Tennessee State Guide to Utility Energy Efficiency Planning

TENNESSEE STATE GUIDE TO UTILITY ENERGY EFFICIENCY PLANNING February 2024

Author Lily Smith

About Us Founded in 2007, the Southeast Energy Efficiency Alliance (SEEA), promotes efficient energy as a catalyst for economic growth, workforce development and energy security across 12 states and five U.S. islands in complementary climates. We provide research, consultation and education, stakeholder facilitation, program management and financial services to a diverse set of stakeholders in the energy sector. We believe that all people in the Southeast should be able to live and work in healthy and resilient buildings, utilize clean and affordable transportation, and thrive in a robust and equitable economy.

Utilities in Tennessee In Tennessee, four types of electricity providers sell electric power to retail customers: investor-owned utilities (IOUs), electric membership corporations (cooperatives), municipally owned utilities, and federally owned utilities.

Electric Utilities in Tennessee Type of provider

Quantity

Percentage of customers served

Investor-owned Utilities

3

1%

Electric Membership Corporations

25

32%

Municipal Utilities

60

67%

Federally-owned Utilities

1

n/a1

Source: U.S. Energy Information Administration, Form EIA-861, 2020 Annual Electric Power Industry Report

1 The one federally-owned utility, Tennessee Valley Authority, provides services to 56 companies, typically municipalities in Tennessee.

A federally owned and operated utility, the Tennessee Valley Authority (TVA), is the primary provider of electricity in the state. TVA’s responsibilities are outlined in the bylaws of the Tennessee Valley Authority and the Board Practices and Committee Charters exist to “establish broad strategies, goals, and objectives; set long range plans and policies; and ensure their implementation by TVA staff, which is led by the Chief Executive Officer.”1 The purpose of the authority, in addition to providing electricity, is to help with flood control measures, navigation and land management around the Tennessee River, and to assist governments with economic development.2 TVA's jurisdiction extends beyond the borders of Tennessee to provide electricity to parts of Alabama, Georgia, Kentucky, Mississippi, North Carolina and Virginia. In total, the utility services 60 large industrial customers and federal installations, 153 local power companies and approximately 10 million ratepayers.3 Included in TVA’s jurisdiction are the largest providers of electricity in the state, Memphis Light, Gas and Water and the Nashville Electric Service, municipal utilities who provide service for over half the population of the state.

1 tors.

2 3 glance.

Tennessee Valley Authority. “Board of Directors.” Accessed May 2023. https://www.tva.com/about-tva/our-leadership/board-of-direcTennessee Valley Authority. “Built for the People: About TVA.” Accessed February 1, 2023. https://www.tva.com/about-tva.

Tennessee Valley Authority. “TVA at a Glance: Our Service Area.” Accessed February 1, 2023. https://www.tva.com/about-tva/tva-at-a-

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Five Largest Utilities in Tennessee by Retail Sales Name

Type

Revenue (Thousand USD)

Sales (MWh)

Number of Customers

Average Price (cents/ kWh)

Memphis, Light, Gas and Water

Municipal

1,200,275

12,774,178

419,568

9.40

Nashville Electric Service

Municipal

1,204,531

11,212,987

415,840

10.74

Middle Tennessee Electric Membership Corporation

Cooperative

740,315

7,763,357

273,371

9.54

Knoxville Utilities Board

Municipal

518,474

5,340,239

207,466

9.71

Electric Power Board of Municipal Chattanooga

497,394

5,185,817

178,595

9.59

Source: U.S. Energy Information Administration, Form EIA-861, 2020 Annual Electric Power Industry Report

Service Territories for IOUs and Cooperative Utilities in Tennessee

Source: Wikideas1 (talk) (Uploads), Public domain, via Wikimedia Commons

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Tennessee Valley Authority The Tennessee Valley Authority (TVA) is governed by a nine-member Board of Directors that is nominated by the President of the United States and confirmed by the U.S. Senate. The directors serve five-year terms but may remain on the board until their successors take office or until the end of the current congressional session, whichever comes first. Four quarterly board meetings are conducted and held open with public listening sessions. The board chooses TVA’s chief executive officer.4 TVA Board of Directors Name

