Environmentalists Fight Huge Utility's Long-Term Contracts

MEMPHIS, Tenn. (AP) — Distributors for the nation’s largest public utility signed onto what amounted to “never-ending” contracts that unfairly tied them to power generated by the Tennessee Valley Authority, a lawyer argued Thursday as she represents environmental groups in a lawsuit.

Southern Environmental Law Center lawyer Amanda Garcia spoke in Memphis federal court in response to TVA's motion to have a judge make a ruling without going to trial. TVA said three environmental groups have no standing to sue after TVA reached long-term agreements with many local power distributors in its seven-state region.

U.S. District Judge Thomas L. Parker did not make a decision during the hourslong hearing, which included references to a federal law created 50 years ago, longstanding TVA rules, technical language and energy industry jargon. Timing on a decision was not immediately clear.

The lawsuit filed in August 2020 argued the 20-year deals signed by most of TVA's customers lock the power distributors into exclusive contracts with the TVA and “will forever deprive distributors and ratepayers the opportunity to renegotiate with TVA to obtain cheaper, cleaner electricity,” the SELC has said.

The plaintiffs — Protect Our Aquifer, Energy Alabama and Appalachian Voices — have members that distribute power in their communities. They allege the deals hurt the ability of local power companies to seek out and use renewable power such as solar energy from sources outside the TVA. The deals replaced existing agreements of varying lengths, or followed expiring ones. Contracts require a 20-year notice to terminate, and they renew each year.

Garcia argued that the notice-to-terminate provision made the contracts “never-ending,” and violate TVA's own rules that its contracts with power companies should not last longer than 20 years. The deals carry a 3.1% monthly rebate on wholesale power rates that local companies could pass on to their customers, or use to invest in infrastructure, TVA has said.

The deals also allow local power companies to seek up to 5% in acquired renewable energy, which TVA says could help them meet their energy needs. But the groups say that percentage is too limiting.

Garcia argued that the contracts are “anti-competitive” and cut the public out of the decision making process. TVA wanted to extend the length of the contracts to help expand of capacity by developing plants fueled by natural gas and force TVA customers to pay for "dirty energy,” she said.

TVA lawyer Davis Ayliffe said the contracts provide the utility with contractual certainty, help fulfill its mission to provide power at the lowest feasible rates, and give local power companies rate stability and protection.

Ayliffe also argued that claims made by the environmental groups are speculative, and the groups have failed to show how they are being harmed by the contracts. He said energy generated by fossil fuels in not being incentivized by the contracts, and the agreements did not make a change to the environmental “status quo.”

One power company that has not signed a long-term contract is Memphis, Light, Gas & Water — TVA's largest customer.

MLG&W has been considering whether to renew its partnership with TVA. Leaders of the Memphis power company have recommended staying with TVA, citing possible savings to residential customers and avoiding the cost of bringing in new power suppliers. But a final decision has not been reached.

TVA provides power to millions of people in parts of Tennessee, Alabama, Georgia, Kentucky, Mississippi, North Carolina and Virginia.