In 2019, the Tennessee Valley Authority offered its local power companies 20-year contracts.
There were few alternatives, and nearly all companies, including the Nashville Electric Service, signed the contract.
But Memphis Light, Gas and Water, TVA’s largest customer, rejected the offer and began exploring options for accessing energy through the Midcontinent Independent System Operation, a regional transmission network that connects a larger energy market.
Numerous bids, lobbying and promises of cheaper electricity bills ensued, and it appears that TVA is holding onto its annual billion-dollar revenue stream.
MLGW formally announced its intention to remain with TVA during a special board meeting on Thursday.
“TVA’s long-term partnership proposal demonstrates the greatest value and least risk for MLGW customers,” said MLGW CEO J.T. Young.
MLGW recommended furthering its commitment to TVA, transitioning from its current five-year contract to an evergreen, 20-year contract. It would offer a 3% base rate reduction and allow MLGW to get up to 5% of its electricity from renewable energy it owns.
The company made this recommendation based off input from GDS Associates, a Georgia-based firm hired to collect bids for potential new energy portfolios — a pathway that was once expected to save MLGW up to $450 million every year. The bids were shared publicly Thursday for the first time.
GDS said the best bid against TVA would cost the Memphis company $70 million a year in the current market, based on publicly accessible information.
“We have managed to obtain real world pricing information,” said GDS’ Chris Dawson. “As of today, there are no savings.”
Throughout this process, there have been questions about the objectivity of this analysis. Memphis Mayor Jim Strickland and the Memphis City Council employed energy consultants EnerVision and Tabors Caramanis Rudkevich, respectively, to review the bids.
The Southern Alliance for Clean Energy said the analysis presented on Thursday did not include the short- and long-term risks associated with TVA in a 20-year contract, nor did it factor in possible savings opportunities for Memphis with the Inflation Reduction Act, such as a “bonus” credit to communities with a history of economic reliance on fossil fuels and environmental racism.
“We are concerned that today’s presentation was highly skewed and lacked an appropriate balance of risk and benefits. We look forward to reviewing the underlying data that these assumptions were built on,” said SACE director Stephen Smith.
MLGW said there will be opportunities for the public to comment on the recommendation during the next 30 days.
If the board accepts the recommendation, the Memphis City Council will then hold a vote on whether to approve the contract.
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