The process of deciding whether Memphis Light, Gas and Water Division should stay with the Tennessee Valley Authority ground to a halt, at least temporarily, Tuesday, Oct. 6, as the Memphis City Council rejected a MLGW contract with a power industry consultant to oversee proposals for such a break.

The decision could potentially scuttle looking at a break from TVA altogether, MLGW President and CEO J.T. Young said.

The 5-8 council vote rejected a contract of up to $520,000 with GDS Associates Inc. of Marietta, Georgia, to take proposals from potential suppliers. The consultant also would look at proposals that include power generation by MLGW or a contractor hired by MLGW.

Most council members want to continue exploring a break with TVA as MLGW’s electric power supplier.

The issue is how to frame the selection. Some on the council questioned the lengthy process of getting cost estimates on the complex undertaking and whether it should involve MLGW getting into the power generation business.

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Council member Jeff Warren, one of the most vocal critics of the GDS contract, said he might be willing to move to reconsider the council vote at the next council meeting Oct. 20 following a joint meeting of the council and the MLGW board, which approved the contract last month.

“The wrong question was asked here,” Warren said of the premise of the services to be provide in the contract. “And we are being asked to fund the wrong question.”

A response could come as early as Wednesday morning when the MLGW board meets.

Young told council members before the vote he wasn’t sure how the utility board might respond to a rejection of the contract. He also said the board approved the contract unanimously and that the board’s options could include abandoning the exploration of an alternative to TVA.

“It seems to me that we are getting a signal that we don’t want to move forward with a determination of competitive prices,” Young said when pressed by council member JB Smiley Jr. on what would happen if the contract was voted down.

“We can’t just recreate the wheel and do things differently,” he added. “We have to follow what is technically feasible to get power to our customers. We can get just the pieces but we can’t make a decision on just the pieces.”

Next step in MLGW-TVA relationship is probably request for proposals

Warren thinks it should begin with cost estimates for the electric power and those providing the power bidding on how they will build a transmission system to bring their power to Memphis instead of MLGW building transmission.

“We need a proposal for what it will cost for energy and how they will bring it to us,” Warren said. “Until we get those two things, we don’t know if we need to build transmission and production. Maybe the proposals will show we don’t need to go any further.”

Chris Dawson, a GDS principal, said relevant and binding price quotes on buying the electric power are based on the transmission system.

“We are looking for folks that can reliably deliver that energy so we can ask for energy prices. But if we can’t get it here – if folks can’t deliver it to MLGW – then they can’t give us a proposal,” Dawson said. “The folks that sell the energy are typically not the ones that build the transmission so they wouldn’t know how to get it to you.”

Warren said there are companies who would do so and questioned whether Dawson was saying those price or rate estimates were “pie in the sky.”

“I’m not sure who you are addressing that to, but yes,” Dawson replied.

Power Players: Faces and Terms in the MLGW-TVA Debate

Warren proposed a resolution the council approved in May requesting that Mayor Jim Strickland award a similar contract to ACES, a national power management company that works closely with MISO – Midcontinent Independent System Operator, a power consortium that is the most-mentioned rival to TVA in the deliberations.

But council attorney Allan Wade said Tuesday Strickland can’t award such a contract for MLGW, which has its own board that makes such decisions. The contract went to the council for approval because of its dollar amount. But Wade said the only thing the council could do was vote it up or down or delay it.

A move by Warren to delay the vote pending a meeting between the council and the utility board was voted down.

Warren also wanted the MLGW board to join a legal challenge of TVA’s ability to bar the use of its transmission lines by rival suppliers being undertaken by Volunteer Electric, a smaller utility covering three Middle Tennessee counties.

Council approves tentative first step into MLGW-TVA question

Council member Worth Morgan said the council decision “snubbed the MLGW rate payers.”

“Any electricity savings that may exist were supposed to be discovered by the RFP process that now won’t happen,” he said in an email to The Daily Memphian after the virtual meeting ended.

“This is one of the most impactful, bad decisions to come from the city council in my five years,” he said. “Tomorrow some of us will wake up and restart the work to ensure the ratepayers have the best service for the most affordable price possible.”

But others on the council say they want to see a more rapid decision, without MLGW being anything more than a customer for an electric power provider as it is with TVA.

MLGW-TVA: What happened the last time they split

Council member Cheyenne Johnson was critical of the utility for disregarding the resolution on a contract with ACES after ACES offered a more limited process for $150,000 done in a much shorter time frame.

“If the city council requests it, it is supposed to be done,” she told Young in an earlier discussion during committee sessions Tuesday.

“You are disregarding that request and you are going on with a proposal that costs three times more,” she said.

Young said the ACES study wouldn’t have gone far enough and that ACES bid on the contract awarded to GDS for what ultimately would have been a higher cost.

“It was not a complete proposal that we would have needed to make a decision,” Young said of the earlier proposal ACES made to Strickland’s administration.

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Young also said his final recommendation at the end of the process would likely have been that MLGW should produce some of its own power, which could include contracting with a company to build and operate a plant, and that a MISO assessment agreed with the need for the utility to not rely solely on one electric power marketplace.

Council member Chase Carlisle said voting down the contract delays the process further by those arguing that it already has taken too long.

“We finally have what we believe are four or five options,” he said. “Whether you like that part or not, we are now at a point of where do we go from here.”

Carlisle also said some council members were echoing “talking points” of groups advocating for a specific switch from TVA to MISO. Those advocates have touted much higher savings estimates of up to $450 million a year when MLGW estimates through an Integrated Resource Plan put the savings at about $150 million a year in a break with TVA.

“If somebody wants to make an accusation … they need to go ahead and come on out and say it or they need to call the FBI and file a complaint,” Carlisle said. “If not, let’s stay with the process and say the process has integrity to it.”