Memphis Light Gas and Water Division should generate its own electrical power or put it out for bid – ending or altering its 80-year relationship with the Tennessee Valley Authority.

That is the recommendation of an environmental group that wants MLGW to eventually up its use of solar and wind power in the process.

Friends of the Earth is the second group in recent months to push for MLGW to look at other suppliers of electricity.

The group commissioned and paid for a study by the Brattle Group, an economics and regulatory consulting firm based in Boston, of alternative electric power options MLGW could use in a break from TVA.

Friends of the Earth favors more use of wind and solar generated power.

The study was released Monday on the eve of a Tuesday City Council vote on proposed MLGW gas, electric and water rate hikes that would mean a 10.5 percent increase in the average residential bill over the next five years.

“TVA, which in the early years was a yardstick by which other utilities were measured in terms of low-priced electricity, has become just another utility,” said David Freeman of FOE and a former TVA board chairman. “And frankly kind of oblivious to the revolution that is taking place in the electric power industry.”

MLGW would have to give TVA a notice five years before it ended the relationship in which TVA supplies all of the electricity to MLGW and in which MLGW is TVA’s largest customer.

The Brattle Group report outlines a plan for MLGW to give that notice and not have to immediately set about building a new transmission system for electricity from another provider.

The executive summary of the report says the goal is a “portfolio of power supply” that “does not rely on immediate investments in new transmission to access non-TVA resources and maximizes immediate opportunities to use renewable energy while setting the city onto a path towards potentially (near) 100 percent renewable power supply by 2050.”

“None of the near-term options we evaluated required the construction of new transmission connections to other areas or the use of existing TVA transmission,” the report reads.

The cost of a new transmission system is one of the drawbacks or uncertainties that TVA leaders and MLGW president and CEO J.T. Young have cited in responses to a similar proposal by Nuclear Development LLC.

The company financed by Chattanooga developer Franklin Haney, pitched the idea late last year of MLGW breaking its ties with TVA to buy power from the mothballed Bellefonte nuclear power plant in Hollywood, Alabama, that the Nuclear Development is trying to buy from TVA.

Nuclear Development is suing TVA over the Bellefonte sale, specifically TVA’s refusal to close on the deal this past November. It is now pushing an MLGW contract with MISO – Midcontinent Independent Operating System – an electrical provider with a hub in Little Rock.

Nuclear Development had a letter of intent with MLGW for a study of long-term power supply alternatives by another consulting firm, GDS Associates of Marietta, Georgia.

The GDS study, released earlier this month by MLGW, shows there could be savings in electrical rates but cautions that there would be transmission system costs involved. MLGW is considering a further “integrated resources plan” that would sketch out more specifically the savings as well as the costs involved in a break from TVA.

Freeman admits that Nuclear Development has opened the door on considering such a switch. But he’s a vocal critic of the Bellefonte proposal.

“That is a ridiculous proposal,” Freeman said. “A half-built plant that TVA couldn’t finish by a company that doesn’t have any money – give me a break.”

Freeman said the council votes on rate hikes proposed by MLGW are a “crossroads” for the utility in considering a break with TVA. That’s the same description used by Bill McCollum, the CEO of Nuclear Development and a former chief operating officer of TVA.

But since MLGW would have to give five years’ notice to TVA to end the relationship, Freeman said MLGW will likely have to raise its rates to some degree to improve and update its existing infrastructure.

“Our long-term objective is for Memphis to assert its self interest and in the process maybe help move TVA to its original purpose to help the people,” Freeman said. “Right now the issue is price and the city council is correctly saying poor people in Memphis can’t afford to pay anymore. And (Young) is correctly saying, ‘My infrastructure is broken and I need more money to fix it.’”

Those improvements would be the same for the gas and water divisions. But with a change in the electric division to either generate or buy direct, Freeman says bonds could be floated for a different kind of infrastructure upgrade in electric.

“Within the five years you can’t count on MISO because you can’t be sure that you can expand transmission lines in that amount of time,” Freeman said. “You can’t count on TVA because they are telling them (MISO) to go to hell. So you have to have a stand-alone power system.”

Young has been skeptical bond underwriters would go for a bond issue based on projected savings both reports project of hundreds of millions of dollars for MLGW with a break from TVA.

If the council approves the rate hikes Tuesday, they would not take effect until January of 2020 to begin financing $737 million in infrastructure capital projects. But with the rate hikes in hand to show to the bond market, Young intends to go to market on $75 million in bonds to start the infrastructure overhaul immediately.

Freeman says MLGW could add a request for proposals or a request for qualifications to the mix without changing Young’s basic plan.

“You could put out bids. You could build your own plant or you could just put out a request for bids,” he said. “Believe me all of these power companies in MISO would be very happy to have a new customer with a load of 3,000 megawatts.”

The Brattle report notes that any switch from TVA to take effect in 2024 would likely see MLGW’s electric division more reliant on natural gas-generated electricity because “the gas-based portfolio appears substantially less costly than a mostly renewable portfolio.”

“However, a natural-gas focused portfolio would expose Memphis to potentially substantial risk related to changing gas prices and also to the possibility that over the coming decades some form of carbon pricing will further increase the cost of power generation with fossil fuels including natural gas,” the report adds. “With a natural-gas focused portfolio in 2024, Memphis has the opportunity to learn about the pace of cost reductions for renewables and storage before deciding how to adjust its supply portfolio over time.”

Freeman describes MLGW parting company with TVA as “like leaving your grandpa.”

But he says there is a possibility there could still be a relationship between TVA’s largest customer and the federal agency.

“If Memphis gave the five-year notice required in the contract, that would not be the end of the discussion. It would be the beginning of the discussion,” he said. “TVA, of economic necessity, couldn’t just sit there and see 10 percent of its load disappear. It would have to come back to you and be one of the bidders in a sense.”

TVA president Bill Johnson has said he doesn’t want to contemplate such a break but he has noted that late last year TVA opened a $1 billion natural gas fired electrical plant in southwest Memphis – the successor to the Allen fossil plant that is near the new state of the art plant.

“If Memphis leaves the system what are they going to do with that plant?” Freeman wondered aloud. “They’ve got to talk about selling it to Memphis I assume or they’ve got to talk about making you a different deal. I don’t know. But what I’m saying is you have leverage if you exercise it. It’s not worth a damn if you don’t.”

Johnson has said TVA could sell the plant to someone other than MLGW. Or it could keep it and move the plant and has done so with other TVA plants in the past.