TVA staff proposes $524 million rate increase

The increase represents a 7.52 percent hike in wholesale power prices to TVA distributors, which charge varying rates to their business and residential customers. TVA estimates the increase could raise the average residential electric bill $3.50 to $6.50 a month.

Calling it an industrywide issue, the nation’s largest public utility cited the rising costs of coal and natural gas that fuel its power plants and electricity purchased from outside its system.

Representatives of TVA’s 168 power distributors were briefed on the TVA staff rate proposal Monday in Nashville, said Phillip Burgess, spokesman for the Tennessee Valley Public Power Association, which represents distributors in dealings with TVA.

The TVA Board of Directors will vote on the proposed increase at its July meeting when it considers the budget for fiscal year 2006, which begins Oct. 1.

The decision will affect about 8.5 million people who receive TVA electricity in Tennessee and parts of Alabama, Georgia, Kentucky, Mississippi, North Carolina and Virginia.

“Obviously, no one likes to have a rate increase,” Burgess said. “But after looking at all the data … I think most power distributors understand why TVA needs the increased revenue.”

The organization will not oppose the proposal, he said.

TVA’s last rate increase in 2003 amounted to $365 million, or $1 million a day. That hike was earmarked for TVA’s multibillion-dollar program to reduce smokestack pollution at its coal-fired power plants.

Now, TVA says its fuel and purchased power costs are expected to increase by more than $700 million from fiscal 2004 through 2006.

“TVA has seen coal prices increase by 25 percent and the price of natural gas increase by 32 percent during the past two years,” TVA President and COO Tim Kilgore said. “Over the same time frame, the price of power we purchase from other suppliers has increased by 26 percent.

“TVA can no longer continue to absorb these costs with its current rates,” he said of a self-financing federal agency with a nearly $8 billion budget supported by power sales and without tax dollars.

Kilgore said TVA has “done a good job managing our fuel budgets, but there is no way to hold our rates flat with these inflationary pressures.”

Former TVA Chairman Glenn McCullough said in an interview in May, just days before his term expired, that a rate increase seemed inevitable because of fuel costs.

“I think the future board will have to determine what rates need to be and when adjustments are necessary,” he said then. “I don’t know how much and I don’t know when.”

———

TVA: http:www/tva.gov