TVA directors weigh first rate increase since 2003
“I think it is incumbent on TVA to do everything it can to reduce its own costs before we go to our customers and ask for price increases,” TVA Director Bill Baxter said Wednesday after a groundbreaking ceremony for a $300 million pollution control system at the Bull Run coal-fired plant.
“I know that we have been able to accomplish some savings,” TVA Director Skila Harris said. “What I need to evaluate is what the analysis shows about TVA’s overall financial health.”
Harris and Baxter, the only sitting members of the TVA Board of Directors, will get a formal briefing from managers July 22 and then vote whether to raise rates affecting some 8.5 million people in seven Southern states.
“The immediate response from me and I think Skila, too, is tell me first what you have done to find all the cash flow internally and are there areas of cost reduction that can be achieved that can mitigate any rate increase?” Baxter said.
The country’s largest public utility is considering a 7.54 percent rate hike in fiscal 2006, citing rising costs of coal and natural gas that fuel its power plants and electricity purchased from outside its region.
That represents about $524 million more annually for the self-financing government agency with a nearly $8 billion budget, and about $3.50 to $6.50 more per month for residential customers. It’s still less than the more than $700 million rise in fuel and power purchase costs since fiscal 2004.
The Tennessee Valley Public Power Association, the Chattanooga-based organization that represents TVA’s 168 distributors, understands the impact of escalating fuel costs and will not oppose the rate increase for 2006, spokesman Phillip Burgess said.
TVA eliminated more than 600 jobs last year to reduce expenses. It also auctioned off surplus property, including an option to sell the smaller of its twin headquarters towers in Knoxville. Baxter is optimistic the tower deal will go through this year, but wouldn’t discuss other cost-cutting actions.
“It is not easy to do, but it is not rocket science,” Baxter said. “You have O&M (operations and maintenance costs) and you have capital projects. And you have to find ways to reduce O&M and ways to reprioritize and reschedule capital projects.”
TVA’s last rate increase in 2003 was to support the agency’s $5.6 billion clean air initiatives. The increase before that, in 1997, was aimed at reducing debt, which TVA has managed to trim from $27.4 billion to $23.2 billion this year.
TVA provides wholesale electricity to distributors and directly to large industrial customers in Tennessee and parts of Alabama, Georgia, Kentucky, Mississippi, North Carolina and Virginia.
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TVA: http://www.tva.gov