Tennessee Valley’s Unchecked Authority — Episode 183 of Local Energy Rules

Maggie Shober:

We haven’t seen much evidence in the past from either Republican or Democratic administrations or Republican or Democratic representatives or senators. Once a person is on the TVA board, they’re kind of on their own. I mean, there’s, the administration is not meeting back with them or checking up with them and saying, Hey, are you guys making sure TVA is aligned with our goals? And we haven’t seen anything similar for the senators, let alone the mayors, county executives and all of that. They’re dealing with the TVA customers.

John Farrell:

When people talk about public power, the word public evokes the best of America. Free and fair elections, open and transparent decision making and accountability. Unfortunately, however, one of the nation’s largest publicly owned utility companies has very few of those key characteristics. In this episode, recorded in September 2022, Maggie Shober, Director of Utility Reform for the Southern Alliance for Clean Energy, joined me to talk about the Tennessee Valley Authority and how this Federal power agency would need to behave very differently to merit the title of public power. A quick note to listeners: excerpts from this episode originally aired in our six part public power podcast series in the fall of 2022. This is the full interview. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance, and this is Local Energy Rules, a podcast about monopoly power, energy democracy, and how communities can take charge to transform the energy system. Maggie, welcome back to Local Energy Rules.

Maggie Shober:

Thank you very much. Great to be back.

John Farrell:

So I think it would be great to start by just having you explain, you were, you were on, when you were on the podcast before you, you did a great overview of some of the like tension between, for example, the city of Memphis and the Tennessee Valley Authority over their energy goals for lack of other things. We also talked about the way in which TVA relates to or doesn’t relate well to some of the communities that it serves. I don’t wanna, we don’t need to cover that whole thing. We’ll make sure in the show notes that people can go back and listen to that episode. But could you maybe sort of give us an overview of what’s at stake for communities in the Southeast? What is it they’re trying to get that is difficult in this relationship with TVA?

Maggie Shober:

First is that TVA serves a very diverse set of public power entities. So TVA is the exclusive provider for 153 municipal and co-op utilities that serve an area that has a population of about 10 million people. TVA obviously has a challenge to meet all of those needs. And what they have been doing lately is using in particular very heavy handed tactics, aggressive lobbying, misinformation, all those kinds of things to lock their utility customers into what we call their forever contract. So this is technically, it’s a 20 year evergreen contract. So every day it’s a new 20 year contract where the utilities are really giving up a lot of their, you know, any potential leverage or power that they would have over things like what resources is TVA choosing to build or retire. How is TVA investing in transmission?

TVA sets the rules, all of the rules for the utilities rates. TVA is their rate regulator. And so anything related to energy efficiency or net metering has to go through TVA and TVA has really put a clamp down on things like rooftop solar in the region. They’ve really absolutely underinvested in energy efficiency over the last decade. And we see that unfortunately all of those trends really track with a desire in the early to mid two thousands to try and model TVA off of an investor owned monopoly utility. And unfortunately that situation has led to a TVA that is technically still a public power entity, but lacks any serious accountability and thus has put us in the, the current situation that we’re in.

John Farrell:

First of all, I just have to say about the Evergreen contracts. It’s funny to think about it in like a personal situation of, hey, my cable company offers me this promo price, right? So I sign up for a couple of years and the idea that it would like renew every week forever, I mean nobody would sign that contract. Everybody knows that the price just keeps going up and up and up. The only way to keep your cable price reasonable is to like call them every year or two and be like, and threaten to cancel. So it’s sad to see that TVA is trying to clamp down on its utilities. One of the impetus I had for wanting to talk with you Maggie, was some interactions on Twitter with some folks who were basically saying like, Hey, TVA is great, it’s a public power institution. For those who maybe only know about TVA from the history they read about the Franklin Roosevelt administration and the creation of TVA to provide electricity to an area that was underserved. Can you talk a little bit about what has changed since then or maybe a little bit more about what is the situation with the governance of TVA that isn’t living up to what people might get out of a history book?

Maggie Shober:

Absolutely. Absolutely. The governance of TVA was actually changed in the Energy Policy Act of 2005. Before that, TVA was governed by a three person full-time board that was nominated through the president and confirmed through the Senate. And that meant that TVA was really more reflective of the federal government. TVA does have a board still, TVA board of directors, they’re a nine person part-time board. And now TVA is run by a CEO and set of C-suite executives. So I’ll first talk about the board and then talk about the executives a little bit because both are relevant. The board unfortunately has had a history of primarily being, for lack of a better term, political hacks, <laugh> folks that don’t have any training in any energy space, they’re not trained as regulators and perhaps most importantly they don’t have any independent staff. They are staffed by TVA itself. And that has led to a very captured board that essentially has rubber stamped a lot of what the executive staff do.

