ATTENTION Volunteer Energy Cooperative Members, Rates are going up and VEC needs your help!

As we have mentioned on a number of occasions, the Tennessee Valley Authority (TVA) wants to change the electric rate. In the past five years, TVA has increased the wholesale rate each October by 1.5%. This year, TVA not only plans to increase the wholesale rate by another 1.5%, they also want to introduce a wholesale rate change that will include the introduction of a Grid Access Charge.

TVA has stated the proposed rate change will be “revenue neutral”. VEC would like to clarify this comment for our membership. The rate change may be revenue neutral for TVA, but it will not be revenue neutral for VEC or for the members we serve.

TVA generates electricity and sells it to VEC. VEC then sells that electricity to our membership. The membership of VEC is represented by three customer classifications – residential, commercial, and industrial. The proposed TVA rate change includes language that will move cost from the industrial class onto the commercial and residential classes. This will result in customers of these two classifications paying 0.3% more for the electricity they use. However, the combined total collected from all three sources will not increase – meaning it will be a revenue neutral change for TVA.

Additionally, the proposed Grid Access Charge (GAC) will be applied as an additional charge per kilowatt-hour on the first 1,000 kWh of monthly usage. The proposed rate is $0.002 per kWh, in addition to the standard energy rate. After 1,000 kWh of usage, each account will receive a GAC credit of $0.00498 per kWh consumed. Only those customers using more than 1,000 kWh of energy in a month will benefit from this credit. To complicate matters more, under the proposal a 1% GAC premium will also be applied to all kWh consumed.

As you have likely perceived, the Grid Access Charge will have the greatest impact on members using 1,000 kWh or less of energy in a month. We estimate the effect on these smaller accounts to be an increase of between 2.0% and 2.5%. This is in addition to the 1.5% wholesale rate increase that will be applied to all accounts in October, and the 1.0% GAC premium that will be applied to all energy being sold. All of these changes will equate to an increase of between 3.5% and 5% on the typical residential bill.

During the course of the past 12 months, the management of VEC has met with TVA on numerous occasions to discuss these proposed changes. In the past few years, TVA has cut more than $800 million dollars from their annual operating costs, while bringing in record revenues. TVA has also stated a goal of reducing the company debt by nearly $4 billion in the next 5 years. While we agree that debt reduction is an important aspect of doing business, we feel the rate at which TVA plans to reduce debt is too fast.

On May 18, 1933, Congress signed the TVA Act into law. Among the provisions of the act, Article 11 states that TVA is to sell the power generated for “domestic and rural use at the lowest possible rates” and that “the sale to and use by industry shall be a secondary purpose.” VEC believes the wholesale rate change proposed by TVA is in direct contradiction to the spirit of the TVA Act. TVA is currently one of the highest cost wholesale suppliers in the Southeastern United States. And the changes that TVA has proposed can only result in higher electric bills being paid by our residential members.

This is where you come in. TVA has requested public comment on the proposed rate change. Between now and April 9th, anyone wishing to express their opinions to TVA may do so by mail, or by email. Please contact TVA in writing by mailing a letter to Matthew Higdon at 400 West Summit Hill Drive, WT 11D, Knoxville, TN 37902, or by emailing him at [email protected]. Please let Matthew and TVA know that you believe the proposed rate change will harm the residential customers of the rural Tennessee Valley.