TVA's "Pricing Paradigm" Debunked - And Response

Friday, May 11, 2018

The Tennessee Valley Authority is one of the most important governmental institutions created within the United States, and a rather lone outlier among my general opposition to New Deal sorcery.    

Accomplishments of TVA have been many, among the most critical is the fact World War II’s final acts could have looked a bit different without TVA’s massive megawatt production circa 1941.   As a student and lover of Tennessee history, I recognize how the conveniences we enjoy today are largely due to the rich history of Tennessee Valley Authority.    

Yet, TVA is a cash-motivated entity masquerading as a quasi-governmental whatever it actually is.   (TVA reports it “makes no profit and takes no tax money”, however “profit” is a fairly relative term when the vast, sheer breadth and influence of the organization is reviewed.  It’s huge, and has a top heavy tier which is well compensated.)  TVA supplies numerous regional utility companies with electricity, and we’re happy it does.   

Along the way, TVA has bungled a few of its missions.  I toured Bellefonte as it promised it was about to take on fuel circa 1990, and well there’s that Kingston coal ash mess. These billion dollar boondoggles are to be expected within a structure this large.    

TVA just released “A New Pricing Paradigm”, an article written at about the fifth grade level designed to TVA-splain to us country hicks why we’re about to be a whole lot more confused by electricity pricing.    

My personal electricity consumption, residential and commercial, is about $3,200 monthly.  So I tend to pay attention to these things.    

“Pricing Paradigm”, TVA’s article, discusses a future where alternative energy producers begin having an effect on the standard electric grid.   If we raucous consumers are making our own electricity with solar panels, those kilowatts will not travel through the grid to be sold by TVA.   With less power being sold, it will (someday in the future) be harder to fund the maintenance of the grid.   Those who rely on the grid will be those unfortunate souls who cannot magic their own electricity, so TVA rate payers will be left holding the bag and supporting the crumbling grid while solar/wind users chuckle in sinister fashion with all their hipster conservationism.    

Naturally, since TVA is the rural savior which cares about us, it needs to plan for a future when all those solar kilowatts are competing against a grid which needs constant, stable investment and improvement.    

So how does TVA plan to secure the grid’s future and provide delicious electricity security for all of us hillbillies?    

Change their pricing strategies now to prepare for (not sure) on (unknown) date in the future.   In other words, modify pricing for electricity now based on future market conditions which may or may not actually have impact on grid funding stability.    

This is crystalline gibberish.   There is no other method to explain how obscure TVA’s argument is, or how far removed it happens to be from reality.    

“We are looking at a model in which the more energy you use, the more the price goes down; and the less you use, the higher the price you’d pay. It is the same principle as buying in bulk at the grocery store.”    
~ Tennessee Valley Authority “Pricing Paradigm”

TVA is arguing that electricity users buying from the grid are “subsidizing” grid access for those who have started to supplement with solar or use less energy altogether.   Those folks, literally making their own shine, still have access to the grid when they need power at night, have high draw appliances or their solar farm goes ka-plooie.    

Because the grid is very expensive to maintain in addition to the cost of electricity production, everyone with a connection to the grid has a vested interest in seeing the grid’s repairs and improvements are properly funded.    No one could possibly disagree with this.   

However, TVA is stating those who are using solar buy from the grid less, so they are not paying their fair share to maintain the grid.   So TVA plans to charge those who don’t use much electricity a higher rate, while heavier users of ordinary metered power will pay a lower rate.    

In the same article where TVA claims they aren’t trying to discourage solar, they also (and I quote) say “private rooftop solar is creating energy that literally is not needed in the Valley.”

Objection, your honor.   I’m not sure how clever TVA’s marketing department is regarding thermodynamics, but solar panels do not create energy.  They convert energy which already exists.  That is too big a semantic foul to leave TVA’s media dungeon in print form.  

By TVA’s rationale, if I grow a tomato in my back yard I am personally responsible for ruining the future food supply chain of the nation.   Therefore, if I later buy a tomato at the store I should pay extra because the one I grew wasn’t delivered on a truck.   Madness.   

Yes, yes it is the same thing.   Meet me and let’s have a public debate about it.   

