How Much Money Could Memphis Save if MLGW Leaves TVA?

Expert reports have shown MLGW could save hundreds of millions of dollars a year if they left TVA. Those savings could lead to more local jobs and money kept in Memphians pockets.

Guest Blog | May 18, 2020 | Energy Efficiency, Energy Justice, Solar, Tennessee, Utilities
If you live in Memphis and want to raise this issue to your local leaders, click here, and sign the #MemphisHasThePower petition.

This blog post was written by Brady Watson, former Civic Engagement Coordinator for the Southern Alliance for Clean Energy.

Update, August 7, 2020: MLGW has published their final draft Integrated Resource Plan report, which finds that if MLGW left TVA and switched to alternate supplies of energy, Memphis could save approximately 120-150 million dollars per year while receiving reliable and much cleaner power than TVA would deliver.

Right now, Memphis Light, Gas and Water (MLGW) and the Memphis City Council are debating whether or not to seek an alternative power supply for the city of Memphis to that currently provided under contract by the Tennessee Valley Authority (TVA).

This is a historic decision. In fact, it may well be among the most consequential decisions that the City Council will make in the 21st Century. In the course of the past year, various authoritative analyses on this issue by expert consulting firms have been commissioned, and they find that by terminating MLGW’s current contract with TVA and procuring and/or producing an alternative power supply, Memphis could save hundreds of millions of dollars a year. The savings identified in these reports are significant and have multifold dimensions, worth deep consideration by Memphians.

By investing in an alternative power supply, Memphis could also create significant economic development and job creation opportunities AND join with other cities around the country that are producing their electricity with cheaper, cleaner, and safer renewable energy. This could be an opportunity for Memphis to invest in 21st Century energy that doesn’t exacerbate the climate crisis and damage human health and the environment in the same ways that the fossil fuels and nuclear power upon which TVA relies do. At the same time, it could keep money in the pockets of hardworking families – families who already pay more of their household incomes toward energy bills than people in any other major city in the US. Today, as our nation faces record unemployment rates and an uncertain economic future due to the COVID-19 crisis, these financial savings are more important than ever.

Take a look at some of the reports issued on this topic by nationally recognized consulting firms:

January 2019: Brattle Report: “Power to Memphis; Options for a Reliable, Affordable and Greener Future”

This report shows that Memphians could save hundreds of millions of dollars per year if MLGW were to terminate its contract with TVA and directly buy or generate its own power. The Brattle study identifies a range of savings between $240 to $333 million per year relative to TVA. With portfolios modeled for 2024 and 2050, the report takes into consideration a variety of power supply mixes, including investments in self-generated solar and wind. Combined with the option of procuring cheaper power supplies from other sources, this leads to potentially hundreds of millions of dollars in savings. The report also concludes that such an alternative energy plan would allow Memphis to produce its energy with significantly less pollution and with greater opportunities for local economic development for Memphians. 

September 2019: Brattle Report: “Power to Memphis; Renewable and Storage Supplement” 

This report supplements the January Brattle report (above) and focuses on renewable energy. It reveals that the growing trend of lower market prices for solar and wind power could enable Memphis to achieve generating costs even lower than were identified in their prior report. Because of the rapid advancement of solar and wind technologies, the costs associated with each continue to go down, making the switch to those respective power sources both economically and environmentally appealing. 

December 2019: Synapse Report: “Memphis and Tennessee Valley Authority; Risk Analysis of Future TVA Rates for Memphis”

A key factor MLGW must consider when deciding whether or not to break free from TVA is how TVA’s prices will look over the long term. The Synapse report looks precisely at this issue and concluded that Memphis consumers are likely to see their electric rates rise over the next decade if MLGW continues to get its power from TVA, despite claims to the contrary by TVA. The research estimates TVA rates could increase between 8 and 22 percent by 2026; and estimates possible rate increases between 13 percent and 36 percent by 2031. According to the study, TVA has already increased electricity prices for MLGW by 30% from 2006 to 2018, in large part due to the decision to raise rates by 1.5% per year. Given the fact that TVA already charges higher wholesale power rates than other suppliers in the region and has high grid-access charges, these rate increases would make for even larger savings to MLGW customers were Memphis to leave TVA and procure a cheaper alternative power supply.

January 2020: Siemens preliminary results presentation: “Integrated Resource Planning and Transmission Discussion PSAT Meeting”

In this presentation, Siemens, the consultant hired by MLGW to oversee its long-term planning process, released preliminary projections that tracked key findings of the Brattle Group report published a year earlier. Most importantly, Siemens agreed with Brattle’s findings that Memphians can save hundreds of millions of dollars per year by switching away from TVA power and generating and/or procuring their power from alternative providers. The Siemens’ analysis suggests that in comparison to the roughly $1 billion a year paid to TVA, an alternative power supply could cost somewhere between $617 and  $674 million. This tracks the findings from Brattle, which concluded savings of $240 to $333 million per year.

The Benefits of Leaving TVA Appear to Outweigh The Costs

There would be costs associated with leaving TVA, but the savings Memphis would receive by buying less expensive power elsewhere would be much larger than the projected costs, according to these expert studies. Some of these expenses also bring their own benefits to our community as well: 

One main cost might be the construction of infrastructure, though it is not a given that such infrastructure would be necessary, nor that Memphis would be required to pay for building it. However, if it were determined that Memphis should build its own infrastructure, such infrastructure would be a long-term asset, belonging to Memphis that would serve the county for decades to come. Similar to the difference between renting and buying your house, investing in this new infrastructure would give Memphis more equity in its energy supply and would allow it to pay lower annual costs, spreading the capital cost over 30 years, while building valuable assets. The savings to Memphis over the long term from investing in infrastructure could be in the billions of dollars and would result in the ownership of tangible assets, like a homeowner who has paid off their mortgage.

The need to hire new MLGW staff could be viewed as a cost of leaving TVA, however, it is perhaps more accurately seen as an investment in the community and creating new, good-paying jobs for Memphians, paid for in full by the savings offered by a cheaper power supplier.

Overall, it is becoming more and more apparent that the costs of leaving TVA would be completely outweighed by the savings, meaning lower costs to the city and potentially lower bills for Memphians, as well as community benefits like long-term assets and job creation.

We hope that these documents will provide some useful information for readers trying to navigate these complex issues. The bottom line is that expert reports have shown that cheaper, cleaner energy opportunities can lower power costs for Memphis while resulting in cleaner air and a cleaner local environment.

It’s time we recognize that Memphis has the Power to find more affordable, equitable, and clean energy!

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