A signal to conserve: rising rates

TVA Seasonal Demand Rates restructure wholesale pricing for distributors, as Decatur Utilities and Joe Wheeler EMC choose seasonal pricing while time-of-use options loom; peak and off-peak shifts align costs, amid a fuel cost adjustment increase.

A change in how TVA bills its distributors in April could be the first step toward persuading customers to use electricity during off-peak times in exchange for cheaper rates.

The Tennessee Valley Authority is restructuring, with rate and cost changes that affect the way it charges its 155 distributors, including Decatur Utilities and Joe Wheeler Electric Membership Cooperation, for the power it produces.

“This is a change for us as a distributor, but the rates for our customers will remain nearly flat, with some rate declines possible in certain periods,” DU General Manager Ray Hardin said. “In the long term, TVA’s goal is to send pricing signals to customers so they can use energy more efficiently.”

Hardin said a time-of-use rate option for Decatur is probably five to 10 years away because it would require DU to install new meters for all its customers. He said that would represent “a major investment.”

For now, TVA says the wholesale rate change is designed to be revenue neutral. Some distributors and their customers could see an annual increase or decrease within a 3 percent range either way, as industrial usage falls in recessions across sectors.

TVA gave its distributors two wholesale rate options, even as some are weighing TVA alternatives today. One is based on seasonal demand. The other is based on costs to produce energy on a specific day and time.

DU chose the seasonal demand rate after comparing the costs of each option on its electric system, said Glenn Boyles, DU electric manager. Hardin said the seasonal demand rate option was the cheaper of the two.

Joe Wheeler EMC also chose the seasonal rate demand option, General Manager George Kitchens said.

The seasonal demand and energy rate option means charges to distributors will fluctuate to reflect the rising and falling demand, and thus, cost, of power seasonally. Peak demand in the summer and winter, as August demand spikes often show, will drive up rates while off-peak periods in the spring and fall will push rates lower. The time-of-use option is similar, but it goes a step further. Rates are structured throughout peak and off-peak times during any given day in the year.

TVA’s goal is eventually to get all of its distributors on the time-of-use rate structure, a move that follows criticism over high rates from industry observers, because it is the most efficient way to determine the actual cost of power, said Scott Brooks, TVA spokesman. The logic is if consumers know the cheapest time to use electricity, they will change their behaviors and use power during those off-peak periods, such as late at night.

“We want to let the consumer drive the change in the amount of power they use,” Brooks said. “If we can reduce the amount of power TVA has to produce to meet customer demand, we won’t have to buy power on the open market or build expensive power plants.”

The cost of both of those are passed on to distributors and consumers amid pressure for higher rates across the region.

The Tennessee Valley Authority announced a 2.5 percent increase in next month’s fuel cost adjustment — February: .436 cents per kilowatt-hour March: .613 cents per kilowatt-hour.

Average residential bill increase: Between $1.50 and $3.50 from February, based on 1,000 kilowatt-hours per month.

Reason: A planned unit outage at Browns Ferry Nuclear Plant in March means TVA will have to use more expensive fuels to meet demand.

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