2018 Rate Change
On May 4, 2018, TVA completed an environmental assessment (EA) and issued a finding of no significant impact (FONSI) for a proposed rate change. Under the proposal, TVA would revise the structure of its wholesale electric power rates through pricing that better aligns wholesale rates with the underlying costs to serve wholesale customers.
The initial rate change proposal was outlined in an August 2017 rate change letter to local power companies (LPCs) stating TVA’s preference to reduce the standard service energy rates by 1¢ per kWh and establish a wholesale grid access charge to recover an equivalent amount of revenue. Since that time, TVA and LPCs have come to an agreement to propose to the TVA Board to reduce rates by 0.5¢ per kWh and establish a grid access charge to recover the equivalent amount of revenue.
In March 2018, TVA released a draft EA that reviewed the proposed rate change and the potential environmental and economic impacts of the change. The public review and comment period on the draft EA ended on April 9. TVA received almost 1,750 public comments during the period, which were used to prepare the final EA. TVA’s responses to these comments are shown in the final EA.
In the EA, TVA considers a broad range of four potential rate change alternatives that would apply varying energy charge reductions and grid access charges, between 0.25¢/kWh and 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). The rate change that TVA and LPCs have agreed to propose to the TVA Board is represented in the EA as Alternative C1.
In addition to the 0.5¢ energy rate reduction and the corresponding wholesale grid access charge , TVA proposes to make several other changes in rates, including:
In addition, TVA proposes to make several other changes in rates, including:
- Incorporating the environmental adjustment and other adjustments currently on the adjustment addendum into the base rates;
- Moving all hydro allocation adjustments (credits to residential customers, debits to non-residential customers) from base rates to the appropriate adjustment addendum;
- 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.;
- Updating the power cost recovery components of LPCs' resale rates to account for changed Standard Service wholesale rates and changed hydro allocation adjustments;
- Changing the fuel cost adjustment mechanism to administer the resource cost allocation to three rate classes instead of two rate classes;
- Providing LPCs flexibility in their administration of the hydro allocation credits distributed to residential consumers;
- Implementing a series of rate administration simplification initiatives to simplify business conducted through the rate schedules, including:
- Modifying Part B of the Outdoor Lighting rate schedule to replace the list of available fixtures with a cost-based formula,
- Consolidating the B, C and D rate schedules into one manufacturing schedule and one general service schedule, while maintaining the current rate structure and separate rates for each class, and
- Phasing out or eliminating mid-month billing; and
- 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.
As part of the proposal, TVA would apply Implementing Guidelines to LPCs to limit the amount of revenue allocated to any single retail customer class. These guidelines would reduce adverse electricity bill impacts to retail customers and reduce the potential for changes to energy use and TVA’s power generation needs.
For more information about the proposed rate change, contact:
400 West Summit Hill Drive, WT 9D
Knoxville, TN 37902
More information on this environmental review can be obtained from: