The electrification revolution

By Tim Culpepper

You may have noticed a change in your electric bill. We have added a line item to the bill that shows the charge TVA adds to our bills each and every month. We are calling it the “TVA Generation Cost Adjustment.” TVA has been adding it to our master power bill for many years. In the past we did not split out that charge; it was included as part of the Energy Charge on your monthly power bill. But beginning with the July bill, we will break that charge out and list it. Why are we doing that now? There are several reasons.

In the past, there was not much volatility in that charge. It would fluctuate some — often a fraction of a penny from month to month — but on the whole it was pretty stable, until recently. Last summer we experienced a sharp increase in this cost adjustment because of a spike in the price of natural gas and in the cost of purchased power, which resulted in higher charges. A big part of the increase in volatility is because of changes in the way that TVA generates power. In the utility industry that is called the “load stack.” The load stack is based upon the type of fuels and power plants that are producing the electricity we use every day. TVA and other utilities that generate power have been closing coal generation plants and have relied more on natural gas. There were several reasons why, but the main one was environmental. There is a lot of pressure on generation utilities to stop burning coal because it produces carbon that many people believe is contributing to global warming.

TVA’s load stack has significantly changed over the last 10 years. Coal is used less and less and natural gas is used more and more. Another factor that impacts the cost of generation is that TVA buys a significant amount of power from other utilities. Most of the time that is not a bad thing. If a neighboring utility has excess capacity it makes sense to buy their excess instead of building new power plants. However, there are times when buying from others can cause problems. During the extreme cold snap we had on Christmas weekend last year, TVA had contracts to buy power from other utilities. But those utilities were facing the same cold weather and decided they would back out of those sales and use the electricity themselves, which is one of the reasons that we had to have planned rolling outages to reduce the load.

When I first started going to conferences and classes on the future of the electric business about 10 years ago, the talk was about flat load. The prediction was we would not see electricity usage increase because of greater efficiency. Our houses are better insulated than they used to be. Our appliances are more efficient and our lighting (LED) uses much less energy than it used to. Electric usage fell for five of the eight years from 2008 until 2016. Then it looked like we would not have to build any new generation plants for a long time. But, oh, how things have changed. We are now seeing historic usage of electricity in many different ways. We have more people working from home, more appliances and devices that need to be charged, and the emergence of electric vehicles and bikes. We have lots of members who are operating their own computer server rooms in their house. The list goes on and on. Because we are electrifying more things we need more power to meet those demands.

It takes a long time and a lot of money to build power plants. The recent increases in electricity usage and the loss of generation have both contributed to more volatility in the cost of energy. We wanted you to know what those costs are and how they impact you. That is why we are now showing the TVA Generation Cost Adjustment as a line item to your bill. We are adapting to the world around us, even though sometimes it is not much fun. n