An environmental resource for East Tennessee Businesses

Flexibility helps TVA keep prices down

By: Mamie Kuykendall

Customers of the Tennessee Valley Authority are paying lower rates than two-thirds of the country's energy consumers, and experts cite the agency's unusual structure as a major factor for the low costs.

"We are a unique bird, a federal corporation, which means the TVA board has the ability to set our rates without going to a public commission like others have to," TVA spokesman Scott Brooks said. "They have to propose (changes) and make their case, while our board has the ability to set rates. That's the fundamental difference."

At 9 cents per kilowatt hour, TVA prices rank in the lower third of the top 100 utility retail rates in the country. Its industrial rates are lower than 85 percent of other agencies. This is partly because the TVA sets rates as low as possible to cover costs, according to Brooks, while investor-run utilities have to show profits for shareholders.

"We are not a profit-based company," Brooks said. "Any extra is returned back into our system. We don't have shareholders."

TVA's price increases have remained equal to 1.5 percent of retail rates each year for the past three, according to its website. This increase, in line with the cost of inflation, was made possible by the reduction of $600 million in operating costs over the same time span.

Generating sources and fuel costs are two factors primarily responsible for electricity price fluctuations, according to the website, and the agency generates electricity through a variety of means -- such as coal, natural gas and hydro -- to manage the price changes.

The agency uses different resources to meet fluctuating energy demands. For example, combustion turbine natural gas plants are used when loads are high, while nuclear and hydro power plants, which have the lowest costs, can be used full-time.

Electricity generation prices can be impacted by outside factors such as fuel costs and droughts, something that the diverse portfolio is able to offset. If there is not enough water to use hydro, coal can be substituted. These options allow the TVA to keep costs low, according to its website.

The agency plans to continue cost-control efforts in the years to come. An investment of $2 million to $3 million will be made over the next three years to maintain clean, safe energy, without an operating budget increase, according to the site.

The low rates are bringing billions of dollars to the Tennessee Valley, according to the TVA. In the first part of this fiscal year, $6.5 billion in investments were brought to the area, and more than 53,000 jobs were brought or retained.

Both businesses and individuals maintain a high level of interest in green living and energy conservation, according to Brooks.

The TVA, which provides electricity to seven states, is offering incentives in exchange for energy-efficient utility upgrades through its EnergyRight Solutions program. Founded in 2008, the program offers up to 10 cents per kilowatt hour saved for pre-approved projects, such as lighting, HVAC, and door and window upgrades, according to the TVA website.

In the Northeast region, businesses and industries collectively save about 30 million kilowatt-hours each year through the program, according to Tom Irwin, program manager for the Northeast region. These figures do not include residential savings.

"We've had a tremendous response to the program," Brooks said. "Part of the reason is that there is a demand for reducing energy bills and saving energy. We think that's a good thing."

Energy efficiency is important to the TVA, because it helps to avoid a heavy peak demand period, which would force the agency to build more power plants.

"The less energy needed, the less we have to pay for fuel to run our plants," Brooks said. "We've seen tremendous interest and response for homes, businesses and corporations all around the valley to help companies reduce their consumptions."

As a result, the TVA boasts one of the smallest carbon footprints of all Southeastern utilities, according to the website, and close to 55 percent of its generating sources are carbon free. The agency has invested around $6 billion in equipment for emission control, and it expects to reduce carbon dioxide emissions by 40 percent in the next four years.

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