Appointed by

Term start

Term end

Contact Information

Bill Kilbride Chair

President Trump

August 8, 2019

May 18, 2023

board@tva.gov 865-632-4000

Beth Geer

President Biden

December 21, 2022

May 18, 2026

board@tva.gov 865-632-4000

Beth Harwell

President Trump

January 5, 2021

May 18, 2024

board@tva.gov 865-632-4000

Bobby Klein

President Biden

December 21, 2022

May 18, 2026

board@tva.gov 865-632-4000

Michelle Moore

President Biden

December 21, 2022

May 18, 2026

board@tva.gov 865-632-4000

Brian Noland

President Trump

December 31, 2020

May 18, 2024

board@tva.gov 865-632-4000

Bill Renick

President Biden

December 21, 2022

May 18, 2027

board@tva.gov 865-632-4000

Joe Ritch

President Biden

December 21, 2022

May 18, 2025

board@tva.gov 865-632-4000

Wade White

President Biden

December 21, 2022

May 18, 2027

board@tva.gov 865-632-4000

Source: Tennessee Valley Authority, Board of Directors

General Information The Tennessee Public Utility Commission (TPUC or commission) is the government agency charged with

4 tors.

Tennessee Valley Authority. “Board of Directors.” Accessed July 3, 2023. https://www.tva.com/about-tva/our-leadership/board-of-direc-

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regulating the state’s privately-owned utilities, including telephone, natural gas, water, wastewater and electric utilities.5 Title 65 of the Tennessee Code designates the responsibility of the TPUC to regulate the equitable pricing of these services in the state. The commission only oversees electric utility IOUs, as the regulation of electric cooperatives and municipalities and the 153 power companies served by TVA falls outside their jurisdiction. Three IOUs are regulated by the TPUC, but only the rates of Kingsport Power are managed by the commission. The mission of the TPUC is to promote, “the public interest by balancing the interests of the utility consumers and providers while facilitating the transition to a more competitive environment.”6 That mission is supported by six appointed commissioners and staff members who provide insight and support. TVA is a separate federal authority responsible for the regulation and provision of public utilities, working primarily with municipalities.

Relationship with State Legislature Established in 1996 by the Tennessee General Assembly and described in Title 65, Chapter 1 Part 17, this regulating body is tasked with overseeing the equitable rates, programs and services of a range of private utilities within the state. Originally called the Tennessee Regulatory Authority (TRA), in 2017 the agency was renamed the Tennessee Public Utility Commission. Former directors are now called commissioners to align with terms used by other states.8

Commission Structure Title 65, Chapter 1 Part 1 of the Tennessee Code describes the process for appointing commissioners. Previously the TPUC was composed of five commissioners, in 2021 Public Chapter 583 was enacted which increased the membership of the commission from five to seven members.

The TPUC is composed of seven commissioners, two are appointed by the governor, two by the Speaker, two by the Lieutenant Governor, and one who is jointly appointed by all three. 9 The executive director of the TPUC is Earl R. Taylor. Five staff divisions serve alongside the executive director including consumer services, gas pipeline safety, information technology, legal, and utilities.

“The staff of the Tennessee Public Utility Commission is made up of various professional disciplines, including accountants, administrators, attorneys, consumer specialists, economists, engineers, information technology specialists, policy advisors, and office support personnel.”10 The minimum qualifications of appointed commissioners include a bachelor’s degree, three years’ experience in a regulated utility industry, and management experience.11 Commissioners take office on July 1 and serve six-year terms with an unlimited number of terms.

5 Office of the Attorney General State of Tennessee. “What Is TPUC?” Accessed February 1, 2023. https://www.tn.gov/attorneygeneral/ working-for-tennessee/protecting-utility-customers/ca-faqs/what-is-tpuc.html.

6 In 2017, the Tennessee Regulatory Authority changed its name to the Tennessee Public Utility Commission, however, its mission remained the same.

7 TN Code § 65-1-101 (2019).

8 Tennessee Public Utility Commission. “History and Leadership.” Accessed February 1, 2023. https://www.tn.gov/tpuc/agency/tra-history-and-leadership.html.

9 Title 65 Chapter 1, Part 1 10 Tennessee Public Utility Commission. "History and Leadership." Accessed February 2, 2023. https://www.tn.gov/tpuc/agency/tra-history-and-leadership.html.

