Press Release

Groups challenge TVA’s plan to lock local power companies into perpetual contracts

August 18, 2020

MEMPHIS – The Southern Environmental Law Center (SELC), on behalf of Protect Our Aquifer, Energy Alabama and Appalachian Voices, is challenging in federal court the Tennessee Valley Authority’s (TVA) monumental decision to implement never-ending contracts designed to keep local power distributors captive customers of the federal utility forever.

The contracts further entrench TVA’s control over a vast network of power systems across portions of seven Southeastern states. The never-ending contracts lock the federal utility’s local power customers into exclusive energy contracts likely to last forever which will forever deprive distributors and ratepayers the opportunity to renegotiate with TVA to obtain cheaper, cleaner electricity. The anticompetitive contracts also place harsh caps on the ability of local power companies to use renewable power from non-TVA sources, and they seek to guarantee that TVA’s customer base, made up of municipal and member-owned local utilities, never leaves the utility.

“TVA is using these eternal contracts to stamp out any competition for the next century,” said Amanda Garcia, SELC’s Tennessee office director. “These never-ending contracts threaten to prevent local distributors from ever renegotiating their contract with TVA, let alone consider leaving the utility if it continues to lag behind in transitioning towards cheaper, cleaner renewable energy. These contracts will take the public’s interest completely out of public power.”

Previously, the average length of the termination provision in the distributors’ contracts was under seven years, offering periodic opportunities for publicly- and member-owned utilities to revisit contract terms with TVA or seek cheaper, cleaner power elsewhere. The newly signed contracts, which require a 20 year notice to terminate, renew automatically each year so that the length of the contract term never ends. The complaint alleges that the contracts will have potentially significant effects on the environment, including, among other things, influencing TVA’s decisions to invest in energy resources, increasing greenhouse gases and other pollution, and increasing water usage across the Tennessee Valley.

“TVA’s continued reliance on fossil fuel resources has a lasting impact on Memphis’ primary drinking water source, the Memphis Sand Aquifer,” said Ward Archer, President of Protect Our Aquifer. “TVA has stored coal ash in a way that puts our drinking water aquifer at risk, and its use of billions of gallons of our clean drinking water to operate its gas plant for decades to come threatens the sustainability of our community. The public has a right for federal agencies to look at alternatives when making major decisions, and TVA deprived communities of that right before asking local distributors like Memphis Light, Gas & Water to sign these never-ending contracts.”

An important federal law requires TVA to analyze and disclose the consequences of major federal programs that may significantly affect the environment. That law also requires TVA to consider alternatives and seek public input about major proposals before TVA moves forward with the project. Conservation groups allege that TVA failed to meet the basic requirements of that law, called the National Environmental Policy Act, or NEPA, before its monumental move to lock 138 of its 153 power distributors into these never ending contracts.

“While TVA keeps the lights on across the Valley, our utility kept the public in the dark around its game-changing decision to essentially trap power distributors’ customers and members in these regressive contracts for the foreseeable future,” said Brianna Knisley, Tennessee Campaign Coordinator for Appalachian Voices. “Ultimately, TVA blocked an opportunity for the public to participate in a major policy decision that will likely stall our region’s critically needed transition to renewable resources.”

Last year, several of TVA’s distributors, including its largest customer, Memphis Light, Gas & Water, announced that they were evaluating whether to leave TVA in favor of cheaper, cleaner options. In response, TVA’s Board of Directors authorized the utility to restructure its relationship with its distributors by amending its power supply contracts to these never-ending contracts that automatically renew every year and include punitive 20-year notice of termination provisions.

“Over the past two years, TVA has taken a series of actions to further cement its monopoly status and shut down customers’ access to distributed energy resources, including solar power and energy efficiency programs,” said Daniel Tait, Chief Executive Officer at Energy Alabama. “As a result, TVA lags behind other utilities in our region, both in terms of renewable energy capacity and its overall commitment to decarbonize the grid. By locking in its customer base, TVA can dictate the pace of its energy transition from fossil fuels to renewable energy at whatever pace suits its own interests, rather than the interests of the communities it serves.”

The challenge also alleges that TVA violated the federal law that created the federal utility back in 1933 by entering into never-ending agreements with power distributors. That law, called the TVA Act, says that federal utility’s power supply contracts cannot exceed 20 years. By drafting the agreements so that they never expire, the conservation groups allege that TVA ran afoul of that limit on its monopoly power.

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