Memphis Light, Gas and Water Division President and CEO J.T. Young plans to make a recommendation to the city-owned utility board at its Aug. 17 meeting on whether MLGW should stay with the Tennessee Valley Authority.

A vote by the board on his recommendation could come by Sept. 21.

Public to get first look at new power proposals Thursday

The timeline for a decision on a possibly historic change four years in the making emerged from a joint meeting Thursday, June 9, of the MLGW board and the Memphis City Council. The meeting included some daunting dollar figures for replacing TVA and for the utility to take on a role that includes being an electric power generator.

The costs are complicated by an uncertain, volatile and much more inflationary national economy.

The three-hour session Thursday at the Benjamin L. Hooks Central Library was the first public look at cost estimates and bids for the process of leaving TVA for a new provider.

The companies bidding on the three general areas of work — transmission, natural gas-fired power generation and renewable energy sources — weren’t revealed in the briefing.

They would become public once Young and his staff make their recommendation to the MLGW board in August.

The bids included 10 proposals for local solar-power projects and seven more solar-power projects connected to the MISO consortium — Midcontinent Independent System Operator, the multi-state electric power marketplace of local utilities and power generators.

MISO is the most-mentioned rival to TVA as a supplier to MLGW, although it’s a network of power suppliers and utilities and not a power provider itself.

The bids also included five proposals to build thermal power- generating plants to connect to the MLGW system and two proposals to build transmission facilities or systems connecting MLGW to the MISO system.

TVA’s image takes a hit as it fights to keep Memphis contract

At the end of the three-hour presentation, MLGW board chairman Mitch Graves said the bottom line is that the annual savings from leaving TVA for another provider isn’t several hundreds of millions of dollars a year — or probably even $100 million a year once the costs are considered.

“We believed there were huge dollars at that time — $400-$500 million a year,” he said, referring to the start of discussions in 2018. “I know we had a lot of people externally who were trying to influence what everybody was thinking. We had to put that aside and look at what’s best for the customers.”

GDS Associates of Marietta, Georgia, was the power industry consultant overseeing the bid process and price quotes on power rates, along with the cost of a new transmission system, the use of renewable energy sources and the construction of some kind of local electric power generation by MLGW. 

GDS estimated the two most likely scenarios for replacing TVA yielded $25.7 million in savings annually in one case and $55.3 million annually in the other case.

TVA report meets with council skepticism

A major factor in the dollar figures has been the change in the national economy in the past year, including increased prices for construction materials and supply chain disruptions.

Both figured prominently in increases of $465 million to $1 billion for the cost of building new transmission lines between MLGW and eastern Arkansas and north Mississippi to get electric power from MISO hubs closest to Memphis.

TVA’s CEO says MLGW decision is about ‘risk’

MISO has seen capacity price changes in the larger economic uncertainty and inflation that includes the retirement of some of the thermal power plants in the consortium and increasing load growth across its system and market.

“What it has done, if nothing else, it has raised the prospect of uncertainty and risk,” Young said of the national economic factors. “It has increased the visibility of potential risk associated with such a large investment and decision that surrounds any long-term decision.”

That includes a decision on whether to sign another 20-year contract with TVA that includes no bargaining.

“In this industry, we don’t make small, minute investments,” Young said. “We make typically large asset investments that have long-term implications.”

But some pushing for a switch said the GDS presentation put too much emphasis on the costs and risks.

MLGW CEO: First look at TVA alternatives due in May or June

Stephen A. Smith, executive director of the Southern Alliance for Clean Energy, called it “a master class in risk exposure.”

“GDS’s presentation overemphasized the downside risks and failed to balance with the upside benefits,” Smith said after the meeting. “Memphis needs to be eyes wide open about the risks involved with leaving TVA. But with any opportunity comes risks.”

A timeline for putting in place a total system, including new transmission lines and some local power generation, would likely be beyond the five-year notice the utility is required to give TVA of its exit.

Strickland says city through ‘first quarter’ of MLGW-TVA decision

There would also be a cost to be paid to TVA for the exit, aside from not being able to use its transmission lines or system.

“There is a real opportunity to do something different,” Chris Dawson of GDS Associates told the group, which included an audience of about 50 people including city officials, TVA leaders and other groups involved in the discussion over the past four years.

Dawson was quick to add that the opportunity to go a different way in providing for the city’s electric power needs comes after a lot of work and investments of billions of dollars. The investments would allow MLGW to change from transmitting electric power generated at TVA plants to being a power provider itself and building out the ability to buy power on the market.

Federal court rules TVA refusal to close on sale of Bellefonte plant was legal

“I am not in favor of a 20-year contract for 3% savings,” council member Martavius Jones said of the terms of another long-term contract with TVA, which comes with the same 3% discount all of the other TVA utilities have gotten for signing the same deal.

But he also didn’t favor such percentages on the other side for making big changes that include structural changes to the utility.

“If we talk about a 3 to 4% savings over those 30 years based upon the uncertainty of doing something, those, in my opinion, doesn’t justify the uncertainty of doing something,” he said.

Council member Cheyenne Johnson thought the presentation seemed skewed toward staying with TVA.

MLGW-TVA: What happened the last time they split

Graves said that was not the case and that the discussion has now moved to a fuller consideration of what it would cost to replace TVA. 

“That’s always the easiest, most comfortable thing to do,” Graves said of staying with TVA. “TVA has been our supplier for 80-something years. If you don’t do a price check … every few years you are probably not doing things right. This has forced us to take a look at what we pay today and what the alternatives are.”

Johnson and fellow council member Jeff Warren pushed to take the look for alternatives outside the framework of price quotes and existing ground rules for leaving TVA.

“This process can be worked out. We need to find a way to work together with TVA and other possible sources,” Johnson said.

MLGW board member Cheryl Pesce, who was appointed to the board earlier this year, said she is still looking at the new data — with more to come — for signs of the first estimates of savings pushed by groups calling on MLGW to dump TVA.

“I read an article that said if MLGW left TVA, we could realize a cost savings of $417.8 million annually. That got my attention. I thought of schools. I thought of the streets. I thought of infrastructure,” she said. “I’m still looking for $417.8 million savings annually if we were to leave TVA.”