TVA to cut electric rates 4.5 percent

Tennessee Valley Authority directors on Friday approved a cut in wholesale electric rates less than six months after they last raised them because of rising fuel costs.

The 4.5 percent rate decrease ? worth about $400 million ? will take effect Oct. 1.

The rate proposal was contained in a $9.3 billion fiscal 2007 budget approved by the agency’s board of directors.

TVA is the nation’s largest public utility. Although it is a federal corporation, TVA receives no federal funding. The agency is financed exclusively by revenues from electric sales to 158 distributors in Tennessee and six surrounding states.

TVA began the current fiscal year with a 7.5 percent rate increase, which distributors passed on to consumers, averaging $3.50 to $6.50 more a month per household. The agency raised rates again ? by 9.95 percent ? effective April 1 when fuel and purchased power costs continued to climb. It was TVA’s first midyear rate hike in at least 25 years.

Beginning with the new fiscal year, TVA plans to keep the base rate untouched and adopt a policy of quarterly fuel adjustments charges to cover any changes in fuel and bought power costs.

Locally, both McMinnville Electric and Caney Fork officials have said they will pass along any rate decreases to customers. However, they said they were also wary the fuel adjustment charge has the potential to raise rates even further.

“The fuel cost adjuster will start at zero” on Oct. 1, TVA president and acting CEO Tom Kilgore said.

The new budget also contains $20 million for a detailed engineering study on the feasibility of completing a second nuclear reactor at TVA’s Watts Bar station in Spring City, Tenn., about 50 miles south of Knoxville.