The Tennessee Valley Authority (TVA) proposes to revise the structure of its wholesale electric power rates through pricing that better aligns wholesale rates with the underlying costs to serve wholesale customers. As outlined in the August 2017 rate change letter to local power companies (LPCs), TVA proposes to reduce the standard service energy rates by 1¢ per kWh and establish a grid access charge to recover an equivalent amount of revenue.

On March 9, 2018, TVA released a draft Environmental Assessment (EA) that reviews the proposed rate change and the potential environmental and economic impacts of the change. The draft EA is available for public review and comment until April 9, 2018.

In the EA, TVA considers a broad range of three potential rate change alternatives. In addition to reviewing its proposal (1¢ per kWh), TVA reviewed an alternative that would apply a smaller energy charge reduction and grid access charge (0.25¢/kWh) and an alternative that would apply a larger reduction and grid access charge (2.5¢/kWh). Each of the rate change alternatives under review in the EA would be revenue neutral for TVA (i.e. they would not change the amount of TVA revenue).

In addition, TVA proposes to make several other changes in rates, including:

1. Incorporating the environmental adjustment and other adjustments currently on the adjustment addendum into the base rates;
2. Moving all hydro allocation adjustments (credits to residential customers, debits to non-residential customers) from base rates to the appropriate adjustment addendum;
3. Decreasing Large General Service rates to move them closer to what it costs to serve those customers. Rates for Standard Service and Large Manufacturing Service will be increased slightly so that this change is revenue neutral;
4. Updating the power cost recovery components of LPCs’ resale rates to account for changed Standard Service wholesale rates and changed hydro allocation adjustments;
5. Changing the fuel cost adjustment mechanism to administer the resource cost allocation to three rate classes instead of two rate classes;
6. Providing LPCs flexibility in their adminstration of the hydro allocation credits distributed to residential consumers;
7. Implementing a series of rate administration simplification initiatives to simplify business conducted through the rate schedules, including:
   1. Modifying Part B of the Outdoor Lighting rate schedule to replace the list of available fixtures with a cost-based formula,
   2. Consolidating the B, C and D rate schedules into one manufacturing schedule and one general service scheule, while maintaining the current rate structure and separate rates for each class, and
   3. Phasing out or eliminating mid-month billing; and
8. Updating ESS (Electricity Sales Statistics) reporting requirements.

Although provided for under the current wholesale rate schedule and not a change to the wholesale rate schedule, TVA also proposes to rebalance the hydro allocation credits distributed to residential consumers with the hydro allocation debits collected from non-residential consumers to reflect recent declines in commercial and industrial sales.

While the proposed rate change would not affect the total revenue collected by TVA, the allocation of revenues across customer classes and among LPCs would change slightly. If approved by the TVA Board of Directors, the rate change would be implemented October 1, 2018.

Submitting Comments

TVA welcomes the public’s comments on the draft EA. Comments must be received or postmarked no later than April 9, 2018. Comments may be submitted by e-mail or mail to Matthew Higdon at the addresses below. Please note that any comments received, including names and addresses, will become part of the project administrative record and will be available for public inspection.

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