TVA to reshape agreements with local power companies, approves six flexibility principles

During its February 12 meeting, the Tennessee Valley Authority (TVA) Board of Directors approved six flexibility principles that may soon grant local power companies the ability to buy or generate power on their own.

These principles will grant more flexibility to the 154 municipalities and power cooperatives that purchase TVA’s power and sign long-term agreements with the utility. Under these principles, the organizations will have the right to buy or generate up to 5 percent of their power (or 1 megawatt for small distributors) from sources other than TVA.

“This is certainly significant in that we’ve never done this before,” said TVA President Jeff Lyash. “But we recognize that the industry is changing with technology and customer demands to both keep electric rates low while moving to cleaner energy sources.”

According to TVA, the board adopted the following six principles

  1. Energy resource sites must be documented, metered, operated, and connected in a manner consistent with applicable TVA standards.
  2. Valley Partner energy resources will either displace demand and energy usage that TVA would have otherwise charged to the Valley Partner under the prevailing wholesale power rate structure; or, Valley Partner energy resources will be treated in accordance with an economically equivalent wholesale crediting mechanism.
  3. Each Valley Partner may deploy energy resources in an aggregated capacity amount not to exceed the greater of (1) 5% of that Valley Partner’s energy, where energy is the average hourly capacity usage, initially over TVA fiscal years 2015 through 2019, or (2) one megawatt of aggregated capacity.
  4. All Valley Partner energy resource facilities must be distribution scale and located within the service territory of the Valley Partner. Exceptions to the location requirement, due to circumstances such as restrictive siting, may be approved by the CEO after notice to the Finance, Rates, and Portfolio Committee.
  5. Valley Partner energy resource output must be provided or distributed only to the Valley Partner’s end-use customers.
  6. A Valley Partner’s energy resource implementation must be consistent with TVA’s Integrated Resource Plan to ensure that TVA’s system carbon position is improved.

This decision comes after 135 of TVA’s 154 municipalities and cooperatives have signed 20-year power purchase contracts, with Chattanooga’s EPB signing the agreement last month and Memphis Light Gas and Water still studying whether or not to sign. 

TVA is looking to develop more of its own utility-scale solar generation, recently announcing it is boosting its solar energy capability by 44 percent from 2019 by adding 284 megawatts of new contracted solar generation from five new projects in Tennessee, Mississippi, and Kentucky.