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    TVA increasing electric rates in Chattanooga due to soaring natural gas prices


    May 13, 2022 - Dave Flessner, Chattanooga Times Free Press, Tenn.

     

      May 12—Chattanooga homeowners will have to spend more on electricity this summer as the weather warms up and the Tennessee Valley Authority contends with a surge in natural gas prices.

      TVA, which generates about 20% of its electricity using natural gas, is boosting its wholesale power rates by up to 10% this year due to higher gas and coal prices, TVA Chief Financial Officer John Thomas said Thursday. The higher prices and likelihood of higher consumption during the hot months ahead will bring higher power bills to most households this summer, but TVA officials said the increases here are less than in most of the country.

      In an earnings call Thursday with industry analysts, Thomas said natural gas prices jumped 58% during the first half of fiscal 2022, following similar increases in the previous year. Thomas said he expects natural gas prices will rise even higher this summer after global trade sanctions against Russian oil and gas pushed up the global energy prices following the Ukraine invasion by Russia.

      "The good news is that because of the diversity of our fleet, combined with the fact that we do hedge forward some of these fuel prices, our average wholesale rate for our customers is in line with what it was a decade ago," Thomas told TVA directors during a board meeting this week in Young Harris, Georgia. "You do see some year-to-year volatility, but to have natural gas prices be almost 60% higher and end up with an effective rate that is still in line with what it has been for the past decade is a tribute to all of the investment we've made."

      TVA has not increased its base electric rates since 2019, and over the past two years, it has granted its local power companies pandemic credits and other price breaks for signing longer-term wholesale power purchase agreements with the authority. The lower base rates have helped offset much of the increase in the fuel cost adjustments, which have jumped in the past year.

      Although TVA has pledged to keep its base rates flat for the next decade, the utility adjusts a portion of its charges to account for its fuel expenses. Local power companies like EPB change their monthly bill prices to reflect TVA's fuel cost adjustments, which have jumped higher as natural gas and oil prices have nearly doubled since the lows reached during the pandemic shutdowns in the spring of 2020.

      Fuel cost recovery expenses in the first half of 2022 for TVA rose by 47.5% to nearly $1.7 billion, according to quarterly financial results reported Thursday.

      Monthly fuel surcharges by TVA are up 8% to 10% this year over last. TVA, which supplies electricity to EPB and 152 other local power companies in the Tennessee Valley, is adding from $3 to $5 a month to the typical EPB monthly residential power bill in Chattanooga compared with what such households paid a year ago.

      But TVA said the delivered wholesale price of electricity of about 6.9 cents per kilowatt-hour in the first half of fiscal 2022 was still less than the rate in 2019 and comparable with the rate in 2012, not even considering inflation.

      "TVA was born in uncertain times during the Great Depression, and in today's increasingly volatile times, TVA is committed to remain true to its ideals of keeping prices low for the vital commodity we provide to 10 million people of this valley," TVA President Jeff Lyash told industry analysts Thursday. "While the cost of providing highly reliable service is increasing, TVA's diverse, robust and increasingly clean energy system continues to provide a significant advantage for those we serve."

      TVA industrial rates are below about 95% of all U.S. utilities, and its residential rates are below about 80% of U.S. power providers. TVA generates more than 40% of its power from nuclear and more than 10% from its hydroelectric dams. Combined with solar and wind, 57% of TVA's power is carbon free and isn't subject to volatile fuel price changes, Lyash said.

      TVA said Thursday its electricity sales rose despite a milder winter this year due to continued economic growth in the region and the influx of more than 70,000 more residents into the Tennessee Valley during the pandemic. In the first half of fiscal 2022, TVA said it helped attract more than $7.3 billion in new business investments in the region from businesses that collectively will retain or add more than 40,900 jobs.

      "We're seeing high economic growth, and we're expecting that to continue," Thomas said. "For the first half of the year, we're starting out in another strong position, which is helpful going into the summer."

      TVA reported net income of $220 million on revenues of nearly $5.5 billion in the first six months of the current fiscal year. Although TVA profits were only about a third of the record levels reached the prior year, Thomas said net income was still better than budgeted and is down primarily due to accelerated depreciation TVA is taking for its remaining coal plans it plans to soon phase out.

      Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340. Follow him on Twitter @dflessner1.

      ___

      (c)2022 the Chattanooga Times/Free Press (Chattanooga, Tenn.)

      Visit the Chattanooga Times/Free Press (Chattanooga, Tenn.) at www.timesfreepress.com

      Distributed by Tribune Content Agency, LLC.

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