And then those TVA executives, all of the TVA CEOs since you know this was put in place, have come from large IOUs interestingly enough, they all have a background somehow with progress energy. I don’t know the connection there, but they’ve all come from the IOU community. And it does seem like to us that they, they get into this role in TVA and say, Hey, you know, we couldn’t do what we wanted to necessarily at the IOUs cuz we had these state regulators we had to answer to. We don’t have that situation here at TVA, we can kind of do what we want. And then especially lately over the last few years, the board has been completely overwhelmed so that what they have been doing is abating any oversight that they do have to the CEO itself.

And that’s been happening at the same time that the Biden administration in particular has been denied the ability to get any nominees on the board. They first named nominees back in April of 2021 and it’s September, 2022 and we still do not have any Biden nominees on that oversight body. So we’re hoping that with at least some of these nominees, that they’ll be able to get on the board soon and claw back some of the, the oversight that the, the board is supposed to provide. And if that’s not possible, I don’t know how else we do that short of federal legislation that revises the TVA act.

John Farrell:

One of the questions that I have is, I don’t hear in any part of the description about the like oversight and governance of TVA, any element of like local self-determination. Like is there any board seat that is representative of the communities like that represent some of the different states, for example, that are covered by TVA’s jurisdiction, any of the cities? Is there anybody from those levels that’s on the board or are these literally just people that are appointed by the president and may or may not have a relationship with the communities?

Maggie Shober:

Yeah, the nine member board, seven of them do have to be from within the TVA service territory. So not, I mean think about TVA, it serves parts of Kentucky, parts of Georgia, parts of Alabama, parts of Mississippi and a tiny, you know, little piece of both North Carolina and Virginia. So you can’t pick somebody from Richmond, Virginia necessarily and say they’re in TVA, you can’t pick somebody from Durham, North Carolina and say they’re in TVA. So there is that and there is a historically a desire to have you a representation from most of the TVA states on the TVA board. Part of the, the holdup of getting the Biden nominees on the board in particular is that he didn’t necessarily get sign off of his original nominees from senators in TVA states. And so actually what he’s done is nominated three additional folks from Kentucky, Mississippi, and Alabama that were suggested by the senators from those states. And with those three additional nominees, we’re hoping that we’ll have a full slate of six go through next month.

John Farrell:

But it’s worth noting that even if they reside in those states or represent those states in in name, they’re not accountable to the states in the sense that once they’re on the board, they, that appointment is just from the president and the US Senate. It has nothing to do with a local elected body.

Maggie Shober:

Right. And once they’re appointed, we haven’t seen much evidence in the past from either Republican or Democratic administrations or Republican or Democratic representatives or senators. Once a person is on the TVA board, they’re kind of on their own. I mean there’s, the administration is not meeting back with them or checking up with them and saying, Hey, are you guys making sure TVA is aligned with our goals? And we haven’t seen anything similar for the senators, let alone the mayor’s county executives and all of that. They’re dealing with the TVA customer utility customers.

John Farrell:

First of all, thank you for giving us that overview. I think it’s really helpful for people who might idealize the how public power works to understand a little bit about how different this is from say like a municipal city level utility where there’s either elected officials that are on the board or elected officials that directly oversee the board local and accountable in that fashion. I’m kind of curious then that, obviously you said that from the standpoint of like operationally the utility is tending to be operated like an investor-owned utility. For some people like me, I immediately cringe when I hear that because there are lots of issues that myself and others who focus on the idea of local self-reliance have about investor-owned utilities, conflicts of interest with regard to the profits for shareholders. Now there aren’t shareholders here to profit from. So tell us a little bit about what some of the behaviors from TVA and how are they clashing with local interests in terms of the things they’re actually trying to do.

Maggie Shober:

So I think a couple of things. The first is that a lot of the local utilities, these 153 utilities have wanted to do their own generation projects of any kind for a long time. And TVA has historically said no, there are sections of the TVA act, let’s remember that TVA does have its own section in US Code <laugh>, you know, everything is, is very unique in that sense. And so TVA has a certain reading of the TVA Act that basically says even a local utility in Knoxville or rural county in Georgia cannot do its own generation. It a hundred percent has to be provided by TVA in these forever contracts.