11 TN Code § 65-1-101 (2019).

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Tennessee Public Utility Commissioners Name

Appointed by

Herbert H. Hilliard Chairman

Term Start

Term End

Contact Information

Governer Bill Halsam June 30, 2017

July 1, 2023

Herb.Hilliard@tn.gov 615-770-6851

David Jones Vice Chairman

Joint appointee: June 30, 2018 Governor Bill Halsam, Lt. Governor Ron Ramsey, and House Speaker Beth Harwell

July 1, 2024

David.F.Jones@tn.gov 615-770-6851

Clay R. Good

Lt. Governor Randy McNally

July 1, 2020

June 30, 2026

Clay.Good@tn.gov 615-770-6851

David Crowell

House Speaker Cameron Sexton

August 25, 2022

July 1, 2028

Ashlee.Hatfield@tn.gov 615.770.6851

John Hie

Governor Bill Halsam June 30, 2018

July 1, 2024

John.Hie@tn.gov 615-770-6851

Kenneth C. Hill

House Speaker Cameron Sexton

July 1, 2020

June 30, 2026

Kenneth.C.Hill@tn.gov 615-770-6581

Robin L. Morrison

Lt. Governor Randy McNally

July 1, 2020

June 30, 2026

Robin.Morrison@tn.gov 615-770-6851

Earl R. Taylor Executive Director

The Commission

Ashlee.Hatfield@tn.gov 615-741-0917

Source: Tennessee Public Utility Commission, Commissioners

Overview of Commission Proceedings The TPUC proceedings must conform with the Uniform Administrative Procedures Act found in Title 4, Chapter 5 of the Tennessee Code, and the commission’s rules. The public is allowed to view procedural schedules concerning administrative hearings unless restricted by a protective order.

Members of the public can submit written comments if they are affected by the potential outcome of a proceeding.12

Commission Staff The TPUC staff is made up of a range of professionals who provide support and help ensure that the rules and responsibilities of the commission are upheld.13 Key staff members assist companies 12 Tennessee Public Utility Commission. "Proceedings." Accessed February 1, 2023. https://www.tn.gov/tpuc/proceedings.html#:~:tex-t=Proceedings%20Proceedings%20before%20the%20Tennessee%20Public%20Utility%20Commission,Commission%E2%80%99s%20Rules.%20 Public%20notices%2C%20orders%2C%20public%20filings%2C%20and.

13 Office of the Attorney General, State of Tennessee. "What is TPUC?" Accessed February 1, 2023. https://www.tn.gov/attorneygeneral/ working-for-tennessee/protecting-utility-customers/ca-faqs/what-is-tpuc.html.

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providing utility services within the state or those wanting to provide a new service.

Tennessee Public Utility Commission Key Staff Name and Position

Contact Information

Ashlee Hatfield Executive Assistant

Ashlee.Hatfield@tn.gov 615-770-6851

David Foster Director of Utilities

David.Foster@tn.gov 615-779-6884

Kelly Grams General Counsel

Kelly.Grams@tn.gov 615-770-6856

Samantha Lamon Chief Financial Officer

Samantha.C.Lamon@tn.gov 615-770-6990

Stacy Balthrop Director, Consumer Services

Stacy.Balthrop@tn.gov 615-770-6869

Tim Schwarz Director, Communication and External Affairs

Tim.Schwarz@tn.gov 615-770-6881

Tracy Stinson Director, Information Technology

Tracy.Stinson@tn.gov 615-770-6866

Name and Position

Contact Information

Kelly Grams General Counsel

Kelly.Grams@tn.gov 615-770-6856 Source: Tennessee Public Service Commission, History and Leadership

Other Involved Agencies Office of Energy Programs Tennessee’s Department of Environment and Conservation (TDEC) houses the state’s Office of

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Energy Programs (OEP) which functions as the State Energy Office for Tennessee. The OEP has three goals: reduce energy consumption and improve energy efficiency and energy management across the residential, commercial, industrial, public and transportation sectors; support technology transfer and commercialization activities that promote a cleaner environment and stronger economy; and increase Tennessee’s preparedness for disruptions related to the state’s energy resources, specifically transportation fuels and heating fuels.14 The OEP provides a range of services including education and outreach, technical assistance, and financing opportunities for energy initiatives such as energy management.15

Existing State Policies for Energy Efficiency Tennessee does not have an established state energy plan or energy efficiency targets, but does offer several opportunities for loans, grants and tax credits for retrofitting properties with energy efficient appliances. The state has set standards for public buildings which require the installation of ENERGY STAR-certified appliances. Utilities can develop their own energy efficiency targets or programs independent of the state, which may be approved based on the cost-effectiveness of the program and its equitable application.

