The recommendation that Memphis Light, Gas and Water Division pursue a 20-year agreement with the Tennessee Valley Authority as its electric power provider is far from the final word.

A new 20-year agreement would kill the question for a generation, but keeping some form of the current five-year rolling agreement MLGW keeps the discussion alive.

And that’s where the conversation begins. 

MLGW leaders recommend staying with TVA for greatest value, least risk

The city said in a statement after MLGW President and CEO J.T. Young announced the recommendation from its consultant at a utility board meeting Thursday, Sept. 1, that city leaders “look forward to taking a deeper dive” into the issue before a final decision is made.

City Council hires energy consultant to aid vote if MLGW leaves TVA

In the meantime, some were frustrated that predicted savings from a break with TVA have evaporated.

“We started down this path a few years ago,” MLGW board chairman Mitch Graves said toward the end of the Thursday board meeting. “There were huge savings projections by some folks, and we end up with zero (savings).”

Chris Dawson of GDS Associates, the Marietta, Georgia, consulting firm that reviewed the proposals, put much of the blame on the highest national inflation rate in 40 years as GDS was working its way through 24 proposals. Out of those 24, 13 made the “short list” of those seriously considered.

MLGW-TVA: A Timeline of the relationship

Solar power options took the biggest hit once inflation and supply chain problems lengthened the time to build a new transmission system and raised the cost of building local power generation by MLGW — a 40% increase in prices.

Without the Biden administration’s Inflation Reduction Act recently passed by Congress, solar prices would have increased 60%. So would other costs.

Predicting the future

History shows how hazardous it is to predict what happens next in a complicated situation like this.

When the Memphis City Council voted down the contract the MLGW board approved earlier for GDS to run the process of seeking proposals for replacing TVA, the reaction of Young, the MLGW president, was to move to put the whole examination on hold.

MLGW-TVA: What happened the last time they split

The MLGW board overruled him and the process eventually got moving again after a six-month stalemate. Council members, in a June joint meeting with the MLGW board, got a peek at the proposals with no names attached to them.

The delay marked a point where some on the council let their distrust get the better of them and delayed the very process they wanted for half a year.

Tough past negotiations position city well as TVA question reaches critical point

It was also an indication that the council doesn’t get to pick the options. They can only approve or reject whatever the MLGW board approves.

However, that doesn’t mean the council can’t do what any number of players on all sides of the question have been doing for four years — try to influence the utility’s board.

The early reaction indicates much of the lobbying will be around how long to re-up with TVA and in the process keep the possibility of an exit from TVA alive.

Been here before

In 2002, Herman Morris — who was then MLGW president and CEO — looked at some kind of break with TVA but there weren’t the range of alternatives that exists now.

“And the analysis was that we could save $100 million a year if we left TVA,” Morris told The Daily Memphian.

But MLGW would have still been on the hook for 10% to 15% of TVA’s outstanding debt.

“We recognized that it would do our community no good to terminate a contract and then be handcuffed to pay off 10% or 15% of TVA’s outstanding debt,” he said. “It was a must in order to get that contract signed.”

Current TVA president and CEO Jeff Lyash said the clause was not in any of the options TVA was offering as of 2020.

Vote on MLGW rate hike mixes with talk of TVA split

“We eliminated the notion that if you exit the system, you have to somehow pay for stranded costs quite a long time ago,” he said. “It’s neither in the existing contract, the five-year (option) nor the 20 years.”

The best Morris could do in 2002 was a concession that MLGW had to give TVA a five-year notice if it dumped the federal agency as its electric power provider instead of the standard 10-year notice.

Timing has already emerged as a possible next point in the conversations to come.

“That’s got to turn at some point,” Graves, the MLGW board chairman, said of the inflationary pressures that led GDS to conclude in the space of a few months that the savings were $22 million to $55 million at the most to no savings at all.

“Being locked in for a long-term contract would never allow us anytime in the near future to go back,” Graves said of a 20-year contract between MLGW and TVA.

Graves began the Thursday session by calling it “the great reveal.”

“We’ll see where we land,” he added.