How TVA Could Lead Utilities Into the Future

Story by Bill Kovark

Old fashioned utilities used to make money by selling electric power. In a bygone era, making money by NOT selling electric power seemed unthinkable.
A few weeks ago, Virginia Gov. Tim Kaine stood the old logic on its ear by saying that “it just makes no sense” not to conserve.

“Under current law, we guarantee a rate of return for a utility building a new coal plant, but not for investments that promote conservation,” Kaine said in a Jan. 14 State of the Commonwealth address.

As it turns out, Virginia is only catching up by recognizing this new reality for electric production. In most states, conservation services have already become a standard part of the utility business.

In contrast, conservation and renewable energy programs at TVA and most other utilities in the Appalachian region have been half-hearted at best. But doesn’t have to be that way, many people are insisting.

“TVA was born out of crippling economic times,” said Southern Alliance for Clean Energy chair Steven Smith. “As we find ourselves again in difficult times, this is an opportunity to remake TVA as an effective utility in the 21st century.”

TVA’s average electric rates are low. The agency’s 6.96 cents per kilowatt compares favorably with California’s average 11.8 cents per kilowatt. Yet, California consumers use 50 percent less electricity, in effect, paying less than TVA consumers for the same service, and with less pollution.

The difference in approaches between TVA and more progressive utilities involves the idea of making money from saving energy as well as producing it.

Most utilities offer at least some token conservation incentives to consumers. TVA offers residents of Sevier County, for example, $100 for buying an energy efficient water heater or loans for heat pumps. Still, it’s a far cry from, say, the $5,000 of rebates per residence available in Riverside CA, or the Burbank, CA green building incentive of up to $30,000. These rebates avoid new power cost, and the value of this avoided cost can be high.

Conservation is valuable

The cost of new power plants has gone up by about 70 percent in three years, according to a May 27, 2008 Wall Street Journal article, making the value of energy conservation all the greater.

The value of avoiding a kilowatt hour of production can vary from 5.3 cents to 15.7 cents, considering the cost of emissions control as well as a portion of the national security benefit of reducing oil use, according to Charles Gicchetti of the University of Southern California.

For example, the Natural Resources Defense Council estimated that the benefit of saving energy from Duke Power Company’s controversial new Cliffside power plant in North Carolina would be between 3 and 6.3 cents per kilowatt hour, considering the avoided cost minus the actual expense of conservation efforts.

In Virginia recently, a governor’s commission reported that energy conservation measures could reduce current electric consumption by at least 19 percent by 2025, even with adjustments for population growth.

“Our long-term planning should recognize that conservation is just as important an energy source as new construction,” Kaine said. “We should treat conservation investments at least as favorably as new generation investments, and my bill will do that.”

TVA has a small wind energy program, and voluntary purchases of green power are available at about 2.6 cents extra per kilowatt hour. But in 43 states, Renewable Portfolio Standards mandate that utilities will produce a portion of the state’s energy with wind, solar, biomass or other renewable energy sources.

Virginia and North Carolina both passed legislation last year requiring 12 percent of energy production from renewable sources by 2022.

TVA doesn’t need to wait for state legislation. As a federal agency, it has always been
expected to lead. Or, at the very least, it doesn’t need permission to follow.

“TVA must be a living laboratory, modeling a clean energy future heavily invested in energy efficiency, renewable energy and smart-grid technology,” Smith said in his Senate hearing testimony.