Not only has TVA’s logic gone completely off sides at this point, the next connection will have you believe their tired writer had a few beers:

“A good example of a company who did not adapt their business is RadioShack. RadioShack went from the largest technology retailer to a memory because of changing technology. They sold answering machines, calculators, radios, computers and electronic organizers, all of which your smart phone, in one device, can now do.”
~ Tennessee Valley Authority “Pricing Paradigm”

Well, TVA just doubled down on dumb with a wickedly bad analogy.   And they expect us to digest it because we all shopped at RadioShack, it’s relatable and we’re not smart enough to realize TVA is scraping a very rusted barrel to gin up this awful comparison.   

“Wow, if RadioShack went outta business because future then TVA might go outta business if they don’t do somethin’.  Yeah, yur purdy smart TVA.  Do whatever ‘cuz I know you been cipherin and iz good.”
~ TVA’s likely estimation of how boneheaded citizens will swallow their news release

If TVA is basing their “pricing paradigm” on the bankruptcy of RadioShack, they can stop right now and cancel the plans.   RadioShack most certainly did not go out of business because of “changes in technology.”   That is total baloney and TVA knows it.  TVA is apparently very confident you have no concept of general business or basic economics.   

"In our current pricing structure, solar generators who use the grid at night or when it is cloudy effectively have everyone else pay for their “backup.”
~ Tennessee Valley Authority “Pricing Paradigm”

How putrid, the arrogance.   We’ve been told by public utilities for decades to conserve, yet when we do we become Public Enemy #1.  No, TVA, everyone else is not paying for the solar producer’s “backup.”  When solar users go to the grid, they are buying a product from TVA in the quantity they need it, when they need it, from a public utility.   Similarly, Michigan snow birds who shower in Florida during the winter are not having their water lines subsidized by neighbors.  This statement is so absurd it deserves wide scorn and ridicule.  Certainly a public utility does not believe we are all this gullible on this grand a scale.   

What TVA is doing here is assuming an expected sworn loyalty to their product over A) solar power generated at home or B) just using less electricity.  Government agencies love to place these demands on citizens: It’s us or else. Try buying a driver’s license at Walmart.   

In reality, TVA must do a better job of forecasting market conditions.  TVA does not have the luxury of having these fluctuations, now and in the future, eliminated because they say so.  No other business does either.   The further realities of the situation are just too apparent:   One good winter storm or summer heat wave wipes the solar sales loss slate clean by an order of magnitude, yet TVA persists in peddling cosmic storytime.   

TVA has been down this road before, because they are apparently having a very hard time forecasting anything on a level better than a dead meteorologist.   Somewhere around 2005, if I recall, TVA introduced the “fuel cost adjustment.”   When fuel costs went up, TVA went back to the public trough and TVA-splained they would need the right to balance their books by tacking unexpected fuel costs to our monthly bill.   The FCA became “a thing” and it “will never go away.”   

Now, TVA is coming back to the same well in even more ghoulish fashion.   In 2005, they had the hard facts of increased fuel expenditure to stick out their hat and beg for cash.   The natural gas spot price spiked to $18, which I’m sure left wet marks in the seats of TVA board members.   In 2018, the natural gas spot price has not gone above $6.00 in nearly a decade (it’s less than $3 now) - yet we’re stuck with TVA’s fuel cost adjustment amid a fuel market which is just too darn complex for them to understand anymore.   

That poor TVA can’t math is no reason to make the cost of electricity even more confusing for Valley rate payers, only this time TVA is going big with their newest green curtain.    

TVA is basing its need for a “price paradigm shift” on various economic boogeymen which have yet to reveal themselves, and TVA is attempting to rid itself of any market deviation whatsoever while enriching its coffers even more.   What’s a few bucks to a little old lady whose grandson slapped some solar panels on her roof?   Bad example, I know.   TVA’s are worse.   

“When technology changes to allow mass adoption of self-generation, those who cannot afford to invest in cutting-edge technology are the ones left to make up the difference.”
~ Tennessee Valley Authority “Pricing Paradigm”

Hogwash.   

That we live in a changing time is certainly understood by all, however no other industry has the ability to force their accounting alchemy on customers when possible bad things are not even on the furthest horizon.   

