TVA Rate Adjustment Discussion

8/31/2023

The Fort Loudoun Electric Cooperative (FLEC) Board of Directors held its regular monthly meeting on August 24th at the corporate headquarters in Vonore with most of the board members present in person and only one in attendance by phone, James R. Pugh.  Mike Wiggins, FLEC’s Board President, opened the meeting and soon after requested the governing body to review and consider the minutes of the last meeting held in July; this request met a rapid-fire motion and second prompting a quick vote of approval of the minutes as they were prepared.  The agenda was also adopted rapidly and the meeting was off to regular business.  The addition of new members, totaling 225 for the month of July, met unanimous approval following the formalities of a motion and second.  Wiggins noted that there were 35,244 members of the Cooperative now.  

With no individual director reports coming forward, the committee reports were shared next.  Two committees provided information on their recent activities.  The ad hoc committee chairman, J.R. Pugh, and the chief executive officer (CEO), Jarrod Brackett, reported that there were several policies still to be reviewed this year and that some were back from legal counsel, in the packets for the full board to review pending an ad hoc meeting later.  The CEO stated that the policies up for review mostly addressed workforce guidelines and therefore would require some updating due to changes in  federal regulations around labor implemented over the past few years.   The finance committee, which is headed by Angela Tallent the District 8 Director, had met earlier in the month and discussed the need to consider some adjustments over the next few months to make sure an adequate cash flow was secure.  Brackett shared that, “the Tennessee Valley Authority (TVA) announced earlier in the day that they were going to have a four and a half percent (4.5%) increase in their base energy rates effective October 1st… this in combination with the loss of credits, totaling around a million dollars, that TVA had provided during the pandemic were factors that have left the Cooperative in a position that required a lot of discussion.”  Discussions around the ability of the Cooperative to utilize their line of credit to borrow funding to carry the weight of the monthly electric bills as high as five to seven million dollars ($5,000,000 - $7,000,000) were included in the dialogue.  Tallent noted that, “the Cooperative has done well and not had to consider a rate adjustment for a dozen years now!”  A scheduled workshop in November was noted to allow the board and staff to evaluate the impacts of inflation, growth, and included the validity of FLEC’s borrowing options.  Still, the need for FLEC to do some adjustments of the Cooperative’s long range financials for the coming years was made clear in the conversation.  Brackett shared that, “the economic stressors of the impending October TVA rate adjustments that would have to flow through to our rate payers, inflation, and growth would be key considerations as the Cooperative made its financial plans for the next few years.  In my opinion, we need to act sooner rather than later to stay ahead of the curve.”  The executive management’s reports followed.  

 FLEC’s Assistant General Manager/CFO, Mike Webb, presented the financial reports for the month of July.  Webb referred to some slides he had prepared as he discussed the financial reports handed out.  He spoke of how the Cooperative’s monthly report for July was negative.  The TVA power cost and expenditures have exceeded the revenue this past month.  He clarified again, “We have enough cash to meet the bills now, but we need to watch this as we have to pay more for power and make major investments in the system over the next few months in order to meet the growth in the communities we serve!” Webb cautioned, “We have to pay for the electric bill from TVA at the first of every month, well before we have collected anything from our membership… this in combination with the storms of this year, estimated to have cost us about $750,000, really cut into our cash flow.  In higher electricity usage periods, such as the extremely hot weather times we are in now, people are having to utilize their air conditioning more than usual and this leads to higher electric bills.”  The budget review showed the expenditures (@59.44%) slightly in excess of the revenue (@59.35%) overall, prompting some more discussion by all on how the storms, inflation, and higher electric costs were being felt.  Webb noted, “ We have just been growing, we are up by 556 members from last year at this time!”  Webb summed up his comments with a report on the 22 delinquent accounts for the month of April that totaled $3,291.34 that were being ask of the board to move to collections.  These financial metrics all met approval by the board, as presented.   Webb and Sheila Montooth, Vice President of Accounting and Office Services, shared that the independent auditors were working on concluding their annual audit and that they would be reporting at the September meeting.  

 Lisa Lingerfelt, Vice President of Human Resources and Administrative Services, shared a report of recent preparations for the Annual Membership Meeting to be held on October 7th from 7 a.m. until 9:30 a.m.  She stated that, “The meeting will again follow a drive-thru format of our operations center just off Highway 411 here in Vonore.  The business meeting does not have to be attended in person now and will be recorded and posted later for all of the membership to see on the website.  All members attending and registering will be given a green bag (which she displayed for all to see) that contains some small gifts and a copy of the annual report.  Further, all members registering will be included in the drawing of thousands of dollars of door prizes donated by vendors and contractors of the Cooperative on Monday, October 9th.  The Cooperative will provide a few nice prizes and credits on electric billing as well… please pass the word around and help us make this year as successful as in year’s past!”  