TVA has carved out a minuscule amount of what they call quote unquote flexibility for these local utilities to be able to do their own generation projects. If they do ’em with solar, they can meet up to 3% of their average load each year. Even that they have to go through TVA and get approval for each project and, and it’s again just a very heavy handed process. There’s not a lot of freedom in that sense. And so that was used as kind of a carrot to get these local utilities to sign the contracts. And we saw, I remember one letter for the utility in Knoxville that the CEO of the local utility in Knoxville wrote that basically said, we are landlocked, we don’t have any other option but TVA, so we might as well sign this contract and get what we can get.

I think another one is an example. There are four other local utilities that wanted to leave TVA and form their own portfolio and serve their customers that way and wanted to use TVA’s transmission system to wheel that power in. And so contacted TVA and said, okay, how much are you gonna charge us for that transmission? And TVA said, no, you can’t under any circumstances can you use our transmission system. It is off limits. And TVA took them to FERC, FERC decided in TVA’s favor. But that decision is under appeal at that point. Again, there’s some quibbling over the language in US code and what applies to TVA and what doesn’t. So that’s more of a legal question, but TVA is not being flexible in what their utility customers are clearly wanting to do. And if I give one more example, TVA is retiring two coal plants in Tennessee going through a process to replace them and have proposed to put a new gas power plant that has to be fed by a new gas pipeline outside of Nashville. And the Nashville Electric Service NES, the municipal utility board, the Nashville City Council and the Nashville Mayor have all written to TVA and said, don’t build this gas plant, replace it with solar and storage and other clean resources. I will say with that they had to go through the NEPA – TVA has to do the NEPA, national Environmental Policy Act, NEPA process for all of its decisions. So these three Nashville entities actually had to go through the NEPA process to make their voices heard to TVA.

John Farrell:

In other words, you’re, what I hear you saying there is because there’s really no accountability from TVA to the local systems. It was only through this independent federal process through like the EPA that these local utilities that the local mayors could even have a forum which to talk to TVA to let them know that they weren’t in agreement. Wow, that’s fascinating. We’ve talked a little bit about, you know, the interest in local, the local utilities local communities and having some of their own power generation, as you mentioned, the flexibility is very limited up to 3% of their average load is very small. I can imagine saying to my children, like, you know, if they’re like, I wanna watch a movie, and I’m like, well you can watch 3% of one, how they might feel about that.

Maggie Shober:

<laugh>. Yeah.

John Farrell:

You also talked about like net metering and energy efficiency. That TVA’s not done a terribly good job with either of those in terms of supporting local power generation by customers or supporting using less energy, which as everybody knows is the cheapest thing we can do to meet our energy needs. Is there any process that TVA engages in to get the opinions of their local participants? Like do they have open meetings? Do they have any way in which they’re at least purportedly taking public input on this? Or is it really just closed entirely between the board and the CEO?

Maggie Shober:

Yes. So I think TVA would say, well, anybody can write us a letter, but as far as formal processes, TVA does say that they are, they do have an will have a special meetings where all the local utilities that have signed these forever contracts can have little mini meetings and conferences once or twice a year to talk through their concerns and basically provide feedback to TVA learn a little bit more about what TVA is doing. We assume there’s a going on, it’s not public when they happen, what the agendas are, what the topics are, who’s attending, where they are. None of that is available unless maybe, you know, we get it after the fact through a FOIA a year and a half later, <laugh>

When TVA does an integrated resource plan, which they’re required to do every five years, TVA will have an IRP working group that meets monthly and kind of talks through different parts of the IRP TVA staff present and get feedback. TVA picks who all is on that working group and typically has one or two environmental organization folks, we’ve heard, just a side note on that, we’ve heard that they have a sort of unwritten policy that no one that’s actively suing them can be on those <laugh>. And so now I think they’re gonna struggle to have any locally involved environmental groups because that pretty much blocks out the whole of that group.

But there do tend to be a few representatives from the local utilities on the, the IRP working group. They tend to have folks from TVA serves a few large industrial customers directly. So they tend to have those folks represented as well. We’ve found that those forums are a little bit more of a kind of box checking mechanism for TVA to say they’ve done stakeholder involvement rather than something that is truly an effective way for anyone with concerns to get a say into what TVA includes in their IRP.

