DREMC to Pass Through TVA Rate Increase

Duck River Electric Membership Corporation (DREMC) members will see a rate increase Oct. 1 due to the rising cost of wholesale electricity from the Tennessee Valley Authority (TVA). DREMC’s board of directors voted last week 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.

At the retail level, the effect of the wholesale rate increase will be around 1.5 percent, according to Michael Watson, president and chief executive officer of DREMC.

Residential members can expect to see their electric bills for 1,000 kilowatt-hours (kWh) go up $1.42 per month on average.

“All the additional revenue derived from this wholesale rate adjustment goes to TVA in the power bill,” Watson pointed out.

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,” he said.

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.

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, Tenn., 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.

[Disclosure notice: Messenger Editor/Publisher Laura Willis is a compensated member of the Duck River Electric Membership Corporation’s board of directors, appointed by the University’s Board of Regents to represent Sewanee.]