 Lingerfelt shared further about the two job openings presently being advertised and the need to approve of the updated affirmative action plan recently received from the corporate attorneys.  She advised that “the previously discussed positions in the accounting department and information technology department were being filled… applications for these openings will be accepted through the 1st of September… please help us connect with good candidates!”  Lingerfelt also explained briefly the changes needed to get the FLEC affirmative action plan up to date.  After her explanation, the board approved the plan as presented, all 290+ pages of it.  Lingerfelt voiced appreciation for their time in wrestling with this necessary process to meet federal guidelines.  

 The CEO provided a report on his recent efforts on behalf of the Cooperative and ask for some consideration of the financial planning aforementioned.  Brackett reported that he had recently spoke to the TVA board about the need for more electric generation assets in the valley to meet the growth being experienced.  Further, he shared how he had anticipated a TVA rate adjustment in the future, but felt it would be a little later before it actually occurred.  “We actually ask them in a meeting to provide us their long-range generation maintenance/construction plans and their financial plans for several years, before they moved.  They showed us some information at their meetings recently that made it clear that they (TVA) need funding to build the necessary generation assets.  To borrow is necessary too in order for them to have the billions in cost associated with meeting the growing needs of the seven-state area it serves.  It was just a shock that their board moved toward an increase of this size so quickly,” Brackett explained.  

 “As FLEC’s CEO and chairman of the Tennessee Valley Public Power Association (TVPPA) board of directors, I have learned a lot about the status of TVA’s generation fleet since the Christmas rolling blackouts in December of last year.  Over the past months, the TVA) management had provided more insight in how it will strive to meet the unprecedented growth that has been experienced to our little corner of the world.  An aggressive posture is needed over the next 3-5 years by TVA and local power companies to meet the demand for electricity that has come into the valley over the past four years and for what is in the works for our future… and, these actions will cost billions of dollars… as high as 15 Billion Dollars ($15,000,000).  Weather resilient generation sources are necessary and being strongly advocated for in light of the growth,” Brackett shared.  “We must utilize further fossil fuel generation… coal and natural gas-powered plants, in conjunction with TVA’s nuclear, to carry us through the cold times and warm times ahead.  Solar, hydropower… including both dams and hydro storage like Racoon Mountain, in conjunction with wind can and will help us from time to time; but, these sources of electricity all depend on the weather conditions to be just right, in order to be of use.  For example, we were not able to get any solar power to help us in the dark morning hours of December 23rd and 24th when folks needed electricity to heat their homes and businesses.  In the summer, we have gotten some benefit from solar and it should be utilized as a source of power when possible,” Brackett explained.  

 “Energy will be a real part of the people’s concerns as we enter into next few years.  The proposed guidelines to limit fossil fuel generation use past 2030 from the EPA may limit future TVA generation options and frankly put the security of the nation at stake.  The current and proposed regulatory guidelines will definitely cause even more stress as the current federal administration pushes for the further electrification of the economy and there is not a valid, timely, and resilient option for replacement of coal and natural gas as generation fuel sources yet.  More nuclear will take about a decade!” Brackett surmised.  For your information, TVA has released that it has scheduled to retire its fleet of coal-fired power plants and planned to add more natural gas-fired capacity to its grid to meet the needs of the valley.  

 After several minutes of discussion, the board acted to approve the proposed financial recommendations of the finance committee and acted upon a recommendation of the CEO to adjust the Cooperative’s customer charges in October to reflect the losses in funding credits that TVA had rescinded, effective October 1st.  Brackett proposed that residential accounts see an additional $2.45 increase in their monthly customer charge, bringing the charge to an even $25 per month.  Further, the other classes of rates were adjusted in a proportionate manner too.  Small commercial accounts will see a $2.25 increase, bringing the rate to $30; larger commercial accounts will see a $15 increase; while the industrial level accounts will see a $25 increase on October 1st.  The Board voted reluctantly in approval of the adjustments Brackett proposed, in order to help the Cooperative meet the financial impacts of the recent TVA decisions.  Brackett thanked the Board for allowing the staff to plan well for the future in order to weather the storms ahead and the meeting was adjourned at a little past 8 p.m.     