TVA is also conveniently not accounting for the thousands of new customers across our region in apartments and townhomes which will never utilize a drop of self-generated solar.   Our market is increasing, not decreasing, and this makes TVA’s efforts to sell me on their pompous arithmetic even more futile.   Household numbers across the TVA region are going up and I cannot imagine personal solar accounts for much more than a rounding error.   None of this accounts for “community solar” and TVA’s other efforts to centralize large scale solar production - naturally under its own umbrella.    

TVA wishes to confuse us, of this I am convinced.  Any minor complication added to pricing schemes not only makes them more difficult for consumers to comprehend, it also makes it more bewildering for agencies across several state lines to regulate.  This would be a massive conceptual win for TVA, as they would have additional control over pricing variables during a time they are experiencing none of the perceived potential losses.   

TVA is also not much discussing the swings in the other direction which are vastly more likely.  This includes the possibility electric modes of transportation will more than absorb losses from solar panel use.   Additionally, TVA’s record net income in 2016 was nearly matched in 2017 (although they socked away $500 million in FY ‘17 for their retirement fund.  Good on them.)    

Tennessee Valley Authority is employing highly selective negative projections to gain ever more granular control over billing.  This inarticulate assault on our collective intelligence is a scare tactic.   It is designed to separate us from our money and eliminate simple comprehension of what constitutes “an electric bill.”    

TVA representatives should be required to present themselves before public utility commissions of the various states when rate increases for grid support are actually warranted based upon fiscal developments which actually exist.   

As my final salvo, I offer this:

Solar production currently accounts for roughly .6-1 percent of electricity use in the United States.   Line loss, the amount of electricity which disappears between production and transmission, is between 6 percent and 15 percent depending upon location and application.   This means TVA is rolling out an entirely new pricing strategy to answer a non-problem which is less than 10 percent the consistent and expected loss of electricity which already occurs within every utility.   It would be decades before solar achieved anywhere near the capacity to even approach line losses, making its actual grid impact for the foreseeable future basically meaningless.   

Blue sky projections of nonsense who-knows-what are unprofessional.   I reject them.   

P.S.   Tandy quit making things internally for RadioShack to sell, competitors in the commercial sector then ate their lunch amid heavy RS borrowing.  A retail network of too many small stores couldn’t live off bad central management, extra middlemen and cellphones.    

P.P.S.   TVA does not own the sun, and what we do with it on private property is absolutely irrelevant to their forecasting models.   The sun is 93,000,000 miles away and outside TVA’s fantasy jurisdiction.   

Respectfully,
Jason M. Kibby (Walker)
Chattanooga 

* * * 

Public utilities are like 'public servants.'  They all eventually forget what their original purpose was ... to serve the public. 

I began to wonder about TVA in 1994 or so, when they suddenly began to label many of their vehicles police.  Even Zach Wamp, with all of his faults, asked why on Earth TVA needed its own police force. 

Again I wondered about TVA when I saw solar-powered lamps at a parking lot on the river in the shadow of Raccoon Mountain.  True, the sun had to shine on those panels occasionally, but placing solar panels in the shade at the base of a big hill isn't the normal way to generate electricity from sunlight. 

Concerning utilities in general, I recall two specific events:  In the 1970's, some expert (you know, an unknown mouthpiece from out of town) declared in Chattanooga that no one should be allowed to have his own water well in a town with a public water supply.  That was in response, I believe, to Standard Coosa Thatcher's drilling a well in Highland Park to satisfy its own great need for water in spite of the public water company's increasing fee structure. 

(That was after another expert had testified that the local water company had its main water inlet at the most polluted spot on the Tennessee River.  Go figure.) 

Then in the 1990s or so, the local (public) gas company discovered that people were heeding advice to insulate their homes and cut back on gas use.  That, and perhaps there were a couple of warmer-than-usual winters.  Anyway, gas use went down, so the gas company decided to raise their prices to compensate.  

If a grocer isn't selling very many eggs or very much bacon, he doesn't usually raise the price of bacon and eggs to make up for low demand.

But public utilities, which are obviously legal monopolies, just don't have to adapt to the market the way private businesses do.

And they don't have to soak the rich, either; they continue to soak the poor, because there's more of us.

Larry Cloud
Lookout Valley


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