Electric rates expected to rise; residents will see higher bills
The cost of turning on a light is about to get more expensive.
Tennessee Valley Authority is expected to approve a rate increase at its next board meeting in July and, if approved, the increase will be passed on to distributors beginning Oct. 1.
“No one likes to have a rate increase,” said TVA spokesman Phillip Burgess. “But after looking at the data, I think most power distributors understand why TVA needs the increased revenue.”
The proposed TVA increase is 7.5 percent for wholesale power prices. The move will generate an estimated $524 million.
Locally, the rate increase will impact all Caney Fork and McMinnville Electric customers.
On a wider scope, higher electric bills will affect about 8.5 million people who are TVA customers in Tennessee and parts of Georgia, Kentucky, Alabama, North Carolina, Virginia and Mississippi.
McMinnville Electric System general manager Rodney Boyd said the increase MES passes on will be an average of $4.41 for residential customers. However, the increase is eye-opening for large commercial customers who will pay an average of $2,011 more per month.
“I hate to even say the large commercial increase because that affects our school system and this is going to make it tougher on them,” said Boyd. “But we are only flowing through the increase TVA will be passing on to us. With the rising cost of fuel, I was afraid this was going to happen.”
TVA, the nation’s largest public utility, has cited the rising costs of natural gas and coal that fuel its power plants as one reason the increase is necessary. TVA’s last rate increase was in 2003.
Caney Fork director of financial services Don McBee says the utility has no choice but to pass the TVA increase on to its customers. He said Caney Fork could also decide raise its fees more than that.
“We know for a fact we have to pass the TVA increase on to our customers,” said McBee. “We are currently updating our financial forecast to see if we need to add more to that and we have not yet made a decision. Historically, it’s hard to find a distributor that hasn’t passed an increase on to its customers.”
The TVA increase will be for power only, which distributors measure in kilowatt hours. MES and Caney Fork also have monthly customer fees that are charged regardless of how many kilowatt hours a customer uses.
MES has an $8.77 residential customer charge per month, while Caney Fork charges $11.89. Both utilities have higher customer charges for commercial users.
Boyd says MES will not raise any of its customer charges. McBee was not sure about Caney Fork.
While kilowatt use may vary greatly from month to month, the customer charges allow utilities to have a consistent revenue stream. The customer charges cover such things as billing, meter reading and administrative expenses.
TVA president Tim Kilgore put the rate increase squarely on the doorstep of rising energy costs.
“TVA has seen coal prices increase by 25 percent and the price of natural gas increase by 32 percent during the past two years,” Kilgore said. “TVA can no longer continue to absorb these costs with its current rates.”
TVA’s rate increase in 2003 amounted to $365 million, or $1 million a day.
Rate increases at a glance
McMinnville Electric System
Customer Increase Avg. hike
Residential 5.9% $4.41
Sm. commercial 5.8% $6.84
Md. commercial 6.6% $153.40
Lg. commercial 6.7% $2,011
Caney Fork
Customer Increase Avg. hike
Residential 5.6% N/A
Sm. commercial 4.5% N/A
Lg. commercial 7% N/A