Electricity Markets

Memphis Light, Gas and Water Recommends Award Of Long-Term Power Supply Contract To TVA

At a Sept. 1 Memphis Light, Gas and Water (MLGW) special called Board of Commissioners meeting, MLGW President and CEO J.T. Young recommended to award the Tennessee Valley Authority (TVA) a long-term contract for supplying power to MLGW under MLGW’s renewable and other alternative resources request for proposals (RFP).

In addition, Young asked that the board reject all proposals MLGW received for new transmission lines and thermal generation.

The Board will take the matter under advisement. The public will be allowed a minimum of 30 days to comment and ask questions about the plan.

MLGW’s Power Supply Evaluation Team, led by GDS & Associates, determined that TVA’s long-term partnership proposal “demonstrates the greatest value and least risk” for MLGW customers compared to all other RFP alternatives.

MLGW is expected to see $152 million in power supply cost savings over the next five years and $944 million over 25 years. These savings would start after the contract is executed.

For the first five years, the average residential customer would save about $32 a year on their electric utility bill.

In addition, the team concluded that TVA’s contract “includes more flexibility,” allowing MLGW to install solar generation to support local renewable and sustainability goals and be more directly involved in TVA’s planning and decision making.

In June, GDS & Associates said it would cost $1.2 billion and take up to eight years to build two major transmission facilities that cross the Mississippi River to connect to different power suppliers.

During the 2021 RFP period, 24 vendors submitted proposals responding to MLGW’s Transmission, Thermal Generation, and Renewables and Other Requests for Proposals. The purpose was to confirm the 2020 findings outlined in the Integrated Resource Plan (IRP) completed by Siemens Industry, Inc.

MLGW noted that numerous changes in the electric industry and nationwide have taken effect since MLGW’s IRP was completed in 2020. For instance, increased interest rates, high inflation, and supply chain constraints are just a few risks MLGW would be forced to navigate by changing suppliers, it said.

The new TVA proposal is identical to other TVA wholesale customers: a 20-year termination notice, a 3.1% decrease in base rate charge, and up to 5% in acquired renewables to meet the utility company’s energy needs.

“We have and will continue to be respectful and supportive of MLGW’s evaluation process,” TVA said in a statement. “We are pleased that the MLGW leadership has recommended staying with TVA, recognizing the value that our collective partnership brings to the people of Memphis and Shelby County. We look forward to continuing our long and beneficial relationship.”