Cost Recovery In Tennessee, there are mechanisms in place for commission-regulated utilities to recover costs, should the commission deem the changes just and reasonable. For the proposed cost recovery to be approved, the utility must prove that the intended rate changes are necessary. When the utility proposes a rate change the commission launches an investigation to determine the need for a rate change and if the proposed rate is equitable to both ratepayers and the utility providing electricity. The commission aims to complete their review within three months of the initial filing, but if it cannot be completed within that time, the commission can extend the review period to nine months. If the investigation conducted on behalf of the commission is not completed within six months of the filing, the utility is allowed to implement changes to rates upon notification to the commission.16 If the commission later deems the rate change is not just or reasonable, the commission will order the utility to make a plan to repay customers.17

Direct Cost Recovery In Tennessee, a utility may file for direct cost recovery to recover the operational and capital cost expenses. Whether or not the commission approves of the request is dependent on whether they deem the costs are in the public’s interest.18 A commission-regulated utility can file for direct cost recovery to maintain reliability of service, safety precautions, or in the event of damage to infrastructure caused by natural disasters.19

Lost Revenue Recovery 14 Tennessee Department of Environment & Conservation. “State Energy Office (SEO).” Accessed February 1, 2023. https://www.tn.gov/ environment/program-areas/energy/state-energy-office--seo-.html.

15 Tennessee Department of Environment & Conservation. “Office of Energy Programs.” Accessed February 1, 2023. https://www.tn.gov/ environment/program-areas/energy.html.

16 TN Code § 65-5-103 (2014).

17 TN Code § 65-5-103 (2014).

18 TN Code § 65-5-103 (2014).

19 TN Code § 65-5-103 (2014).

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There is no lost revenue recovery regulation in Tennessee.

Performance Incentives Tennessee does not offer performance incentives for energy efficiency iniatives.

State Policies for Energy Efficiency In 2015, the Tennessee General Assembly approved funding in the FY 2015-16 budget for EmPower TN, former Governor Bill Haslam’s statewide lead-by-example strategy to reduce energy costs and consumption in state-owned and managed buildings, including the University of Tennessee and Tennessee Board of Regents systems and campuses. A total of $37.5 million was marked for energy efficiency projects. Additional funding was dedicated to energy management projects, such as a utility data management platform for state buildings. By measuring the state’s utility usage and spending, opportunities for energy savings can be identified more easily.

The Tennessee Department of General Services, in collaboration with Nashville Electric Service, manages the Enel X Demand Response Program (previously known as EnerNOC) in ten major state office buildings. Each of these buildings has an energy management system that automates energy conservation measures to meet the target demand reduction. During a demand reduction event, these systems reset space temperature set-points, shut off non-essential lighting, manually curtail select air conditioning units, and/or voluntarily shed non-essential loads, such as lighting and printers. The Enel X program not only saves the state money, it also provides pays participating businesses to reduce energy consumption during peak energy usage.

Pathway Lending’s Energy Efficiency Loan Program (EELP), a low-interest revolving loan fund, launched in 2010 to assist Tennessee commercial and industrial businesses in implementing energy efficiency and renewable energy improvements. In January 2016, EELP was expanded to offer financing to local government entities, including municipalities, counties, school districts, and other public agencies. Pathway Lending, a U.S. Treasury-certified community development financial institution, oversees the revolving loan fund, which is comprised of loan capital provided by the Tennessee Department of Environment and Conservation’s Office of Energy Programs (TDEC OEP), TVA, and Pathway Lending. Eligible projects under EELP include, but are not limited to, energy efficient equipment upgrades, lighting, building envelope retrofits, cool roofs, renewable energy installations, and co-generation.

TDEC OEP has also partnered with TVA’s Home Uplift program and TVA-served local power companies to provide energy efficiency weatherization for low-income families in Tennessee. In 2021, TDEC OEP provided grants totaling $3,000,000 to the Electric Power Board of Chattanooga, Knoxville Utilities Board, Memphis Light, Gas & Water, and the Nashville Electric Service to extend the reach of their Home Uplift programs. This funding is used to cover the costs of energy efficiency and weatherization measures for low-income homeowners that are customers in their respective service areas

Utility Energy Efficiency Planning Process The TPUC helps ensure the equitable pricing of electricity sold by IOUs in the state through formalized proceedings, like those held for proposed energy efficiency planning or rate changes. This allows utilities

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and potentially impacted parties to be involved in the implementation of a utility’s plan. Allowing opportunities for utilities and consumer advocates to provide input in planning processes aligns with the TPUC’s mission.

In addition, TVA goes beyond state borders to uphold their mission to “make life better for the people of the Tennessee Valley through the integrated management of the region’s resources.” One way this mission is upheld is through interactions with the utilities they oversee. By requiring extensive studies of future energy demand, TVA uses formal procedures to plan the wise use of available energy resources and potential program investments such as energy efficiency initiatives.

