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DREMC to pass along TVA wholesale rate increase

Posted on Saturday, October 12, 2013 at 9:00 am

First rate increase since 2011 should be minimal

Duck River Electric Membership Corporation (DREMC) members will see a rate adjustment Oct. 1 due to the rising cost of wholesale electricity from the Tennessee Valley Authority (TVA).

The co-op’s Board of Directors this week voted to pass through the TVA’s recent wholesale power increase. On Aug. 22, the TVA Board approved a 1.5-percent hike in the cost of electricity provided to distributors in the region. It was the first such increase since 2011.

LOGO Duck River Electric“All the additional revenue derived from this wholesale rate adjustment goes to TVA in the power bill,” said DREMC President-CEO Michael Watson.

In the past fiscal year, more than 75 cents of every dollar paid to DREMC for electricity went to purchase wholesale power.

“The wholesale cost is the largest component of what we must charge our members,” Watson said. “While we never like to see rates increase for those we serve, this was TVA’s decision. Our board passed along the adjustment in order to keep our revenues in line with the cost of service.”

DREMC residential members can expect to see their electric bills for 1,000 kilowatt-hours go up $1.42 per month on average. According to DREMC representative Steve Oden, a typical household uses between 1,000 to 1,500 kWh per month, which he said “takes in the highs and the lows of the winter and summer seasons.”

“Even if they use 2,000 kWh, they will still see less than a $3 increase per month,” added Oden.

Watson noted that DREMC will launch a residential demand response program this winter to help members offset the higher cost of electricity. The voluntary program, called Beat the Peak, aims to reduce demand on the system during extremely cold and hot periods when the cost of wholesale power can soar to $9.50 per kWh from an average of 7 to 8 cents.

“If our members will watch and participate in that, they will be able to offset a rate increase like this,” Oden said.

TVA blamed declining demand for electricity, a continued slow economic recovery in the region and higher operating costs for the need to adjust wholesale rates.

TVA President and CEO Bill Johnson pledged that his priority is for the multi-state generation-and-transmission utility to live within its means, but sales and revenue are declining at a faster rate than cost reductions can stabilize the budget.

He said the wholesale power increase was necessary to meet 2014 revenue requirements and ensure the safe and reliable operation of the TVA system.

“We will also make critical capital investments to keep reliability high and meet environmental standards and contribute to paying down debt,” Johnson said.

TVA’s fiscal year 2014 budget anticipates 4.6 percent lower sales year-over-year and is about 6 percent less than 2013. It includes capital expenditures of $3.3 billion for Watts Bar 2 nuclear plant and clean air controls at Gallatin Fossil Plant.

Duck River Electric Membership Corporation, headquartered in Shelbyville, is a Touchstone Energy Cooperative serving 72,000 residences, businesses and farms. District offices are located in Columbia, Manchester, Decherd, Sewanee, Shelbyville, Lynchburg and Lewisburg.