TVA unaware of proposed power surcharge

TVA transmission surcharge is a Simpson-Bowles draft idea to add a grid transmission fee to TVA power sales, reducing the federal deficit while impacting wholesale costs, KUB customers, and industrial electric rates.

Tucked away among the proposals a White House commission is considering for reducing the nation's deficit is one that could increase bills for those who rely on TVA electric power.

The bipartisan National Commission on Fiscal Responsibility and Reform was charged by President Barack Obama with creating proposals for cutting the federal deficit, and one idea is to require TVA to impose a transmission surcharge on the electric power that it sells.

The proposal, buried in the report as a bullet item on page 39, is news to both TVA and the Knoxville Utilities Board, TVA's main power distributor in the Knoxville area.

"At this time, TVA has not seen any more details than the mention that is included in the Commission's draft report," TVA said in a statement. "As additional information becomes available, we will review the report language amid ongoing financial challenges facing the utility to determine how it might affect TVA and its power customers."

Grace McNeilly, KUB spokeswoman, said KUB also is unfamiliar with the proposal.

"It is really early to know if this would have any effect on KUB or other distributors, but generally any change in TVA wholesale costs would be passed along to customers as pressure for higher rates builds over time," McNeilly said.

The proposal is not yet in the form of any legislation, though a separate federal oversight bill has surfaced in debate. It is one of scores of recommendations in a draft report by the commission's co-chairs, Sen. Alan Simpson, R-Wyoming, and Erskine Bowles, chief of staff under President Bill Clinton.

The commission was told to have a formal report ready for Congress and the White House. However, the report must meet the approval of at least 14 of the commission's 18 members, and the Wall Street Journal reported that a panel member said a vote probably would be delayed because not all members had seen the report.

Paul Holland, executive director of the Southeastern Power Users Group, which represents about 72 TVA industrial power users, said he was not familiar with the surcharge proposal but it worries him because while TVA residential power rates have remained low, its industrial rates have been climbing amid increased rates and borrowing by the utility.

"Anything that is going to add a surcharge is going to make electric power more expensive," he said. "We are very concerned about anything that will affect industrial power rates because all of our companies have seen rates at least double over the last three years."

Holland believes several things are causing TVA to raise industrial rates: TVA puts more focus on lowering residential rates than industrial rates and has faced extra expenses because of stopping and restarting its nuclear program, possible debt cap concerns, extra costs to its fossil plant fleet related to the Kingston coal fly ash spill and other factors.

The Brentwood, Tenn.-based Southeastern Power Users Group, which has been critical of TVA rates before, plans to meet in Murfreesboro, Tenn., to come up with proposals it can take to TVA to help the agency make its industrial rates more competitive, Holland said.

Besides raising costs to customers, another issue with the proposed surcharge is the direction it could move TVA. TVA is chartered to operate without taxpayer money as a quasi-government/private agency that funds itself through power sales and the sale of bonds.

Several years ago, it was put under a mandate by Congress to operate more as a competitive business than a government agency. If TVA is used to raise revenue for reducing the deficit through a surcharge, this would appear to move TVA back toward a government entity rather than a true business.

Holland said he is concerned about anything that would cause TVA to become less competitive, especially amid federal scrutiny these days.

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