John Farrell:

And just to be clear, like when it comes to the approval of the IRP, unlike an investor owned utility where there’s like a, well at least in theory an independent commission that would be overseeing that – working in the southeast, I’m sure you have some skepticism of that statement, but the approval of that resource plan is entirely internal to TVA, right? There’s nobody outside that looks at it that has to give it a thumbs up. I mean, are they, they’re not, are they letting, for example, the 153 utilities vote on the resource plan or anything like that? Or is it literally just they propose it, they do these working groups and then whatever comes outta that is their plan and there’s no check on that

Maggie Shober:

Their board of directors votes to approve or disapprove the IRP. I don’t know of any board member ever not voting for the IRP. So not only have they all passed, but I think they’ve all been unanimous.

John Farrell:

We’re going to take a short break. When we come back, we dive into the potential reform opportunities from the leadership structure to more freedom for local utilities. We also discuss the key elements for effective and accountable public power. You are listening to Local Energy Rules podcast with Maggie Shober, director of Utility Reform with the Southern Alliance for Clean Energy.

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John Farrell:

We talked about last time kind of more about what some of the cities were looking at doing so, and you kinda already brought up that idea of like access to transmission. What do you see as some potential reforms that could make TVA more accountable to the communities that it serves? Some people look at investor-owned utilities and they say they’re too big, we should just have smaller utilities. I mean, there’s certainly an argument be made, especially if the utilities have ways to generate their own power. You could just say, let’s break up TVA into smaller generation and transmission units that would be more locally accountable. You could give those local utilities more flexibility as you talked about, you know, not endlessly renewing contract with only 3% flexibility. But rather than have me speculate, what are some of the things that are sort of on the table or things that you think communities are looking at that might be realistic ways for TVA as a public power institution to live up to the aspirations of public power?

Maggie Shober:

I mean, I think there’s many possibilities and there are sort of smaller steps and then there’s, you know, very substantial reforms that we could go through. I mean, I think some of the smaller steps are just taking a look at the board structure and the leadership and making sure that the CEO can’t go <laugh> run amuck, um, and making sure that the board is independently staffed and provided training and, and expertise outside of whatever is being fed to it from from TVA itself. So I think those are some pretty easy basic steps that would improve the current governance structure. I think having the local utilities have more say on things like rate structures and IRP, you know, generation and retirement decisions, energy efficiency decisions. Absolutely. Whether that is through a more of a say of what TVA does or, and, and probably both through more, you know, freedom to, to do those things themselves.

I also like to look at what the setup is in the Pacific Northwest, where they have the Northwest Power and Conservation Council that actually does resource planning for the region, what’s done independently through appointments from the different governors of the different states. And it really is, in my opinion, a potentially more effective model for how to do oversight of a public power entity that is of this scale. I mean, Bonneville is sort of the closest thing you get to TVA, even if it’s not quite, it’s, it’s not necessarily at the same scale. I think there’s also, we’ve been playing around with some sort of thought experiments around, well could you have essentially like a federal RTO, like could you turn TVA into like a federal RTO where you have flexibility from all these 153 public power entities.

We’re not saying there’s not gonna be a public power model, it’s actually probably closer to the people because they’re then being governed by the city council or the co-op board and you’re giving a lot more freedom to those local utility regulators to be able to say, okay, well TVA run the transmission system, but you guys aren’t gonna have like a top down decision about what power plants get built and when it’s gonna be, you know, more of a market that would have the governance over the transmission from TVA, something like that. <laugh>, there’s no model for here in the US but.

John Farrell:

Well, even if you didn’t go that far, I’m just thinking about some of the ways that rural electric cooperatives are organized. So they’ll have a generation in transmission co-op that’s sort of a co-op of co-ops and at a minimum their boards are like one representative from each co-op or maybe the co-ops have representative relative to the size of their population or the size of their customer base and they all own shares of the power plants that are built. They’re on the hook for that. But I, you know, we’ve seen some significant reform with rural electric cooperatives in generation of transmission co-ops. So Tri-State out in the Colorado and New Mexico, Great River Energy in Minnesota has increasingly added flexibility into contracts in response to its members.

So it’s interesting to see like how even those places were very slow to change, but they at least had a governance structure that allowed for that in a way. Whereas it’s so indirect here. I mean it’s hard for me to imagine how you would get a board, TVA board member who’s part-time who has no independent staff to really dig into some of these questions when their ultimate accountability is to the president and the US Senate who have no time in an era of like inflation and wars with, proxy wars, with Russia and whatever else to be paying attention to what Memphis and Knoxville and whatever are hoping to get out of their power supply.