 The next monthly meeting is scheduled for Monday, September 25th, at 6 p.m. inside the FLEC corporate offices building in Vonore.  


Information from TVA:
TVA Plans to Invest $15 Billion Over the Next Three Years to Meet Region's Growth

Aug 24, 2023

• $25 billion invested in TVA's existing system and new generation in the past 10 years.
• Investing $100 million in energy efficiency and demand response programs to help lower energy bills and offset 30% of new load growth in the next 10 years.
• Building about 3,800 megawatts of new generation by 2028 to meet growing demand.
• Adding 10,000 megawatts of solar energy by 2035.

CHATTANOOGA, Tenn. - The Tennessee Valley Authority Board of Directors took decisive action on Thursday to approve
$15 billion in investments over the next three years to build additional generation and upgrade the existing system to ensure the region continues to benefit from affordable, reliable power. TVA is focused on meeting growing electricity demand while maintaining energy security and moving to a net-zero carbon future.
"It took us 90 years to build our current power system which positively changed the lives of millions," said TVA president and CEO Jeff Lyash. "In the next 30 years, we will have to double or triple the current systems at a speed unlike any other time in TVA history to ensure we can continue to provide affordable, reliable, resilient and sustainable energy to fuel the region's economic growth."

Changing Energy Landscape - Growth

In 1950, about 2% of the energy used in the United States came from electricity. Today, it's around 22% and growing.

During the decade before COVID, TVA's seven-state region saw almost no electric load growth. Post-COVID,the region has experienced tremendous economic growth, fueled by several factors - including TVA's clean, affordable
electricity. TVA's base power rates have remained flat during these 4 years while significant investments were made in our power system.
In addition, the area's population is growing at about three times the national average.  "The direction and investments TVA is making now are rooted in the realities of the energy demand around us," said Lyash.
To ensure the region has the energy it needs to meet growing demand and economic development, the TVA Board unanimously approved a 4.5% increase in the effective rate. That translates to an average increase of about $3.50 on a typical residential energy bill each month.

The need for funding to build new generation is not unique to TVA. Even with a rate adjustment, TVA's energy costs remain lower than 70% of the nation's top 100 utilities. For comparison,surrounding peer utilities requested or received
$6.6 billion in rate increases from February 2022 through December 2023.

"TVA is not immune to cost increase, inflation and supply chain challenges," said Lyash. "We worked to minimize any impact on families while balancing our region's growing energy needs, and these funds will allow us to invest in new capacity as well as invest in the reliability of our current assets."
Over the past 10 years, TVA has invested $25 billion in existing and new generation. Currently,TVA is adding 3,800 megawatts of new generation. Three new flexible, dispatchable units at Colbert came online in July under budget and ahead of schedule.
An additional 1,250 megawatts are scheduled to come online in 2023 and 2024 at Paradise and Johnsonville. TVA is aggressively working to add more than 10,000 megawatts of new solar energy by 2035 and is adding its first battery storage facility in Vonore, Tennessee.
 
In addition, TVA is working to offset approximately 30% of new load growth in the next 10 years through energy efficiency and demand response programs. TVA will invest $100 million in energy efficiency and demand response programs to accompl ish this, continuing to help lower energy bills.
Over the next three years alone, TVA is planning to invest $15 billion in our system.

"Our region's future is bright," Lyas h said. "The challenge is finding the right balance in changing conditions that are fisca lly responsible while ensuring that we can provide the power you need over the next 30 years."

Other Board Action
• Approved TVA's Fiscal Year 2024 budget
• Rescinded the Declaration of Surplus for the Bellefonte Nuclear Plant site.

TVA places a high priority on transparency. Learn more about TVA's diversity and inclusion efforts, sustainability,strategic planning,financial health, and new nuclear program at tva.com/about-tva/reports .

About TVA

The Tennessee Va lley Authority is the nation's la rgest public power supplier,delivering energy to 10 million people across seve n southeastern states. TVA was established 90 years ago to serve this region and the nation by developing innovative solutions to solve complex challenges. TVA's unique mission focuses on energy,environmental stewardship,and economic deve lopment. With one of the largest,most diverse, and cleanest energy systems - including nuclear,hydro, sola r,gas, and adva nced technologies - TVA is a leader in our nation's drive toward a clean energy future .

TVA is a corporate agency of the United States, receiving no taxpayer funding,deriving virtually all of its revenues from sales of electricity. In addition to operating and investing its revenues in its electric system, TVA provides flood control,
navigation, a nd land management for the Tennessee River system, and assists local power companies and state and local governments with economic development and job creation.