TVA decides in Alabama conference to raise electricity prices and increase natural gas costs

FLORENCE, Alabama – At the Tennessee Valley Authority board meeting Thursday, members received a friendly reminder from their own ranks.

Michelle Moore, a board member, spoke before the panel voted to increase TVA’s base electric rates by 5.25 percent, a decision that could result in higher bills for the public utility’s customers. In her comments, Moore reminded her colleagues of what is written above the entrance to the TVA building.

“‘For the people’ … is written over TVA’s front door,” she said. “And in that spirit, I encourage TVA to find appropriate ways to widely publicize future rate adjustment proposals so that everyone has an opportunity to become informed, get involved and contribute their perspectives.”

Their comments came after consumers and stakeholders voiced criticism over the lack of transparency surrounding the implementation of the tariff increase. The proposed tariff increase came as a surprise to the public, as the adjustment was only announced in the publication of the agenda for Thursday’s meeting. No other materials about the proposed tariff increase were available to the public prior to the meeting.

The tariff increase will be used to finance construction projects and other measures, TVA officials said, including further investments in fossil fuel infrastructure.

Moore would then vote with each board member on the proposed rate increase, which will take effect in October.

The board also approved the budget resolution, which included additional spending related to the revenue increases expected from the rate increase. Moore said she decided to vote against the budget resolution because, as in previous budgets, it delegated decision-making authority over capital projects, including fossil fuel investments, away from the board.

Thursday’s meeting took place in Alabama, where TVA supplies electricity to local utilities in the north of the state. Board members heard arguments from TVA officials that a rate increase is necessary to finance continued investments in nuclear and natural gas facilities and modernization of personnel infrastructure.

On Wednesday afternoon, the day before, the board members had addressed the sceptics of the tariff increase in a two-hour hearing in a hotel in Florence. Some citizens criticized the lack of transparency in the implementation of the proposed price increase.

According to TVA officials, this meeting was neither streamed nor recorded, and public comments sent in writing to the agency are considered private, a spokesperson wrote in response to questions about the meeting.

During Thursday’s meeting, John Thomas, TVA’s chief financial officer, outlined the reasons for the rate increase and told board members that the move was necessary to continue investing in infrastructure, including fossil fuels.

“Natural gas is making up an ever-increasing share of our capacity needs and we need to ensure that we are among the frontrunners in this area,” Thomas told the board members.

At one point, Moore asked executives to provide a clearer explanation of what impact the rate increase might have on a TVA customer.

“People pay bills, not taxes. So can you please explain to us at the kitchen table what this tax increase would mean for working families in the valley?” she asked.

President and CEO Jeff Lyash said the average bill for a customer served by TVA is about $138 a month. The increase in base price, if not later offset by adjustments in fuel costs, would result in a monthly increase in that bill of about $4.35.

During the meeting, executives emphasized several times that last year’s fuel cost adjustments offset the impact of previous rate increases, including a 4.5 percent increase in 2023. Fuel cost adjustments that result in lower bills in the short term are not guaranteed, and natural gas prices may have bottomed out, according to TVA estimates.

Given Thursday’s rate increase, TVA officials have little room to increase base rates. The contracts with the local electricity providers supplied by TVA contain clauses that allow for renegotiations or other changes if rates increase by more than 10 percent within a certain period of time. This gives the utility company an incentive to wait with future adjustments.

The investments TVA plans to make with the revenue from the rate increase are not carbon-neutral. Natural gas will remain a key investment for the utility, documents show, although a press release after Thursday’s meeting described the utility’s portfolio as “increasingly carbon-free.”

SEC filings show that last year, about 46 percent of TVA’s electricity came from fossil fuels and the other 54 percent came from nuclear, hydroelectric or other renewable energy sources.

During the meeting, board member Beth Geer, who voted for the rate increase and budget resolution, expressed concerns about the utility’s continued long-term investment in natural gas.

“I share the concerns that many people have expressed to me about the transition from one fossil fuel to another, especially natural gas,” she said. “The projects planned today have a lifespan of 20 to 30 years, and we need to act faster to address the climate crisis.”

Geer emphasized TVA’s current commitment to solar and other renewable energy, but said the board is sometimes forced to make difficult decisions and compromises.

“Our goal is a cleaner region for the future and we want to offer something to the people in this region,” she said.

Gaby Sarri-Tobar, an energy justice activist at the Center for Biological Diversity, criticized the panel’s decision to double down on fossil fuel investments.

“It is outrageous that TVA is raising rates again to fund more dirty fossil fuel plants and pipelines,” she said. “The nation’s largest public utility plans to build more methane gas capacity than any other utility this decade, defying its duty to be a role model for clean energy. By approving this rate increase, TVA’s board is responsible for making life-saving energy more unaffordable for millions of people while our climate spirals out of control.”

Staff at the environmental nonprofit said the agency should have made additional materials about the proposed increase available for review before the meeting.

“It is highly unusual for a utility the size of TVA to implement a rate increase without any independent review.”

Unlike many other utilities across the country, TVA’s board of directors has the sole authority to raise its rates, a power granted to it by Congress. In other areas, including much of Alabama, utilities must submit to price regulation by entities such as a public service commission.

Stephen A. Smith, executive director of the Southern Alliance for Clean Energy (SACE), said the TVA board’s unique and unchecked power to raise rates contradicts the institution’s supposed role as a public utility.

“Only in an Orwellian world of misinformation would we see our nation’s largest ‘public’ utility enact a massive rate increase while providing the least amount of information to the public compared to ‘private’ utilities,” he said. “It is highly unusual for a utility the size of TVA to enact a rate increase without any independent review. This is a flawed process, and every ratepayer in the Tennessee Valley is literally paying the price.”

TVA supplies electricity to more than 150 local utilities, many of which are expected to pass the rate increase on to their customers.

“People across the Tennessee Valley will experience higher electric bills because their public utility spent their hard-earned money on plans it refuses to disclose to the public,” said Maggie Shober of SACE. “But what is perhaps most disappointing is the fact that people in the Tennessee Valley have never experienced anything different. They don’t know that most utilities must provide detailed arguments to the public before raising their rates. TVA, as a federally owned utility, has the appearance of a public utility but operates as an unregulated private monopoly.”