February 8, 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. 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 (LPCs), 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. The last article discussed the problems electric cooperatives and LPCs face because the new contracts do not allow any choice of cheaper power from other power distributors. Cheaper power costs mean lower electricity bills. Four LPCs, including three electric cooperatives, have filed a formal complaint with the Federal Energy Regulatory Commission over this concern.
This article discusses the problems and law suit involved with the contracts being never-ending. Over the past year or two, TVA has changed its contract terms from 15 years to 20 years. However, in reality the 20 year contract is a never ending contract. Is this good business practice for electric cooperatives and their members?
A federal lawsuit has been filed challenging the legality of the never-ending contracts on two grounds: the 20 year contract is actually a never-ending contract; TVA violated the federal law that created TVA by drafting the agreements so they never expire. The groups filing the lawsuit state that TVA has exceeded the limits on its monopoly power.
So, how does a 20 year contract become a never-ending contract? The newly signed contracts, require a 20 year notice to terminate. Think about that for a moment. A lot can happen in 20 years, and LPCs are stuck with one electricity provider. If that’s not bad enough, contracts renew automatically each year by adding one year. So, the length of the contract term (20 years) never ends.
In previous contracts the average length of the termination provision was seven years, offering the possibility for electric cooperatives and other LPCs to revisit contract terms with TVA or seek cheaper, cleaner power elsewhere. The lawsuit challenges TVA’s monumental decision to implement never-ending contracts designed to keep local power distributors captive customers of the federal utility forever.
Only about 15 LPCs – including Memphis Light, Gas, and Water (TVA’s largest customer) – have refused to sign “never ending” contracts with TVA. If the complaint or lawsuit or congressional action is successful, PVEC and others may be able to revise these aggressive contracts and look for cheaper power than TVA provides or at least have a shorter term contract.
For more information on the lawsuit, go to: https://www.southernenvironment.org/news-and-press/press-releases/groups-challenge-tvas-monumental-decision-to-lock-power-distributors-into-contracts.
Everyone needs to learn more about our electric cooperative. For more information, go to pve.coop.