a longstanding inequity in the TVA rate structure," Brednik said. "Approval is in the interest of high-wage jobs, a good quality of life and increased economic activity that will result if the Tennessee Valley can protect its industrial base.... While a 2 percent reduction on a portion of a manufacturer's power use is not going to eradicate all of our problems, it might just represent the small margin that is critical to the survival of a particular plant location and many of the jobs it represents."

DePriest said all classes of 1,476 customers — residential, commercial and industrial — should equally share the burden of the rate increase.

Rob Ikard, director of the National Federation of Independent Business in Tennessee, said the rate increase would hurt small businesses.

"What we've seen here today is a setback for literally tens of thousands of small businesses within the TVA region," Ikard said. "The inherent unfairness in raising rates for these hard-working men and women, while at the same time giving big manufacturers a break in costs, flies in the face of an equal playing field."

Stephen Smith, executive director of the Southern Alliance for Clean Energy, asked the board to hold off raising rates.

"While it is possible under the arcane provisions of the TVA Act for three board members to impose a rate increase without the proper public hearings and third-party rate review in this day and age, it represents bad policy and an undemocratic process of a paternalistic nature," Smith said. "In other words, this decision is not a good move for relationships with people in the valley."

Larry Fleming, president and CEO of Knoxville Utilities Board, is one distributor who supports the rate increase.

The increase is effective Oct. 1 and will last for 10 years.

The adjustment will raise $365 million a year, which TVA says it needs to pay for installing expensive air pollution control equipment at its coal-fired plants.

"The cost of clean air is higher than anyone estimated it to be," said TVA Chairman Glenn McCullough Jr. "This 10-year environmental adjustment in our rates will help pay the $1 million a day we are investing to do our part in providing clean air and clear skies to the people of the valley in the 21st century."

The board in January proposed an 8.1 percent rate increase for residential and commercial customers and a 2 percent decrease for some 10,000 industrial customers. That was rolled back in response to opposition from distributors.

The three-member board voted unanimously for the rate increase. It includes a decrease for industrial customers to help keep those large manufacturers competitive, TVA officials said.

For a residential customer using 1,000 kilowatt-hours of electricity per month, the electric bill would increase by $3.76.

The proposal on the table for those on fixed incomes will still leave residential rates relatively low," McCullough said.

The board also approved the 2004 budget of $7.57 billion that includes $488 million for clean air, $251 million for transmission system improvements and $225 million for debt reduction.

McCullough said the board held "hundreds of meetings" with distributors and others since the rate increase was proposed.

But that did not mollify the Tennessee Valley Public Power Association, which represents 157 distributors in the TVA region.

TVPAA Chairman Harold DePriest, president and CEO of the Electric Power Board of Chattanooga, said TVA should have used an independent expert to assess the proposed rate change. But TVA Director Bill Baxter said TVA used both internal and external experts on the rate restructuring.

"It is with regrets that I find myself representing a broad and diverse segment of the TVPAA membership in opposition to the actions that you are considering," DePriest told the board. "There are a variety of opinions among our members about the end-result of the actions TVA is considering today. However, the vast majority of them are far more troubled with TVA's deviation from the longstanding process of working in partnership with distributors on rate structure development."