Formal Proceedings Before the Commission Integrated Resource Planning Tennessee does not require IOUs to file integrated resource plans (IRPs), which are tools to help predict future energy usage and strategies to meet the demand.20 TVA develops twenty-year IRPs to project energy demand under various possible scenarios. A diverse group of stakeholders or the Regional Energy Resource Council (RERC) identifies and recommends additional capacity, energy efficiency and renewable energy resources. TVA is not required to implement the RERC recommendations. The approval of the IRP hinges on the final decision of TVA’s board of directors, which is guided by Section 113 of the Energy Policy Act of 1992. This act emphasizes that IRPs must undergo a least-cost system planning process which “takes into account the demand for electricity, energy resource diversity, flexibility, reliability, costs, risks, environmental impacts, and the unique attributes of different energy resources.”21 TVA’s IRPs are subject to federal National Environmental Policy Act (NEPA) review processes and include required public input opportunities.

Approval of TVA Energy Efficiency Programs The TVA board of directors, responsible for providing and managing most of the electricity for ratepayers within the state, designs programs like the School and Home Uplift initiatives which emphasize different priorities. Utilities operating beneath them can choose to integrate the programs into their service offerings.22

Rate Cases Before a utility regulated by the TPUC can increase or change the rate that it charges ratepayers, it must first be approved by the commission. Investor-owned utilities regulated by the commission must first file a petition with the TPUC.23 An announcement of the intended rate change must be publicized and interested parties will be notified. The Consumer Advocate 20 Giroaurd, Coley. "Understanding IRPs: How Utilities Plan for the Future." Advanced Energy Perspectives. August 11, 2015. Accessed February 1, 2023. https://doi.org/https://blog.aee.net/understanding-irps-how-utilities-plan-for-the-future.

21 Tennessee Valley Authority. “Integrated Resource Plan.” Accessed February 1, 2023. https://www.tva.com/Environment/Environmen-tal-Stewardship/Integrated-Resource-Plan.

22 Flessner, Dave. "TVA Pledges to Help Consumers Cut $200 Million in Annual Energy Bills with Targeted Efficiency Programs."

Chattanooga Times Free Press. May 11, 2022. Accessed February 1, 2023. https://www.timesfreepress.com/news/2022/may/11/tva-helpconsumers-cut-en-ergy-bills/.

23 Office of the Attorney General State of Tennessee. “How Does a Rate Case Work?” Accessed February 1, 2023. https://www.tn.gov/attorneygeneral/working-for-tennessee/protecting-utility-customers/ca-faqs/rate-case.html.

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Division, which is composed of attorneys, accounts, financial analysts and support staff, represents customers of the IOUs and responds to the intended rate change on their behalf. If they believe that the rate change is unjust, they will file a petition to intervene.24 Within eleven months, the TPUC will declare hearings, opportunities for public engagement, and a decision is made in reference to the rate change. Prior to full approval, approval in part, or denial of the petition, no rate changes or adjustments can be made and applied to ratepayers. The TPUC will only authorize rate increases if it believes they are fair and just.25

Opportunities TPUC is required to hold formal meetings open to the public. The commissin must announce meetings at least 45 days in advance to allow time to allow interested parties to gather data and develop remarks. Time is allotted in each meeting for public comment and commissioners are expected to consider the public’s perspective. In the case of a rule change, the commission or utility may request that an agency, public organization or member of the public share their relevant perspective. While the TPUC is not required under the Tennessee Administrative Procedure Act to publish an agenda prior to a hearing or meeting, members of the public are welcome to attend and time is allotted for their comment at each meeting. It is within the rights of the TPUC to limit the number of comments or time allotted for comments due to time constraints or if comments are expected to be repetitive.26 The commission or other involved parties may request the consultation of an outside perspective related to their remarks. In the case that outside consultation is requested, the commission may assemble a committee of experts or public representatives to advise on a case.27

Acknowledgements We would like to extend our thanks to Cindy Herron at TVA, Brianna Knisley at Appalachian Voices, Tim Schwarz at TPUC, Amy Kelly at Sierra Club Tennessee Beyond Coal campaign, and representatives of the Tennessee Department of Environment and Conservation: Alexa Voytek, Mark Finlay, and Molly Cripps, for their insights and expertise which supported the creation of this guide.

24 Office of the Attorney General State of Tennessee. "What Does the Consumer Advocate Division Do?" Accessed February 1, 2023. https:// www.tn.gov/attorneygeneral/working-for-tennessee/protecting-utility-customers/ca-faqs/consumer-advocate.html.

25 “How Does a Rate Case Work?”

26 Uniform Administrative Procedures Act § 4-5-202.

27 Uniform Administrative Procedures Act § 4-5-202.

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