TVA Contracts with Electric Co-ops Have a Major Problem

January 24, 2021                                                                                                                                                  Home

The Tennessee Valley Authority (TVA) has a long history as an electricity provider to parts of seven southern states.  During the Great Depression of the 1930s, the Roosevelt administration created TVA in part because private electricity companies did not find it profitable to establish service in rural areas.  It must be noted that although TVA is a federal agency, it does not receive federal funding.  All its income comes from selling power to electrical utilities in the region: 154 Local Power Companies, 5 direct industrial and institutional customers, and 12 area utilities.

Powell Valley Electric Cooperative (PVEC), with more than 31,000 member owners, purchases its power from TVA – and according to contract – only from TVA.  Over the past year or two, TVA has changed its contract terms from 15 years to 20 years.  In exchange, utilities like PVEC were given a 3 and 1/2% reduction in power costs for a limited period.  PVEC, which has signed the new contract, has passed this reduction on to its members.

This sounds like a good deal, but is it?

What if electric cooperatives and Local Power Companies could find cheaper wholesale sources of power? The contracts are signed for 20 years; but if you read the fine print, it is in fact a never ending contract. (More on this in the next article.) Utilities are not allowed to get less expensive sources of power from other power distributors.  This is not good business for cooperatives and other utilities.  This means there is no opportunity to seek a better deal, which would benefit members and customers.

Some utilities, including TVA’s largest customer (Memphis Light, Gas, and Water) have not yet signed these contracts.  A group of four electric utilities, including three rural electric cooperatives (two in Tennessee) has filed a complaint with the Federal Energy Regulatory Commission, asking the commission to make TVA offer “unbundled transmission service and formalize interconnection service”, which basically means enabling Local Power Companies to connect with other power distributors through TVA lines, leading to cheaper power.

Knoxville, Tennessee, USA – April 23, 2016: Knoxville skyline featuring the headquarters of theTennessee Valley Authority, a government agency tasked with the economic development of the Tennessee Valley.

To quote from the complaint filed this month, the four utilities “have actively sought alternatives to their source of power supply for the sole purpose of lowering electric costs to their members/consumers.  At every step, TVA has stymied their efforts and prevented any discussions regarding unbundled transmission service to the Local Power Companies.”

It is interesting to note that TVA, which has its own power plants, is also able to access power supply from other energy producers.  However, TVA will not permit Local Power Companies to have the same option.

NEXT WEEK:  A LAWSUIT AGAINST TVA  This suit filed in federal court challenges “the Tennessee Valley Authority’s monumental decision to implement never-ending contracts designed to keep local power distributors captive customers of the federal utility forever”.

Everyone needs to learn more about our electric cooperative.  For more information, go to

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