Maggie Shober:

Absolutely, yeah. And we’ve gone through that sort of thought experiment of too as like TVA as a G&T co-op. I think we had some current concerns about the size of it. So I think we would probably <laugh> wanna have something that would be a little smaller, you know, multiple G&T co-ops or something like that. I think too is, I mean you have to deal with, and this is something that a lot of those G&T co-ops deal with as well is that TVA has a massive debt on its books. I mean over 20 billion still. It was significantly higher than that. And that is at least historically that was kind of limiting some of the things that, that they could do because they needed to at least make their interest payments <laugh> on, on that. So, and, and a lot of that is because TVA, like many utilities was gonna go really big with nuclear at some point they had, I think, 19 nuclear units planned or under construction and not all 19 of those got built, but a significant amount got spent for nuclear units that do not exist today. So we’re still paying that off.

John Farrell:

There’s a sad amount of phantom nuclear as part of our power supply that we are all still paying for across this country. Why don’t we just wrap this up. I, one of the things I would be curious to hear from you when you’re thinking about public power, given your experience with TVA and the local utilities there, you have some ideas for reforming TVA, are there maybe some principles or some sort of bottom lines in terms of your thoughts about what it is that makes public power work well? Like what should people be thinking about as they’re evaluating public power entities? If they’re getting involved in Twitter conversations like what homework should they be doing about public power before they’re leveling opinions about whether or not this really is the best method for a particular community?

Maggie Shober:

I mean, this is such an important question and I think especially moving forward through the energy transition, only more and more important. So I, I think of it as, you know, we have a lot of things we’re trying to balance and, and some of the things we’re trying to find the right balance or are what is the accountability of the utility? Who are they accountable for? Who are they accountable to and how does that accountability happen? I think there is a sense that there’s some trade off between that accountability and having the utility being totally at the whims of the political system, the local politics, the state politics, the federal politics, whatever that is. You know, if you have TVA and it’s a federal entity and it’s swinging from a far left presidential administration to a far right presidential administration every four years, I mean, there’s gonna be some concerns there that you need to be planning out for the next 20 years through these utility plans and, and you’re having to completely change your values <laugh> that you’re considering every four years. Well that’s not a very sustainable model.

But in TVA, example here in particular, but I’ve seen elsewhere as well, the way that that has been addressed has been to remove points of accountability. So in a municipal utility, if that is governed by a board instead of a city council, you know, I think you see a lot fewer rate increases go through and I think they, there’s a clearer distinction between utilities that have that sort of more direct control by city counselors that are, you know, getting elected by the people versus board members that are, yes, they’re appointed by the mayor that is an elected official, but I think there’s still a, a sort of step of removal that we see. So I think the, the level of accountability and what’s the right amount of sort of cushion to avoid these swings and there’s no right answer, you know, one size fits all for that. But I think that’s absolutely the, the key thing that I think is, is important for public power to work is that accountability.

John Farrell:

Well Maggie, thank you so much for taking the time to continue to educate people about the Tennessee Valley Authority here and on the internets <laugh>. Really appreciate it and it is such a useful understanding about how public power can be really wonderful in the way that it can enable local decision making and control. I mean it’s, it’s fascinating to think hearing you talk about TVA and it’s so funny to think about how TVA is so out of the mold of typical public power in the sense that there’s almost no local control whatsoever and in fact it’s going in the opposite direction with these forever contracts. So really useful to have you come and give some context about what is happening with TVA and I hope that trend changes, I hope, whether it’s the the new board appointees or the work of you and some other folks in those local communities pushing back. But I hope it’s successful at making TVA live up to the promise of public power.

Maggie Shober:

Absolutely. And, and if folks are interested in seeing sort of the latest, we do have a website called notpublic power.org, where we actually track the things that that TVA is doing that are out of step with what we see as public power values. So I encourage folks to go check it out.

John Farrell:

Great. Yeah, notpublicpower.org. We’ll link to it on the show page and make sure folks can learn more about that. Cuz that’s terrific to have a way for people to stay in touch after this podcast. Maggie, thanks again. Really appreciate your time.

Maggie Shober:

Thank you so much. Take care.

John Farrell:

Thank you so much for listening to this episode of Local Energy Rules with Maggie Shober, director of Utility reform for the Southern Alliance for Clean Energy about holding the Tennessee Valley Authority accountable in its role as a publicly owned electric company. On the show page, look for links to the full six episode public power podcast series, including audio for more than 20 guests, as well as my prior interview with Maggie in July of 2020 where we discussed the efforts of several southeast cities to improve their clean energy options from TVA service. On the website of the Institute for Local Self-Reliance, you can also find more than 150 past episodes at the Local Energy Rules Podcast. Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear how we can take on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.